DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
Partnership and Corporation Accounting Theory
Direction: Read and select best answer for the following questions.
1. It is a contract whereby two or more persons bind themselves to contribute money, property or industry into a common fund with the
intention of dividing profits among themselves.
a. Sole proprietorship
b. Corporation
c. Partnership
d. Co-ownership
2. The following are the characteristics of a partnership, except
a. Mutual Agency It means that any partner may act as an agent of the partnership in conducting its affairs.
b. Unlimited liability It means that the personal assets (separate assets of partners) of any partner may be used to satisfy the
partnership creditors claims upon liquidation if partnership assets are not enough to settle the liabilities to outsiders.
c. Unlimited life A partnership may exist for 50 years and subject to renewal.
d. Mutual participation of profits A partner has the right to share in partnership profits.
e. Legal entity A partnership has legal personality separate and distinct from that of each of the partners.
f. Co-ownership of contributed assets Property contributed to the partnership are owned by the partnership by virtue of
separate legal personality.
g. Income tax Partnerships are subject to the corporate income tax of 30% except general professional partnership.
3. The following are the advantages of partnership, except
a. It is easy and inexpensive to organize as it is formed by a simple contract as compared to corporation which is created by
operation of law.
b. The unlimited liability of the partner makes it reliable from the point of view of the creditors.
c. The combined personal credit of the partners offers better opportunity for obtaining additional capital that a sole
proprietorship.
d. The participation in the business of more than one person makes it possible for a closer supervision of all the partnership
activities.
e. The direct gain to the partners is an incentive to give close attention to the business.
f. There is divided authority among the partners.
4. The following are the disadvantages of partnership, except
a. The personal liability of a partner for firm debts deter s many from investing capital in a partnership.
b. A partner may be subject to personal liability for the wrongful acts or omissions of his associates.
c. It is less stable because it can easily be dissolved.
d. There is constant likelihood of dissention and disagreement among partners.
e. The personal element in the characters of the partners is retained.
5. The following are the types or kinds of partnership. Which of the following refers to partnership by estoppel?
a. It is one whose main activity is the manufacture and sale or the purchase and sale of goods.
b. It is one which is organized for the purpose of rendering services.
c. It is one in which the partners contribute, at the time of the constitution of the partnership, all the properties which actually
belong to each of them into a common fund with the intention of dividing the same among themselves as well as the profits which they
may acquire therewith and all assets contributed to the partnership and subsequent acquisitions become common partnership assets.
d. It is one which comprises all that the partners may acquire by their industry or work during the existence of the partnership
and the usufruct of movable or immovable property which each of the partners may possess at the time of the institution of the contract.
The original movable or immovable property contributed do not become common partnership assets.
e. It is one which has for its object determinate things, their use or fruits, or a specific undertaking or the exercise of a
profession or vocation.
f. It is one consisting of general partners who are liable prorata or sometimes solidarily with their separate property for
partnership liabilities.
g. It is one formed by two or more persons with at least one general partner and at least one limited partner.
h. It is one for which no term is specified or is not formed for a particular undertaking or venture and which may be terminated
any time by mutual agreement of the partners or the will of one alone.
i. It is one in which the term or period for which the partnership is to exist is agreed upon.
j. It is one formed for a particular undertaking or venture.
k. It is one which actually exists among the partners and also as to third persons.
l. It is one which in reality is not a partnership but is considered as one only in relation to those who, by their conduct or
omission are precluded to deny or disprove the partnerships existence.
m. It is one which has complied with all the requirements for its establishment.
n. It is one which failed to comply with one or more of the legal requirements for its establishment.

o. It is one wherein the existence of certain persons as partners is not made known to the public by any of the partners.
p. It is one wherein the existence of certain persons as partners is made known to the public by the members of the firm.
6. The following statements pertain to classes of partners. Which of the following pertains to ostenscible partner?
a. He is one who contributes money, cash or property.
b. He is one who contributes industry, labor, skill, talent or service.
c. He is one who contributes cash, property and industry.
d. He is one whose liability to third persons extends to his separate or personal property.
e. He is one whose liability to third persons is limited only to the extent of his capital contribution to the partnership.
f. He is one who manages actively the business of the partnership.
g. He is one who does not participate in the management of the partnership affairs.
h. He is one who takes charge of the winding up of partnership affairs upon dissolution.
i. He is one who is not really a partner, not being a party to the partnership agreement, but is made liable as a partner for the
protection of innocent third persons.
j. He is one who takes active part in the management of the firm and is known to the public as a partner in the business.
k. He is one who takes active part in the management of the business but whose connection with the partnership is concealed
or unknown to the public.
l. He is one who does not take active part in the management of the business and is not known to the public as a partner or he
is a partner who is both silent and secret.
7. Indicate the measurement of the following assets when they are contributed in the partnership:
a. Cash
b. Non-cash asset
c. Non-cash asset in the absence of agreement
d. Industry
8. It is a written agreement among the partners which governs the formation, operation and dissolution of the partnership.
a. Articles of incorporation
b. Articles of co-partnership
c. By-laws of corporation
9. The following are the approaches allowed in case the capital share or interest of a partner is different from his capital contribution?
a. Bonus approach
b. Positive asset revaluation approach
c. Negative asset revaluation approach
d. Goodwill approach
10. As a general rule, profits and losses shall be distributed based on the agreement of the partners. In the absence of agreement as to
sharing of profit, how shall the capitalist partner share on profits be computed?
a. Based on the capital contribution.
b. Equally
c. Based on the agreement as to losses sharing.
11. As a general rule, profits and losses shall be distributed based on the agreement of the partners. In the absence of agreement as to
sharing of losses, how shall the capitalist partner share losses be computed?
a. Based on the capital contribution.
b. Equally
c. Based on the agreement as to profit sharing.
12. As a general rule, profits and losses shall be distributed based on the agreement of the partners. In the absence of agreement as to
sharing of profit, how shall the industrial partner share on profits be computed?
a. Based on the capital contribution.
b. Equal with capitalist
c. Based on the agreement as to losses sharing.
d. Just and equitable share
13. As a general rule, profits and losses shall be distributed based on the agreement of the partners. How shall the industrial partner
share on losses be computed?
a. Based on the capital contribution.
b. Equally
c. Based on the agreement as to profit sharing.
d. Just and equitable share
e. Industrial partner shall not share in the loss even with agreement.
14. If the problem is silent, what is the contribution of capitalist partner?
a. Proportionate to their wealth.
b. Equally
c. In accordance with third person

