Pre-week Summary I – Oct 2006 Page 1

FINANCIAL ACCOUNTING

Accounting and Financial Accounting Concepts

1.0 Overview of Accounting

1. Which of the following statements about the nature of accounting is not true?
a. Accounting is the language of business.
b. Accounting identifies, measures and communicates financial information about economic
entities for use by both external and internal users in making economic decisions
c. Before accounting can render communication services, an economic entity should first be
created
d. Accounting communication services are available only to publicly accountable, medium-
sized and small industries and not to micro entities

2. Which of the following statements regarding accounting theory is [are} true?

I . Accounting concepts are human made
II. Accounting Theory can be defined as a coherent set of hypothetical, conceptual and pragmatic
principles that form a general frame of reference for a field of inquiry
III. Accounting theory has developed primarily in response to government regulations.
Statement 1 Statement II Statement III Statement I Statement II Statement III
a. true false true c. false true false
b. true true false d. true true true

3. Which of the following statements does not properly describe the fact that the Accountancy
Profession is a communication profession?
a.Financial statements should use terminology within the level of understanding of the statement
user.
b. Financial statements can be expressed in the Spanish or Chinese language
c.Financial statements, as far as possible, should show information that can be verified from
documentary evidence in order to gain the confidence of statement users
d. Financial statements can be expressed in any dialect of a country

4. Which one of the following is an application of the science aspect of Accounting?

a.Exercise of creative skill and judgment
b. Interpreting the information presented in the financial statements through ratios and trend
analysis
c.Use of an accounting equation to express the relationship of accountable events
d. Attesting to the fairness of presentation of financial condition and operating results

5. The art aspect of accounting is applied in the following circumstances except when
a. The accountant refers to a body of organized knowledge in processing accounting
information.
b. A provision is recognized on the basis of the company lawyer’s professional opinion that there
is a
strong probability that the company will lose in a lawsuit in the corridor of P 5 M to P 8 M
c. The accountant chooses the most appropriate method of inventory valuation for the entity.
d.. The external auditor gives an unqualified opinion that the financial statements are fairly
presented
in conformity with generally accepted accounting principles
6. Which of the following statements is incorrect?
a. General purpose financial statements were developed primarily because all outside party
users have the same information needs
b. The double-entry system of accounting has been used for centuries.
c. The practice of accounting requires considerable professional judgment
d. The objective of external financial statements is to communicate the economic effects of
completed transactions and other events in the entity
7. The branch of accounting that focuses on general purpose reports on financial position and
results of operations is known as
a. Financial accounting c. Bookkeeping
 b. Auditing d. Management Accounting

8. Which of the following applies to financial accounting?

a. b. c. d
Information meets specific needs of particular statement users yes no no no
Emphasizes objective data yes no yes no
Future-oriented no no no yes
Basically concerned with income determination and asset valuation no yes yes no

9. The following descriptions pertain to limitations of financial accounting and financial

statements except
a. Historical in nature c. Centered on quantifiable information
b. Use of estimates d. Records information on the basis of business papers

Accounting standard setting (institutions and process)

10. According to the Preface to International Financial Reporting Standards, which of the following
are objectives of the IASB?
I. To harmonize financial reporting between IFRS and US GAAP and the European
II. To work actively with national standard setters
III. To promote the use and strict application of financial accounting standards
a. I and II b. I and III c. II and III d. I, II and III

11. Which of the following are parts of the “due process” of the IASB in issuing a new
International Financial Reporting Standard?
I. Establishing an advisory committee to give advice
II. Developing and publishing a discussion document for public comment
III Issuance of an interpretation as authoritative guidance
IV Reviewing compliance and enforcement procedures
V Issuance of the final standard with number and title
a. I II & III only b. I, II & V only c. I, II, III & IV only d. I, II, III, IV & V
12. As an assistance to the IASB and the accountancy profession and the public it serves, which of
the following should IFRIC consider issuing an interpretation?
I. Newly identified financial reporting issues not specifically addressed in IFRSs
II. Issues where unsatisfactory or conflicting interpretations have developed, or seem likely to
develop.
III. Accounting issues affecting specific industry or specific country jurisdictions.
IV. Issues where the IASB members cannot have a common agreement.
a. I and II only b. I, II and III c. II, III and IV only d.. I, II, III and IV only
13. Which of the following statements about international accounting standards is true?
a. Legal and psychological hurdles to achieving common reporting standards will be fully
overcome by the year 2012, the time frame set for convergence between IAS and US GAAP
b. Accounting professionals in the USA consider US GAAP superior to IAS and has no
intention to adopt International Accounting Standards..
c. The IASB is able to enforce its standards by prohibiting the listing of companies which do
not
comply on stock exchanges which sell internationally.
d. The International Accounting Standards Board (IASB) was established with the purpose
of narrowing the range of divergence in accounting standards throughout the world.
14. Which one of the following bodies is responsible for reviewing accounting issues that are likely
to receive divergent or unacceptable treatment in the absence of authoritative guidance, whit a
view to reaching consensus as to the appropriate accounting treatment?
a. International Financial Reporting Interpretations Committee (IFRIC)
b. Standards Advisory Council (SAC)
c. International Accounting Standards Board (IASB)
d. International Accounting Standards Committee Foundation (IASC Foundation)

15. Which of the following statements relating to the FRSC and standard setting process in the
Philippines. Which of these is (are) true?
I. All members of the FRSC should be CPAs
 II.
The Financial Reporting Standards Council (FRSC) Board of Accountancy (BOA) and
Professional Regulation Commission (PRC) are all involved in the standard setting process,
with PRC as the final approving authority.
a. Only I is true b. Only II is true c. I and II are true d. I and II are false

16. Who among the following may be nominated for membership in Financial Reporting Standards
Council?
a. A member of FINEX who is a CPA and is a Finance Officer of the company he represents
b. The BIR Commissioner who is a LAWYER
c. A director of the Securities and Exchange Commission who is not a CPA
d. A Deputy governor of the Central Bank who is not a CPA

The Conceptual Framework

17. The objectives of financial reporting for business enterprises are based on
a.the need for conservative information
b. the needs of the users of the information
c. the need to comply with financial accounting standards
d. the need to report on management’s stewardship

18. Which statement is false concerning users and their information needs?
a. Lenders are interested in information that enables them to determine whether their loans and
the
interest on these loans will be paid when due.
b. The providers of risk capital and their advisers are concerned with the risk inherent in and
return provided by their investments.
c. Government and its agencies have an interest in information about the continuance of
an enterprise, especially when they have long-term involvement or are dependent on the
enterprise.
d. Employees and their representative groups are interested in information about the stability
and profitability of their employees.

19. Which of the following statements regarding users of financial information is correct?
a.External decision makers can obtain whatever financial data they need and whenever they need
it.
b. Accounting information is prepared for and useful to only outside decision makers
c.The members of the Board of Directors are not internal rather than external users of financial
information
d. Managers of an entity are considered to be internal decision makers.

20. Which one of the following term 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

21. Are the following statements regarding the term 'profit' true or false?
(1) Profit is any amount over and above that is required to maintain the capital at the beginning of
the period.
(2) Profit is the residual amount that remains after expenses have been deducted from
income.
Statement (1) Statement (2) Statement 1) Statement (2)
a. False False c. True False
b False True d. True True

