FAT : Pre-week Summary I Oct 2006

Page 1

TOA
1. Which of the following statements is (are) correct?
I.. Accounting provides communication services about economic entities
intended to be useful
in making economic decisions.
II. The primary purpose of accounting is to provide quantitative information
primarily financial
in nature about economic entities to help management in making
economic decisions.
III. Before accounting can render communication services, an economic entity
should first be
created..
a. Statement I only
c. Statements I and III only
b. Statements I and II only
d. Statements I, II and III
2.

Are the following statements about accounting true or false?

I.
Accounting identifies, measures and communicates information about
economic entities for use by both external and internal users in
making economic
II.
The primary purpose of accounting is to provide quantitative
financial information that is
intended to aid management make economic decisions.
Statement I
Statement II
Statement I
Statement II
a.
true
true
c.
true
false
b.
false
true
d.
false
false
3. Accounting provides which of the following type of information?
a
b
c
d
Financial information
yes
yes
no
no
Qualitative information
yes
no
yes
no
Quantitative information
yes
yes
no
yes
4.

Which of the following statements is (are) true?

I.
Accounting is considered as the language of business.
II. Accounting is a service activity.
III, Accounting is both science and art
a. Statement I only
c. Statements I and II only
b. Statement II only
d. Statements I, II and III

5. Which of the following statements regarding accounting theory is incorrect?

a.
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.
b.
Accounting theory has developed primarily in response to
government regulations.
c.
Accounting concepts are components of accounting theory
d.
Accounting concepts are human-made.
6. Accounting concepts are not derived from which of the following?
a. Inductive reasoning
c. Pragmatisim
b. Experience
d. Laws of nature
7. Which of the following is not an economic entity?
a. San Miguel Corporation
b. Manny Pacquiao, a fillipino citizen who owns Man-ky Supermart
c. Caritas Manila, a charitable institution
d. Philippine Institute of Certified Public Accountangs

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8. Which of the following branches of accounting focuses on general purpose

reports
on financial position and results of operations, and cash flows?
a. Financial accounting
c. Management advisory services
b. Auditing
d. Bookkeeping
9. Which of the following is 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
10. The process of analyzing, recording, classifying, summarizing and
communicating all transactions involving state funds and property is known as
a. government accounting
c. fiduciary accounting
b. estate accounting
d. receivership accounting
11.

Which of the following is not applicable to Management Accounting?

a. Must conform with GAAP
b. Special purpose reports
c. Emphasizes relevant data even if subjective
d. Future - oriented

12.

Which of the following is not a characteristic of financial accounting?

a. Uses facts and estimates
c. Makes use of accrual basis in
recording transactions
b. Primarily financial in nature
d. Use of subjective data if
relevant

13.
a.
b.
c.
d.
14.

Which one of these is not among the criteria for accountable events?
It must increase or decrease an element of financial accounting.
It must have already happened
Its cost can be measured reliably
It must involve an exchange between two parties

Which of the following statements about financial accounting is incorrect?

a. General purpose financial statements must be prepared by a certified
public accountant.
b. Financial accounting is a social science that can be influenced by
changes in legal, political, social, and business environments.
c. The preparation of general-purpose financial statements is usually based
on the assumption that the primary users of information are external
decision-makers.
d. In recording transactions, an external transaction is more likely ton be
overlooked and not recorded than an external transaction
15. The accountancy profession has recently
developed a process of
encouraging reductions in greenhouse gas emissions. This scheme whereby
participating entities are issued rights to a special level of emission is known
as
a. Emission scheme
c. Greenhouse Effect Accounting
b. Cap and trade scheme
d. Carbon Accounting

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16. Accounting that recognizes changes in the purchasing power of money is

known as
a. Price level accounting
c. Current value accounting
b. Historical accounting
d. Traditional accounting
17. Which of the following statements about users of financial information is
(are) true?
I. The public need information on trends and recent developments in the
prosperity of
enterprise
II. Employees and their representative groups are interested in
information about the
stability and profitability of the enterprise
III. The providers of risk capital and their advisers are concerned with
the risk inherent in
and return provided by their investments.
IV. Government and their 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
a. Only I is true
b. I and II are true
c. I, II and III are true
d.
All statements are true
18.

19.
A

Which of the following statements about accounting 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 practice of accountancy is much regulated in order to protect the
interest of its
clientele, particularly external decision makers
Which of the following applies to financial accounting?

B
C
D
o Information meets specific needs of particular statement users
no
yes
no
o Emphasizes objective data
ye
yes
no
no
o Basically concerned with income determination and asset valuation
yes
no
yes
o Primarily historical in nature
no
yes
yes
yes

yes

no

20.
Which TWO of the following areas of an accountant work are not part of
financial accounting?
A. Reporting on parent and subsidiary relationships and transactions
B. Reporting on installment sales and long-term construction contracts
C. Reporting on profitability trends as well as ratios and measurements
D. Reporting on the fairness of presentation of financial position and
performance of an entity in conformity with GAAP.
a. A and B
b. C and D
c. A and C
d. B and C
21. Which of the following is among the limitations of financial accounting and
financial statements?
I.. Historical in nature

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II. Some information that are not quantifiable but may be significant to
statement users in
forming economic decisions are not given recognition.
III. Use of estimates
a. I only
b. I and II only
c. II and III only
d. I, II and III
22. The accounting standard setting body in the Philippines is currently known
as
The Accounting Standards Council
The Financial Reporting Standards Council
The Auditing Standards and Practices Council of the Philippines
The Auditing and Assurance Standards Council
23. The body established by the Financial Reporting Standards Council as its
support group tasked to study and deliberate on controversial issues affecting
Philippine accounting practice is
a. Philippine Accounting Principles Committee
b. Standing Interpretations Committee
c. Philippine Interpretations Committee
d. International Financial Reporting Standards Committee
24. The International Financial Reporting Interpretations Committee (IFRIC)
issues interpretations as
authoritative guidance. For which of the following should IFRIC consider
issuing an interpretation?
I.
Narrow, industry - specific issues
II.
Newly identified financial reporting issues not specifically addressed in
IFRSs
III.
Issues where unsatisfactory or conflicting interpretations have developed,
or seem likely to develop.
IV.
Areas where members of the IASB cannot reach unanimous agreement.
a. I and II only
b. II and III only
c. II and IV
d.
III and IV
25.
a
I.
II.
III.
IV.

Which of the following are parts of the due process of the IASB in issuing
new International Financial Reporting Standard?
Establishing an advisory committee to give advice
Reviewing compliance and enforcement procedures
Issuing an interpretation as authoritative interim guidance
Developing and publishing a discussion document for public comment

a. I and II only
and IV only

b. II and III only

c. III and IV only

d. I

26. According to the Preface to International Financial Reporting Standards,

which two of the following are objectives of the IASB?
I.
To harmonize financial reporting between IFRS and US GAAP
II.
To work actively with national standard setters
III.
To promote the use and rigorous application of accounting standards
IV.
To harmonize financial reporting within the European Union
a. I and II
b. II and III
/
c. III and IV
d. I
and IV
27. Choose the incorrect
principles (GAAP):

statement about generally accepted accounting

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a. They are not rigid laws as they are subject to amendment from time to
time
b. Firms that do not comply with GAAP may suffer negative economic
consequences
c. Generally accepted accounting principles and regulatory accounting
principles are both
enforced by the Bureau of Internal Revenue.
c. The Philippine Financial Reporting Standards that constitute GAAP in the
Philippines are not
included in the scope of the Conceptual Framework
28. You are given 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
c. I and II are true
b.
Only II is true
d. Neither I nor II is true

d.

29. Which of the following is not part of the financial reporting standard
setting process in the Philippines?
a.
Creation of a task force by the standard setting body to study the
proposed accounting standard
b. Distribution of the exposure draft for comment to CPA professionals and
other interested parties.
c. Approval by the Financial Reporting Standards Council (FRSC) and
eventually by the Professional Regulation Commission (PRC)
Publication in the PRC Official Gazette and in a newspaper of general circulation
30. Which of the following statements about the IASB Conceptual Framework is
(are) correct?
(1)
The Framework deals with the qualitative characteristics of financial
statements
(2) The Framework normally prevails over International Accounting
Standards where there is a conflict between the two.
(3)The Framework deals with the objectives of financial statements
a. Statement (1) and Statement (3) only
/
c. Statement (1) and
Statement 23) only
b. Statement (2) and Statement (3) only
d. All of them
31.
a.
b.
c.
d.

The objectives of financial reporting for business enterprises are based on

The need for conservatism
The needs of the users of the information /
Generally accepted accounting principles
Reporting on managements stewardship

32. Which statement is false concerning users and their information needs?
Lenders are interested in information that enables them to determine whether
their loans and the interest on these loans will be paid when due.
a. The providers of risk capital and their advisers are concerned with the risk
inherent in and return provided by their investments.

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b. 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.
c. Employees and their representative groups are interested in information
about the stability and profitability of their employees.
33. Of the following statements relating to users of financial information, which
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.
/
34.

A primary objective of financial reporting is to

a.
Assist investors in analyzing the economy of the nation
b.
Assist suppliers in determining an appropriate discount to offer a
particular company
c.
Assist investors in predicting prospective cash flows /
d.
Assist banks in determining an appropriate interest rate for their
commercial and industrial loans

35. Which ONE 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
36. Which ONE of the following statements best describes the term 'financial
position'?
a. The net income and expenses of an entity
b. The net of financial assets less liabilities of an entity
c. The potential to contribute to the flow of cash and cash equivalents to
the entity
d. The assets, liabilities and equity of an entity
37. Which one 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 /
38. Which one of the following is true of the qualitative characteristic of
understandability in relation to information in financial statements?
a. Users are expected to have a significant business knowledge
b. Users should be willing to study the information with reasonable diligence
c. Financial statements should exclude complex matters
d. Financial statements should be free from material error
39. Which one of the following terms best describes the amount of cash or
cash equivalents that could be currently obtained by selling an asset in an
orderly disposal?