15. Which of the following statements refers to dissolution?

a. It is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying out of the
business.
b. It refers to the termination winding up of partnership affairs preparatory to going out of business.
c. It refers to the end of the partnership business upon completion of winding up.
d. It is the process of converting non-cash assets into cash.
e. It is the excess of the selling price over the book value of the noncash assets disposed.
f. It is the excess of the book value of the noncash assets disposed over the selling price.
g. It is the excess of partners share on losses over his capital.
h. It is a partner with a debit balance in his capital account after receiving his share on the loss on realization.
i. It involves the order of creditors rights against the partnerships assets and the personal assets of the individual partners.
j. It is the right legal right to apply part or all of the amount owing to a partner on a loan balance against deficiency in his capital
resulting from losses in the process of liquidation.
k. It is a type of liquidation whereby the distribution of cash to the partners is done only after all the non-cash assets have been
realized, the total amount of gain or loss on realization is known, and all liabilities have been paid.
l. It is a type of liquidation whereby assets are realized on piecemeal basis and cash is distributed on a periodic basis.
m. It is a statement prepared to summarize the liquidation process.
n. He is a partner whose personal assets are less than his personal liabilities.
o. It is a partners capital interest that is available for cash payment.
p. It s a portion of a partners capital account balance that is restricted for possible losses on liquidation and not available for
cash payment.
q. He is a partner whose personal assets are more than his personal liabilities.
r. It is the maximum amount of loss that a partner may absorb without incurring capital deficiency.
s. It is a program prepared prior to liquidation, that is, before cash becomes available for distribution.
16. The following are the modes of dissolution of partnership, except
a. Admission of new partner
b. Retirement or withdrawal of a partner
c. Death, civil interdiction or insolvency of a partner.
d. Incorporation of a partnership
e. Withdrawal or admission of a limited partner
17. The total asset contributed by the partners is equal to the total agreed capital of the partnership. Which of the following is true?
a. Bonus approach can be used.
b. Goodwill approach can be used.
c. Negative asset revaluation can be used.
d. Positive asset revaluation can be used.
18. The total asset contributed by the partners is less than the total agreed capital of the partnership. Which of the following is true?
a. Bonus approach can be used.
b. Goodwill approach can be used.
c. Negative asset revaluation can be used.
d. Positive asset revaluation can be used.
19. The total asset contributed by the partners is more than the total agreed capital of the partnership. Which of the following is true?
a. Bonus approach can be used.
b. Goodwill approach can be used.
c. Negative asset revaluation can be used.
d. Positive asset revaluation can be used.
20. The total asset contributed by the new partner and old partners is equal to the total agreed capital of the new partnership. Assuming
the asset contributed by the new partner is less than the capital credited to him, which of the following is true?
a. There is negative asset revaluation.
b. There is positive asset revaluation.
c. There is bonus in favor of new partner from old partners.
d. There is bonus in favor of old partners from new partner.
21. The total asset contributed by the new partner and old partners is equal to the total agreed capital of the new partnership. Assuming
the asset contributed by the new partner is more than the capital credited to him, which of the following is true?
a. There is negative asset revaluation.
b. There is positive asset revaluation.
c. There is bonus in favor of new partner from old partners.
d. There is bonus in favor of old partners from new partner.

