1.

A complete set of financial statements includes all of the following components, except

a. Statement of financial position b. Statement of changes in equity.

c. Notes to financial statements

d. Environmental reports and value added statements

2. What is the objective of financial statements?

a. To provide information about the financial position, financial performance and changes in financial

position useful to a wide range of users

b. To prepare a statement of financial position and statement of comprehensive income

c. To present relevant, reliable, comparable and understandable information d. To prepare financial

statements in accordance with all applicable standards

3. The primary responsibility for the preparation of the financial statements is reposed in

a. Management of the entity

b. Internal auditor

c. External auditor

d. Controller

4. The major financial statements include all, except

a. Statement of financial position

b. Income statement

c. Statement of cash flows

d. Statement of retained earnings

5. The major financial statements include all, except

a. Statement of financial position

b. Statement of changes in financial position

c. Statement of comprehensive income

d. Statement of changes in equity

1. When an entity changed the reporting period longer or shorter than one year, an entity shall disclose
all of the following, except

a. Period covered by the financial statements.

b. The reason for using a longer or shorter period.

C. The fact that amounts presented in the financial statements are not entirely comparable.

d. The fact that similar entities in the geographical area in which the entity operates have done so.

2. Which of the following is not a component of the financial statements?

a. Statement of financial position

b. Statement of changes in equity

c. Report of board of directors

d. Notes to financial statements

3. Which of the following is included in a complete set of financial statements?

a. A statement by the board of directors of compliance with local legislation

b. A statement of changes in equity

c. Statements of financial position for the last five years

d. Value added statement

4. Which of the following is included within the financial statements?

a. A statement of retained earnings

b. Accounting policies

C. An auditor's report

d. Board of directors' report

5. An entity shall clearly identify each financial statement and display all of the following, except

a. Name of the reporting entity.

b. Names of major shareholders of the entity.

c. The presentation currency.

d. Whether the financial statements cover the individual entity or a group of entities.
1. Which statement is incorrect concerning fair presentation of financial statements?

a. Fair presentation requires the faithful representation of the effects of transactions and other events.

b. Financial statements shall present fairly the financial position, financial performance and cash flows of
an entity.

c. In virtually all circumstances, a fair presentation is achieved by compliance with applicable PFRS.

d. An entity whose financial statements comply with PFRS shall not make an explicit and unreserved
statement of such compliance in notes.

2. Which of the following cannot be considered fair presentation of financial statements?

a. To present information in a manner that provides relevant and faithfully represented financial
information.

b. To provide additional disclosures when compliance with specific PFRS is insufficient to understand the
financial position and financial performance.

c. To select and apply accounting policies in accordance with applicable PFRS.

d. To rectify inappropriate accounting policies either by disclosure of the accounting policies used or by
notes or explanatory information.

3. Which statement indicates a going concern?

a. Management intends to liquidate the entity.

b. Management intends to cease the operations of the entity.

c. Management has no realistic alternative but to cease the operations of the entity.

d. None of these would indicate going concern

4. An entity is permitted to depart from a particular standard if all of the following conditions are
satisfied, except

a. In extremely rare circumstances.

b. When management concludes that compliance with the standard would be misleading.

c. When the departure from the standard is necessary to achieve fair presentation.

d. When the Conceptual Framework for Financial Reporting prohibits such a departure.

5. The effects of transactions and other events on economic resources and claims are depicted in the
periods in which those effects occur even if the resulting cash receipts and payments occur in a different
period.

a. Accrual accounting

b. Cash accounting
c. Modified accrual accounting

d. Modified cash accounting

6. Financial statements must be prepared at least

a. Annually

b. Quarterly

c. Semiannually

d. Every two years

7. Technically, offsetting in financial statements is accomplished when

a. The allowance for doubtful accounts is deducted from accounts receivable.

b. The accumulated depreciation is deducted from property, plant and equipment.

c. The total liabilities are deducted from total assets.

d. Gain or loss from disposal of noncurrent asset is reported by deducting from the proceeds the carrying
amount of the asset and the related disposal cost.

8. The presentation and classification of items in the financial statements shall be retained from one
accounting period to the next.

a. Consistency of presentation

b. Materiality

c. Aggregation

d. Comparability

9. A third statement of financial position as at beginning of the earliest comparative period presented is
required

a. When an entity applies an accounting policy

retrospectively.

b. When an entity makes a retrospective restatement of items in the financial statements.

c. When an entity reclassifies items in the financial statements.

d. Under all of these circumstances

10. Which statement in relation to financial statements in incorrect?

a. General purpose financial statements do not and cannot provide all of the information that primary
users need.

b. General purpose financial statements are designed to show the value of the reporting entity.

c, General purpose financial statements are intended to provide common information to users.

d. Financial statements are largely based on estimate and judgment rather than exact depiction.

