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EASY ROUND
1. Which of the following terms best describes financial statements whose basis of accounting
recognizes transactions and other events when then occur?
A. Accrual basis of accounting
B. Cash basis of accounting
C. Going concern basis of accounting
D. Invoice basis of accounting
2. During the lifetime of an entity, accountants produce financial statements at arbitrary pints in time in
accordance with which basis accounting concept?
A. Cost and benefit constraint
B. Expense recognition principle
C. Materiality constraint
D. Periodicity assumption
3. Basic steps in the recording process include all of the following, except
A. Enter the transaction information in a journal
B. Analyze each transaction for the effect of the accounts
C. All of the choices are correct regarding the basis steps in the recording process
D. Transfer the journal information to the appropriate account in the statement of financial position
8. A document prepared to prove the equality of debits and credits after all adjustments is the
A. Adjusted financial statements
B. Adjusted statement of financial position
C. Adjusted trial balance
D. Post-closing trial balance
AVERAGE ROUND
1. IFRIC Interpretations
A. Are considered authoritative and must be followed
B. Cover newly identified financial reporting issues not specifically addressed
C. Cover issues where unsatisfactory or conflicting interpretations have developed
D. All of these are correct regarding IFRIC Interpretations
3. Which of the following is not a benefit associated with the Conceptual Framework?
A. A coherent set of accounting standards and rules should result
B. Practical problems should be more quickly solvable by reference to an existing conceptual framework
C. A conceptual framework should increase financials statement users’ understanding and confidence in
financial reporting
D. Business entities will need far less assistance from accountants because the financial reporting
process will be quite easy to apply
4. What is the objective of financial statements?
A. To prepare comparable, relevant, reliable and understandable information to investors and creditors
B. To prepare financial statements in accordance with all applicable Standards and Interpretations
C. To prepare a statement of financial position, an income statement, a statement of cash flows and a
statement of changes in equity
D. To provide information about the financial position, performance and changes in financial position of
an entity that is useful to a wide range of users in making economic decisions
7. The term “assessing cash flow prospects” as an objective of financial reporting means
A. Cash basis is preferred over accrual basis of accounting
B. Over the long run, trends in revenue and expenses are generally more meaningful than trends in cash
receipts and payments
C. Information about the financial effects of cash receipts and cash payments is considered the best
indicator of continuing ability to general favorable cash flows
D. All of these are correct regarding assessing ash flow prospects
9. For information to be useful, the link between the users and the decision made is
A. Materiality C. Reliability
B. Relevance D. Understandability
1. What is the requirement for incorporating an item into the income statement of statement of
financial position?
A. It satisfies the criteria of capital maintenance
B. It meets the requirement of comparability and consistency
C. It meets the definition of relevance and faithful representation6
D. It meets the definition of an element and can be measured reliably
3. An entity shall present current and noncurrent assets and liabilities when the
A. Entity is a public utility
B. Entity is a government entity
C. Entity supplies goods or services within a clearly identifiable operating cycle7
D. Presentation based on liquidity provides reliable and more relevant information
5. Which of the following is not acceptable treatment for the presentation of current liabilities?
A. Listing current liabilities in order of maturity
B. Listing current liabilities according to amount
C. Showing current liabilities in order of liquidation preference
D. Offsetting current liabilities against assets that are to be applied to their liquidation
6. The income statement provides information that is useful for all of the following, except
A. To evaluate future performance of the entity
B. To provide a basis for predicting future performance
C. To assess the risk and uncertainty of achieving future cash flows
D. To predict the amount, timing and uncertainty of future cash flows
7. An entity decided to extend the report period from a 12-month period to a 15-month period. Which
of the following is not required in case of change in reporting period?
A. The entity should disclose the period covered by the financial statements
B. The entity should disclose the reason for using a longer period than a period of 12 months
C. The entity should disclose that comparative amounts used in the financial statements are not entirely
comparable
D. The entity should change the reporting period only if other similar entities in the geographical area in
which it generally operates have done so in the current year
10. Under PFRS 1, how should a first-time adopter of PFRS recognize the adjustments required to
present the opening PFRS statement of financial position?
A. All of the adjustments should be recognized in profit or loss
B. All of the adjustments should be recognized directly in retained earnings or, if appropriate, in another
category of equity
C. Current adjustments should be recognized in profit or loss and noncurrent adjustments should be
recognized in retained earnings
D. Adjustments that are capital in nature should be recognized in retained earnings and adjustments
that are revenue in nature should be recognized in profit or loss
1. Which of the following is a true statement regarding disclosures for subsequent events?
A. Recognize a loss for a recognized subsequent event in the current year financial statements
B. Recognize a gain or loss for any recognized subsequent event in the current year financial statements
C. Recognize a loss for all recognized and unrecognized subsequent events in the current year financial
statements
D. Recognize a loss for a recognized subsequent event in the financial statements in the year when the
subsequent event occurs
2. One of the benefits of the statement of cash flows is that it helps users evaluate financial flexibility.
Which of the following explanations is a description of financial flexibility?
A. The entity’s ability to pay debts on maturity
B. The nearness to cash of assets and liabilities
C. The entity’s ability to invest in a number of projects with different objectives and costs
D. The entity’s ability to respond and adapt to financial adversity and unexpected needs and
opportunities
4. How should an unrealized gain on foreign currency transaction be presented in a statement of cash
flows?
A. It should be ignored as it is an unrealized gain
B. As an adjustment to the net income under “operating activities”
C. As an inflow under “financing activities” because it arises from a foreign currency transaction
D. It should be disclosed in the notes to the financial statements by way of abundant precaution
5. An entity other than a financial institution receives dividends from investment in shares. How should
it disclose the dividends received in the statement of cash flows?
A. Operating cash inflow
B. Either as operating cash inflow or as investing cash inflow
C. Either as operating cash inflow or as financing cash inflow
D. As an adjustment in the “operating activities” section of the cash flow because it is included in the net
income for the year and as a cash inflows in the “financing activities” section of the statement of cash
flows