22. The total asset contributed by the new partner and old partners is less than the total agreed capital of the new partnership.
Assuming the asset contributed by the new partner is less than the capital credited to him, which of the following is true?
a. There is negative asset revaluation and bonus in favor of new partner from old partners.
b. There is negative asset revaluation and bonus in favor of old partners from new partner.
c. There is positive asset revaluation and bonus in favor of new partner from old partners.
d. There is positive asset revaluation and bonus in favor of old partners from new partner.
23. The total asset contributed by the new partner and old partners is less than the total agreed capital of the new partnership.
Assuming the asset contributed by the new partner is more than the capital credited to him, which of the following is true?
a. There is negative asset revaluation and bonus in favor of new partner from old partners.
b. There is negative asset revaluation and bonus in favor of old partners from new partner.
c. There is positive asset revaluation and bonus in favor of new partner from old partners.
d. There is positive asset revaluation and bonus in favor of old partners from new partner.
24. The total asset contributed by the new partner and old partners is more than the total agreed capital of the new partnership.
Assuming the asset contributed by the new partner is less than the capital credited to him, which of the following is true?
a. There is negative asset revaluation and bonus in favor of new partner from old partners.
b. There is negative asset revaluation and bonus in favor of old partners from new partner.
c. There is positive asset revaluation and bonus in favor of new partner from old partners.
d. There is positive asset revaluation and bonus in favor of old partners from new partner.
25. The total asset contributed by the new partner and old partners is more than the total agreed capital of the new partnership.
Assuming the asset contributed by the new partner is more than the capital credited to him, which of the following is true?
a. There is negative asset revaluation and bonus in favor of new partner from old partners.
b. There is negative asset revaluation and bonus in favor of old partners from new partner.
c. There is positive asset revaluation and bonus in favor of new partner from old partners.
d. There is positive asset revaluation and bonus in favor of old partners from new partner.
26. It is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly
authorized by law or incident to its existence. The following are the characteristics of a corporation, except
a. Separate legal entity artificial being It is artificial being with a personality that is separate from the shareholders.
b. Created by contract It is created by mere agreement of parties.
c. Right of succession It continues to exist despite the death or insolvency of shareholders.
d. Powers, attributes and properties authorized by law I can exercise only powers and can acquire properties as authorized
by law.
e. Ownership divided into shares The proprietorship in a corporation is divided into units of shares of stocks.
f. Board of directors Management of a corporation is vested with the BOD.
27. The following are the advantages of a corporation, except
a. The corporations power of succession enables it to enjoy a continuous existence.
b. The continuity of corporate existence enables it to obtain a strong credit line.
c. Large scale business undertakings are made possible because many individuals can invest their funds in the enterprise.
d. The liability of its investors or shareholders is limited to the extent of their investment in the corporation.
e. It is subject to more taxes.
f. The transfer of shares can be effected without the need for prior consent of other shareholders.
28. The following are the disadvantages of a corporation, except
a. It is not easy to organize because of complicated legal requirements and high costs in its organization.
b. The limited liability of its shareholders weakens its credit capacity.
c. It is subject to rigid government control.
d. Its centralized management restricts a more active participation by shareholders in the conduct of corporate affairs.
e. Its smooth operation is guaranteed because of centralized management.
29. The following statements pertain to the classer of corporation. Which of the following refers to domestic corporation?
a. It is a private corporation in which the capital is divided into shares of stock and is authorized to distribute corporate
earnings to holders on the basis of shares held and its owners are called stockholders or shareholders.
b. It is a private corporation in which capital comes from fees by individuals composing it and its owners are called members.
c. It is a corporation that is organized to govern a portion of the state.
d. It is a corporation that is organized for private benefit.
e. It is a private corporation which is given a franchise to perform functions of a public character.
f. It is a corporation which exists in both law and fact because it complied with all the legal requirements and actually operates
as a corporation.
g. It is a corporation which exits only in fact but not in law because of non-compliance with certain legal requirements.
h. It is a corporation organized under Philippine Laws.
i. It is a corporation organized under the laws of other countries.
j. It is a corporation whose ownership is widely held by many investors, usually a private stock corporation.
k. It is a private corporation in which 50% or more of its stock is owned by five persons or less.

30. The following statements pertain to components of a corporation. Which of the following refers to incorporators?
a. They are the persons who originally formed the corporation and whose names appear in the Articles of Incorporation.
b. They are the persons who compose the corporation whether as members or stockholders.
c. They are the corporators of a stock corporation.
d. They are the corporators of a nonstock corporation.
e. They are the persons who undertake to form a company based on a given project and set it going and take the necessary
steps to accomplish the purpose for which the corporation is organized.
f. They are the persons who have agreed to take original, unissued shares but will pay at a later date.
g. They are those who undertake to dispose of the shares to the general public.
31. The process of organizing corporation consists if these three states. Which of the following stages pertain to promotion?
a. It refers to the stage when the incorporators make preliminary arrangements to set up a tentative working organization and
to solicit subscriptions to raise sufficient capital for the business.
b. It is the process of formalizing the organization of the corporation.
c. It is the stage wherein the operation of the business shall begin which must be two years from the date of incorporation.
32. It contains the provisions for the internal administration of the corporation.
a. Articles of co-partnership
b. Articles of incorporation
c. By-laws
d. Minutes of board of directors meeting
33. It enumerates the powers and limitations conferred upon the corporation by the government.
a. Articles of co-partnership
b. Articles of incorporation
c. By-laws
d. Minutes of board of directors meeting
34. It is the amount fixed by the corporate charter to be subscribed and paid in or secured to be paid in by the shareholders of a
corporation either in money or in property, labor or services upon organization of the corporation or afterwards.
a. Share capital or capital stock
b. Retained earnings
c. Share premium
d. Reserve
35. It is the maximum number of shares that a corporation may issue multiplied by its par value.
a. Subscribed shares
b. Authorized share capital
c. Legal capital
d. Contributed capital
36. It is a type of share capital which has priority as to distribution of dividends and distribution of assets upon corporate liquidation.
a. Ordinary share
b. Common stock
c. Preference share
d. Bonds payable
37. The following rights of ordinary shareholders are available also to preference shareholders, except
a. To share in the distribution of corporate profit.
b. To share in the distribution of assets upon corporate liquidation.
c. To vote in the shareholders meetings.
d. Preemptive right Right to maintain ownership interest in the corporation through the purchase of additional shares when a
new capital is issued.
38. Which of the following statements pertain to par value share capital?
a. It has nominal or face value stated on the face of the stock certificate and in the articles of incorporation.
b. It has nominal value stated in the articles of incorporation but not on the face of the stock certificate.
c. It has no nominal value stated in the articles of incorporation nor on the face of the stock certificate.
39. What is the minimum consideration for a no-par share capital?
a. P5
b. P1.
c. P10
d. P3

