1. What are internal controls in accounting?

A. Procedures put in place within an organization to ensure business is carried

out in an orderly and accurate manner.
B. Federal laws put into place to protect investors from fraudulent accounting
practices.
C. State laws designed to report errors and fraud in financial statements and
financial reporting.
D. Rules and laws created by the SEC and FASB to regulate the accounting
industry.
ANSWER: A

2. All of the following may be included under the heading of "cash" except
A. currency.
B. money market funds.
C. checking account balance.
D. savings account balance.
ANSWER: B

3. What is a compensating balance?

A. Savings account balances.
B. Margin accounts held with brokers.
C. Temporary investments serving as collateral for outstanding loans.
D. Minimum deposits required to be maintained in connection with a borrowing
arrangemen
ANSWER: D

4. All of the following may be included under the heading of "cash" except
A. currency.
B. money market funds.
C. checking account balance.
D. savings account balance.
ANSWER: A

5. In preparing its May 31, 2020 bank reconciliation, Catt Co. has the following
information available: Balance per bank statement, 5/31/2020 30,000 Deposit in
transit, 5/31/2020 5,400 Outstanding checks, 5/31/20202 4,900 Note collected by
bank in May 1,250 The correct balance of cash at May 31, 2020 is
A. P 35,400
B. P 29,250
C. P 30,500
D. P 31,750
ANSWER: C

6. Which of the following is an appropriate reconciling item to the balance per

bank in a bank reconciliation?
A. Bank service charge.
B. Deposit in transit.
C. Bank interest.
D. Chargeback for NSF check
ANSWER: B

7. If the month-end bank statement shows a balance of P 36,000, outstanding

checks are P 12,000, a deposit of P 4,000 was in transit at month end, and a check
for P 500 was erroneously charged by the bank against the account, the correct
balance in the bank account at month end is
A. P 27,500
B. P 28,500
C. P 20,500
D. P43,500
ANSWER: B

8. Casper Company has the following items at year-end: Cash in bank, P 200,000;
Petty cash fund, P3,000; Commercial paper with maturity of 2 months, P 55,000;
Postdated checks, P 14,000.Casper should report cash and cash equivalents of
A. P 200,000.
B. P 203,000.
C. P 258,000.
D. P 272,000
ANSWER: C

9. An entity budgeted the following sales: Sales on account for June July and
August respectively 1,800,000; 1,840,000; 1,900,000 and Cash sales 180,000;
200,000; 260,000. All merchandise is marked up to sell at invoice cost plus 20%.
Merchandise inventory at the beginning of each month is 30% of that month's
projected cost of goods sold. What is the amount of anticipated purchases for July?

A. 1,632,000
B. 2,076,000
C. 1,700,000
D. 1,730,000
ANSWER: D

10. An entity provided the following information about assets in forest

plantation: Freestanding trees 5,000,000 Land under trees 900,000 Roads in
forest 500,000 Animals related to recreational activities 2,000,000 Rubber
trees and grape vines 1,500,000. What total amount should be reported as
biological assets?
A. 5,000,000
B. 8,500,000
C. 6,500,000
D. 9,900,000
ANSWER: A

11. On January 1, 2022, Gymnastic Company issued 9% bonds in the face amount of
P5, 000, 000 which mature on January 1, 2032. The bonds were issued for P4, 695,
000 to yield 10%. Interest is payable annually on December 31. The entity used the
interest method of amortizing bond discount? What is the interest expense for 2022?
A. P450, 000
B. P469, 500
C. P422, 550
D. P500, 000
ANSWER: B

12. On December 31, 2022, what is the carrying amount of the bonds payable?
A. P5, 000, 000
B. P4, 704, 750
C. P4, 714, 500
D. P4, 695, 000
ANSWER: C

13. Which of the following steps in the accounting cycle are listed in a logical
order?
A. Post the dosing entries, take a post-closing trial balance, and journalize
the closing entries.
B. Post the journal entries to the general ledger accounts, prepare a worksheet,
and then take a trial balance.
C. Take a trial balance, prepare a worksheet, then prepare financial statements.
D. Prepare the income statement, prepare trial balance sheet and then prepare a
trial balance.
ANSWER: C