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a. Fair value
d. Value in use

b. Realizable value

c. Residual value

40. Which one of the following terms best describes information in financial
statements that is neutral?
a. Understandable
b. Reliable
c. Relevant
d. Unbiased /
41.
Which one of the following terms best describes financial statements
whose basis of accounting recognizes transactions and other events when they
occur?
a. Accrual basis of accounting
/
c. Cash basis of
accounting
b. Going concern basis of accounting
d. Invoice basis
of accounting
42. Which one of the following best describes information that influences the
economic decisions of users?
a. Reliable
b. Prospective
c. Relevant
/
d. Understandable
43. Which one 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. Freedom from
material error
b. Inclusion of a degree of caution
d.
Comprehensibility to users
44. Historical cost is a measurement base used in financial accounting. Which
of the following
measurement bases is also currently used in financial accounting?
Current
Present
Net settlement
Cost
discounted value
value
a.
yes
no
yes
b.
yes
no
no
c.
yes
yes
yes
/
d.
no
yes
yes
45. Which of the following is a constraint in attaining the qualitative objectives
of accounting?
a. Verifiability
b. Cost
c. Objectivity
d.
Accuracy
46. According to the Conceptual Framework for the preparation and
presentation of financial statements all of the following are examples of
expenses except
a. A decrease in the value of inventories due to sale
b. A decrease in asset arising from distribution of assets to owners
c. A decrease in asset because of benefit received in the current period
d. A loss on the disposal of non-current asset
47. The following qualitative objectives of accounting are basically inter-related
except
a. Faithful representation
c. Substance over form
b. Materiality
d. Prudence

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48. Which
I.
II.
III.

of the following statements about prudence and conservatism is (are) true?

Conservatism is not a concept in the IASB Conceptual Framework
Prudence is the same as conservatism
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

49. Which is incorrect concerning the qualitative characteristics of financial

statements?
a. Information has the quality of relevance when it influences the economic
decisions of users by helping them evaluate past, present or future events
or confirming or correcting their past evaluations
b. To achieve the quality of understandability, users are assumed to have a
reasonable kowledge of business and economic activities and
accounting, and a willingness to study the information with reasonable
diligence
c. The need for comparability dictates that the seasonality nature of the
activities of an entity be disclosed in interim financial statements.
d. When information that are a result of related party transactions are
shown in the financial statements and described as such, these financial
statements lose their reliability.
50. 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. Information that is representationally faithful, neutral, prudent, and free
from error is reliable.
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
51.

Which of these qualitative characteristics or concepts are related?

a. Relevance and materiality /
c. Relevance and
understandability
b. Understandability and comparability
d. Reliability and
comparability
52. 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.. conservatism
b. maintaining consistency
c. invoking the materiality constraint rather than the cost benefit
constraint
d. providing relevant data at the expense of reliability

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53.

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
54.
a.
b.
c.
d.

Which one of the following is an essential characteristic of an asset?

The inflow of future economic benefits is controlled by the enterprise
It must be exclusively owned and must be exchangeable
The cost of the asset can be measured accurately
It is a result of either a past or predictable transaction or activity

55.

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.
56. 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
57.

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

I. Equity is the excess of assets over liabilities, thus, it cannot be
measured separately from
the other elements of the financial position.
II. Residual Equity has no specific maturity date except upon liquidation.
III.. Income-related transactions as well as transactions such as revaluation
surplus and
unrealized holding gains and losses on available for sale securities
affect equity.
a. I and II only
II, and III

b. I and III only

c. II and III only

d. I,

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

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a. Fair value
d. Value in use

b. Realizable value

c. Residual value

59. When fair value is used in the measurement of assets in the financial
statements, current GAAP provides the following references as basis of fair
value except
a. Price in an active market
b. Price in a more recent transaction
c. Price based on the assessed value of governmental bodies
d. Price taken from industry or sector benchmarks
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. Which ONE 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
63.

Which one of the following is not an expense recognition principle?

a. Associating cause and effect
c. Profit maximization
b. Immediate recognition
d. Systematic and
rational allocation

64. Resty is the owner and manager of Resty Landscaping Services. Resty
purchased a new
station wagon for personal use and a dump truck to be used in the business.
Which of the
following assumptions, concept or constraints would be violated if both
station wagon and
dump truck are recorded as assets of the business?
a. Materiality constraint
c. Reliability concept
b. Conservatism constraint
d. Separate entity
assumption /
65. 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 /
c. Net income
b. Increase in cash flow
d. Return on net assets

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66.

Normally, revenue is recognized

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

67. 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
68.

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

69. When applying the provisions of PAS 18, Revenue , which of the following
is not among the situations in which an enterprise may retain the significant
risks and rewards of ownership on the goods?
a. When the receipt of revenue from a particular sale is contingent on the
derivation of revenue
by the buyer from its sale of goods.
b . When the enterprise retains an obligation for unsatisfactory performance
covered by normal
warranty provisions.
c . When the goods are shipped subject to installation and is a significant
part of the contract
which has not yet been completed by the enterprise.
d. When the buyer has the right to rescind the purchase for a reason
specified in the sales
contract and the enterprise is uncertain about the possibility of return.
70. Revenue may, under proper circumstances, be recognized in which of the
following circumstances?
a. When goods marked at 150 percent gross margin on cost are
delivered to the consignee
b.. When an entitys loan from government is forgiven
c. When at least fifty percent of the selling price is received in a lay-away
sale
d.. When accounts receivable are assigned on a with recourse basis
a.
b.
c.
d.

71. Which of the following involves recognizing an expense?

A machinery is used in the production of goods for sale
A delivery truck is used in complying with the companys sales policy of FOB
Destination
A sales discount is granted to customer who pays within the discount period
Previously unrecorded wages are paid to laborers engaged in constructing a
building for a
companys own use
72. Alice Company assigned its receivable to MC Bank on a without-recourse
basis. Control was
surrendered in the transaction to MC Bank. Alice received cash as a result of
the transaction,

Page 12

which is best described as

a. Loan from MC Bank collateralized by Aices accounts receivable
b. Loan from MC Bank to be repaid by the proceeds from Alices accounts
receivable
c. Sale of Alices accounts receivable to Joy, with the risk of uncollectible
accounts retained by
MC Bank.
d. Sale of Alices accounts receivable to Joy, with the risk of uncollectible
accounts transferred to
MC Bank
73.

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
74. Which of the following would be matched with current revenue on a basis
other than association of
cause and effect?
a. Depreciation /
b. Cost of goods sold
c. Sales commission
d. Warranty costs
75.

The accounting concept of matching is best demonstrated by

a. Recognizing prepaid rent received as revenue
b. Associating effort (cost) with accomplishment (revenue)
/
c. Establishing an allowance for possible market declines in inventory value
d.. Not recognizing any expense unless some revenue is realized.

76. Which of the following types of losses is excluded from the determination of
current period net income?
a. Material losses resulting from early extinguishment of a companys
bonded indebtedness
b. Material losses resulting from adjustments specifically related to
operations of prior years /
c. Material losses resulting from unusual sales of assets not acquired for
resale
d. Material losses resulting from the write-off of intangibles.
77. 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
78.

Which of the following is a period cost?

a. Factory overhead
b. Work in process
d. Direct labor
79.

c. Selling expense /

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
truera

Page 13

c.
d.
80.

b.

true
true

false
true

Which of the following is not a function of an accounting system?

a. Record transactions and events
c. Interpret summarized
data
b. Retrieve recorded data
d. Store recorded data

81. A system of bookkeeping whereby transactions are not analyzed in terms of

debits and credits. Only a cash book summarizing receipts and disbursements
is used. This is known as
a. Double-entry system
c. Accrual basis
Single-entry system
/
d. Hybrid basis
82. The primary characteristic that distinguishes double-entry bookkeeping from
single-entry is
a. It recognizes the two-fold effect of each event affecting the enterprise
b. A complete set of journals and ledgers is maintained
c. A trial balance is periodically prepared
d. Accrual basis accounting is used
83. An accounting device for accumulating increases and decreases relating to a
particular accounting value such as an asset, a liability, etc.
a. Account
c. Journal
b. Ledger
d. Book of secondary
entry
84. 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.
85. 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
/
86.

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
87. A transaction which has the net effect of increasing assets and owners
equity is
a. Bad debts expense
b. Issuance of capital stock at a discount
c. Payment of accounts payable
d. Declaration of a 10% stock dividend.
88.

Which one of the following items least resembles a typical adjusting entry?

Page 14

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
89. XYZ 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
90. CJ 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
91.

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

92.

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
93.
Which of the following transactions are recognized in single-entry
bookkeeping?
A
D
o Purchase of office supplies for cash
yes
yes
no
o Collection on accounts receivable
no
yes
yes
o Unsold merchandise at the end of the year
yes
no
no
o Modified cash basis (or hybrid basis) differs from the accrual basis
computation of
a. Gross Profit
b. Expenses
/
c. Depreciation
Bad debts expense

94.

The effect of closing entries is to

a. Change assets

no
no
yes
in the
d.