40. Which of the following statements to convertible preference shares?

a. It entitles the holders to the receipt of previous years unpaid dividends before any payment can be made to ordinary
shareholders upon dividend declaration.
b. It entitles the holders to the receipt of current dividends but not on the previous years unpaid dividends.
c. It entitles the holders to the receipt of additional dividends after holders of both preference and ordinary shares have been
paid up to the current years dividend.
d. It entitles the holders to the receipt of dividends up to the fixed rate only.
e. It entitles the holders the option to exchange the shares for some other securities of the issuing corporation.
f. It entitles the corporation the option to redeem or call the shares at a certain call price.
41. This type of share represents the residual ownership equity. Its holders are subject to greatest risk and it entitles the holder an equal
or pro rata division of profits.
a. Ordinary share
b Preferred stock
c. Preference share
d. Bonds payable
42. What is the minimum subscribed share?
a. 10% of authorized share capital
b. 20% of authorized share capital
c. 25% of authorized share capital
d. 30% of authorized share capital
43. What is the minimum paid in capital?
a. 10% of subscribed share but with a minimum of P1,000
b. 20% of subscribed share but with a minimum of P3,000
c. 25% of subscribed share but with a minimum of P5,000
d. 30% of subscribed share but with a minimum of P6,000
44. The following are the purposes of appropriation of retained earnings, except
a. Voluntary purpose
b. Legal purpose
c. Contractual purpose
d. Special purpose
45. Appropriation of Retained Earnings for Treasury Shares refers to
a. Voluntary appropriation
b. Legal appropriation
c. Contractual appropriation
d. Special appropriation
46. Which of the following statements pertain to book value per share
a. It is the peso equity in corporate capital of each capital share and is computed by dividing the total stockholders equity by
the number of shares outstanding.
b. It is the amount earned during a given period on each ordinary share outstanding.
c. It is the portion of Retained earnings set aside for special purpose.
47. Which of the following dates pertains to date of declaration?
a. It is the date of approval of BOD of dividend declaration.
b. It is the date when the company determines the shareholders who are entitled to receive dividends.
c. It is the date when dividends declared are paid or distributed to shareholders.
48. In which of the following dates shall the dividends payable be recorded?
a. Date of record
b. Date of declaration
c. Date of payment

1.

It is an artificial being created by operation of law, having the right of succession, and the powers, attributes, and properties
expressly authorized by law or incident to its existence.
a. Partnership
b. Corporation
c. Sole-proprietorship
d. Association

2.

Under the corporation code, the minimum paid in capital for registration of a corporation which has P60,000 authorized capital
is
a. P15,000
b. P3,750
c. P5,000
d. P4,000

3.

PAS 38 provides that start up costs which include legal and secretarial costs in establishing a legal entity shall be
a. Charged to share premium
b. Charged to share capital
c. Charged to retained earnings
d. Expensed as incurred

4.

What is the definition of subscribed share capital?

a. It is the portion of the paid in capital representing the total par or stated value of the shares issued.
b. It is the portion of the authorized share capital that has been subscribed but not yet fully paid and therefore still
unissued.
c. It represents the cumulative balance of periodic earnings, dividend distributions, fundamental errors and other capital
adjustments.
d. It is the portion of the paid in capital representing excess over the par or stated value.

5.

The following are the common sources of share premium, except

a. Excess over par or stated value
b. Donated capital
c. Revaluation surplus
d. Issuance of share warrants

6.

The following form part of shareholders equity, except

a. Treasury shares
b. Conversion option
c. Retained earnings
d. Subscription receivable collectible within twelve months after the end of reporting period

7.

It is a type of share wherein the shareholders have the same rights and privileges.
a. Redeemable preference shares
b. Ordinary shares
c. Preferred shares
d. Convertible preference shares

8.