22. Which of the following statements best describes the term 'going concern'?
a.When current liabilities of an entity exceed current assets
b. The ability of the entity to continue in operation for the foreseeable future
c.The potential to contribute to the flow of cash and cash equivalents to the entity
d. The expenses of an entity exceed its income
23. Which of the following terms best describes the relationship of the assets, liabilities and equity
of an entity?
 a. Financial performance b. Financial position c. Future economic benefit d. Obligation
24. Which of the following terms 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
25. Which of the following is true of the qualitative characteristic of 'understandability' in relation to
information in financial statements?
a. Users should be willing to study the information with reasonable diligence
b. Users are expected to have significant business knowledge
c. Financial statements should exclude complex matters
d. Financial statements should be fee from material error
26. Which of the following terms describing information in the financial statements are properly
matched?
a. Understandable and comparable c. Prudent and relevant
b. Reliable and verifiable d. Unbiased and neutral
27. Which of the following is the best description of 'reliability' in relation to information in
financial
statements?
a. Influence on the economic decisions of users c. Inclusion of a degree of caution
b. Freedom from material error and bias d. Comprehensibility to users
28. This is the quality of information that influences the economic decisions of financial
statement users?
a. Relevance b. Reliability c. Understandability d. Comparability
29. According to the IASB Framework for the preparation and presentation of financial statements,
which TWO of the following are examples of 'expenses'?
I. A loss on the disposal of a non-current asset
II A decrease in equity arising from a distribution to equity participants
III A decrease in economic benefits during the accounting period
IV A reduction in income for the accounting period
a. I and II b. II and III c. I and III d. III and IV
30. If accounting information is timely, and has predictive as well as feedback value, then it is
considered to be
a. verifiable b. relevant c. reliable d. understandable
31. Which of the following accounting concepts states that before a transaction is recorded,
sufficient evidence must exist to allow two or more knowledgeable individuals to reach
essentially the same conclusion about the transaction?
a. Continuity assumption c. Reliability quality
b. Separate entity assumption d. Materiality constraint
32. Which of the following statements about prudence and conservatism is (are) true?
I. Conservatism is not a concept in the IASB Conceptual Framework
II. Prudence is the same as conservatism
III. Conservatism is intentional bias --- downward bias in recognizing profits and assets and an
upward bias in recognizing expenses and liabilities
IV. Prudence is the inclusion of a degree of caution in the exercise of judgments needed in making
the estimates required under conditions of uncertainty
a. I, II and III only c. I, III and IV only
b. II, III and IV only d. I, II, III and IV
33. In the first week of December, 2011, Elisa Company signs a major contract to develop an
accounting information system for Edward Inc. No work is begun the current year, yet the
notes to the financial statements discusses the nature and peso amount of the contract. This is an
example of:
a. completeness or full disclosure c. relevance
b. historical cost d. conservatism

34. A company reports only its total accounts receivable balance in its balance sheet, as opposed to a
complete listing of its individual customer balances. This is an example of
 a. consistency b. materiality c. cost/benefit d. conservatism

35. Which of the following statements is true with regard to the accountant’s concept of
Materiality?
a. Materiality is the threshold of recognition as to what accountable events will be recognized in
the
balance sheet and which will be recognized in the income statement.
b. Materiality judgments generally may be based solely on the magnitude of the item
c.Materiality judgments generally may be made without consideration of the magnitude of the item
involved.
d. Relevant items are always material

36. According to the Conceptual Framework, which of the following is not a primary qualitative
characteristic that make the information provided in financial statements useful to users?
a. Comparability b. Relevance c Materiality d Understandability

37. Are the following statements in relation to materiality true or false, according to PAS 1
(1) Materiality of items depends on their individual or collective influence on the economic
decisions of users
(2) Materiality of an item depends on its absolute size and nature
(3) Materiality serves as the threshold of recognition in deciding whether a financial
information is relevant to be included in the statement of financial position or to the
income statement
Statement (1) Statement (2) Statement (3)
a. true false true
b. true true false
c. false false fakse
d. true false false
38. Comparability of financial information depends on
A B C D
Consistency Yes Yes No No
Regular reporting periods Yes No No Yes
39. The recognition of periodic depreciation expense on company-owned automobiles requires
estimating both salvage or residual value, and the useful life of the vehicles. The use of
estimates in this case is an example of
a. providing relevant data at the expense of reliability
b. invoking the materiality constraint rather than cost benefit constraint
c. conservatism
d. maintaining consistency
40. Which of the following situations violates the concept of reliability?
a. Financial statements were issued nine months late
b. Report on segments having the same expected risks and growth rates to analysts estimating
future periods
c.Financial statements included property with a carrying amount increased to management’s
estimate of market value
d. Management reports to stockholders regularly refer to new projects undertaken, but the
financial statements never report project results.
41. Which of the following statements about the qualitative characteristics is (are) true?
I. Relevance is the capacity of information to make a difference in decision by helping users
form
predictions about outcome of past, present and future events or confirm /correct prior
expectations
II. The quality of reliability assures readers that the financial information is free from bias and
faithfully represents what it purports to show, including adequate disclosure of significant
information
III. Under the IASB Framework for the Preparation and presentation of financial statements,
conservatism is not a concept that is recognized as a qualitative objective.
a. I and II only b. I and III only c. II and III only d. I, II and III
 42. Which TWO of the following are listed in the IASB Framework as 'underlying assumptions'
regarding financial statements?
A The financial statements are prepared under the accrual basis
B. The entity can be viewed as a going concern
C. The financial statements are reliable
D Accounting policies are consistently applied
a. A and B b. B and C c. B and D d. C and D
43. Which TWO of the following statements concerning the provisions of the Conceptual
Framework are correct?
I. The Framework provides that transactions must be accounted for in accordance with their
legal form
II. The primary responsibility for the preparation and presentation of the financial statements of
the entity rests with both its management and its external auditor
III. It is not proper that financial statements should exclude complex matters simply in order to
achieve understandability
IV Where any conflict arises between the Framework and an accounting standard, the
requirements of the accounting standards should prevail
a. I and II b. I and IV c. II and III d. III and IV
Basic Assumptions of Accounting
44. Richard Santos is the owner and manager of Santos Landscaping Services. Santos purchased a new
station wagon for personal use and a dump truck to be used in the business. Which of the following
assumptions, principles, or constraints would be violated if both station wagon and dump truck are
recorded as assets of the business?
a. Materiality constraint c. Continuity assumption
b. Conservatism constraint d. Separate entity assumption

45. Adjusting entries are needed because in reporting financial data an entity
I. Adopts the accrual assumption
II Reports on transactions that overlap accounting periods
III. Adopts the going concern assumption
a. I only b. I and II only c. II and III d. I, II and III

46. Fatima Inc. is a company whose securities are traded on over-the-counter market. It controls
Portugal Corp. Consolidated financial statements are prepared in recognition of the accounting
concept of
a. Economic entity b. Materiality c. Legal entity d. Flexibility

47. Which one of the following statements best describes the term “going concern”?
a. When current liabilities of an entity exceeds current assets
b. The ability of the entity to continue in operation for. the foreseeable future
c. The potential to contribute to the flow of cash and cash equivalents to the entity
d. The expenses of an entity exceed its income

Principles of Recognition and Measurement (Assets, Liabilities, Equity, Revenue, Expense)

48. Are the following statements regarding “recognition” true or false?
(1) An accountable item is deemed “recognized” if it is recorded in the journals and ledgers.
(2) Recognition is the process of determining the amounts at which elements of the financial
statements are to be recognized,
(3) Recognition is the process of incorporating in the financial statements an item that meets the
definition of an element and the criteria for recognition
Statement (1) Statement (2) Statement (3)
a. false false true
b. true true false
c. true false true
d. true true true

49. Which of the following statements about accounting recognition is (are) true?
I. In accounting, there are instances when a gain / loss would arise upon initial recognition of an
asset.
II. No asset can simultaneously be an asset of more than one entity
 III. At times, two or more entities may share the benefits that an asset provides
IV. An appropriate basis for recognizing an asset is when a particular enterprise acquires the right
to
utilize and control access to the asset’s benefits
a. I and II only c. I, II and III only
b. I and IV only d. I, II, III and IV

50. Which of the following is a condition necessary for the recognition of an asset?
a. It is probable that future economic benefits will flow to the enterprise and the cost of the asset
can be measured accurately.
b. The cost of the asset can be measured reliably
c. It is probable that future economic benefits will flow to the enterprise and the cost of the
asset can be measured reliably.
d. It is probable that future economic benefits will flow to the enterprise and the asset is paid for

51. Which one of the following is not among the essential characteristic of an asset?
a.The inflow of future economic benefits is controlled by the enterprise
b. It must be exclusively owned and must be exchangeable
c.The cost of the asset can be measured reliably
d. It is a result of either a past activity

52. Which condition is necessary for the recognition of a liability?

a.It is probable that an outflow of economic benefits will be required to settle an obligation
b. The amount of the obligation can be measured reliably
c.The amount of the obligation must be definite
d. It is probable that an outflow of economic benefits will be required to settle an obligation
and the
amount of obligation can be measured reliably.