1. Items of dissimilar nature or function

a. Must always be presented separately.

b. Must not be presented separately.

c. Must be presented separately if material.

d. Must be presented separately even if immaterial.

2. Materiality depends on

a. The nature of the omission or misstatement.

b. The absolute size of the omission or misstatement.

c. The relative size and nature of the omission or misstatement judged in the surrounding circumstances.
d. The judgment of management.

3. An entity must disclose comparative information for

a. The previous comparable period for all amounts.

b. The previous comparable period for all amounts and for all narrative and descriptive information.

c. The previous comparable period for all amounts and for all narrative and descriptive information when
it is relevant to an understanding of the current period's financial statements.

d. The previous two comparable periods for all amounts.

4. When the classification of items in the financial statements is changed, the entity

a. Must not reclassify the comparative amounts.

b. Can choose whether or not to reclassify.

c. Must reclassify the comparative amounts unless it is impracticable to do so.

d. Must reclassify the current year amounts only.

5. An entity shall present

a. The statement of cash flows more prominently.

b. The statement of financial position more prominently.

c. The income statement more prominently.

d. Each financial statement with equal prominence.

1. The overall objective of financial reporting is to provide information

a. That is useful for decision making

b. About assets, liabilities and equity

c. About financial performance during a period

d. That assesses performance of management

2. The objective of financial reporting is based on

a. The need for conservatism

b. Reporting on management stewardship

c. Generally accepted accounting principles

d. The needs of the users of the information

3. Which is an objective of financial reporting?

a. To provide information that is useful in making investing and credit decisions.

b. To provide information that is useful to management.

c. To provide information to investors.

d. To provide information about internal and external conflicts.

4. Which is an objective of financial reporting?

a. To provide information useful to management.

b. To identify nonfinancial transactions.

c. To provide information useful to assess the amount, timing and uncertainty of prospective cash
receipts.

d. To provide information that excludes claims.

5. An objective of financial reporting is to provide

a. Information about the investors in the entity.

b. Information about the liquidation value of the entity.

c. Information useful in assessing cash flow prospects.

d. Information that will attract new investors.

1. During a period when an entity is under the direction of a particular management, financial reporting
will directly provide information about

a. Entity performance and management performance

b. Management performance but not entity performance

c. Entity performance but not management performance

d. Neither entity nor management performance

2. Financial reporting pertains to

a. Individual business entities, rather than to industries or an economy or to members of society as

consumers

b. Individual business entities and an economy or to members of society as consumers

c. Individual business entities and an economy rather than to industries or to consumers

d. Individual business entities, industries and an economy rather than to members of society as
consumers

3. Which is not an objective of financial reporting?

a. Financial reporting shall provide information about resources, claims against resources and changes in
them.

b. Financial reporting shall provide information useful in evaluating stewardship of management.

c. Financial reporting shall provide information useful in investment, credit and similar decision.

d. Financial reporting shall provide information useful in assessing cash flow prospects.

4. Which is not an objective of financial reporting?

a. To provide information about assets and claims against those assets

b. To provide information useful in assessing cash flows

c. To provide information useful in lending and investing decisions

d. To provide information about the liquidation value of an entity

1. Which would likely prepare the most accurate financial forecast for an entity based on empirical
evidence?
a. Investors using statistical models

b. Corporate management

c. Financial analysts

d. Independent certified public accountants

2. What is the most useful information in predicting future cash flows?

a. Information about current cash flows

b. Current earnings based on accrual accounting

c. Information regarding the accounting policies used d. Information regarding the results obtained by
using a wide variety of accounting policies

3. The accrual basis of accounting is most useful for

a. Determining the amount of income tax liability.

b. Predicting short-term financial performance.

c. Predicting long-term financial performance.

d. Determining the amount of dividends to shareholders.

4. In measuring financial performance, accrual accounting is used because

a. Cash flows are considered less important.

b. It provides a better indication of ability to generate cash flows than cash basis.

c. It recognizes revenue when cash is received and expenses when cash is paid.

d. It is one of the implicit assumptions.

5. The financial statements prepared under GAAP

a. Do not articulate with one another.

b. Reflect a single measurement which is historical cost.

c. Are not highly precise because estimate and judgment must be made.

d. Contain a limited number of future projections.