Legal capital is the portion of the paid in capital arising from issuance of share capital which cannot be retained to the
shareholders in any form during the lifetime of the corporation. Which of the following statements is incorrect concerning legal
capital?
In the case of par value share, the legal capital is the aggregate par value of the shares issued and subscribed.
In the case of no-par value share, the legal capital is the total consideration received from shareholders including the
excess over the stated value.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

I.
II.

9.

Under this doctrine, the corporation can pay dividends to shareholders but limited only to the retained earnings balance.
a. Trust fund doctrine
b. Wasting asset doctrine
c. Retained earnings doctrine
d. Share capital doctrine

10. The Corporation Code provides that a share shall not be issued for a consideration less than the par or stated value thereof.
In case the issue price of share is over the par or stated value, the excess shall be credited to
a. Revaluation surplus
b. Gain on issuance of shares
c. Retained earnings
d. Share premium
11. When the equity shares are issued for noncash consideration, the share capital is recorded at an amount equal to the
following in which order of priority
a. Fair value of shares issued Fair value of the noncash consideration received Par value of the shares issued.
b. Fair value of noncash consideration received Fair value of shares issued Par value of the shares issued.
c. Par value of the shares issued Fair value of noncash consideration received Fair value of shares issued.
d. Fair value of shares issued Par value of shares issued Fair value of noncash consideration received.
12. In conformity with the legal provision and PFRS 2, if shares are issued for services, the share shall be recorded at the
a. Fair value of services rendered
b. Fair value of shares issued
c. Par value of the shares issued
d. None of the above
13. Share issuance costs such as printing of stock certificates, cost of stock and transfer book, seal of corporation, underwriting
and promotional fees, accounting and legal fees related to share issuance shall be
a. Debited to expense account
b. Debited to share premium
c. Debited to retained earnings
d. Debited to share capital
14. It is a share capital issued for inadequate or insufficient consideration in which case the asset is overstated and capital is
correspondingly overstated.
a. Watered share
b. Secret reserve
c. Liquidated share
d. Solidified share
15. It is a share issued wherein the asset is understated or liability is overstated with a consequence of understatement of capital.
a. Watered share
b. Secret reserve
c. Liquidated share
d. Solidified share
16. Secret reserve usually arises from the following, except
a. Excessive provision for depreciation, depletion, amortization and doubtful accounts.
b. Excessive writedown of receivables, inventories and investments.
c. Capital expenditures are capitalized.
d. Fictitious liabilities are recorded.
17. In case of delinquent subscription, the delinquent shares shall be sold in a public auction. They shall be sold to the highest
bidder. Who is the highest bidder?
a. A person who is willing to pay the offer price of the delinquent share which includes balance due on the subscription,
interest accrued on the subscription date and expenses of advertising and other costs of sale, for the highest number
of shares.
b. A person who is willing to pay the offer price of the delinquent share which includes balance due on the subscription,
interest accrued on the subscription date and expenses of advertising and other costs of sale, for the lowest number
of shares.
c. A person who is not willing to pay the offer price of the delinquent share which includes balance due on the
subscription, interest accrued on the subscription date and expenses of advertising and other costs of sale, for the
highest number of shares.
d. A person who is not willing to pay the offer price of the delinquent share which includes balance due on the
subscription, interest accrued on the subscription date and expenses of advertising and other costs of sale, for the
lowest number of shares.

18. Which of the following items can be considered as equity instruments?

I.
Callable preference share at the option of the corporation.
II.
Redeemable preference share that provides a mandatory redemption by the issuer for a fixed or determinable amount of
a future date.
III.
Redeemable preference share that gives that holder the right to require the issuer to redeem the instrument for a fixed or
determinable amount at a future date.
a. I, II and III
b. II and III only
c. I and II only
d. I only
19. When a corporation issued preference shares with share warrants, how shall the issue price be allocated by the corporation?
a. Proportionately to preference shares and share warrants based on their relative book value.
b. Proportionately to preference shares and share warrants based on their fair market value.
c. The issue price shall be allocated first to preference share based on its fair market value and the excess of issue
price to share warrants.
d. The issue price shall be allocated first to share warrants based on its fair market value and the excess of issue price
to preference share.
20. These are an entitys own shares that have been issued and then reacquired but not canceled.
a. Ordinary shares
b. Share warrants
c. Share options
d. Treasury shares
21. What method of accounting shall be used for treasury shares in accordance to the Corporate Code?
a. Par value method
b. Stated value method
c. Fair value method
d. Cost method
22. What does PAS 32, par. 33, provide as regards to the gain from sale of treasury shares?
a. It shall be recognized in profit or loss.
b. It shall be credited to share premium.
c. It shall be credited to share capital.
d. It shall be credited to retained earnings.
23. If the treasury shares are subsequently issued below its cost, the excess of the cost over the issue price is charged
a. First, Share premium from the original issuance and then Retained Earnings.
b. First to share premium from original issuance and then share premium from treasury shares of the same class.
c. First to share premium from original issuance, and then share premium from treasury shares of the same class and
then to retained earnings.
d. First to share premium from treasury shares of the same class and then the balance to retained earnings.
24. If treasury shares are subsequently retired and the retirement results in a loss, meaning, the cost of the treasury shares
exceeds the par value, such loss is debited or charged
a. First, Share premium from the original issuance and then Retained Earnings.
b. First to share premium from original issuance and then share premium from treasury shares of the same class.
c. First to share premium from original issuance, and then share premium from treasury shares of the same class and
then to retained earnings.
d. First to share premium from treasury shares of the same class and then the balance to retained earnings.
25. Under Application Guidance 36 of PAS 32, an entitys own equity instruments also known as treasury shares shall be
presented as
a. Financial asset
b. Financial liability
c. Deduction in the shareholders equity at par value or stated value
d. Deduction in the shareholders equity at cost
26. What shall be the proper treatment of donated shares from stockholders?
a. They shall be credited to share premium at cost at the date of donation.
b. They shall be credited to share premium at fair value at the date of donation.
c. They shall be credited to share premium at par value at the date of donation.
d. They are recorded by memorandum entry at the date of donation but the reissue or resale of donated shares
increases assets and donated capital from share premium.