53. The following statements relate to liabilities. Which statement is (are) false?
I. Liabilities may be measured by estimates of a definitive character when the amount of the
liability cannot be measured precisely
II. All monetary liabilities should be stated in the balance sheet at their present (discounted) values
III. Under current GAAP, there are instances when an increase in liability is matched with an
increase in revenue.
a. I and II only b. II and III only c. I and III only d. I, II and III

54. Which of the following statements about Equity is (are) correct?

I. Since equity is the excess of assets over liabilities, equity cannot be measured separately
from the
other elements of the financial position.
II. Equity has no specific maturity date except upon liquidation.
III. Income-related transactions as well as “reserve” or other comprehensive income
transactions
such as revaluation surplus and unrealized holding gains and losses automatically affect
equity.
a. I and II only b. I and III only c. II and III only d. I, II, III

55. These are gross inflows of economic benefits during the period arising the course of the ordinary
activities of an enterprise when those inflows result in increases in equity, other than increases
relating to contributions from equity participants.
a. Revenue b. Increase in cash flow c. Net income d. Return on net assets

56. In which of the following circumstances can revenue be normally recognized?

a. When the customer’s order is received
b. When title to the goods changes
c. Only when a transaction creates an account receivable
d. When the customer’s order is accompanied by a check

57. Under the realization principle, revenue from sale of products is recognized
a. At date of delivery to the customers c. When the customers are billed
 b. When the inventories are readied for shipment d. Upon receipt of cash payment

58. This revenue recognition method is allowed when a sale is assured under a forward contract or
government guarantee or when a homogeneous market exists and there is negligible risk of
failure to sell.
a. Percentage of completion method c. Cash method
b. Production method d. Accrual method

59. Which one of the following may be recognized as revenue?

a. Cash deposit received for lay-away sales
b. Cash received in payment of note receivable
c. Cash from advance magazine subscription
d. Cash reimbursement from government for calamity losses sustained (per PAS 20 –
Government Grants)

60. According to the IASB Framework, the following are examples of expenses except
a. A decrease in asset due to benefit received
b. A decrease in asset arising from distribution to equity participants
c. A decline in the recoverable amount of an asset which is lower than its carrying amount
d. A sale of a non-current asset below cost

61. According to the Revenue recognition principles, which one of these activities do not generate
revenue?
a. Permitting others to use enterprise resources c. Adjustment of revenue of prior periods.
b. Sale of merchandise d. Disposing of investment in other entities

62. An expiration of cost which is incurred without compensation or return and is not absorbed as
cost of revenue is called
a. Indirect cost b. Loss c. Deferred credit d. Deferred charge

63. Which of the following is a period cost?

a. Factory overhead b. Work in process c. Selling expense d. Direct labor
64. Which of the following statements about measurement in accounting is (are) true?
I. All assets must be initially recognized at historical cost, but the final valuation can be a mixture
of
costs and other values.
II. Current selling price and net realizable value differ conceptually
III. According to PAS 29. Hyper-inflationary Economy, only non-monetary items are restated to
current price – level amounts in the balance sheet
a. Only I is true c. II and III are true
b. Only II is true d. All statements are true
65. Which of the following measurement bases is also currently used in financial accounting?
Current Present Net settlement
Cost discounted value value Historical cost
a. yes yes yes yes
b. yes no no yes
c. yes yes yes no
d. no yes yes no
66. Which of the following statements about accounting measurement is (are) true?
I. Measurement in accounting is the assignment of numbers, quantities, and
monetary amounts to objects such as property and equipment and events such as
purchases or sales
II. Under current GAAP, all assets must be initially measured at historical cost.
III. There are certain rare instances when price level adjusted amounts may be used in financial
reporting to external users
a.I and II only b. II and III only c. I and III only d. I, II and III
67. Which of the following assets are initially and subsequently measured at Fair value?
 I. Biological assets IV. Property and Equipment
II. Available for Sale Securities V. Held for Trading Securities
III. Inventories VI. Intangible Assets
a. I and II only b. I, II, and V only c. I, II, III ad V only d. I, II IV, and V only
68. Which of the following may be optionally measured at Fair value in the Statement of Financial
Position?
I. Held for Trading Securities IV. Non-current Assets Held for Sale
II. Property and Equipment V. Intangible Assets
III. Biological Assets, current
a. I and II only b. II and V only c. I, II, and III only d. II, IV, and V only
2.0 Presentation of Financial Statements
69. Financial statements include a statement of financial position, a statement of comprehensive
income and a statement of changes in equity. According to the Preface to international financial
reporting standards, which TWO of the following are also included within the financial
statements?
I. A statement of cash flows III. An auditor’s report
II Accounting policies IV. A directors' report
a. I and II b. I and III c. II and III d. III and IV
70. Which of the following is (are) among the limitations of financial accounting and financial
statements?
I. Use of estimates
II. Historical in nature
III. Some information that are not quantifiable but may be significant to statement users in
forming economic decisions are not given recognition.
a. I only b. I and II only c. II and III only d. I, II and III
71. Which of the following statements about financial statements is incorrect?
a. They show the results of the stewardship of management of the resources entrusted to it by
the capital providers
b. They are the primary responsibility of the external auditor after audit
c. They are prepared at least annually and are directed to the common information needs of a
wide
range of statement users
d. They provide information about the financial position, performance and cash flows of an
enterprise that is useful to a wide range of users in making economic decisions
72. Which of the following statements is (are) false?
I. Financial accounting is the only source of information needed by those who make economic
decisions about the business enterprises.
II. Financial accounting is based on the presumption that all statement users have the same
information
needs
III. Financial accounting is procedural
a. Only I is false b. Only II is false c. II and III are false d. I, II and III are false
73. Under PAS 1 [2009], which of the following items is not included in the computation of net
income?
a. Finance cost
b. Post-tax Gain [Loss] on discontinued operations
c. Unrealized gain in change in value of available for sale securities
d. Unrealized gain in change in value of biological assets

74. According to PAS1 Presentation of financial statements, which TWO of the following must be
included in an entity's statement of financial position?
a. b. c. d
 Investment property yes yes yes yes
 Number of shares authorized no no yes yes
 Provisions yes no no yes
 Shares in an entity owned by that entity no yes no no
 75. According to PAS1 Presentation of financial statements, which TWO of the following must be
included in an entity's statement of financial position?
A Cash and cash equivalents
B Property, plant and equipment analyzed by class
C Share capital and reserves analyzed by class
D Deferred tax
a. A and B b. A and D c. B and C d. B and D
76. In which section of the statement of financial position should cash that is restricted to the
settlement of a liability due 18 months after the reporting period be presented, according to PAS1
Presentation of financial statements? (select one answer)
a. Current assets b. Equity c. Non-current liabilities d. Non-
current assets
77. In which section of the statement of financial position should employment taxes that are due for
settlement in 15 months' time be presented, according to PAS1 Presentation of financial
statements? (select one answer)
a. Current liabilities b. Current assets c. Non-current liabilities d. Non-current assets

Notes to Financial Statements

78. What is the purpose of information presented as notes to financial statements?
a. To provide disclosures required by generally accepted accounting principles
b. To correct improper presentation in the financial statements
c. To provide recognition of amounts not included in the totals of the financial statements
d. To present management’s responses to auditor comments.
79. Which information is normally not included in the “notes to financial statements”?
a. A statement of compliance with GAAP
b. A statement of measurement basis for the financial statements and accounting policies applied
c. Supporting information for line items presented and aggregated
d. A Statement of cash flows

80. Disclosure in the financial statements is not required for which of the following?
a. Use of property by lease between a parent company and its subsidiary
b. Receipt of services by subsidiary from a principal without charge or without record of receipt of
services
c. Possibility of strike
d. Guarantees for indebtedness of others if the possibility of loss is remote
81. As a significant component of the notes to financial statements, the “accounting policies
section” should describe
a. Only the measurement basis used in preparing the financial statements
b. Only the specific accounting policies followed by the enterprise
c. Both the measurement bases and the accounting policies followed
d. The nature of the enterprise’s operations and its principal activities
82. Part of the notes to financial statements are events after the reporting period which pertain to
those events, both favorable and unfavorable that occur
a. After balance sheet date
b. After issuance of the statements
c. Between the balance sheet date and the date when the financial statements are authorized for
issue
d. After the balance sheet date but prior to issuance of financial statements
83. Adjustments of financial statements are required for those events after balance sheet date which

a. Have a material effect on a user’s evaluation of the information presented in the financial
statements
b. Occurred prior to issuance of the financial statements
c. Are unusual and material
d. Provide additional information for determining the amounts relating to conditions existing at
balance sheet date
84. Non-adjusting events after balance sheet date should be disclosed if
 a. Non-disclosure would affect the amounts presented in the financial statements
b. Non-disclosure would affect the ability of users of the financial statements to make
proper
valuations and decisions.
c. They relate to conditions existing at the balance sheet date
d. They are unusual and material
85. Are the following statements true or false, according to current PFRSs?
(1) Biological assets should be shown in the statement of financial position either in
current assets or non- current assets or both.
(2) The number of shares authorized for issue should be shown in the statement of financial
Position or the statement of changes in equity, or the notes.
Statement (1 ) Statement (2) Statement (1) Statement (2)
a. false false c. true false
b. false true d. true true
86. In which section of the statement of financial position should employment taxes that are due for
settlement in fifteen (15) months’ time be presented according to PAS 1?
a. Current liabilities c. Non-current liabilities
b. Current assets d. Non-current assets