Page 15

b. Change retained earnings

c. Change liabilities
d. Change debit balances of all accounts into credits and vice-versa
95. The following six adjusting entries were recorded by RNQ Corp. at the end of
the fiscal year:
(1)Bank service charge expense xx
(4) Wages expense
xx
Cash
xx
Wages payable
xx
(2)Unearned rent
Rent revenue
xx

xx

(3)Bad debts expense

xx
Allowance for bad debts
xx

xx

xx

(5) Insurance expense

xx
Prepaid insurance
(6) Prepaid rent
Rent expense

xx

If the firm reverses all adjusting journal entries which should be

appropriately reversed, which
of the six adjusting journal entries would be reversed?
a. (3), (4) and (6)
b. (1), (2) and (5)
c. (4), (6) .
d. All six adjustments should be reversed

96.

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
c. II and III are false
b. Only II is false
d. I, II and III are
false
97.

Which of the following best describes the double-entry concept?

a. Only two accounts are affected by each recording of accountable event.
b. The debit credit convention must be used.
c. For every increase in asset, there must be an increase in liability or
revenue.
d. Events and transactions are analyzed and recorded using the principle of
duality and equality

98.

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
99.

Which of the following statements is incorrect?

a. All of the accounts of a specific business enterprise are referred to as a
ledger.

Page 16

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.
/
100. Which one of the following concepts is least related to adjusting entries.
a. Accrual
c. Materiality
b. Approximation
d. Matching of cost against revenue
101. Which one of the following bases of income and expense recognition is used
in
accounting for revenue and expenses under single-entry bookkeeping.?
a. cash basis
c. modified cash basis
b. accrual
d. None of these is used
102. 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
103. Which of the following statements is (are) true?
I. The steps of the accounting process implements the steps of the
accounting cycle
II. The steps of the accounting cycle implements the steps of the account ting
process.
III. The steps of the accounting cycle describe accounting work in a going
concern
a. A only
b. A and B only
c. B and C
d. A, B and C
104. Which of the following explains the debit and credit rules relating to the
recording of revenue
and expenses
a. Expenses appear on the left side of the balance sheet and are recorded
by debits; revenue
appears on the right side of the balance sheet and is recorded by
credits
b. Expenses appear on the left side of the income statement and are
recorded by debits; revenue appears on the right side of the income
statement and is recorded by credits
c. The effects of revenue and expenses upon owners equity
d. The realization principle and the matching principle
105. Which of the following is (are) reason (s) for preparing 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.

Page 17

a. I and II only
b. II and III only

c. I, II and III only

d. All of these

106. Which of the following statements is incorrect?

c. All of the accounts of a specific business enterprise are referred to as a
ledger.
d. 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.
107. In the equation, Assets + Expenses = Liabilities + Revenue + Capital, the
expenses and revenues are
a. Contra asset and contra liability accounts, respectively, that assist
analysis of the financial
progress of the firm.
b. Incorrectly stated because their signs are reversed i.e., both are contra
items that should have negative signs in the formula.
c. Adjustments to capital that are postponed until the end of a specific
accounting period to determine their net effect on capital for that
period.
d. Incorrectly included in the formula because Assets = Liabilities +
Capital
108. Which of the following statements is (are) false concerning double-entry
bookkeeping?
I. The duality and equilibrium principles in double entry are expressed
through an accounting
equation, Assets = Liabilities + Equity
II. If an economic entity has no liabilities, the assets will be equal to equity
unless some assets
are impaired.
III. In double entry bookkeeping, an accountable event always has an effect
on assets and / or
liabilities or capital account
a. Only I is false
c. I and II are false
b. Only II is false
d. All statements are false

109. The computed figure which represents the difference between sales or other
revenues and the sum of costs expired and expenses incurred during the year is
considered as the
a. Economic measurement of profit
b. Accounting concept of income
c. Return on investment
d. Return on total assets
110. Periodic net earnings are conventionally measured by a
a. Transactions approach, including recognition of certain unrealized gains
and losses
b. Capital maintenance approach
c. Transactions approach including recognition of effects of price level
changes
d. Market value approach

Page 18

111. Which of the following statements about bookkeeping systems and income
determination is (are) false?
I. Net income or loss under single entry bookkeeping is computed using an
approach that directly matches cost with revenue.
II. Double entry bookkeeping is also known as the transactions approach of
accounting for Assets, liabilities, equity, revenue and expenses including
certain identified unrealized gains and losses is
III. Double-entry bookkeeping is the generally acceptable method of
bookkeeping because it offers an acccurate and more complete income
measurement than single-entry.
a. I and II are false
c. II and III are false
b. I and III are false
d. I, II and III are false
112. In double-entry bookkeeping system which of the following may be used as
basis for recognizing income and expenses by an economic entity?
a.
b.
c.
d.
o Cash basis
yes
no
yes
no
o Modified cash basis
yes
yes
no
no
o Accrual basis
yes
no
no
yes
113. Which of the following is (are) recognized in both modified cash basis and
accrual
basis of accounting?
a. Prepaid rent expense
c. Accrued commission income
b. Bad debts expense
d. Unearned rent revenue
114. Revenue may, under proper circumstances, be recognized in which of the
following circumstances?
a. When goods marked at 150 percent gross margin on cost are
delivered to the consignee
b.. When an entitys loan from government is forgiven
c. When at least fifty percent of the selling price is received in a lay-away
sale
d.. When accounts receivable are assigned on a with recourse basis
115. All but one of the following are required before a transfer of receivables can
be recorded as a sale:
a. The transferred receivables are beyond the reach of the transferor and its
creditors.
b. The transferor has not kept effective control over the transferred
receivables through a
replacement agreement.
c. The transferor maintains continuing involvement
d. The transferee can pledge or sell the transferred receivable.
116. Which of the following statements about income and expense recognition is
(are) true.?
I.. The gross profit on sales computed under modified cash basis is the
same as that
computed under accrual basis.
II. Both cash basis and modified cash basis will yield the same amount of
operating expenses
in the income statement.
III. In recording day-to-day transactions and events, all entities must follow
accrual basis of accounting
a. Only I is true
c. II and III are true

Page 19

b. I and II are true

d. All statements are true

117. 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
118. When applying the provisions of PAS 18, Revenue , which of the following
is not among the situations in which an enterprise may retain the significant
risks and rewards of ownership on the goods?
a. When the receipt of revenue from a particular sale is contingent on the
derivation of revenue
by the buyer from its sale of goods.
b . When the enterprise retains an obligation for unsatisfactory performance
covered by normal
warranty provisions.
c . When the goods are shipped subject to installation and is a significant
part of the contract
which has not yet been completed by the enterprise.
d. When the buyer has the right to rescind the purchase for a reason
specified in the sales
contract and the enterprise is uncertain about the possibility of return.
119. Which of the following involves recognizing an expense?
a. A machinery is used in the production of goods for sale
b. A delivery truck is used in complying with the companys sales policy
of FOB Destination
c. A sales discount is granted to customer who pays within the discount
period
d. Previously unrecorded wages are paid to laborers engaged in
constructing a building for a companys own use

120. What concept is critical in distinguishing an enterprises return on

investment from return of its investment?
a. Comprehensive income concept
b. Current performance concept
c. Capital maintenance concept
d. Investments return concept
121. The capital maintenance concept followed under present GAAP is
a. Financial capital concept
c. Economic capital concept
b. Physical capital concept
d. Financial and physical
capital concept

Page 20

122. 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
123. 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. Change in revaluation surplus
d. Increase in value of
investment property
124. Total comprehensive income includes all changes in equity during a period
except
a. Those resulting from investments by or distribution to owners
b. Sale of assets other than inventory
c. Those resulting from revaluation increases and decreases on plant assets
d. Those resulting from revenue generated by a totally owned subsidiary

a.
b.

125. Are the following statements about the requirements of PFRS 5 Non-current
assets held for sale and discontinued operations true or false?
(1) An asset that meets the criteria for classification as held for sale after the
end of the reporting period but before the authorization of the financial
statements should be measured in the statement of financial position at the
lower of carrying amount and fair value less costs to sell.
(2) To be classified as an asset held for sale, the sale must be expected to be
completed
within 12 months from the end of the financial year.
Statement (1) Statement (2)
Statement (1)
Statement (2)
False
False /
c.
True
False
False
True
d.
True
True
126. To which TWO of the following types of asset do the measurement provisions
of PFRS5 Non-current assets held for sale and discontinued operations apply?
A. Financial assets
C. Buildings
B. Intangible development assets
D. Deferred tax assets
a. A and B
c. B and D
b. B and C
/
d. A and D
127. Which of the following statements about non-current assets held for sale
(PFRS 5) is false?
a . Assets classified as held for sale are carried lower of carrying amount or
fair value less cost
to sell.
b. An entity shall classify a non-current asset as held for sale if its carrying
amount will be
recovered principally through a sale, or through continuing use.
c.. An asset classified as held for sale must be available for immediate sale
in its present
condition and the sale must be highly probable
d. An asset held for sale shall not be depreciated.
128.The impairment loss attributable to a discontinued operation is

Page 21

a.. Excess of net recoverable value of the net assets of a discontinued

operation over its
carrying amount
b.. Excess of the carrying amounts of the net assets of a discontinued
operation over their net
recoverable value
c. Treated as extraordinary item
d. Not recognized
129. In accordance with PFRS5 Non-current assets held for sale and discontinued
operations, an asset should be classified as held for sale when which of the
following criteria are satisfied?
A