14. Which statement is correct regarding the accounting process?

A. An adjusted trial balance that shows equal debit and credit columnar totals
proves the accuracy of the adjusting entries.
B. Each adjusting entry affects one statement of financial position account and
one income statement account.
C. The trial balance is a listing of all the accounts and their balances in the
order the accounts appear on the statement of financial position.
D. Reversing entries are made at the end of the accounting cycle to correct
errors in the original recording of transactions.
ANSWER: B

15. Which of the following enhancing qualitative characteristics can make

irrelevant or not faithfully represented information useful?
A. Timeliness
B. Verifiability
C. Understandability
D. None of these
ANSWER: D

16. Which statement is correct regarding the Conceptual Framework?

A. The revisions will automatically lead to changes to the Standards.
B. Excludes the concept of prudence or conservatism because it is inconsistent
with neutrality, which encompasses freedom from bias.
C. The new recognition criteria are intended to increase or decrease the range
of assets and liabilities recognized
D. Requires focusing on presentation and disclosure objectives and principles
rather than focusing on rules.
ANSWER: D

17. An entity shall disclose comparative information in respect of the previous

period for all amounts reported in the current period's financial statements. When
an entity applies an accounting policy retrospectively, it shall present, as
minimum
A. Three complete sets of financial statements
B. Three statements of financial position and cash flows, two of each of the
other statements, and related notes.
C. Three statements of financial position and statement of comprehensive income,
two of each of the other statements, and related notes.
D. Three statements of financial position, two of each of the other statements,
and related notes.
ANSWER: D

18. A firm factors P40,000 of accounts receivable without recourse. The factor
agrees to provide financing based on these receivables, but imposes a 10% fee. In
addition, the transferor and transferee agree that P3,000 of sales returns and
allowances can be expected from these accounts. What is the loss or expense to
recorded by the transferor?
A. P7,000
B. P3,000
C. P4,000
D. P0
ANSWER: B

19. Which of the following inventories carried by a manufacturer is similar to

the merchandise inventory of a retailer?
A. Raw materials
B. Work-in-process
C. Finished goods
D. Supplies.
ANSWER: C

20. Grumpy Retailers purchased merchandise with a list price of P50,000, subject
to trade discounts of 20% and 10%, with no cash discounts allowable. Grumpy should
record the cost of this merchandise as
A. P35,000
B. P36,000
C. P39,000
D. P50,000
ANSWER: B

21. On June 1, 2022, Penny Corp. sold merchandise with a list price of P20,000 to
Linn on account. Penny allowed trade discounts of 30% and 20%. Credit terms were
2/15, n/40 and the sale was made f.o.b. shipping point. Penny prepaid P400 of
delivery costs for Linn as an accommodation. On June 12, 2022, Penny received from
Ison a remittance in full payment amounting to
A. P10,976
B. P11,368
C. P11,376
D. P11,196.
ANSWER: C

22. Goods in transit which are shipped f.o.b. shipping point should be
A. included in the inventory of the seller
B. included in the inventory of the buyer
C. included in the inventory of the shipping company
D. none of these.
ANSWER: B

23. Net realizable value is

A. acquisition cost plus costs to complete and sell
B. selling price.
C. selling price plus costs to complete and sell
D. selling price less costs to complete and sell
ANSWER: D

24. Generally speaking, biological assets relating to agricultural activity shall

be measured using
A. Historical cost
B. Historical cost less depreciation less impairment
C. A fair value approach
D. Net realizable value
ANSWER: C

25. Salter Ltd has completed its current year financial statements which reveal,
in part, the following information: Profit for the year-P110,000 Total
comprehensive income --P130,000 Other comprehensive income relates to the
revaluation of land and buildings to fair value Dividends paid -P35,000 Opening
equity balances-share capital P300,000 retained earnings P220,000, asset
revaluation surplus P60,000 No more share capital was issued during the reporting
period. The total equity at the end of the current year is
A. P580,000
B. P655,000
C. P675,000
D. P695,000
ANSWER: C
26. A company's statement of profit or loss for the year ended 31 December 2022
showed a net profit of P83,600. It was later found that P18,000 paid for the
purchase of a motor van had been debited to the motor expenses account. It is the
company's policy to depreciate motor vans at 25% per year on the straight-line
basis, with a full car's charge in the year of acquisition. What would the net
profit be after adjusting for this error?
A. P79,100
B. P101,600
C. P97,100
D. P106,100
ANSWER: B

