The elements directly related to the measurement of financial position are

a. asset, liability and equity

b. asset and liability

c. income and expense

d. asset, liability, equity, income and expense a

The elements of financial position describe amounts of resources and claims against resources

a. during a period of time

b. at a moment in time

c. both a and b

d. neither a and b b

The elements directly related to the measurement of financial performance are

a. income and expense

b. asset, liability and equity

c. asset and liability

d. income, expense and equity a

It is a resource controlled by the entity as a result of past events and from which future economic
benefits are expected to flow to the entity

a. asset

b. liability

c. equity

d. income a
It is a present obligation of an entity arising from past events the settlement of which is expected to
result in an outflow from the entity of resources embodying economic benefits

a. asset

b. liability

c. equity

d. exxpense b

It is the residual interest in the assets of the entity after deducting all of the liabilities

a. income

b. equity

c. retained earnings

d. all of the above b

It is an increase in economic benefit during the accounting period related to an increase in asset or a
decrease in liability that results in increase in equity other than contribution from owners

a. asset

b. liability

c. income

d expenses c

It is a decrease in economic benefit during the accounting period related to a decrease in asset or an
increase in liability that results in decrease in equity other than distribution to owners

a. asset

b. liability

c. income

d. expenses d
This arises in the course of ordinary regular activities of the entity and is referred to by a variety of
different names including sales, fees, interest, dividends, royalties and rent

a. income

b. revenue

c. profit

d. gain b

Which of the ff in relation to income is true?

a. Income encompasses both revenue and gain

b. Revenue encompasses both income and gain

c. Gain encompasses both revenue and income

d. Income encompasses revenue only a

Financial statements portray the financial effects of transactions and other events by grouping them into
broad classes according to their economic characteristics. These broad classes are termed as

a. audit reports

b. financial reports

c. notes to financial statements

d. elements of financial statements d

An asset is recognized when

a. it is probable that future economic benefit will flow to the entity

b. the cost or value of the asset can be measured reliably

c. the entity obtains control of the rights associated with the asset

d. it is probable that future economic benefit will flow to the entity and the cost or value of the asset can
be measured reliably d
A liability is recognized when

a. it is probable that an outflow of economic benefit will be required to settle the obligation

b. the amount of obligation can be measured reliably

c. it is probable that an outflow of economic benefit will be required to settle the obligation and the
amount of obligation can be measured reliably

d. the entity obtains control of the obligation c

An income is recognized when

a. it is probable that future economic benefit will flow to the entity and that the economic benefit can be
measured reliably

b. it is possible that future economic benefit will flow to the entity and that the economic benefit can be
measured reliably

c. the entity obtains control of the future economic benefit

d. the future economic benefit can be measured reliably a

An expense is recognized when

a. it is probable that a decrease in future economic benefit has occurred

b. the decrease in future economic benefit can be measured reliably

c. it is probable that a decrease in future economic benefit has occurred and the decrease in future
economic benefit can be measured reliably

d. it is probable that an increase in future economic benefit has occurred and the increase in future
economic benefit can be measured reliably c

It is the process that involves the simultaneous or combined recognition of revenue and expenses that
result directly from the same transactions and other events

a. matching of cost with revenue

b. matching of revenue with cost

c. systematic and rational allocation

d. immediate recognition a

When economic benefits are expected to arise over several accounting periods and the association with
income can only be broadly or indirectly determined, expenses are recognized on the basis of

a. cause and effect association

b. systematic and rational allocation

c. immediate recognition

d. profit maximization b

An expense is recognized immediately

a. when an expenditure produces no future economic benefit

b.when cost incurred ceases to qualify as an asset

c. when an expenditure produces future economic benefit

d. when an expenditure produces no future economic benefit and when cost incurred ceases to qualify
as an asset d

It is the process of incorporating or reporting in the statement of financial position or statement of

comprehensive income an item that meets the definition of an element of financial statements

a. recognition

b. allocation

c. realization

d. summarization a

It is the process of determining the monetary amounts at which the elements of the financial statements
are recognized and carried in the financial statements

a. measurement
b. recognition

c. presentation

d. recording a

Which of the following measurement attributes is not currently used in practice?

a. present value

b. net realizable value

c. current replacement cost

d. inflation-adjusted cost d

Which of the ff attributes is generally considered to be the most relevant?

a. present value

b. current exit value

c. current cost

d. historical cost a

It is the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset
was acquired currently

a. Historical cost

b. Current cost

c. Realizable value

d. Present valueb

Which of the ff best describes assets recorded at the amount that represents the immediate purchase
cost of an equivalent asset?

a. Historical cost
b. Realizable value

c. Present value

d. Current cost a (according to sir D.) / d (according to multiple sources)

Which of the following terms best describes the amount of cash or cash equivalents that could currently
be obtained by selling an asset in an orderly disposal?