C
D
Asset available for immediate sale
no
no
Sale is highly probable
no
yes
no
Asset market value is observable
no
yes
yes

yes

yes

yes
no

130. An entity has an asset that was classified as held for sale. However, the
criteria for it to remain
as held for sale no longer apply. The entity should
a. Leave the non-current asset in the financial statements at its carrying
value.
b. Remeasure the noncurrent asset at fair value
c. Measure the noncurrent asset at the lower of its carrying amount before
the asset was
classified as held for sale (as adjusted for subsequent depreciation,
amortization, or
revaluation) and its recoverable amount at the date of the decision not to
sell
d. Recognize the non-current asset at its carrying amount prior to its
classification as held for
sale as adjusted for subsequent depreciation, amortization or
revaluation.
131. PAS 28 does not require the equity method to be applied with an associate
that has been acquired and held with a view to its disposal within a certain
time period. Per guidance from PFRS 5, what is this time period within which
the associate must be disposed of?
a. Six months
c. Two years
b. Twelve months
d. In the near future

132.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. Net realizable value is not exactly the same as current selling price.
III.According to PAS 29. Hyper-inflationary Economy, only non-monetary
items are restated to

Page 22

current price level amounts in the balance sheet using the national
price index sourced
from Central Bank of the Philippines
a. Only I is true
c. II and III are true
b. Only II is true
d. All statements are
true
133.Which of the following statements about asset concepts is (are) true?
I. In accounting, there are instances when a gain or a 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 assets benefits
a. I and II only
b. I and IV only
c. I, II and III only
d. I, II, III, IV
134. 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

135.Which of the following items is classified as a financial asset?

a. ordinary shares of the issuer;
c. accounts receivable
b. loans payable (owed by the borrower)
d. inventory.
136.All of the following would be regarded as financial instruments except:
a. bank overdraft;
c. cash
b. notes payable;
d. equipment.
137. Which of the following is not among the categories of financial assets?
a. Held-to-maturity investments
b. Loans and receivables
c. Financial assets at fair value through profit or loss
d. Non-monetary assets
138. Trading securities, available for sale securities and underwriting accounts are carried at
a. Cost
c. Cost adjusted for permanent market decline
b. Fair value
d. Lower of cost or market value

139.In accordance with PAS32 Financial instruments: presentation, which ONE of

the following types of instrument is best described as a contract that evidences
a residual interest in the assets of an entity after deducting the liabilities?
a. Financial liability
c. Guarantee
b. Equity
d. Financial asset
140.At what amount is a financial asset or financial liability measured on initial
recognition?
a. Fair value. For items that are not measured at fair value through profit or
loss, transaction costs are also included in the initial measurement
b. The consideration paid or received for the financial asset or financial
liability.
c. Acquisition cost, which is the consideration paid or received plus any
directly attributable

Page 23

transaction costs to the acquisition or issuance of the financial asset or

financial liability
d. Zero.
141.What is the best evidence of the fair value of a financial instrument?
a. Its cost, including transaction costs directly attributable to its purchase,
origination or issuance
b. Its estimated value determined using discounted cash flow techniques ,
option pricing models, etc.
c. Its quoted price, if an active market exists for the financial instrument
d. The present value of the contractual cash flows less impairment.
142.In accordance with PAS39 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 nonderivative host contract?
a. An available-for-sale financial asset
b. An embedded derivative
c. A held-to-maturity investment
d. A financial asset held for trading
143.In accordance with PFRS7 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
c. Credit risk
b. Financial riskc.
d. Payment risk
144.The Goldie Company has entered into a contract on 1 June 1, 2009 that
requires it to issue its
own ordinary shares with a value of P 250,000 on 31
May 2012. In accordance with PAS32, Financial instruments: presentation,
Goldie should classify the contract as
a. a financial asset
c. an equity instrument
b. a financial liability
d. am embedded derivative
145.In accordance with IFRS7 Financial instruments: disclosures, which ONE of the
following best describes the risk that an entity will encounter difficulty in
meeting obligations associated with financial liabilities?
a. Credit risk
b. Financial risk
c. Liquidity risk
d.
Payment risk
146.Which TWO of the following are classified as financial instruments in
accordance with PAS 32 Financial instruments: presentation?
a. Patents and inventories
c. Trade receivables and
Patents
b. Trade receivables and trade payables
d. Inventories and trade
payables
147.Which ONE of the following is not classified as a financial instrument in
accordance with PAS32 Financial instruments: presentation?
a. Convertible bond
c. Foreign currency contract
b. Warranty provision
d. Loan receivable
148.Which TWO of the following are types of hedging relationship as defined by
PAS39 Financial instruments: recognition and measurement?
A Cash flow hedge.
B Credit risk hedge
C Interest rate hedge

Page 24

D Fair value hedge

a.. A and B
c. C and D

b. B and C

d.

A and D
149.What is the principle for recognition of a financial asset or a financial
liability in PAS 39?
a. A financial asset is recognized when and only when, it is probable that
future economic
benefits will flow to the entity and the cost or value of the instrument
can be measured reliably.
b. A financial asset is recognized when and only when, the entity obtains
control of the
instrument and has the ability to dispose of the financial assets
independent of the action of others.
c. A financial asset is recognized when, and only when, the entity obtains
the risks and rewards of ownership of the financial asset and has the
ability to dispose the financial asset
d. A financial asset is recognized when and only when, the entity becomes
a party to the
contractual provisions of the instrument.
150.Are the following statements concerning the measurement of financial
instruments after initial recognition true or false, according to PAS39 Financial
instruments: recognition and measurement?
(1) Held-for-trading financial assets are measured at amortized cost.
(2) Held-to-maturity investments are measured at fair value.
Statement (1) Statement (2)/
a.
False
False
b..
False
True
c.
True
False
d..
True
True
151.In accordance with PFRS7 Financial instruments: disclosures which TWO of the
following are components of market risk?
a..
b.
c.
d
Credit risk
no
yes
yes
no
Currency risk
yes
no
no
yes
Interest rate risk
no
no
yes
yes
Liquidity risk
yes
yes
no
no
152.Are the following statements true or false, according to IAS32 Financial
instruments: presentation?
(1) Transaction costs of issuing equity instruments are charged against
income.
(2) The components of a compound financial instrument are classified
separately in accordance
with their substance.
Statement (1)
Statement (2)
a. False
False
b. False
True
c. True
False
d. True
True

Page 25

153. Are the following statements about dividends true or false, according to IAS32
Financial
instruments: presentation?
(1) Dividends in respect of ordinary shares are debited directly in equity.
(2) Dividends in respect of redeemable preference shares are debited
directly in equity.
Statement (1)
Statement (2)
a..
False
False
b.
False
True
c.
True
False
d.
True
True
154.The Proctor Company has 300 7% preference shares in issue. They are
redeemable on 31 December 20X9. How will the preference shares and the
related preference dividend be presented in Proctor's financial statements for
the year ended 31 December 20X6, according to IAS32 Financial instruments:
presentation? Preference shares Preference dividend
a. Non-current liability Deducted from equity
b. Equity Deducted from equity
c. Equity Finance cost
d. Non-current liability Finance cost
155.Prior to January 1, 2010 The Poe Company had not held any equity
investments in other companies. On January 1, 2010 Poe purchased 3% of the
equity shares in Susan Company with the intention of holding this investment
over the long term. In accordance with PAS39 Financial instruments: recognition
and measurement, the most appropriate classification of the equity investment
in Susan by Poe is
a. at fair value through profit or loss
b. available for sale
c. held to maturity
d. amortised cost

156. Which of the following cannot be shown as part of cash in the current assets
section of the balance sheet?
a. Cash in special checking account for payroll
b. Compensating balance not legally restricted
b. Customers check in payment of past due account
d. Cash deposit with utility company
157. To be reported as cash and cash equivalent, the cash and cash equivalent
must be
a. Unrestricted in use for current operations
b,. Available for the purchase of property, plant and equipment
c. Set aside for the liquidation of long-term debt
d.. Deposited in the bank
158. Which of the following is false concerning the valuation of cash and cash
equivalents?
a. Cash is valued at face value
b. Cash in foreign currency is valued at the current exchange rate.
c. If a bank or financial institution holding the funds of the company is in
bankruptcy or financial
difficulty, cash should be written down to estimated realizable value.