27. Which of the following has the highest authoritative support?

A. Conceptual Framework for Financial Reporting
B. International Financial Reporting Standards
C. International Accounting Standards
D. Interpretations of the IFRIC
ANSWER: B

28. Which organization is NOT directly represented in the 15 member Financial

Reporting Standards Council (FRSC)?
A. Commission on Audit (COA)
B. Bureau of Internal Revenue (BIR)
C. Securities and Exchange Commission (SEC)
D. Professional Regulations Commission (PRC)
ANSWER: D

29. Which accounting process is the recognition or non-recognition of business

activities as accountable events?
A. Identifying
B. Measuring
C. Recording
D. Communicating
ANSWER: A

30. A voucher system is usually used for transactions involving

A. Cash receipts
B. Cash disbursements
C. Cash receipts and Disbursements
D. Communicating
ANSWER: B

31. The profit or loss of a period and the other gains and losses recognized
directly in equity are presented in the
A. Statement of financial position
B. Income statement
C. Statement of cash flows
D. Statement of changes in equity
ANSWER: D

32. Under PAS 1, which information is normally NOT included in the “notes to
financial statements”?
A. Statement of compliance with GAAP
B. Statement of measurement basis for the financial statements and accounting
policies applied
C. Supporting information for line items presented and aggregated
D. A statement or cash flows
ANSWER: D
33. In the notes to the FS, the section on 'summary of significant accounting
policies' shall disclose
A. The composition of property, plant and equipment and the depreciation method
used
B. The composition of property, plant and equipment only
C. The depreciation method used only
D. Neither the composition of property, plant and equipment nor the depreciation
method used
ANSWER: C

34. Adjustments of financial statements are required for those events after
balance sheet date which
A. Are unusual and material
B. Occurred prior to Issuance of the financial statements
C. Have a material effect or a user's evaluation of the information presented in
the financial statements
D. Provide additional information for determining amounts relating to conditions
existing on the BS date
ANSWER: D

35. The term “deficit” refers to

A. An excess of current assets over current liabilities.
B. An excess of current liabilities over current assets.
C. A debit balance in retained earnings.
D. A loss that is reported as a prior period adjustment
ANSWER: C

36. Which of the following expenses is subject to immediate recognition on the

income statement?
A. Utilities expense for the production line of a manufacturer
B. Repairs and maintenance expense incurred on production equipment of a
manufacturer
C. The salary of the production foreman
D. The salary of the company president
ANSWER: D

37. Which of the following temporary differences ordinarily creates a deferred

tax asset?
A. Accrued warranty costs
B. Depreciation
C. Installment sales
D. Prepaid insurance
ANSWER: A

38. Which type of derivative are changes in the fair value deferred and
recognized as an equity adjustment?
A. Fair value hedge
B. Cash flow hedge
C. Operating hedge
D. Notional value hedge
ANSWER: B

39. Which of the following is correct regarding earnings per share?

A. If preference shares are outstanding, dividend declared on the preferred
shares are always deducted from net income in calculating EPS.
B. EPS can never be negative.
C. If income from continuing operations is less than zero, potentially dilutive
securities are antidilutive.
D. All issues of potential ordinary shares must be included in the calculation
of diluted EPS.
ANSWER: C

40. An example of an item that should be reported as a prior period adjustment is

the
A. Collection of previously written off accounts receivable.
B. Payment of taxes resulting from examination of prior years' income tax
returns.
C. Correction of an error in financial statements of a prior year.
D. Receipt of insurance proceeds for damage to a building sustained in a prior
year.
ANSWER: C

41. Which of the following accounting theory justifies the use of historical cost
method in the preparation of financial statements?
A. Conservatism
B. Objectivity
C. Relevance
D. Comparability
ANSWER: B

42. Under current legislation, the number of CPD units required for renewal of
CPA license is
A. 120 units
B. 90 units
C. 80 units
D. 15 units
ANSWER: D

43. Under the Revised Conceptual Framework, financial statements of two or more
entities having a parent and subsidiary relationship are called
A. Consolidated financial statements
B. Combined financial statements
C. Total financial statements
D. Family-owned financial statements
ANSWER: A