27. When a corporation received a noncash asset from a stockholder, what is the proper treatment?
a. The share premium shall be credited for the fair value of the noncash asset.
b. The share premium shall be credited for the book value of the noncash asset.
c. The income account shall be credited for the fair value of the noncash asset.
d. The income account shall be credited for the book value of the noncash asset.
28. When a corporation received a noncash asset from a nonstockholder, what is the proper treatment?
a. The share premium shall be credited for the fair value of the noncash asset.
b. The share premium shall be credited for the book value of the noncash asset.
c. The income account shall be credited for the fair value of the noncash asset.
d. The income account shall be credited for the book value of the noncash asset.
29. It is a transaction whereby the original shares are called in for cancellation and replaced by a larger number accompanied by a
reduction in the par value or stated value.
a. Split up
b. Split down
c. Reverse split up
d. Share right
30. It represents the cumulative balance of periodic net income or loss, dividend distributions, prior period errors, changes in
accounting policy and other capital adjustments.
a. Share capital
b. Share premium
c. Retained earnings
d. Revaluation surplus
31. When a retained earnings has a debit balance, it is called as
a. Deficiency
b. Deficit
c. Net loss
d. Accumulated profit
32. These refer to distributions of earnings or capital to the shareholders in proportion to their shareholdings.
a. Net income
b. Withdrawal
c. Dividends
d. Total comprehensive income
33. Under IFRIC 17 Distribution of noncash assets to owner par. 10, the liability to pay dividend shall be recognized at
a. Date of declaration
b. Date of record
c. Date of payment
d. Date of distribution
34. Under IFRIC 17 Distribution of noncash assets to owner par. 11, the entity shall measure a liability to distribute noncash
assets as a dividend to its owners at
a. Book value of the asset to be distributed
b. Fair value of the asset to be distributed
c. Recoverable amount of the asset to be distributed
d. Cost of the asset to be distributed
35. IFRIC 17, par. 13, further provides that at the end of each reporting period and at the date of settlement, the entity shall review
and adjust the carrying amount of the dividend payable with any change recognized in
a. Share premium
b. Share capital
c. Profit or loss
d. Retained earnings
36. IFRIC 17, par. 14, provides that when an entity settles the dividends payable, the difference between the carrying amount of
the dividends payable and the carrying amount of the asset distributed shall be recognized in
a. Share premium
b. Share capital
c. Profit or loss
d. Retained earnings

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37. When is a share dividend considered a large stock dividend?

a. If it is 20% or more share dividend.
b. If it is more than 20% share dividend.
c. If it is 10% or more share dividend.
d. If it is more than 20% share dividend.
38. If an entity declares a small share dividend, what amount shall be debited to retained earnings?
a. Par value of the shares.
b. Fair value of the shares.
c. Book value of the shares
d. Cost of the shares.
39. If an entity declares a large share dividend, what amount shall be debited to retained earnings?
a. Par value of the shares.
b. Fair value of the shares.
c. Book value of the shares
d. Cost of the shares.
40. These refer to the dividends out of share capital.
a. Liquidating dividend
b. Share dividend
c. Property dividend
d. Cash dividend
41. PAS 32, par. 36, provides that distribution to holders of an equity instrument classified as financial liability are recognized as
a. Dividends deductible directly against Retained Earnings
b. Dividends deductible directly against Share Premium
c. Dividends deductible directly against Share Capital
d. Interest expense and presented in the Profit or Loss
42. In the absence of evidence to the contrary, all the retained earnings of an entity can be declared as dividends. In order to limit
or restrict the payment of dividends, a corporation makes appropriations of retained earnings. Appropriation for treasury
shares is what type of retained earnings appropriation?
a. Contractual appropriation
b. Voluntary appropriation
c. Legal appropriation
d. Discretionary appropriation
43. The following items affect the retained earnings account, except
a. Net Income or loss for the period
b. Prior period errors
c. Realization of revaluation surplus
d. Effect of change in accounting estimate
44. It is a permissive but not a mandatory procedure under which a financially troubled entity restates its accounts and establishes
a fresh start in accounting sense.
a. Restructuring
b. Quasi-reorganization
c. Incorporation
d. Corporate liquidation
45. PFRS 2 defines it as a compensation arrangement established by the entity whereby the entitys employees shall receive
shares of capital in exchange for their services or the entity incurs liabilities to the employees in amounts based on the price of
its shares.
a. Defined benefit plant
b. Defined contribution plan
c. Share-based compensation plan
d. Cash-based compensation plan