Page 26

d. Cash equivalents should be valued at maturity value, meaning, face

value plus interest.
159. It is the last price at which a security is traded during the trading day
a. Open
b. Close
c. High
d. Low
160. Shakeys Co. uses the installment sales method to recognize revenue.
Customers pay the installment notes in 24 equal monthly amounts, which
include 12% interest. What is the installment notes receivable balance six
months after the sale?
a. 75% of the original sales price
b. Less than 75% of the original sales price
c. The present value of the remaining monthly payments discounted at
12%
d. Less than the present value of the remaining monthly payments
discounted at 12%
161. A method of estimating uncollectible accounts that emphasizes asset
valuation rather than income measurement is the allowance method based on
a. Direct write-off
c. Credit sales less returns &
allowance
b. Gross sales
d. Aging the receivables
162. Derivatives are financial instruments that derive their value from changes in
a benchmark
based on any the following except
a. Stock prices
c. Commodity prices
b. Mortgage and currency rates
d. Discounts on
accounts receivable
163. 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. Proceeds received, discounted at the prevailing interest rate for similar
notes
c. Face amount
d. Face amount discounted at the prevailing interest rate for similar notes
164. Unrealized gains and losses on trading securities and available-for-sale
securities are
Trading securities
Available
for sale securities
a. Included in the determination of income
Included in
stockholders equity
b. Only gains are included in determination of income
Only gains
included in equity
c. Included in the determination of income
Included in
determination of income
d. Only losses are included in determination of income
Losses included in
equity
165. A net unrealized loss on a companys available-for-sale portfolio of
marketable equity securities should be reflected in the current
financial statements as
a. An extraordinary item shown as a direct reduction of retained earnings
b. A current loss resulting from holding marketable equity securities

Page 27

c. A footnote or parenthetical disclosure only

d. A valuation allowance and included in the equity section of the statement of financial position

166. A compensating balance is best reflected by which of the following?

a. A savings account maintained at the bank equal to the amount of all
outstanding loans
b. An amount of capital stock held in the companys treasury equal to
outstanding loan
commitments
c. The portion of any demand deposit, time deposit, or certificate of deposit
maintained by a
corporation which constitute support for existing borrowing
arrangements of the
corporation with the lending institution.
d. A balance held in a time or demand deposit account that is equal to the
interest currently
due on a loan
167. MMR Company placed P1.5M in the money market for 60 days subject to
pre-termination.
The P 1.5M should be
a.. Included as part of cash and cash equivalent with appropriate
disaggregation in the notes to
the
financial statements
b. Included as part of its marketable securities without need of any
disclosure.
c. Treated as short-term receivables with the appropriate disclosure in the
notes to financial
statements
d. Considered as part of the marketable securities with the appropriate
disclosure in the notes
to financial statements.
168. Deposits in foreign countries which are subject to a foreign exchange
restrictions should be
a. Valued at current exchange rates and shown as current assets
b. Valued at historical exchange rates and presented as noncurrent assets
c. Valued at current exchange rates and presented as noncurrent assets
d. Valued at historical exchange rates and presented as current assets
169.

Which of the following statements is false?

a. Not all items included in cash constitute legal tender
b. Cash may be offset against a liability if the deposit of funds in a
restricted account clearly
constitutes the legal discharge of the liability.
b. Petty cash fund of P 5,000 composed of currency and coins of P1,400 and
unreplenished
petty cash vouchers of P 3,600 should be shown in the current asset
section at P1,400 only.
d. Marketable securities and commercial papers may be shown as part of
cash provided this is
disclosed
170. What is the proper accounting for credit card sales if the credit card
company is

Page 28

a.
b.
c.
d.

Affiliated with a bank

Sale on account
Sale on account
Cash sale
Cash sale

Not affiliated with a bank

Cash sales
Sale on account
Cash sale
Sale on account

171. Mardi Company uses the allowance method in recognizing uncollectible

accounts. Ignoring deferred taxes, the entry to record the write-off of a
specific uncollectible account
a. Affects neither net income nor working capital
b. Affects neither net income nor accounts receivable
c. Decreases both net income and accounts receivable
d. Decreases both net income and working capital
172. The PRC Company has 300, 7% preference shares in issue. They are
redeemable on Dec. 31, 2011. How will the preference shares and the related
preference dividend be presented in PRCs financial statements for the year
ended, December 31, 2009, according to PAS 32?
Preference shares
Preference dividends
a.
Non equity liability
Deducted from equity
b.
Equity
Deducted from equity
c.
Equity
Finance cost
d.
Non-current liability
Finance cost
173. The Verdi Company acquired 30,000, 4% Government Bonds redeemable
in 2012 at the quoted market price of P200. Verdi has no current intention to
sell the bonds and has a policy to hold them as investments Unless certain
corporate criteria are met and the bonds are sold to maintain liquidity.
In
accordance with PAS 39, Financial Instruments recognition and measurement,
which of the following is the most appropriate classification for Verdis
investment in the Government Bonds?
a. Held for trading
c. Held to maturity
b. Available for sale
d. At fair value through profit
or loss

174. Which one of the following of the following is excluded in the scope of PAS 2
Inventories?
a. Inventories of a service provider
c. Construction in
progress
b. Manufacturing supplies
d. Raw materials
175. All of the following are common classifications for the disclosure of
inventories in a set of financial statements:

Raw materials
Finished goods
Work in progress

I
II
III
Yes Yes
No
No
Yes Yes
Yes
Yes
No Yes
Yes
No

IV

Page 29

Assets held for resale

a. I;

II;

.No
c. III

Yes

No

Yes

d. IV

176. The weighted average inventory costing method is particularly suitable to

inventory whe:
A dissimilar products are stored in separate locations;
B the entity carries stocks of raw materials, work-in-progress and finished
goods;
C goods have distinct use-by dates and the goods produced first must be sold
earliest;
D homogeneous products are mixed together
177. Which one of the following is included in the scope of PAS 2 Inventories but
excluded from the measurement rule?
a. Land held for resale by subdivision company or real estate developer
b. Damaged merchandise inventory of a retailer
c. Biological assets held for regular sale
d. Finished goods produced
178. Costs excluded from cost of inventory and recognized as expenses in the
period when incurred are
a. Storage costs, unless necessary in the production process.
b. Borrowing costs incurred for inventories that require a substantial period
of time to bring
them to a salable condition
c. Foreign exchange differences which result from severe devaluation of a
currency against which
there is no hedging and that affects liabilities directly arising from the
recent acquisition of
inventories
d..Freight and handling costs in acquiring goods.
179. According to current GAAP, which of the following conditions must exist in
order for a market
to qualify as an active market?
I. . The items traded within the market are heterogeneous
II. Willing buyers and sellers can normally be found at any time; and
III. Prices are available to the public.
a. I and II only
b. II and III only
c. I, and III only
d. I, II
and III
180. 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
20. If the average retail inventory method is used, which of the following
calculations would include or exclude net markdowns?
Cost ratio
Ending Invty. at retail
Cost ratio
Ending invty. at retail
a.
Include
Include
c.
Exclude
Include

Page 30

b.
Exclude

Include

Exclude

d.

Exclude

181. 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.
182. Which of the following is not included in the cost of inventories of a service
provider?
a. Labor and other costs of personnel directly engaged in providing the
service
b. Overhead attributable to the rendering of services
c. Labor and other costs relating to general administrative personnel
d. All the above costs are included
183. According to PAS 39, which of the following is not a characteristic of a
financial instrument
known as a derivative?
I.
Its value changes in response to the change in a specified interest rate,
financial instrument
price. commodity price, foreign exchange rate, index of prices or
rates, etc., provided in
the case of a non-financial variable that the variable is not specific to
a party to the
contract (or underlying).
II. It is settled at the current or determinable future date.
III. It requires no initial net investment or an initial net investment that is
smaller than would be required required for other types of
contracts that would be expected to have a similar response to the
changes in market factors
a. I only
b. II only
c. III only
d. II
and III only
184. Losses which are expected to arise from firm and non-cancellable
commitments for the future
purchase of inventory items, if material should be
a. Recognized in the accounts by debiting loss on purchase commitments
and crediting
Estimated
liability for loss on purchase commitments
b. Disclosed in the notes
c. Ignored
d. Charged to retained earnings
185. On November 4, 2011, Bona Company contracted to buy foreign goods
requiring payment in dollars one month after their receipt at Novas factory.
Title to the goods passed on December 15, 2011. The goods were still in
transit on December31, 2011. Exchange rates of the peso to the dollar were P
34. P 38, and P 40 on Nov. 4, Dec. 15, and Dec. 31, respectively. According
to PAS 1, Nova should account for the exchange rate fluctuation in 2011 as
a. A loss included in net income from operating activities
b. A loss included in net income after operating activities but before net
income from ordinary
activities.

Page 31

c. An extraordinary loss
d. A gain included in net income after operating activities but before net
income from ordinary
activities.

186. 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
187. 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 investors 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
188. Bill Co. received a cash dividend from a common stock investment. Should
Bill report an increase in the investment account if it has classified the stock as
available-for-sale or uses the equity method of accounting?
Available for sale
Equity method instrument
Available for sale Equity
method instrument
a.
No
No
c.
Yes
No
b.
Yes
Yes
d.
No
Yes
189. Drio, Inc., owns 40% of the outstanding stock of Gloom Company, and opted
to account for its investment in Gloom under the equity method. During
2008, Drio received a P4,000 cash dividend from Gloom, What effect did this
dividend have on Drios 2008 financial statements?
a. Increased total assets
c. Increased
income
b. Decreased total assets
d. Decreased
investment account

190. 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

Page 32

191. 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
192. An item of property and equipment acquired in an exchange with no
commercial substance is
recorded at
a. Carrying amount of asset given up
c. Fair value of asset
given up
b. Carying amount of asset received
d. Fair value of asset
received
193. The recoverable amount of an impaired asset is equal to its
a. Fair value
c. Fair value or value in use whichever is lower
b. Value in use
d. Fair value or value in use whichever is
higher
194. Which of the following expenditures subsequent to acquisition cannot be
added to the carrying amount of the asset?
a. Costs of modification of an item of property that will extend its useful
life or increase its
capacity
b. Cost of upgrading machine parts to achieve substantial improvements
in quality of output
c. Cost of material repairs that did not increase the life of the asset nor
productive capacity
d . Costs of adopting new production processes that enabled substantial
reduction in
operating costs
195. Healthy Inc. bought a private jet for the use of its top-ranking officials. The
cost of the private jet is P15 million and can be depreciated either using a
composite useful life or useful lives of its major components. It is expected to be
used over a period of 7 years. The engine of the jet has a useful life of 5 years.
The private jets tires are replaced every 2 years. The private jet will be
depreciated using the straight line method over
a. 7 years composite useful life
b. 5 years useful life of the engine, 2 years useful life of the tires, and 7
years useful life applied
to the balance of the cost of the jet
c. 2 years useful life based on conservatism (the lowest useful life of all
the parts of the jet)
d. 5 years useful life based on a simple average of the useful lives of all
major components of
the jet.
196. Matrix Corp. imported a machinery to install in its new factory premises
before year-end. However, due to circumstances beyond its control, the
machinery was delayed by a few months and was received by year-end. Matrix
learned from the bank that it was being charged interest on the loan it had
taken to fund the cost of the plant. What is the proper treatment of freight and
interest expense under PAS 16?

