Chapter 3

1. Which of the following is not a

purpose of notes to financial
statements?
A: To disclose the information
required by Philippine Financial
Reporting Standards that is not
presented elsewhere in the
financial statements.
2. Which is the proper order of
presenting the notes to financial
statements?
I.
Statement of compliance with
PFRS
II.
Other disclosures, such as
contingent liabilities,
unrecognized contractual
commitments and other non
financial disclosures.
III.
Supporting information for
items presented on the face of
the financial statements.
IV.
Summary of significant
accounting policies.
A: I, IV, III and II
3. Which of the following statements
is true concerning compliance with
PFRS?
I.
An entity whose financial
statements comply with
Philippine Financial Reporting
Standards shall make an
explicit and unreserved
statement of such compliance
in the notes.
II.
An entity shall not describe
financial statements as
complying with PFRS unless
they comply with all the
requirements of each applicable
Philippine Financial Reporting
Standard.
A: Both I & II
4. An entity is required to disclose
certain nonfinancial information.
Which of the following is not
embraced in that disclosure?
A: Names and addresses of the
corporate directors and officers.

5. An entity shall disclose in the notes

to financial statements
I.
The amount of dividends
proposed or declared after the
financial statements were
authorized for issue but not
recognized as distribution
during the period and the
related amount per share.
II.
The amount of any
noncumulative preference
dividends not recognized.
A: Neither I nor II
6. The cross-reference between each
line item in the financial
statements and any related
information disclosed in the notes
to financial statements
A: Is mandatory
7. The presentation of the notes to
financial statements in a
systematic manner
A: Is mandatory as far as
practicable.
8. An entity shall disclose in the
summary of significant accounting
policies
A: The measurement basis and
accounting policies used in
preparing the financial statements.
9. Disclosure of information about key
sources of estimation uncertainty
A: Is mandatory
10. Disclosure of information about
judgments
A: Is mandatory
11. Which f the following statements s
incorrect regarding notes to
financial statements?
A: PFRS requires that all notes
should be clear, simple to
understand and nontechnical n
nature.
12. Notes to financial statements
A: Amplify or explain items
presented in the financial
statements
13. Which of the following is not a
method of disclosing pertinent
information?
A: All of these are methods of
disclosing pertinent information.

14. The disclosing of accounting

policies is important to financial
statements readers in determining
A: Whether accounting policies are
consistently applied from year to
year.
15. Accounting policies disclosed in the
notes to financial statements
typically include all of the following
except:
A: The depreciation method
16. Significant accounting policies may
not be
A: Omitted from financial
statement disclosure.
17. Which of the following should be
defined as intentional distortion to
financial statements?
A: Fraud
18. Typical contractual situations that
are disclosed in the notes to
statement of financial position
include all of the following except
A: Advertising contract
19. Which of the following is not a
required supplemental disclosure
for the statement of financial
position?
A: Financial forecast
20. An example of inventory
accounting policy that should be
disclosed in a summary of
significant accounting policies is
A: Method used for pricing
inventory
21. The full disclosure principle is best
described by which f the following?
A: Disclosure of any financial facts
significant enough to influence the
judgment of an informed user.
22. Application of the full disclosure
principle
A: Is demonstrated by the use of
supplementary information
presenting the effects of changing
prices.

23. This means that all information

significant enough to affect a
decision of reasonably informed
users should be reported in the
financial statements?
A: Full disclosure
24. A description of the depreciation
method
A: Is needed in the financial
reporting when accounting policy
differs from income tax policy.
25. Which of the following
classifications would normally
require the greatest amount of
supplementary disclosure?
A: Current liabilities
26. What is the purpose of information
presented in the notes to financial
statements?
A: To provide disclosure required
by generally accepted accounting
principles.
27. Notes to financial statements
should not be used to
A: Correct an improper
presentation in the financial
statements.
28. Which of the following information
should be disclosed in the
summary of significant accounting
policies?
A: Criteria for determining which
investments are treated as cash
equivalents.
29. Which of the following should be
disclosed in a summary of
significant accounting policies?
A: Type of executor contract
30. Which of the following is not
commonly required disclosure of
accounting policies?
A: Key management personnel
involved in drafting the summary
of significant accounting policies.