3.0 The Accounting Process

87. Which of the following statements is / are true?
I. The primary distinction between double-entry and single-entry bookkeeping system is the use
of duality and equilibrium approach in double-entry while single entry recognizes only the
duality principle.
II. Single – entry bookkeeping recognizes only cash transactions and personal accounts.
III. Single – entry bookkeeping and cash basis of accounting are one and the same.
a. I only b. II only c. I and II only d. II and III only
88. Which of the following accounts is recognized under single-entry bookkeeping?
a. Cash b. Merchandise Inventory c. Property and Equipment d. Salaries
Expense
89. Which of the following statements about bookkeeping systems is (are) false?
I. Net income or loss under single entry bookkeeping is computed using the transactions
approach.
II. Double-entry bookkeeping uses the direct matching approach of computing net income.
III. Double-entry bookkeeping is the generally acceptable method of bookkeeping because it
offers a more complete income measurement than single-entry.
a. Only I is false b. Only II is false c. II and III are false d. I, II and III are
false

90. All of the following are disadvantages of the single-entry bookkeeping system except for the
fact that
a. Accounting records are incomplete.
b. It is simple and less costly to apply.
c. Internal control is inadequate
d. Financial statements are not likely to be fairly presented in accordance with GAAP.
91. The following books of account are used in single-entry bookkeeping
a. Cashbook and subsidiary ledger
b. Cash receipts book and general ledger
c. Cash receipts book , cash disbursements book, general ledger and subsidiary ledger
d. Cashbook and general ledger
92. Which accounting process is the recognition or non-recognition of business activities as
accountable events
a. Identifying b. Measuring c. Recording d. Communicating
93. The manner in which the accounting records are organized and employed within a business is
known as
a. Accounting system b. Business document c. Voucher system d. Special journals
 94. An accounting device for accumulating increases and decreases relating to a particular
accounting value such as an asset, a liability, etc.
a. Account b. Ledger c. Journal d. Book of
secondary entry
95. The recording phase of financial accounting covers the following steps, except
a. Business documents are received and prepared c. Transactions are posted to the ledger
b. Transactions are journalized d. Financial statements are prepared
96. Which of the following statements about the bases of recognition of income and expense is
true?
a. Under cash basis accounting, only cash and property and equipment accounts are
recognized as assets
b. In modified cash basis of accounting, prepaid expenses and unearned income are
recognized.
c. Accrual basis and modified cash basis of accounting for income and expenses will yield the
same amount of gross profit for the period.
d. Under accrual basis of accounting, accruals and deferrals are recognized in adjusting entries
which are subsequently reversed in the immediately succeeding accounting period.
97. Which of the following is not a principal purpose of a trial balance?
a. It proves that debits and credits of equal amounts are in the ledger.
b. It is the basis for any adjustments to the account balances
c. It supplies a listing of open accounts and their balances
d. It proves that debits and credits were properly entered in the ledger accounts
98. An error which is disclosed by a trial balance is
a. An omission of a journal entry on purchases on account
b. Double-posting a credit to Sales amounting to P 210,000
c. A journal entry for salaries paid amounting to P 500,000 was not posted
d. Posting to the correct debit or credit side of a wrong account
99. Which one of the following is a purpose of adjusting entries?
I. To apportion the proper amounts of revenue and expense to the current accounting period.
II. To establish the proper amounts of assets and liabilities in the balance sheet.
III. To accomplish the objective of offsetting the revenue of the period with all the expenses
incurred in generating that revenue.
IV. To prepare the revenue and expense accounts for recording transactions of the following
period.
a. I and II only b. II and III only c. I, II and III only d. All of these
100. Adjusting entries are needed
a. Whenever revenue is not received in cash
b. Whenever expenses are not paid in cash
c. Primarily to correct errors in the initial recording of business transactions
d. Whenever transactions affect the revenue or expenses of more than one accounting period
101. The entry to record depreciation is an example of an adjusting entry
a. To apportion a recorded cost c . To record unrecorded expense
b. To apportion unearned revenue d. To record unrecorded revenue
102. Which one of the following items least resembles a typical adjusting entry?
a. Debit an asset and credit revenue c. Debit revenue and credit liability
b. Debit an expense and credit liability d. Debit an asset and credit liability
103. Which one of the following concepts is least related to adjusting entries.
a. Accrual b. Approximation c. Materiality d. Matching of cost against revenue
104. Ian Company initially records prepayments in balance sheet accounts and make reversing entries
when appropriate. Which of the following year-end adjusting entries should be reversed?
a.The entry to record bad debts expense for the period.
b. The entry to record service fees earned by year-end but not billed
c.The entry to record the portion of service fees received in advance that is earned by year-end
d. The entry to record supplies used during the period
105. Which of the following statements is incorrect?
a. All of the accounts of a specific business enterprise are referred to as a ledger.
b. Every adjusting entry affects both a balance sheet and an income statement
c. Transactions often overlap accounting periods
d. The fact that an expense is recognized on the income statement indicates that an equivalent
outlay of cash has been made in the same period.

IV.0Income Determination –
Approaches to Income Measurement/Concepts of Capital Maintenance/Comprehensive
Income /Bases for recognition of Income

106. The process of identifying, measuring and relating revenue and expenses of an enterprise for an
accounting period is known as
a. Revenue recognition b. Income determination c. Realization d. Expense
recognition
107. Which of the following statements relating to the income determination process is (are) true?
I. Revenue for the period is generally determined independently by applying the realization
principles.
II. Expenses are determined by applying the expense recognition principles on the basis of the
relationships between acquisition costs and the independently determined revenue of the
accounting period.
III. The term “matching” is used in accounting to describe the entire process of income
determination, or in a more limited sense, to the process of expense recognition
a. I and II only b. II and III only c. I and III only d. I,
II and III
108. The accounting concept of matching is best demonstrated by
a.Not recognizing any expense unless some revenue is realized
b. Associating effort (cost) with accomplishment (revenue)
c.Recognizing prepaid rent received as revenue
d. Establishing a Reserve for Future Decline in Asset Values

109. Which of the following statements is (are) true?

I. Net loss is the decrease in net assets of business resulting from profit-directed activities
II. Income is a net or partially net concept determined by deducting expenses from revenues.
III. The income or loss which is shown as the final amount in the income statement reflects the
success or failure of the business in its profit-directed activities.
a. Only I is true b. I and II are true c. II and III are true d. I, II and III are true
110. Are the following statements regarding profit true or false?
(1) Profit is any amount over and above that required to maintain capital at the beginning of the
period.
(2) Profit is the residual amount that remains after expenses have been deducted from income
Statement (1) Statement (2)
a. false false
b. false true
c. true false
d. true true

111. What is the purpose of reporting comprehensive income?

a. To report changes in equity due to transactions with owners
b. To report a measure of overall enterprise performance
c. To replace net income with a better measure
d. To combine income from continuing operations and extraordinary items
112. Which is not included in the category of comprehensive income of an accounting entity?
a. Net income for the period c. Gain on sale of treasury stock
b. Revaluation surplus d. Increase in value of available for sale securities
113. Which of the following transactions will not be recognized in cash basis accounting?
 a.Collection of account sales
b. Payment of salaries
c.Purchase of equity shares in XYZ Corporation
d. Unsold inventory at the end of the period
114. Modified cash basis (or hybrid basis) differs from the accrual basis in the computation of
a. Gross Profit b. Expenses c. Depreciation d. Bad debts expense
115. Which of the following statements is incorrect ?
a. Accrual basis financial statements may be prepared from single entry records.
b. Single-entry accounting is synonymous with cash basis accounting
c. No adjusting entries are necessary when accounting records are kept on pure cash basis
d. Over the entire life of the business, there would be no difference between income on cash
basis
and income on an accrual basis.
116. Periodic net earnings are conventionally measured by a
a.Transactions approach
b. Transactions approach including recognition of recognized gains and losses
c.Capital maintenance approach
d. Market value approach
117. The capital maintenance concept followed under present GAAP is
a. Economic capital c. Real capital
b. Financial and physical capital d. Physical capital
118. What concept is critical in distinguishing an enterprise’s return on investment from return of its
investment ?
a. Comprehensive income concept c. Capital maintenance concept
b. Current operating performance concept d. Return on investment concept