Page 33

a. Both expenses should be capitalized

b. Interest may be capitalized but freight should be expensed
c. Freight charges should be capitalized but interest cannot be capitalized
under these
circumstances
d. Both expenses should be expended
197. When the carrying amount of a revalued asset is decreased as a result of a
revaluation, the
decrease should be charged to
a. Expense
b . Retained Earnings
c. Revaluation surplus
d. Revaluation surplus first, if any, then, remaining balance, to expense
198. Which of the following statements regarding property and equipment is
(are) true?
I. Under no circumstance can a revaluation decrease in a property account
be charged to
expense.
II. Start-up and similar pre-production costs are components of the cost of
property and
equipment
III. If a component of a property item has a useful life which is different from
that of the property
item to which it relates, it should be accounted for as a separate asset.
a. Only statement I is true
c. Statements II and III are true
b. Only statement III is true
d. All of the statements are true

I.

199. According to PAS 16 PPE, which of the following statements about

valuation of property
and equipment is (are) true?
No gain nor loss should be recognized in exchanges of assets with no
commercial value
II. Asset restoration and dismantling costs to be incurred in the future
according to the terms of a contract should be capitalized at
present value to the asset cost upon initial recording of the asset
III. If the carrying value of an asset is equal to or is lesser than its scrap
value, depreciation for
the period is zero.
a.
Only I is true
c.
II and III are true
b.
I and II are true
d.
All statements are true
200. Which of the following statements regarding revaluation of asset is
incorrect?
a.
When an item of property and equipment is revalued, accumulated
depreciation is either
Restated proportionately with the change in the carrying amount of the
asset or eliminated against the gross carrying amount of the asset and
the net amount restated to the revalued amount
b. When an item of property and equipment is revalued, the entire class of
property in which
the asset belongs should be revalued
c. Revaluation of assets should be done annually
d.
The revaluation surplus included in equity may be transferred
directly to retained

Page 34

earnings when the surplus is realized, either upon sale or disposal,

as the asset is used in
the enterprise

201. 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.
202. Depreciation is computed on the original cost without deducting estimated
salvage value under which of
the following depreciation methods?
Double-Declining Balance Productive-Output
Double-Declining Balance
Productive Output
a.
Yes
No
c.
No
No
b.
Yes
Yes
d.
No
Yes
21. Normally, depreciation should not be recognized on plant assets during their
construction period. What is the exception?
a. When partial use of the asset can be identified with an income producing
center and the
corresponding costs can be ascertained
b. When the length of the construction period is unduly prolonged
c. When evidence indicates that operations will not produce sufficient
revenue to cover all
costs, Including depreciation
d. When the carrying amount of the property cannot be realized through
sale
203. What is the measurement basis of an asset that is acquired in nonmonetary exchange
With commercial substance
With no
commercial substance
a.
Fair value of asset given up
Carrying amount of asset
given up /
b.
Carrying amount of asset given up
Carrying amount of asset
received
c.
Carrying amount of asset received
Fair value of asset received
d.
Fair value of asset given up
Fair value of asset given up
204. 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.
205. Which of the following factors should not be considered in determining the
useful life of an intangible asset?

Page 35

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
d. The salvage value of the asset
206. 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
207. 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
208. Which of the following should be expensed as incurred by the franchisee for
a franchise with an estimated useful life of ten years?
a. Amount paid to the franchisor for the franchise
b. Periodic payments to a company, other than the franchisor, for that
companys franchise
c. Legal fees paid to the franchisees lawyers to obtain the franchise
d. Periodic payments to the franchisor based on the franchisees revenues.

209. All of the following are classified as Investment Property except

a. Land held for long term capital appreciation rather than for short-term sale
in the ordinary course of business
b. A building owned by the entity (or held by the entity under a finance lease)
and leased out under one or more operating leases
c. A building that is vacant but is held to be leased out under one or more
operating leases
d. Property being constructed or developed on behalf of third parties
210. Which of the following is classified as investment property?
a.. Owner-occupied property
b.. Property that is being constructed or developed for future use as
investment property
c.. Property that is leased to another entity under a finance lease
d. A building owned by the entity and leased out under one or more
operating leases
211. Gain or loss arising from a change in the fair value of investment property
shall
a. be recognized in the profit or loss for the period in which it arises
b. be recognized directly to equity in the period in which it arise
c. be recognized as an adjustment to retained earnings at the beginning of
the year
d. not be recognized in the accounts

Page 36

212. According to PAS 40, Investment Property one of the following are
examples of investment
property except
a. A building that is vacant but is held to be leased out under one or more
operating lease
b. Land held for long-term capital appreciation
c. Property that is leased to another entity under a finance lease
d. Land held for a currently undetermined future use
213. The initial cost of a property interest held under a lease and classified as an
investment property shall be
a. the fair value of the property
b. the present value of the minimum lease payments
c. the lower of the fair value of the property and the present value of the
minimum lease
payments
d. the fair value of the property or the present value of the minimum lease
payments at the
option of the entity.
214. When an owner-occupied property is transferred to investment property at
fair value, a
decrease in the carrying amount of the property to its fair value at the
date of transfer
a. Is recognized in profit and loss, or, for a revalued property, charged
against revaluation
surplus to the extent of its credit balance
b. Is recognized in profit and loss at all times
c. Is absorbed by Retained Earnings
d. Is carried directly to Equity
215. Which of the following statements regarding Investment Property is (are)
true
I. An investment property shall be measured initially at its cost
II. Transaction cost shall be included in the initial measurement of
investment property
III. With certain exceptions, an entity shall choose as its accounting policy
either the fair value model or the cost model and shall apply such policy
to all its investment property
a. I and II only
b. I and III only
c. II and III only
d.
I, II and III
216. Millenium Corporation owns an office building where nine out of ten floors
are leased out to a
Third party under an operating lease, while the 10th floor is occupied by
Millenium as its head
office. What is the proper accounting treatment for this in Milleniums
financial statements?
a.. Nine floors are reported as Investment Property while the tenth floor
as Property and
Equipment
b. Nine floors are reported as Property and Equipment while the tenth floor
as Investment
Property
c. The entire building is reported as Investment Property

Page 37

d. The entire building is reported as Property and Equipment

217.

When an owner-occupied property is transferred to investment property at fair value, a decrease in the
carrying amount of the property to its fair value at the date of transfer
a. Is recognized in profit and loss, or, for a revalued property, charged against revaluation surplus
to the extent of its credit balance /
b. Is recognized in profit and loss at all times
c. Is absorbed by Retained Earnings, but only if the property is accounted for under the Revaluation
Model
d. Is carried directly to Equity

218. In a transfer from investment property carried at fair value to owneroccupied property or inventories, the propertys deemed cost for subsequent
accounting shall be
a. its carrying value at the date of change of use
b. its fair value at the date of change in use
c. its net realizable value at balance sheet date
d. its carrying value or its fair value at date of change of use whichever is
higher
219. This is a decrease in the market value of an asset such that the carrying
amount exceeds its recoverable amount
a. Unrealized loss on market decline
c. Depreciation
b. Impairment
d. Amortization
220. According to PAS 36, Impairment of Assets, this refers to the present value of
estimated future cash flows expected to raise from the continuing use of an
asset and from its disposal at the end of its useful life
a. Value in use
c. Net selling price
b. Carrying amount
d. Recoverable amount
221. The recoverable amount of an asset is its
a. Net selling price
b. Fair value less cost to sell or value in use whichever is higher
c. Value in use
d. Fair value less cost to sell or value in use whichever is lower
222. This is defined as the smallest identifiable group of assets that generate cash
inflows from
continuing use that are largely independent of the cash inflows from other
assets or group of
assets
a. Cash generating unit
c. Segment of business
b. Corporate asset
d. Goodwill
223. This term is used to denote assets other than goodwill that contribute to
future cash flows of
both the cash generating unit under review and other cash generating units
a. Identifiable assets
c. Total cash generating unit
b. Corporate assets
d. Net assets
224. Which of the following is (are) external sources of information on impairment
of an asset?
I. Significant decline in market value of an asset which is more than
would be expected as a
result of passage of time or normal use
II.. Significant changes in technological, market, economic or legal
environment with an

Page 38

adverse effect on the enterprise or in the market to which the asset is

dedicated
III. Evidence of obsolescence or physical damage of the asset
a. I only
b. I and II only
c. II and III only
c. I, II
and III

225. Under PAS 36 Impairment of Assets, covers impairment testing of which of the following assets?:
I
II
III
IV
Inventory
Yes
Yes
No
No
Assets arising from construction contracts
Yes
Yes
No
No
Assets arising from employee benefits
No
Yes
No
Yes
Property, plant and equipment
No
Yes
Yes
No
a. I

b. II

c. III

d.

IV

226.Which of the following statements about impairment is / are true?