a. fair value

b. realizable value

c. residual value

d. value in use b

Generally, revenue from sale of goods shall be recognized at a point when

a. management decides it is appropriate to do so

b. the product is available for sale to the ultimate consumer

c. the entire amount receivable has been collected from the customer

d. the entity has transferred to the buyer the significant risks and rewards of ownership of the goods
d

Revenue from sale of goods shall be recognized when all of the ff conditions have been satisfied, except

a. the entity has transferred to the buyer the significant risks and rewards of ownership of the goods

b. the entity retains either continuing managerial involvement or effective control over the goods sold

c. the amount of revenue can be measured reliably

d. it is probable that economic benefits will flow to the entity b

Which of the following criteria must not be satisfied before revenue from sale of goods shall be
recognized?

a. revenue can be reliably measured

b. managerial control over the goods has been relinquished

c. ownership has been transferred to the buyer

d. significant risks and rewards of ownership have been transferred from the seller to the buyer c

Which of the ff statements is incorrect concerning recognition of revenue?

a. revenue from rendering of services shall be recognized by reference to the stage of completion of the
transaction at the end of the reporting period

b. interest revenue shall be recognized on a time proportion basis that does not take into account the
effective yield on the asset

c. royalty revenue shall be recognized on an accrual basis in accordance with the substance of the
relevant agreement

d. dividend revenue shall be recognized when the shareholder's right to receive payment is established
b

Which of the ff conditions does not apply to the recognition of revenue from rendering of services?

a. the amount of revenue can be measured reliably

b. it is probable that payment for the services shall be received by the entity

c. the significant risks and rewards of ownership have been transferred to the buyer

d. the costs incurred for the transaction and the costs to complete transaction can be measured reliably
c

Which of the following statements describes the revenue recognition principle?

a. cash is received and the amount is material

b. it is probable that future economic benefit will flow to the entity and the amount can be measured
reliably

c. production is complete and there is active market for the product

d. cash is realized and production is complete b

The revenue principle states that revenue shall be recognized at a point when
a. an exchange transaction has occurred and the earning process is essentially complete

b. an order for shipment of merchandise has been received

c. a contract between buyer and seller has been signed

d. the seller has shipped merchandise under terms that the customer need not pay until it is sold a

Generally, revenue is recognized

a. at the point of sale

b. when cause and effect are associated

c. at the point of cash collection

d. at appropriate points throughout the operating cycle a

Which of the ff is not an accepted basis for recognition of revenue?

a. passage of time

b. performance of service

c. completion of percentage of a project

d. upon signing of contract d

Normally, revenue is recognized

a. when the customer order is received

b. when the customer order is accompanied by a check

c. only if the transaction will create an account receivable

d. when the title of the goods changes d

Revenue may be recognized

a. at a point of sale

b. during production

c. at the end of production

d. all of the above d

Which of the following may not be an acceptable deviation from recognizing revenue at the point of
sale?

a. upon receipt of cash

b. during production

c. upon receipt of order

d. end of production c

Which of the ff represents the least desirable choice for the recognition of revenue?

a. during production

b. when a sale occurs

c. when cash is collected

d. when production is completed c

Revenue from an artistic performance is recognized once

a. the audience register for the event online

b. the tickets for the concert are sold

c. cash has been received from the ticket sales

d. the event takes place d

A wholesale bakery would normally recognize revenue when

a. the product is available for sale to a customer

b. cash is received from the customer

c. goods are delivered to the customer

d. management chooses to do so c

Which of the following is not a time when revenue may be recognized?

a. at time of sale

b. at receipt of cash

c. during production

d. all of the above are possible times of revenue recognition d

The term "revenue recognition" conventionally refers to

a. the process of identifying transactions to be recorded as revenue in an accounting period

b. the process of measuring and relating revenue and expenses during a period

c. the earning process which gives rise to revenue realization

d. the process of identifying those transactions that result in an inflow of assets to the entity d

Which of the following in the most precise sense means the process of converting non cash resources
and rights into cash or claims to cash?

a. allocation

b. collection

c. recognition

d. realization d

Gains on assets sold are identified, in a precise sense, by the term

a. unrecorded

b. unrealized
c. unrecognized

d. unallocated b

The term "recognized" is synonymous with the term

a. recorded

b. realized

c. matched

d. allocated a

Under what condition is it proper to recognize revenue prior to the sale of the merchandise?

a. when the concept of consistency is complied with

b. when the revenue is to be reported as an installment sale

c. when the ultimate sale of the goods is at an assured sale price

d. when management has a long-established policy c

Which of the ff statements conforms to the realization concept?

a. depreciation was assigned to product unit cost

b. equipment was sold in exchange for a note receivable

c. cash was collected on accounts receivable

d. product unit costs were assigned to cost of goods soldb

Revenue may result from

a. a decrease in an asset from primary operations

b. an increase in an asset from incidental transactions

c. an increase in a liability from incidental transactions

d. a decrease in liability from primary operations d

It is proper to recognize revenue prior to the sale of merchandise when the revenue is reported

a. as an installment sale

b. under the cost recovery method

c. as an installment sale and under cost recovery method

d. none of these d

When should an entity use the installment method of revenue recognition?