Revenue – PAS 18
119. One of the conditions that must be satisfied in order to recognize revenue in a transaction
involving the rendering of services is that the stage of completion of the transaction at the end of
the reporting period can be measured reliably. Which TWO of the following methods for
determining the stage of completion of a contract involving the rendering of services are
specifically referred to in PAS 18 Revenue, as being acceptable?
I Costs incurred to date as a percentage of the estimated total costs of the transaction
II Advances received to date as a percentage of the total amount receivable
III Survey of work performed
IV Revenue to date divided by total contract revenue
a. I and II b. I and III c. II and III d. III and IV

120. According to PAS 18 Revenue, which TWO of the following conditions apply to the recognition
of revenue for transactions involving the rendering of services?
A The amount of revenue can be measured reliably
B The entity retains neither continuing managerial involvement nor effective control over
the transaction
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 the transaction can be
measured reliably
a. A and B b. C and D c. B and D d. A and D

121. According to PAS 18 Revenue, which of the following is not a criterion to be satisfied before
revenue from the sale of goods should be recognized in profit or loss?
a. Revenue can be reliably measured
b. Control over the goods sold has been relinquished but management maintains
continuing involvement over the goods sold
c. C The risks and rewards of ownership has been transferred to the buyer
d. D The outcome of the transaction is probable
 122. According to PAS 18 Revenue, which TWO of the following criteria must be satisfied before
revenue from the sale of goods should be recognized in profit or loss?
A Ownership has been transferred to the buyer
B The outcome of the transaction is certain
C Revenue can be reliably measured
D Managerial control over the goods sold has been relinquished
a. A & B b. B & C c. C & D d. A & D

123. According to PAS18 Revenue, which of the following conditions apply to the recognition of
revenue for transactions involving the rendering of services?
A The significant risks and rewards of ownership have been transferred to the buyer
B The amount of revenue can be measured reliably
C The entity retains neither continuing managerial involvement nor effective control over the
transaction
D The costs incurred for the transaction and the costs to complete the transaction can be
measured
reliably
a. A & B b. B & D c. C & D d. B, C & D

124. One of the conditions that must be satisfied in order to recognize revenue in a transaction
involving the rendering of services is that the stage of completion of the transaction at the end of
the reporting period can be measured reliably. Which of the following methods for determining
the stage of completion of a contract involving the rendering of services are specifically referred
to in PAS18 Revenue, as acceptable?
I - Costs incurred to date as a percentage of the estimated total costs of the transaction
II - Advances received to date as a percentage of the total amount receivable
III - Surveys of work performed
IV - Revenue to date divided by total contract revenue
a. I and II b. I & III c. II and III d. III & IV

125. Micrium, a computer chip manufacturing company, sells its products to its distributors for
onward sales to the ultimate customers. Due to frequent fluctuations in market price for these
goods, Micrium has a“price protection” clause in the distributor agreement that entitles it to raise
additional billings in case of upward price movement. Another clause in the distributor’s
agreement is that Micrium can at any time, reduce its inventory by buying back goods at the cost
at which it sold the goods to the distributor. Distributors pay for the goods within 60 days from
the sale of goods to them. When should Micrium recognize revenue on the sale of these goods to
the distributors?
a. When the distributor sells goods to the ultimate customers and there is no uncertainty with
respect to the “price protection” clause or the buyback of goods.
b. When the goods are sold to the distributors
c. When the distributors pay to Micrium the cost of goods (i.e., after 60 days of the sale of
goods to the distributors
d. When the goods are sold to the distributor provided estimated additional revenue is also
booked under the “protection clause” based on past experience.
126. Revenues are considered to have been earned when
a. Goods are shipped , not yet received by buyer, under terms “ sale on trial”
b. Goods are sold under “lay-away” terms, where goods are delivered only when buyer makes
the
final payment in a series of installments.
c. Goods are shipped, not yet received by buyer, where the buyer has the right to rescind the
purchase if the goods are not within the specifications in the contract
d. The entity ships goods subject to installation which is a significant part of the contract and
the
entity has completed such installation.

127. Revenue , under proper circumstances may be recognized at all of the following moments in
time
EXCEPT
 a.After the earning process has been completed and an exchange has taken place
b. Upon the receipt of cash from the customer
c.As certain stages of completion of production are attained
d. When goods are shipped under terms “ sale on approval”
128. How should earned but unbilled revenues at the balance sheet date on a long-term construction
contract be disclosed if the percentage of completion method of revenue recognition is used?
a. In a footnote to the financial statements until the customer is formally billed for the portion of
the
work completed.
b. As a receivable in the noncurrent asset section of the balance sheet
c. As construction in progress in the noncurrent asset section of the balance sheet
d. As construction in progress in the current asset section of the balance sheet
129. Company R is a retailer that offers “layaway” sales to its customers. Company R retains the
merchandise sets it aside in its inventory, and collects a cash deposit from the customer.
Company R does not require the customer to enter into an instalment note or other fixed
payment commitment or agreement when the initial deposit is received. The merchandise is
not released to the customer until the customer pays the full purchase price. In the event that the
customer fails to pay the remaining purchase price within two years, the customer forfeits its
cash deposit. In the event the merchandise is lost, damaged, or destroyed, Company R either
must refund the cash deposit to the customer or provide replacement merchandise. The revenue
from “layaway” sales should be recognized by Company R when
a. the goods are delivered to the customer
b. 50% of the purchase price is paid by the customer
c. a substantial portion of the purchase price is paid by the customer
d. the last installment payment is made by the customer
130. Expenses may be best described as
a. Costs which have no discernible benefit to future operations
b. The consideration given to acquire goods or services
c. Costs that are associated with revenues of a given period
d. Gross decreases in owner’s equity
131. Which of the following statements is true?
a. Expenses are synonymous with expenditures
b. Not all expenses are expired costs
c. All expired costs are expenses
d. Expense, in the broadest sense, includes expired costs and losses that are deducted from
revenue, in a narrow sense, expense is distinguished from loss
132. An expiration of cost which is incurred without compensation and is not absorbed as costs of
revenue is called
a. Loss b. Deferred charge c. Indirect costs d. Deferred credit

133. Which of the following transactions would require the recording of an expense?
a. Cash paid to a supplier in settlement of a previously recorded promise to pay when some
advertising supplies were purchased.
b. Cash paid to office employees for services rendered during the month
c. Cash paid to acquire a new truck to be used in the business
d. Cash paid to settle an unrecorded liability for factory supplies received and already consumed

134. In expense recognition principle, which of the following is not an important class of expense?
a. Expenditures to acquire assets
b. Expenses from on-reciprocal transfers and casualties
c. Cost of asset other than products disposed of
d. Declines in market prices of inventories held for sale

135. Expenses cannot arise from

a.External events other than transfers c. Production
b. Non-reciprocal transfers to owners d. Casualties
 136. Which of the following best describes the distinction between expenses and losses?
a. Losses are reported net-of-related-tax effect whereas expenses are not reported net-of-tax
b. Losses are extraordinary charges whereas expenses are ordinary charges
c. Losses are material items whereas expenses are immaterial items
d. Losses result from peripheral or incidental transactions whereas expenses result from ongoing
major or central operations of the entity.

ASSETS, LIABILITIES, EQUITY

Cash and Receivables

137. Which of the following cannot be shown as part of cash in the current assets section of the
balance sheet?
a. Compensating balance not legally restricted
b. Regular Payroll account
c. Cash deposit with utility company
d. Check paid by depositor in payment of past due account

138. Which of the following statements regarding Cash and Cash equivalents is false?
a. Petty cash fund of P 8,000 composed of currency and coins of P 2,100 and unreplenished
petty
cash vouchers of P 5,900 should be shown in the current asset section at P2,100 only.
b.. Legally restricted Compensating cash balance for payment of a current liability is shown as
part of
Cash and Cash Equivalent provided the restriction is disclosed.
c. If a bank or financial institution holding funds of a reporting entity is in bankruptcy or
financial
difficulty such cash should be written down to estimated realizable value if the amount is
lower
than face value
d. Not all items included in cash constitute legal tender money.