I.. Cash generating unit is the smallest identifiable group of assets that
generate cash flows
from continuing use that are largely independent of the cash inflows
from other assets or
group of assets.
II. Corporate assets are assets other than goodwill that contribute to
future cash flows of
both the cash generating unit under review and other cash
generating unit.
III. An impairment loss on an asset, whether carried at cost or revalued
amounts shall be taken
to profit and loss immediately.
a. I and II only
b. II and III only
c. I and III only
d. I, II
and III
227. Under current Philippine Financial Reporting Standards, which among the
following assets
the concept of Impairment be applied?
A. Inventories
B. Property and Equipment
C. Deferred Tax Asset
D. Intangible Assets
a. B only
b. A and B only
c. B and D only
d. A, B, C, D
228.During 2009 Xanti Corporation, estimated that the carrying amount of
goodwill was impaired and wrote it down by P50 000. In a subsequent year,
the company reassessed goodwill was decided that the old acquired goodwill
still existed. The appropriate accounting treatment in the subsequent period
is:
a. reverse the previous goodwill impairment loss;
b. recognize the revalued amount of goodwill by an adjustment against the
asset revaluation surplus account;
c. ignore the reversal as it is prohibited by PAS 36 Impairment of Assets;
d. increase goodwill by an adjustment to retained earnings.
229.Which of the following statements relating to the recognition of a reversal of
impairment loss is
(are) true?
I. After a reversal of an impairment loss is recognized, the
depreciation/.amortization charge

Page 39

for the asset shall be adjusted in future periods to allocate the assets
revised carrying
amount less its residual value, if any, on a systematic basis over its
remaining useful life.
II. The increase in carrying amount of an asset other than goodwill
attributable to a reversal of
An impairment loss shall not exceed the carrying amount that would
have been
determined (net of depreciation / amortization) had an impairment
loss not been
recognized for the asset in prior years.
III. To the extent that an impairment loss of a revalued asset was
previously recognized in
profit or loss, a reversal of that impairment loss is also recognized in
profit or loss.
IV. According to PAS 36 (IAS 36 revised 2005), a reversal of impairment
loss cannot be charged
to Goodwill.
a. I and II only
b. III and IV only
c. I, II and III only
d.
I, II, III and IV
230. 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
231. The principal classification of liabilities are
a. Current and noncurrent liabilities
b. Noncurrent liabilities and deferred credits
c. Current, noncurrent, and other noncurrent liabilities
d. Current liabilities and deferred credits
232. 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
233. 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
234. 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

Page 40

235. J. Roberts has a probable loss that can only be reasonably estimated
within a range of outcomes. No single amount within the range is a better
estimate than any other amount. The loss accrual should be
a . Zero
c. The mid-point of the
range
b. The expected value statistical method
d. The minimum of the
range
236. Where the provision being measured involves a large population of items,
the obligation is estimated by
a. Getting the minimum of the range
b. Weighting all possible outcomes by their associated probabilities
c. Getting the maximum of the range
d. Mid-point of the range
237. Which of the following statements is (are) true?
I. A legal obligation is one that arises only from legislation
II.. When an enterprise, by an established pattern of past practice, or a
sufficiently specific
current statement has indicated to other parties that it will accept
certain responsibilities,
it incurs a constructive obligation
III. A contingent asset should be recognized in the books of account if it is
probable that
economic resources will flow to the enterprise.
a. Only I is true
b. Only II is true
c. I and II are true
d. II and III are true
238.
When an entity breaches an undertaking under a long-term loan
agreement, on or before balance sheet date, such liability continues to be
classified as non-current if the lender has agreed
a. after balance sheet date, before the FS are authorized for issue, not to
demand payment
b.
before balance sheet date, before the FS are authorized for issue, not to
demand payment
c. by the balance sheet date, before the FS are authorized for issue, to
provide a grace period
of at least twelve months after the balance sheet date
d. after the balance sheet date, before the FS are authorized for issue, to
provide a grace
period of at least twelve months after the balance sheet date
239.Lady, Inc. was served a legal notice on Dec. 31, 2009 by the local
environmental protection agency to fit smoke detectors in its factory on or
before June 30, 2010 (before June 30 of the following year. The cost of fitting
smoke detectors in its factory is estimated at P 250,000. How should :Lady,
Inc. treat this in its financial statements for the year ended December 31,
2009?
a. Recognize a provision for P 250,000 in the financial statements for the
year ended, Dec. 31,
2009
b. Recognize a provision for P 125,000 in the financial statements for the
year ended Dec. 31,
2009 because the other 50% of the estimated amount will be
recognized next year in the
financial statement for the year ended Dec. 31, 2010
c. Because Lady, Inc. can avoid the future expenditure by changing the
method of operations

Page 41

and thus there is no present obligation for the future expenditure, no

provision is required at
Dec. 31, 2009 but there is a need to disclose the possible obligation in
the notes to financial
statements
d. Ignore. Neither a provision or disclosure is necessary
240.A factory owned by XYZ Inc. was destroyed by fire, and XYZ lodged an
insurance claim for the value of
the factory building, and amount equal
to one years net profit. After several meetings with the representatives of
the insurance company, it was decided, before year-end, that XYZ would
receive compensation equal to 90% of the claim. XYZ received a letter that
the settlement check for the amount had been mailed but it was not received
before year-end. How should XYZ treat this in its financial statements?
a. Record 90% of the claim as a receivable as it is virtually certain that the
contingent asset will
be received.
b.. Do not recognize nor disclose at all since it is a contingent asset.
c. Record 100% of the claim as a receivable and adjust the 10% next year
when the settlement
check is received.
d.. Disclose the contingent asset in the notes to financial statements.
241. Mikey Inc. is facing a lawsuit for product liability damages which remains
unsettled on balance sheet date, December 31, 2011. Company lawyers
estimate a probable loss amounting to P 1,000,000. Mikeys insurance adjuster
however, has opined that recovery from the insurance company amounting to P
700,000 is virtually certain. Under PAS 37, how should these situations be
presented in the financial statements, Dec. 31,2010?
a. Contingent Loss of P1,000,000; Contingent Liability of P 1,000,000
b. Loss, net of gain, P300,000; Liability, net of Asset of P 300,000
c. Loss, net of gain, P 300,000; Asset, P 700,000; Liability, P 1,000,000
d. Loss, P 1.000,000; Liability, P1,000,000; Contingent Asset, P 700,000;
Contingent Liability, P1,000,000

242. 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
243. A companys 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
c. Stock split
b. Property dividend declaration
d. Purchase of treasury
stock
244. Ole Corp. declared and paid a liquidating dividend of P100,000. This
distribution resulted in a decrease in Oles
Paid-in Capital
Retained Earnings
Paid-in Capital
Retained Earnings
a.
No
Yes
c.
No
Yes
b.
Yes
Yes
d.
Yes

No

Page 42

245. 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.
246. Are the following statements about treasury shares true or false, according
to IAS32 Financial instruments: presentation?
(1) Treasury share purchases are recognized as financial assets.
(2) Any gain or loss on purchasing treasury shares is recognized in profit or
loss.
Statement (1)
Statement (2)
a.
False
False
b. False
True
c. True
False
d.
True
True
247.After a quasi-reorganization where a deficit is removed through absorption
by Revaluation Surplus, the balance of retained earnings will
a. Increase
c. Either increase or decrease
b. Decrease.
d. remain the same
248.A gain or loss from one of the following transactions should not be included
in determining income:
a. Receipt of interest from bank deposits
c . Sales of plant and
equipment
b. Sale of treasury shares
d. Sales of
products

249. 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
250.During 2011, a company collected P 92,000 as advance payment from
customers. The bookkeeper credited sales revenue as the cash was
received. The goods were delivered in 2012. No adjusting entry was made
at the end of 2011 on the advance payment. The failure to adjust the books
would cause
a. Liabilities to be understated on December 31, 2010.
b. Owner;s equity to be understated on December 31,2009 and on
December 31, 2010
c. Assets to be overstated on December 31, 2009
d. Owners equity to be overstated on December 31, 2009.
251.On January 15, 2010, ABC Corporation declared 40% stock dividends on
10,000 outstanding shares of its common stock, with a par value of
P100 per share, when the market value of the common stock was P 120
par share . Which of the following statements is false with regards to this
transaction?

Page 43

a. Retained earnings will decrease equal to the total par value of the stock
dividends declared
b. Common stock will increase equal to the total par value of the stock
dividends declared
c. Additional paid in capital will increase at an amount equal to the
difference between
the total market value over the total par value of the stock dividends
declared
d. The total assets and total stockholders equity will not be affected.
252.How would the declaration and subsequent issuance of a 30% stock
dividend by the issuer affect each of the following 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

253.Under PAS 1 , which of the following items is not included in the computation
of net income?
a.. Unrealized gain in change in value of available for sale securities
b.. Unrealized gain in change in value of biological assets
c.. Investment income from Associates (accounted for under equity
method)
d. Post-tax Gain [Loss] on discontinued operations
254.When an entity opts to present the income statement classifying expenses by
function, which of the following is not required to be disclosed as additional
information?
a. Depreciation expense
b. Employee benefits expense
c. Directors remuneration
d. Amortization expense
255.Which of the following statements about financial statements is incorrect?
a. They show the results of the stewardship of management for the
resources entrusted to it by the capital providers.
b. They are the primary responsibility of both management and 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.
256.Which of the following statements about PAS 1 [2009] is [are] true?