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46. PFRS 2 sets out the measurement principles and specific requirements for accounting of the share-based compensation. The
following statements concerning the two types of share-based compensation are inappropriate
I.
Equity-settled share based compensation means the entity issues equity instruments in consideration for services
received, for example, share options.
II.
Cash-settled share based compensation means the entity incurs a liability for services received and the liability is based
on the entitys equity instruments, for example, share appreciation rights.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
47. What is the measurement method of compensation expense provided by PFRS 2 for share-based compensation?
I.
Fair value method which means that the compensation is equal to the fair value of the share options on the date of grant.
II.
Intrinsic value method which is equal to the excess of the market value of the share over the option price if the fair value
of the share option cannot be measured reliably.
a. I only
b. II only
c. Neither I nor II
d. Both I and II
48. Share options are granted to officers and key employees to enable them to acquire shares of the entity during a specified
period upon fulfillment of certain conditions at a specified price. PFRS 2 provides the following rules for the recognition of
compensation expense:
I.
If the share options vest immediately, the employee is not required to complete a specified period of service before
unconditionally entitled to the share options. In this case, on grant date, the entity shall recognize the compensation as
expense in full with corresponding increase in equity.
II.
If the share options do not vest until the employee completes a specified service period, the compensation is recognized
as expense over the service period or vesting period, meaning, from the date of grant to the date on which the options
can first be exercised.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
49. PFRS 2, par. 24, provides that if the fair value of the share options cannot be estimated reliably, the entity shall measure the
share options at their intrinsic value initially and subsequently at each reporting date and at the date of final settlement, with
any change in intrinsic value recognized in
a. Other comprehensive income
b. Profit or loss
c. Retained earnings
d. Share capital
50. What is the effect of equity-settled share based compensation?
a. It will decrease share premium.
b. It will increase the retained earnings.
c. It will increase the profit or loss for the period.
d. It does not affect total shareholders equity.
51. If an entity cancels or settles a grant of share options during the vesting period, the entity shall account for the cancellation or
settlement as an acceleration of vesting. The accounting procedures are
I.
The entity shall recognize immediately the compensation expense that otherwise would have been recognized for
services received over the remainder of the vesting period.
II.
Any payment made to the employee on the cancellation or settlement of the grant shall be accounted for as the
repurchase of equity interest, meaning, deduction from equity.
a. Both I and II
b. Neither I nor II
c. I only
d. II only
52. Under IFRIC 11, share-based payment transactions in which the employees of a subsidiary are granted to the equity
instruments of the parent shall be accounted for as
a. Cash settled share based compensation
b. Equity settled share based compensation
c. Liability settled share based compensation
d. Asset settled share based compensation

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53. Under IFRIC 11, how shall the subsidiary measure the services received from its employees who are granted to the equity
instruments of the parent?
a. Fair value of the share options at the date of grant
b. Book value of the share options at the date of grant
c. Intrinsic value of the share options at the date of grant
d. Fair value of the services at the date of grant
54. PFRS 2 provides that for a cash settled share-based compensation, the entity shall measure the services acquired and the
liability incurred at the
a. Book value of the liability
b. Fair value of the liability
c. Fair value of the services
d. Recent cost of the services
55. What is the compensation expense for a share appreciation rights?
a. Excess of the market value of the share over a book value per share at the end of reporting period.
b. Excess of price of the share over a book value per share at the end of reporting period.
c. Excess of the market value of share over a predetermined price for a given number of shares over a definite vesting
period.
d. Excess of the market value of the share over the earnings per share.
56. Changes in the compensation expense for share-based compensation transactions shall be accounted
a. Retrospectively as a change in accounting policy
b. Prospectively as a change in accounting estimate
c. Prospectively as a change in accounting policy
d. Retrospectively as prior period error adjustment
57. If a share-based compensation has cash alternative and share alternative and the entity has the choice of settlement, the
entity shall account for the instrument initially
a. Either as liability or equity.
b. By separating the liability and equity components.
c. Both as liability and equity instruments.
d. Neither as liability nor equity.
58. If a share-based compensation has cash alternative and share alternative and the employees have the choice of settlement,
the entity shall account for the instrument initially
a. Either as liability or equity.
b. By separating the liability and equity components.
c. Both as liability and equity instruments.
d. Neither as liability nor equity.
59. It is the amount that would be paid on each share assuming the entity is liquidated and the amount available to shareholders.
a. Earnings per share
b. Dividends per share
c. Book value per share
d. Price per share
60. How shall the book value per share be computed?
a. Total comprehensive income divided by number of shares outstanding
b. Profit or loss divided by number of shares outstanding
c. Other comprehensive income divided by number of shares outstanding
d. Total shareholders equity divided by number of shares outstanding
61. Which of the following statements pertains to participating dividends?
a. It is one which the right to receive dividends is forfeited in any one year in which the dividends are not declared.
b. It is one which is entitled to receive dividends in excess of the basic or fixed rate.
c. It is one that is entitled to receive only the dividend equal to the fixed rate.
d. It is one which any undeclared dividends accumulate each year until paid.
62. PAS 33 titled as Earnings per Share is mandatory for
I.
Public entities
II.
Non-public entities
a. I only
b. II only
c. Both I and II
d. Neither I nor II

