ABELLANO FRIA MAE A.

BSMAC 4
STM PRELIM EXAM

1. XYZ Corporation is engaged in lending business. The interest charge to the customer is being added
to the collectibles which are collected every day for one (1) month. What method of recognizing the
revenue and expense would you recommend; CASH OR ACCRUAL BASIS? -Explain this two (2)
methods of recognizing revenue and expenses. -10%

Answer:
 I would recommend accrual basis of recognizing revenue and expense.
 Cash Basis reflects business transactions on a company's financial statements when the cash
flows into or out of the business. Accrual Basis recognizes revenue when it's earned and
expenses when they're incurred, regardless of when money actually changes hands.

2. What do you mean by tax holiday? -10%

Answer:
 A tax holiday is a government incentive program that offers a tax reduction or elimination to
businesses. Tax holidays are often used to reduce sales taxes by local governments, but they are
also commonly used by governments in developing countries to help stimulate foreign
investment.
3. Mr. X own a business of appliance dealer. He expects to have the following transactional data in the
year 2023. You are asked to recommend the advantageous method of claiming allowable expenses
either itemized or optional. What option has the least tax impact? Present your comparative tax due. -
20%

4. How is the proposed tax law levied? -10%

Answer:
 Taxes are levied in almost every country of the world, primarily to raise revenue for government
expenditures, although they serve other purposes as well

5. What is strategic tax management? -10%

Answer:
 Strategically managing tax involves financial analysis and decision-making while proactively
controlling your organization’s tax position so that legal requirements are met.
6. Supposed, Mr. X expects to have the following transactional data in 2023. Which method of claiming
allowable expense is advantageous, Itemized or optional. What option has the least tax impact?
Present your comparative tax due. -20%