44. An entity leased a new machine having an expected useful life of 12 years.
The noncancelable lease term is 10 years. The entity is certain exercise a purchase
option at the end of the noncancelable term. The machine should be capitalized by
the entity and depreciated over
A. 9 years
B. 12 years
C. 10 years
D. 10 or 12 years at entity's option.
ANSWER: B

45. Which of the following assets is required to be tested at least annually for
impairment?
A. Machinery
B. Patent
C. Renewable broadcast license
D. Copyright
ANSWER: C

46. Which of the following is not a component of employee benefit expense?

A. Interest expense
B. Interest income
C. Benefit paid to retirees.
D. Past service cost.
ANSWER: C

47. Operating activities are

A. The principal revenue-producing activities of the entity and generally result
from the transactions and other events that enter into the determination of net
income or loss.
B. The acquisition and disposal of long-term assets and other investments not
included in cash equivalents.
C. The activities that result in changes in size and composition of equity
capital and borrowings of the entity.
D. Cash flows arising from purchase and sale of goods in the ordinary course of
business only.
ANSWER: A

48. Proceeds from the sale of investments in ordinary shares accounted for by the
equity method would be classified into which of the following sections of the cash
flow statement?
A. Operating
B. Investing
C. Financing
D. Noncash item
ANSWER: B

49. Failure to record depreciation expense at the end of an accounting period

results in
A. Understated income
B. Understated assets
C. Overstated expense
D. Overstated assets
ANSWER: D

50. Which of the following is classified as nonmonetary?

A. Financial assets measured at fair value
B. Accrued expenses
C. Unamortized discount on bonds payable
D. Refundable deposits
ANSWER: A

51. Gains and losses on the purchase and resale of treasury shares may be
reflected only in
A. Share premium accounts
B. Share premium and retained earnings accounts
C. Income, share premium, and retained earnings accounts
D. Income and share premium accounts
ANSWER: B

52. How should an entity present equity investments using the equity method?
A. As part of “Other noncurrent assets”
B. As a separate line item, under Current Assets
C. As a separate line item, under Noncurrent Assets
D. As a component of Share Capital
ANSWER: C

53. Under PFRS for SME, basic debt instruments are subsequently measured at
A. Amortized cost using the effective interest method of amortization
B. Amortized cost using the straight line method of amortization
C. Fair value through profit or loss
D. Cost less impairment
ANSWER: A

54. Under PFRS for SME, if an entity is unable to determine the useful life of an
intangible asset, the entity shall
A. Always presume the useful life to be 10 years
B. Treat the intangible asset as having an indefinite life
C. Determine the best estimate of the useful life but not exceeding 10 years
D. Write-off the asset as an expense
ANSWER: C

55. For questions 55-60. On October 1, 2022, accounts receivable in the amount of
P1,000,000 were assigned to a bank by Jade Company as security for a loan of
P800,000. The bank charged a 3% commission on the accounts. The interest rate on
the note is 12%. During the month, Jade collected P300,000 on assigned accounts
after deducting P50,000 of discounts. Jade wrote off a P53,000 assigned account.
Jade paid to the bank the amount collected plus one month's interest on the note.
On October 31, 2022, Jade estimated that 8% of the assigned accounts is doubtful in
collection. On June 1, 2022, Emerald Company factored P600,000 of accounts
receivable with Finance Company without recourse. Finance assessed a finance charge
of 6% of the total accounts receivable factored and retained an amount equal to 2%
of the total receivables to cover sales returns and allowances. It was agreed that
the factor’s holdback should always be equal to 2% of the account receivable
balance after any collection by Finance. Any amount in excess of the required
balance should be returned to Emerald. During the month, Finance collected P350,000
from Emerald’s customers. On December 20, 2022, Mile Company purchased
merchandise on credit for P3,000,000 with terms 2/10, n/30. 80% of the gross
liability was paid within the discount period. The remainder was paid on January
15, 2023. On December 31, 2022, 90% of the merchandise had been sold and 10%
remained in inventory. Mile uses the net method. What is the balance of accounts
receivable of Jade Company on October 31, 2020?
A. 597,000
B. 647,000
C. 105,000
D. 155,000
ANSWER: A