a. when collectibility of installment accounts receivable is reasonably predictable

b. when repossessions of merch on the installment plan may result in a future gain or loss

c. when there is no reasonable basis for estimating collectibility

d. when collection expenses are deemed immaterial c

Which is not a theoretical basis for the allocation of expense?

a. immediate recognition

b. systematic and rational allocation

c. cause and effect association

d. profit maximization d

Costs that can be reasonably associated with specific revenue but not with specific product should be

a. expensed in the period incurred

b. allocated to the specific product based on the best estimate of the product processing time

c. expensed in the period in which the related revenue is recognized

d. capitalized and then amortized over a reasonable period c

Which is an example of the cause and effect association principle?

a. Sales commission

b. Allocation of insurance cost

c. Depreciation of PPE

d. Officers' salaries a

Which is an application of the systematic and rational allocation principle?

a. doubtful accounts

b. research and development cost

c. warranty cost

d. amortization of intangible asset d

Why are certain costs of doing business capitalized when incurred and then depreciated or amortized
over subsequent accounting periods?

a. to reduce the income tax liability

b. to aid management in the decision making process

c. to match the cost of production with revenue

d. to adhere to the accounting concept of conservatism c

Which principle best describes the conceptual rationale for the method of matching depreciation with
revenue?

a. associating cause and effect

b. systematic and rational allocation

c. immediate recognition

d. partial recognition b
Which should be expensed under the principle of systematic and rational allocation?

a. salesmen's monthly salaries

b. insurance premiums

c. transportation to customers

d. electricity to light office building b

The writeoff of a worthless patent is an example of which of the ff?

a. associating cause and effect

b. immediate recognition

c. systematic and rational allocation

d. objectivity b

What is an example of cost that cannot be directly related to particular revenue but incurred to obtain
benefits that are exhausted in the period when the cost is incurred?

a. sales commissions

b. sales salaries

c. freight in

d. prepaid insurance b

Which of the following would be matched with current revenue on a basis other than association of
cause and effect?

a. Goodwill

b. cost of goods sold

c. sales commission

d. warranty costa
A decrease in an asset arising from peripheral or incidental transaction is called

a. Capital expenditure

b. Cost

c. Loss

d. Expense c

An outflow of asset based on an activity that represents the major operations

a. loss

b. liability

c. expense

d. equity c

The primary distinction between revenue and gain is

a. the materiality of an amount

b. the likelihood that the transaction will recur in the future

c. the nature of the activity that gives rise to the transaction

d. the method of disclosing the transaction c

The term "income"

a. includes change in fair value of financial asset at fair value through other comprehensive income

b. includes foreign currency translation adjustment

c. includes gain resulting fro the sale of an asset in an arm's length transaction

d. is the same as comprehensive incomec

Which of the ff is incorrect in relation to the term "expense"?

a. all expenses and losses are expired costs but not all expired costs are expenses

b. all expenses decrease owner's equity but not all decreases in OE are expenses

c. expense is synonymous with expenditure

d. entities do not incur expensed per se but initially acquire assets c

The matching principle is best demonstrated by

a. not recognizing any expense unless some revenue is realized

b. associating effort with accomplishment

c. recognizing prepaid rent received as revenue

d. establishing an appropriation for contingency b

Bad debt expense is recognized according to which expense recognition principle?

a. direct matching

b. immediate recognition

c. systematic and rational allocation

d. critical event recognition a

What is the general approach as to when product costs are recognized as expenses?

a. in the period when the expenses are paid

b. in the period when the expenses are incurred

c. in the period when the vendor invoice is received

d. in the period when the related revenue is recognized d

Which accounting principle is being observed when an accountant charges to expense a cost that
contributed to revenue during a period?
a. revenue realization

b. matching

c. monetary unit

d. conservatism b

When should an expenditure be recorded as an asset rather than an expense?

a. never

b. always

c. if the amount is material

d. when future benefit exists d

Which of the following is not an acceptable basis for the recognition of expense?

a. systematic and rational allocation

b. direct matching

c. immediate recognition

d. cash disbursement d

The recognition of an allowance for doubtful accounts is an application of

a. going concern assumption

b. revenue recognition principle

c. matching principle

d. materiality constraint c

An example of direct matching of an expense with revenue would be

a. depreciation expense
b. office salaries expense

c. direct labor costs incurred to produce inventory sold during a period

d. advertising expense c

Which category of expenses is subject to immediate recognition in 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 entity president d

Which of the following principles best describes the rationale for matching distribution costs and
administrative expenses with revenue of the current period?

a. direct matching

b. systematic and rational allocation

c. immediate recognition

d. partial recognition c