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63. What are the two types of earnings per share covered by PAS 33?
a. Basic earnings per share and diluted earnings per share
b. Basic earnings per share and liquidation earnings per share
c. Simple earnings per share and complex earnings per share
d. Compound earnings per share and liquidation earnings per share
64. Which of the following statements concerning earnings per share under PAS 33 are correct?
I.
An entity shall present on the face of the income statement basic and diluted earnings per share for income or loss from
continuing operations.
II.
An entity that reports a discontinued operation shall disclose the basic and diluted amounts per share for the discontinued
operation either on the face of the income statement or in the notes to the financial statements.
a. Neither I nor II
b. Both I and II
c. I only
d. II only
65. PAS 33 provides that when an entity presents both consolidated financial statements and separate financial statements, the
disclosures required by this standard need be presented
a. On both consolidated financial statements and separate financial statements.
b. Only on the separate financial statements.
c. Only on the consolidated financial statements.
d. Neither on consolidated financial statements nor separate financial statements.
66. The following are the uses of earnings per share, except
a. It is the determinant of the market price of ordinary share.
b. It is the measure of performance of management in conducting operations.
c. It is the basis of dividend policy of an entity.
d. It is used in computing book value per share.
67. It is a financial instrument or other contract that may entitle its holder to ordinary shares.
a. Potential preference shares
b. Potential ordinary shares
c. Potential bonds payable
d. Potential notes payable
68. What is the formula for computing basic earnings per share?
a. Net income divided by number of shares outstanding
b. Total assets divided by number of shares outstanding
c. Total liabilities divided by number of shares outstanding
d. Total shareholders equity divided by number of shares outstanding
69. If the entity has a preference share is cumulative, the preference dividend for the current year is deducted from the net income
for computation of earnings per share
a. When the entity declared the preference dividend.
b. Whether such dividend is declared or not.
c. When the entity has retained earnings.
d. When the entity has a deficit.
70. In computing weighted number of shares outstanding for purposes of earnings per share, which of the following statements is
false?
a. Ordinary shares issued as part of the purchase consideration of a business combination that is an acquisition are
included in the weighted average number of shares from the date of the acquisition.
b. In the case of stock dividend or a share split, the number of ordinary shares outstanding before the event is adjusted
for the proportionate change in the number of ordinary shares outstanding as if the event had occurred at the
beginning of the earliest period reported.
c. Ordinary shares that will be issued upon the conversion of a mandatory convertible instrument are included in the
calculation of basic earnings per share from the date the contract is entered into.
d. Subscribed ordinary shares are not included in EPS even if they are entitled to participate in dividends.
71. It arises when the inclusion of the potential ordinary shares decreases the basic earnings per share or increases the basic loss
per share.
a. Dilution
b. Anti-dilution
c. Non-dilution
d. Dissolution

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72. In case of convertible bonds payable, how shall it be accounted for in computing diluted earnings per share?
a. Adjustments shall be made only to the net income.
b. Adjustments shall be made only to the ordinary shares outstanding.
c. The net income is adjusted by adding back the interest expense on the bond payable, before tax and decreasing the
number of ordinary shares outstanding.
d. The net income is adjusted by adding back the interest expense on the bond payable, net of tax and increasing the
number of ordinary shares outstanding.
73. In case of convertible preference shares, how shall it be accounted for in computing diluted earnings per share?
a. The net income shall be reduced by the preference shares.
b. The ordinary shares outstanding shall be increased.
c. The net income shall not be reduced by the dividends on preference shares and the number of ordinary shares
outstanding shall be increased.
d. The net income shall be reduced by the dividends on preference shares and the number of ordinary shares
outstanding shall be increased.
74. When are the share options and warrants considered dilutive?
a. Exercise price or option price is equal to the average market price of the ordinary share.
b. Exercise price or option price is less than the average market price of the ordinary share.
c. Exercise price or option price is more than the average market price of the ordinary share.
d. Share options and warrants cannot be considered dilutive.
75. When are written put options considered dilutive?
a. If these contracts are out the money.
b. If the exercise or settlement price is higher than the average market price.
c. If the exercise or settlement price is lower than the average market price.
d. If the exercise or settlement price is equal to the average market price.
76. In case the entity has reported a net loss during the year, the entity shall report
a. Both basic loss per share and diluted loss per share.
b. Only diluted loss per share.
c. Only basic loss per share because potential ordinary shares are always antidilutive.
d. Neither basic loss per share nor diluted loss per share

----Good Luck and God Bless in your qualifying exam.-------Do not settle for less. Always aim for the best.----

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