139. Which of the following is a key element of internal control over cash payments?
a. Making daily bank deposits for all cash receipts
b. Periodically reconciling the cash account balance on the company’s books to the bank statement
balance.
c. Requiring that all petty cash vouchers be approved by two signatories
d. Authorizing and verifying that all cash payments are recorded daily

140. LMN Company issued a note solely in exchange for cash. Assuming that the items below differ in
amount the present value of note at issuance is equal to the
a.Proceeds received
b. Face amount
c.Proceeds received, discounted at the prevailing interest rate for similar notes
d. Face amount discounted at the prevailing interest rate for similar notes
141. Accounts Receivable and Revenue can be properly recognized when
a. Goods are shipped under terms FOB Destination, not yet received by buyer.
b. Goods are sold under “lay-away” terms, where goods are delivered only when buyer makes
the final payment in a series of installments.
c. The entity ships goods subject to installation which is a significant part of the
contract and the entity has completed such installation.
d. Goods are shipped, not yet received by buyer, where the buyer has the right to rescind the
purchase if the goods are not within the specifications in the contract

142. When a specific customer’s account is written off by a company using the allowance method,
the effect on net income and the net realizable value []NRV] of the accounts receivable is
Net income NRV of Accounts Receivable
a. Decrease Decrease
b. Increase Increase
c. Decrease None
d. None None
143. Supsup Company received two one-year notes in payment for merchandise sold. One note, was
interest bearing, with a face amount of P 3,000 at an annual rate of 18 percent. The other note
had a face amount of P 3,540 and was non- interest bearing. Its implied interest rate was 18
percent. Based on the above information, which of the following statements is true?
a. The total amount of cash ultimately to be received will be more for the interest bearing note.
b. Both notes will cause the same amount of total interest to be recognized.
c. The amount of interest revenue which should be recognized is more for the interest-bearing note.
d. The amount which should be credited to sales revenue is more for the non-interest-bearing note.

144. Which of the following would indicate that Cecil Company’s note receivable or other loan is
impaired?
a. When the note receivable is written off..
b. When there is an increasing number of default or delinquency in interest or principal payments
c. When the market value of the note falls below its book value due to interest rate changes
d. When the maker of the note is experiencing financial difficulties.

Inventories
145. According to the net method , which of the following items should be included in cost of
inventory?
a b c d
Freight costs yes yes no no
Purchase discounts not taken no yes yes no

146. Which TWO of the following should be taken into account when determining the cost of
inventories per PAS 2 Inventories?
I. Storage costs of part-finished goods III. Recoverable purchase taxes
II. Trade discounts IV Administrative costs
a. I and II b. II and III c. III and IV d. I and IV

147. According to IAS2 Inventories, which TWO of the following costs should be included in inventory
valuations?
I Transport costs for raw materials III. Storage costs relating to finished goods
II Abnormal material usage IV. Fixed production overheads
a. I and II b. II and III c. I and IV d. III and IV
148. How should import duties be dealt with when valuing inventories at the lower of cost and net
realisable value (NRV) according to IAS2 Inventories? (select one answer)
a. Added to cost b. Deducted in arriving at NRV c. Deducted from cost d. Ignored

149. How should sales staff commission be dealt with when valuing inventories at the lower of cost and
net
realisable value (NRV), according to PAS2 Inventories? (select one answer)
a. Added to cost b. Deducted in arriving at NRV c. Deducted from cost d. Ignored
150. How should trade discounts be dealt with when valuing inventories at the lower of cost and net
realizable value (NRV) according to PAS 2 Inventories?
a. Added to cost b. Deducted in arriving at NRV c. Deducted from, cost d.
Ignored
151. Inventory estimates will be required for the following except
a. when interim financial statements are prepared
b. when inventory is destroyed by typhoon or lahar flow
c. as proof of reasonable accuracy of the physical inventory
d. in the determination of the ending inventory to be shown on the balance sheet at year end.

152. Under the retail inventory method of approximating ending inventory, which of the following is
included in the computation of the cost to retail percentage?
a. Freight-in b. Mark-up c. Mark-down d. All of these
Agriculture (PAS 41)
153. According to PAS 41 – Agriculture, biological assets and agricultural produce held for regular sale
should be valued at
a. Cost c. Lower of cost or net realizable value
 b. Net realizable value d. Fair value less point of sale costs
154. Which one of these is not within the range of activities considered as “agricultural activity”
a. Capability of change c. Production of change
b. Management of change d. Measurement of change

Financial Instruments (Basics) PAS 39

155. Which of the following is not a financial asset?
a. Cash
b. An equity instrument of another entity
c. A contractual right to receive cash
d. A contractual right exchange financial assets or financial liability with another entity under
conditions that are potentially favorable or unfavorable to the entity
156. Which of the following is not among the categories of financial assets?
a. Held-to-maturity investments c. Financial assets at fair value through profit or
loss
b. Loans and receivables d. Non-monetary assets
157. In accordance with IAS39 Financial instruments: recognition and measurement, which ONE of
the following terms best describes a compound financial instrument component of a hybrid
instrument that also includes a non-derivative host contract?
a. An available-for-sale financial asset c. A held-to-maturity investment
b. An embedded derivative d. A financial asset held for trading
158. In accordance with IFRS7 Financial instruments: disclosures, which of the following best
describes the risk that an entity will encounter if it has difficulty in meeting obligations associated
with its financial liabilities?
a. Liquidity risk b. Credit risk c. Financial risk d. Payment
risk
159. Unrealized gains and losses for available for sale securities are
a.Included in the determination of income
b. Included in income for unrealized gains and included in equity for unrealized losses
c.Included in income fpr unrealized losses and included in equity for unrealized gains
d. Included in other comprehensive income and stockholders’ equity
160. The Rissa Company has entered into a contract on June 1, 20X3 that requires it to issue its own
ordinary shares with a value of P 250,000 on 31 May 20X6. In accordance with PAS32, Financial
instruments: presentation, Tootakk should classify the contract as (select one answer)
a. financial asset b. a financial liability c. an equity instrument d. an embedded
derivative
161. Which TWO of the following are types of hedging relationship as defined by PAS39 Financial
instruments: recognition and measurement?
A Cash flow hedge C. Interest rate hedge
B. Credit risk hedge D. Fair value hedge
a. A and B b. B and C c. A and D d. C and D
Investments in Associate (PAS 28)
162. An investor uses the equity method of accounting for an investment in the common stock of
another company when the investment
a.Is composed of common stock and it is the investor’s intent to vote the common stock
b. Ensures a source of supply such as raw materials
c.Enables the investor to exercise significant influence over the investee
d. Is obtained by an exchange of stock for stock
163. According to PAS 28, which of the following will not fall under the situation of “ existence of
significant influence by an investor in the financial and operating policy decisions of the investee
but not control of these decisions”
a.Participation in policy making process
b. Material intercompany transactions
c.Power to govern the financial and operating policy decisions of an enterprise so as to obtain
 benefits from its activities
d. Technological dependency

Property, Plant and Equipment (PAS 16)

164. According to PAS 16, Property, plant and equipment includes all of the following except
a. Property used in production or supply of goods and services
b. Property used for extraction of minerals, oil or natural gas
c. Biological assets related to agricultural activity and mineral rights
d. Property for rental purposes and administrative purposes
165. Which ONE of the following statements best describes 'residual value'?
a.The estimated net amount currently obtainable if the asset were at the end of its useful life
b. The present value of estimated future cash flows expected to arise from the continuing use of
the asset and from its ultimate disposal
c.The amount at which the asset could be exchanged between knowledgeable, willing parties in an
arm's length transaction
d. The amount of cash or cash equivalents that could currently be obtained by selling the asset
in an orderly disposal
166. Which ONE of the following terms best describes the cost (or an amount substituted for cost) of an
asset less its residual value?
a. Revalued amount b. Carrying amount c. Recoverable amount d. Depreciable
amount
167. Sophia Company purchased heavy equipment from Ana Company on September 30, 2011, with
payment due on March 31, 2012. If Sophia’s 2011 net income included no foreign exchange
transaction gain or loss, then the transaction could have
a. Resulted in an extraordinary gain
b. Been denominated in Philippine pesos
c. Caused a foreign currency gain to be reported as a contra account against the heavy equipment
d. Caused a foreign currency translation gain to be reported in equity