56. What is the doubtful account expense to be recognized by Jade Company?

A. 47,760
B. 51,760
C. 104,760
D. 100,760
ANSWER: D

57. What amount of loss on factoring should Emerald Company recognize?

A. 48,000
B. 12,000
C. 36,000
D. 41,000
ANSWER: C

58. What amount should Finance return to Emerald to satisfy the required holdback
balance?
A. 12,000
B. 5,000
C. 7,000
D. 0
ANSWER: C
59. What amount of purchase discount lost should Mile recognize on December 31,
2020?
A. 12,000
B. 60,000
C. 48,000
D. 0
ANSWER: A

60. What amount of cost of goods sold should Mile recognize on December 31, 2020?

A. 2,700,000
B. 2,646,000
C. 2,658,000
D. 2,652,000
ANSWER: B

61. For questions 61 to 65: Maxi Company constructed a building at a cost of

P20,000,000. Average accumulated expenditures were P8,000,000, actual interest was
P1,200,000, and avoidable interest was P600,000 during the year. Bandai Company
plans to acquire an additional machine on January 1, 2022. Hasbro Company offers to
provide the machine to Bandai using either of the options listed below (each option
gives Bandai the same machine and gives Hasbro the same present value cash
equivalent at 10%). Option 1 Cash purchases of P8,000,000. Option 2 Installment
purchases requiring 15 annual payments of P1,051,790 due December 31 each year.
The useful life of this machine is 15 years and the residual value is estimated to
be P500,000. Bandai uses SYD method of depreciation. On December 31, 2022, DD
Company paid P7,000,000 to acquire all of the ordinary shares of EE Company, which
became a division of DD. In the books of EE, the net assets are recorded at
P5,000,000. It was determined that the fair value of the identifiable net assets of
EE is P5,600,000. On December 31, 2023, EE Company reported current assets and
noncurrent assets of P1,600,000 and P4,800,000 respectively. The noncurrent assets
included the amount of goodwill. EE Company was tested for any impairment loss. The
value in use of EE Company was P3,800,000. Riley Company incurred the following
costs during 2022: Significant modification to the formulation of a chemical
product 1,600,000 Troubleshooting in connection with breakdowns during
commercial production 1,500,000 Cost of exploration of new formulas 2,000,000
Seasonal or other periodic design changes to existing products 1,850,000
Laboratory research aimed at discovery of new technology 2,250,000 What is the cost
of the new building to Maxi Company?
A. 21,200,000
B. 20,600,000
C. 9,200,000
D. 8,600,000
ANSWER: B

62. What is the total expense to Bandai under Option 2?

A. 3,487,291
B. 1,909,606
C. 1,989,290
D. 1,737,500
ANSWER: D

63. What is the goodwill on the acquisition of EE Company?

A. 1,400,000
B. 2,000,000
C. 600,000
D. 0
ANSWER: A
64. What amount of impairment loss is allocated to goodwill of EE Company?
A. 2,600,000
B. 1,400,000
C. 2,000,000
D. 568,750
ANSWER: B

65. What amount of research and development expense should Riley recognize?
A. 7,350,000
B. 5,850,000
C. 9,200,000
D. 7,700,000
ANSWER: B

66. Under PAS 1, which information is normally NOT included in the “notes to
financial statements”?
A. Statement of compliance with GAAP
B. statement of measurement basis for the financial statements and accounting
policies applied
C. Supporting information for line items presented and aggregated
D. A statement or cash flows
ANSWER: D

67. In the notes to the FS, the section on 'summary of significant accounting
policies' shall disclose
A. The composition of property, plant and equipment and the depreciation method
used
B. The composition of property, plant and equipment only
C. The depreciation method used only
D. Neither the composition of property, plant and equipment nor the depreciation
method used
ANSWER: C

68. The profit or loss of a period and the other gains and losses recognized
directly in equity are presented in the
A. Statement of financial position
B. Statement of cash flows
C. Income statement
D. Statement of changes in equity
ANSWER: D

69. The major financial statements include all of the following, EXCEPT
A. Statement of financial position
B. Statement of comprehensive income
C. Statement of changes in equity
D. Statement of changes in financial position
ANSWER: D

70. Assets and liabilities, and income and expenses in the financial statements
may be off-set if:
A. there is no tax effect
B. required or permitted by a particular standard
C. they are financial assets and liabilities
D. they are in respect of borrowing and lending activities
ANSWER: B