168. Which of the following statements best describes the carrying amount of an asset?
a. The cost (or an amount substituted for cost) of the asset less its residual value
b. The amount at which the asset is recognized in the statement of financial position after
deducting any accumulated depreciation and accumulated impairment losses
b. The higher of the asset's net selling price and its value in use
c. The fair value of the asset at the date of a revaluation less any subsequent accumulated
impairment losses
169. Which of the following terms best describes the removal of an asset from an entity's statement of
financial position?
a. Derecognition b. Impairment c. Write-off d. Depreciation
170. The carrying amount of property, plant and equipment subsequent to acquisition is the
a.Historical cost less accumulated depreciation
b. Revalued amount less accumulated depreciation and accumulated impairment losses thereon
c.Fair value less accumulated impairment losses thereon
d. Amount at which an asset is recognized in the balance sheet less accumulated depreciation
and
accumulated impairment losses thereon
171. According to PAS16 Property, plant and equipment, which of the following items should be
capitalized into the cost of property, plant and equipment?
A. Cost of preparing the site for installation
B. Cost of testing whether the asset works correctly
C. Cost of excess materials resulting from a purchasing error
D. Initial operating losses while demand builds up
a. A and B b. A and C c. A, B and C d. A, B, C and D
172. As generally used in accounting, what is depreciation?
a.It is a process of asset valuation for balance sheet purposes.
b. It applies only to long-lived intangible assets.
c.It is used to indicate a decline in market value of long-lived asset
 d. It is an accounting process which systematically allocates long-lived asset cost to accounting
periods.
173. Which TWO of the following statements are correct per PAS16 Property, plant and equipment?
A. Assets are depreciated even if their fair value exceeds their carrying amount
B. Land and buildings are accounted for separately, even when acquired together
C A non-current asset acquired as the result of an exchange of assets is not recognized
D. A gain on disposal of a non-current asset is classified as revenue
a. A and B b. A and C c. A and D d. B and D
PAS 38 – Intangibles:
174. Which of the following should be amortized over the periods of estimated benefit?
a. Patent registration cost for a successfully developed product for commercial sale
b. Goodwill arising from the purchase of an existing business
c. Costs incurred in organizing a corporation
d. Legal cost in successful defense of a patent infringement suit.

175. Which of the following factors should not be considered in determining the useful life of an
intangible
asset?
a. Effects of obsolescence, changes in market demand for the product
b. Expected actions of competitors and potential competitors
c. The period of control over the asset and legal or similar limits on the use of the asset, such as
expiry dates of related leases or contractual or regulatory provisions
176. Which of the following should not be amortized over the periods of estimated benefit?
a. Trademarks
b.. Computer software costs
c. Costs incurred in organizing a corporation
d.. Patent right purchased from an inventor
177. Under PAS 38, Intangible Assets, legal fees incurred by a company in defending its patent rights
should be capitalized when the outcome of the litigation is
Successful Unsuccessful Successful Unsuccessful
a. Yes Yes c. No No
b. Yes No d. No Yes
178. Are each of the following factors relevant, according to PAS38 Intangible assets, in determining
the annual amortization expense on an intangible asset?
(1) The cost.
(2) The amortization method.
Factor (1) Factor (2) Factor (1) Factor (2)
a. Not relevant Not relevant c. Relevant Not relevant
b. Not relevant Relevant d. Relevant Relevant

Liabilities Provisions, Contingent Liabilities and Contingent Assets

179. Which of the following is not an essential characteristic for an item to be reported as a liability on
the balance sheet?
a. The liability is the present obligation of a particular enterprise
b. The liability arises from past transactions or events
c. The liability is payable to a specifically identified payee
d. The settlement of the liability requires an outflow of resources embodying economic benefits
180. Current liabilities include
a.Only obligations which are expected to be settled within the normal operating cycle
b. Only obligations which are to be settled within one year from balance sheet date
c.Obligations which are expected to be settled within the normal operating cycle and obligations
which are due to be settled within one year from balance sheet date
d. Refinanced long-term debt falling within one year from balance sheet date for which the entity
has the discretion to refinance
181. According to PAS 37, Provisions, Contingent Liabilities and Contingent Assets, a liability of
uncertain timing or amount is known as
a. Provision c. Constructive obligation
b. Obligating event d. Contingent liability
182. This creates a legal or constructive obligation that results in an enterprise having no realistic
 alternative to settling the obligation is known as
a. Obligating event b. Restructuring c. Onerous contract d. Provision
Stockholders’ Equity
183. This is the residual interest in the economic resources of a company that remains after deducting
economic obligations:
a.Productive resources c. Net income
b. Owners’ interest d. Net cash balance
184. A company’s plan to raise the unit market price of its shares and reduce the number of shares
outstanding may be accomplished by means of a
a. Reverse split b. Property dividend declaration c. Stock split d. Purchase of treasury
stock
185. Sagana Corp.. declared and paid a liquidating dividend of P100,000. This distribution resulted in a
decrease in Sagana’s
Paid-in Capital Retained Earnings Paid-in Capital Retained Earnings
a. No Yes c. Yes No
b. Yes Yes d. No Yes

186. Allied Corporation declared a 10% stock dividend. The declaration

a. Would decrease both retained earnings and total stockholders’ equity
b. Would decrease retained earnings but would have no effect on total stockholders’ equity
c. Would have no effect on retained earnings but would decrease total stockholders’ equity
d. Would have no effect on retained earnings and total stockholders’ equity.

187. How would the declaration and subsequent issuance of a 30% stock dividend by the issuer affect
each of the following when the market value of the share exceeds the par value of the stock?
Common Stock Additional paid-in capital Retained Earnings Stockholders’ Equity
a. No effect No effect No effect No effect
b. No effect Increase Decrease No effect
c. Increase No effect Decrease Decrease
d. Increase No effect Decrease No effect
188. This is a procedure of eliminating a deficit without going through a formal liquidation and re-
incorporation proceedings.
a. Quasi-reorganization c. Recapitalization
b. Conversion d. Retirement
189. The following relate to revaluation of plant assets and quasi-reorganization. Which statement is
false?
a.The difference between historical cost net book value and sound value is credited to Revaluation
Surplus
b. Under Philippine GAAP, quasi-reorganization can be effected through revaluation of assets
c.After a quasi-reorganization, the balance of Retained Earnings will increase.
d. Any remaining balance of revaluation surplus (or appraisal capital)in the ledger after wiping
out
a deficit may be used to wipe out losses that may be incurred in the future.
190. A company acquired some of its own common shares at a price greater than both their par value
and
original issue price but less than their book value. The company uses the cost method of
accounting
for treasury stock. What is the impact of this acquisition on total stockholders’ equity (TSE), and
the
net book value (NBV) per common share?
a. SE – decrease ; NBV – increase c. SE – decrease; NBV – decrease
b. SE – increase ; NBV – decrease d. SE – increase; NBV - increase
191. How would a stock split affect each of the following?
Asset Total stockholders’ equity Additional paid in capital
a. Increase Increase No effect
b. No effect No effect No effect
c. No effect No effect Increase
d. Decrease Decrease Decrease
Cost Accounting Concepts
192. Which of the following is a period cost?
a. Selling expense b. Materials inventory c. Manufacturing overhead d. Direct labor
193. The overstatement of the work in process inventory at the end of the period will result in the:
a. Overstatement o the cost of goods manufactured in that period.
b. Understatement of the net income for that period.
c. Understatement of the gross profit from sales in that period.
d. Overstatement of the net income for that period.
194. The fixed portion of the semivariable cost of electricity for a manufacturing plant is a
Period cost Product cost Period cost Product cost
a. Yes No c. No Yes
b. Yes Yes d. No No
195. The term “conversion costs” refers to:
a.Manufacturing costs incurred to produce units of output.
b. All costs associated with manufacturing other than direct labor costs and raw materials costs.
c.Costs which are associated with marketing, shipping, warehousing, and billing activities.
d. The sum of direct labor costs and all factory overhead costs.
196. The term “prime costs” refers to:
a.Manufacturing costs incurred to produce units of output.
b. All costs associated with manufacturing other than direct labor costs and raw material costs.
c.Costs which are predetermined and should be attained.
d. The sum of raw materials costs and direct labor costs.

197. The term “variable costs” refer to:

a. All costs which are likely to respond to the amount of attention devoted to them by a specified
manager
b. All costs which do not change in total for a given period of time and relevant range but which
becomes progressively smaller on a per unit basis as volume increases.
c. All manufacturing costs incurred to produce units of output.
d. All costs which fluctuate in total in response to small changes in the rate of utilization of
capacity.
198. Which one of the following costs would be most representative of a semivariable cost?
a. Equipment rentals c. Supervisor salaries.
b. Electricity for machinery. d. Plant insurance.
199. Which type of cost is not recorded in the accounting records?
a. Irrelevant costs. b. Sunk costs c. Opportunity costs. d. Noncontrollable
costs.
200. Which statement is incorrect?
a.Within the relevant range, variable costs change on a per unit basis.
b. Middle-level management is primarily responsible for fixed costs.
c.Direct labor is an element of both prime costs and conversion costs.
d. The work of a plant supervisor would be considered direct labor.
JOB ORDER COSTING
201. Joanne, Corp. uses a job order cost system. It should record the use of direct materials previously
purchased as a increase in:
a. Stores control. c. Factory overhead control.
b. Factory overhead applied. d. Work in process control.
202. Prize, Inc. uses the job order cost system. It shall record the use of indirect materials previously
purchased as a decrease in:
a. Factory overhead applied. c. Stores control
b. Factory overhead control d. Work-in-process control
203. In a job cost system, manufacturing overhead is
An indirect A necessary element An indirect A necessary element
cost of jobs in production cost of jobs in production
a. No Yes c. Yes Yes
b. No No d. Yes No
204. A direct manufacturing labor overtime premium should be charged to a specific job when the
overtime is caused by the
 a. Increased overall level of activity.
b. Customer’s requirement for early completion of job.
c. Management’s failure to include the job in the production schedule.
d. Management’s requirement that the job be completed before the annual factory vacation
closure.
205. Angela Decor Inc. incurred direct labor overtime premium of P250,000 during October, 2010. As
Angela’s cost accountant, you are charging the overtime premium to specific jobs because it was
precipitated by:
a. Customer wanted the job completed earlier.
b. Increased production activity leading to the Christmas season.
c. Factory manager’s failure to include the job in the preceding month’s production schedule.
d. Factory manager’s decision to complete all jobs before the annual machinery maintenance in
December.
206. Using direct materials in production and charging direct labor costs to a job results in debits to
a. Finished goods inventory c. Work in process inventory
b. Direct materials and direct labor d. Materials inventory and manufacturing wages.
207. Costs are accumulated by responsibility center for control purposes when using
Job order costing Process costing Job order costing Process costing
a. Yes Yes c. No No
b. Yes No d. No Yes
PROCESS COSTING
208. April Corp. is a semi-conductor manufacturer where the materials are successively run through the
Front-of-Line, Bonding and End-of-Line departments. For purposes of product-costing, the
bonding department should treat the materials received from the Front-of-Line department as:
a. Work-in process b. Equivalent units c. Raw materials d. Finished goods
209. In computing the current period’s manufacturing cost per equivalent unit, the FIFO method of
process costing considers current period costs
a.Only.
b. Less cost of beginning work in process inventory
c.Plus cost of beginning work in process inventory.
d. Plus cost of ending work in process inventory
210. The units transferred in from the first department to the second department should be included in
the computation of the equivalent units for the second department for which of the following
methods of process costing?
FIFO Weighted average FIFO Weighted average
a. Yes Yes c. No Yes
b. Yes No d. No No
211. A process costing system was used for a department that began operations in January 2010.
Approximately the same number of physical units, at the same degree of completion, were in work
in process at the end of both January and February. Monthly conversion costs are allocated
between ending work in process and units completed. Compared to the FIFO method, would the
weighted-
average method use the same or a greater number of equivalent units to calculate the monthly
allocations?
Equivalent units for weighted Equivalent units for weighted
to average compared FIFO average compared to FIFO
January February January February
a. Same Same c. Greater number Same
b. Greater number Greater number d. Same Greater number
212. The economic order quantity formula assumes that
a. Periodic demand for the good is known.
b. Carrying costs per unit vary with quantity ordered.
c. Costs of placing an order vary with quantity ordered.
d. Purchase costs per unit differ due to quantity discounts.
213. NYK’s shipbuilding company construct huge sailing vessels. NYK’s accountant would consider
the inexpensive stain used only on the wood of the wheel of a vessel to be:
a. A direct material. c. A prime cost.
b. A direct material as well as a prime cost. d. A conversion cost.
214. The variable factory overhead application rate under the normal, practical, and expected activity
levels would be the same :
a. Except for normal volume. c. Except for expected activity.
 b. Except for practical capacity. d. For all three activity levels.
215. Rhea, Inc. a manufacturing concern engages your services to develop a factory overhead
application for use in a process costing system. Which of the following could be used as a
denominator?
a. Actual factory overhead. c. Estimated factory overhead.
b. Actual direct labor hours d. Estimated direct labor hours.
216. In process cost system, application of factory overhead usually would be recorded as an increase
in
a. Finished goods inventory control. c. Cost of goods sold
b. Factory overhead control d. Work in process inventory control

Standard Costing
217. The management of Baby Queen Pickle Factory budgeted production of 700,000 units at a cost of
P1,450,000. If actual production was 700,000 units at a cost of P1,490,000, then Baby Queen’s
production supervisor was:
a. Effective c. Both effective and efficient
b. Efficient d. Neither effective nor efficient.
218. What standard cost variance represents the difference between actual factory overhead incurred
and budgeted factory overhead based on actual hours worked?
a. Volume variance b. Spending variancec. Efficiency variance d. Quantity
variance

Activity- based Cost System

219. Investments in activity-based costing systems are justified only if they lead to
a. More accurate inventory values c. Better cost-driver analysis
b. Better management decisions d. More accurate product costs
220. Leni Co. develops computer programs to meet customers’ special requirements. How should Gram
categorize payments to employees who develop these programs?
Direct costs Value-adding costs Direct costs Value-adding costs
a. Yes Yes c. No No
b. Yes No d. No Yes

Spoiled Goods – Normal & Abnormal Scrap Materials

221. Normal spoilage and abnormal spoilage should be classified as
Normal Abnormal Normal Abnormal
a. Period cost Period cost c. Period cost Product cost
b. Product cost Period cost d. Product cost Product cost
222. In a quality control program, which of the following is(are) categorized as internal failure costs?
I. Rework.
II. Responding to customer complaints.
III. Statistical quality control procedures.
a. I only b. II only c. III only d. I, II, and III
Joint & By-product Costing
223. For purposes of allocating joint costs to joint products, the sales at point of sale, reduced by cost
to complete after split-off, is assumed to equal to the
a. Joint costs. c. Net sales value at split-off
b. Total costs d. Sales price less a normal profit margin at point of sale
224. In accounting for by-products, the value of the by-product may be recognized at the time of
Production Sale Production Sale
a. Yes Yes c. No No
b. Yes No d. No Yes
PAS 33 - EARNINGS PER SHARE
225. Are the following statements in relation to the term 'dilution' true or false, according to PAS 33
Earnings per share?
(1) A reduction in earnings per share is an example of dilution.
(2) A reduction in loss per share is an example of dilution.
Statement (1) Statement (2) Statement (1) Statement (2)
a. False False c. True False
 b. False True d. True True
226. Are the following statements true or false, according to IAS33 Earnings per share?
(1) Earnings per share amounts should not be presented if they are negative, i.e. losses per share.
(2) Earnings per share amounts calculated for discontinued operations should be presented.
Statement (1) Statement (2) Statement (1) Statement (2)
a. False False c. True False
b. False True d True True
227. The Peabody Company is calculating its weighted average number of ordinary shares in issue
during the year ended December 31, 20X7. During the year it issued new ordinary shares for cash
at full market price and made a 1 for 8 bonus issue. Are the following statements true or false,
according to PAS33 Earnings per share?
(1) New shares issued as a result of bonus issue should be time apportioned from their date of
issue
(2) New shares issued for cash at full market price should be time apportioned from their date of
issue.
Statement (1) Statement (2) Statement (1) Statement (2)
a. False False c. True False
b. False True d. True True
PFRS for Small and Medium – Sized Entities
228. Which of the following will meet the definition of a small and medium-sized entity?
a.CJ Foodhaus retails food. It is in the process of issuing securities in a domestic stock exchange.
b. A small, private, unlisted manufacturer
c.A large private unlisted commercial bank
d. A manufacturing company with total assets of P600 million and total liabilities of P 200
million
229. Which of the following entities must not describe its financial statements as being in
compliance with the PFRS for SMEs even if it is allowed by law to prepare its
financial statements in accordance with the PFRS for SMEs?
I. An entity whose shares are traded in a public market
II. An entity whose debt instruments (but not its shares) are traded in a public market
III. An entity that is in the process of issuing its debt instruments (but not its shares) for
trading in a public market (eg a local securities exchange).
a. I and II only b. II and III only c. I and III only d. I, II and III

End of Summary I
Good Luck! God Bless you!