Page 44

[1] The statement of comprehensive income supersedes the Income

Statement as a basic
component of general-purpose financial statements
[2] A new component of basic financial statements is a third balance
sheet when
circumstances so warrant
[3] Since the statement of comprehensive income already includes
recognized gains and losses
that are credited directly to equity, this eliminates the need for the
statement of changes in
equity.
[1]
[2]
[3]
[1]
[2]
[3]
a.
true
true true
c.
true true false
b.
false false false
d.
false true false
257.A
statement of financial position as at the beginning of the earliest
comparative period should be prepared by an entity in any of the following
circumstances except
a. when an entity applies an accounting policy retrospectively
b. when an entity makes a retrospective restatement of items in the
financial statements
c. when an entity reclassifies items in the financial statements
d. when an entity changes any of its estimates used in accounting
258.A public utility company reports non-current assets as the first item on its
balance sheet. This is an example of
a. Industry practice
c. Substance over form
b. Prudence or conservatism
d.
Improper statement
presentation
259.Which of the following should not be considered as a current asset in the
balance sheet?
a. Installment notes receivable due over 18 months in accordance with
normal trade practice
b. Prepaid taxes which cover assessments of the following operating cycle
of the business
c. Trading securities purchased as the temporary investment of cash
available for current
operations
d. The cash surrender value of a life insurance policy carried by a
corporation, the beneficiary, on
its President
260.Which of the following is 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
261.The Dawn Company has a loan due for repayment in six months time, but
Dawn has the discretion to refinance for repayment two years later which Dawn
exercised by entering into a refinance agreement that was signed after
balance sheet date but before financial statements were authorized for issue.

Page 45

In which section of its statement of financial position should this loan be

presented, according to PAS 1?
a.. Current liabilities
c. Non-current
liabilities
b. current assets
d. non-current asset
262.For financial reporting in the Philippines, are the following statements true or
false?
I. Philippine practice is to present in the balance sheet current assets
before non-current assets,
current liabilities before non-current liabilities; and equity accounts
before liabilities.
II. Notes are normally presented in the following order: summary of
significant accounting
policies, statement of compliance with PRFSs; supporting information
for item presented
on the face of the FS; and lastly, other disclosures including contingent
liabilities and nonfinancial disclosures
a. I true; II false
c. I true;
II - false
b. I false; II true
c. I true; II true
d. I false; II
false
263. Which of the following statements about other comprehensive income
section of the
Statement of Comprehensive income (SOC) is /are false?
a. The amount of revaluation surplus reported in the other
comprehensive income section of the SOC must be the same as
the amount of revaluation surplus ending balance in the general
ledger
b. Foreign exchange gains and losses arising from purchase of
property and equipment should be reported under the other
comprehensive income section of the SOC
c. Unrealized gain or loss on change in value of Investment Property
should be presented in other comprehensive income section of
the SOC
d. Only the current years unrealized gain or loss on change in value
of available for sale securities should be shown under other
comprehensive income of the SOC.
a. I and II only
b. III and IV only
c. I, II and III only
d. I, II, III and IV
264.Financial statements include a statement of financial position, a statement of
cash flows, and a statement of changes in equity. Which of the following are
also included as components of basic financial statements?
a. A statement of comprehensive income and accounting policies
b. An income statement and accounting policies
c. A combined statement of income and retained earnings
d. A statement of cost of goods manufactured and a statement of retained
earnings
265.For financial reporting in the Philippines, are the following statements true or
false?
I. Philippine practice is to present in the balance sheet current assets
before non-current assets,

Page 46

current liabilities before non-current liabilities; and equity accounts

before liabilities.
II. Notes are normally presented in the following order: summary of
significant accounting
policies, statement of compliance with PRFSs; supporting information
for items presented
on the face of the FS; and lastly, other disclosures including contingent
liabilities and nonfinancial disclosures
a. I true; II false
b. I false; II true
c. I true; II true
d. I
false; II false
266.According to the latest revision of PAS 1, which of the following situations will
require a submission of a third balance sheet of a reporting entity as of the
beginning of the earliest traceable accounting period?
a.
b
c
d

When an entity changes an accounting policy retrospectively

yes
no
yes no

When an entity changes an accounting estimate

no
no
yes yes

When an entity reclassifies certain items in the financial

Statements
no
yes
yes no
267. \For financial reporting in the Philippines, are the following statements true
or false?
I. Philippine practice is to present in the balance sheet current assets
before non-current assets,
current liabilities before non-current liabilities; and equity accounts
before liabilities.
II. Notes are normally presented in the following order: summary of
significant accounting
policies, statement of compliance with PRFSs; supporting information
for items presented
on the face of the financial statements.
a. I true; II false
b. I false; II true
c. I true; II true
d. I
false; II false
268. Which of the following statements about other comprehensive income
section of the Statement of Comprehensive income (SOC) is /are false?
a. The amount of revaluation surplus reported in the other comprehensive
income section of the SOC must be the same as the amount of
revaluation surplus ending balance in the general ledger
b. Foreign exchange gains and losses arising from purchase of property and
equipment
should be reported under the other comprehensive income section of
the SOC
c. Unrealized gain or loss on change in value of Investment Property should
be presented in other comprehensive income section of the SOC
d. Only the current years unrealized gain or loss on change in value of
available for sale securities should be shown under other
comprehensive income of the SOC.
a. I and II only
b. III and IV only
c. I, II and III only
d. I,
II, III and IV

Page 47

269. Which of the following gains and losses should not be taken to profit and
loss?
a. Unrealized gain or loss on change in value t of available-for-sale
securities
b. Unrealized gain or loss on initial recognition of biological asset
c. Gain or loss on conversion of Investment Property to Inventories
d. Unrealized gain or loss on change in value of trading securities
270. All of the following reporting enterprises are required to adopt PAS 1,
Presentation of Financial Statements except
a. commercial enterprises
c.. banks and financial institutions
b. insurance companies
d. enterprises submitting interim
reports to external users
271. 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
272.

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
273. An asset is classified as current when
I.. It is expected to be realized or held for sale or consumption in the normal
course of the
enterprises operating cycle
II.. It is held primarily for trading purposes, or for the short-term and
expected to be realized
within twelve months of the balance sheet date or the operating cycle,
whichever is
longer.
III. It is cash or cash equivalent asset which is not restricted for use.
a. III only
b. I and II only
c. I and III only
d. I, II and
III
274. As defined in PAS 1 Presentation of Financial Statements which one of the
following is not included in the notes to financial statements ?
a.. Information about items that do not qualify for recognition in the
financial statements
b.. Narrative description of items disclosed in the financial statements
c.. Information presented in the balance sheet, income statement,
statement of changes in
equity and cash flow statement
/

Page 48

d.. Information on disaggregations of items disclosed in the financial

statements
275. Shares of stocks in other entities held for investment, valued at cost, but
could not be quickly sold other than at a sacrifice price should be classified on
the balance sheet as
a. Current asset
c. Deferred charge
b. Non current asset /
d. Contra item under capital
276. 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 both management and 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
277. 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
278. According to PAS 1 - Presentation of Financial Statements, which of the
following is not among the criteria in classifying a liability as a current ?
a. Expected to be settled in the entitys normal operating cycle.
b. Due to be settled within twelve months after the balance sheet date.
c. The entity has an unconditional right to defer settlement of the liability for
at least twelve months after the balance sheet date
/
d. It is held primarily for the purpose of being traded
279. Empire Corp. classifies expenses by logistics quality control, manufacturing,
plant engineering, sales and marketing, research and development, finance
and administration. The classification basis is by
a. Object of expenditure
c. Area of responsibility
b. Nature of expense
d. Function performed
280. 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 pf 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

Page 49

a.
b.
c.
d.

income statement
Statement (1)
true
true
false
true

Statement (2)
false
true
false
false

Statement (3)
true
/
false
fakse
false

281. The operating cycle of a an enterprise is normally the period of time elapsed
from the time the
enterprise expends cash to the time it converts
a. Inventory back into cash or 12 months, whichever is shorter.
b. Inventory back into cash or 12 months, whichever is longer
c. Receivables back into cash or 12 months, whichever is longer
d. Current assets back into cash or 12 months, whichever is longer
282. Are the following statements true or false, according to PAS 1?
(1) Provisions should be recognized in the statement of financial
position.
(2) A revaluation surplus on non-current assets should be
recognized in the statement of
Comprehensive income and not in the Statement of Changes in
Equity
Statement (1)
Statement (20
a.
false
false
b.
false
true
c.
true
false
/
d.
true
true
283. In which section of the statement of financial position should cash that is
restricted for the settlement of a liability due 18 months after the reporting
period be presented, according to PAS 1?
a. current assets
c. non=current
liabilities
b. Equity
d. Non-current
assets
284. Cash equivalents are short-term, highly liquid investments that are
a. Readily convertible to known amounts of cash
b. Readily convertible to cash and acquired within three months before
date of maturity
c. So near their maturity that they present insignificant risk of changes in
interest rates
d. None of the above.
285. Which can qualify as cash equivalent?
a. Six-month money market placement
b. Equity securities
c. Preferred shares with specified redemption date and acquired three
months before
redemption date.
d. One-year BSP bill

286. In the cash flow statement, alternatively, interest received and dividend
received may be classified as cash flows from
a. Operating activities
c. Financing activities

Page 50

b. Investing activities

d. Revenue activities

287. In a cash flow statement, which of the following would increase reported
cash flows from operating activities using the direct method?
a. Dividends received from investments /
c. Gain on early retirement of
bonds
b. Gain on sale of equipment
c. Change from straight line to accelerated depreciation
d. Gain on early retirement of bonds
288. In a statement of cash flows using the indirect approach for operating
activities) an increase in inventories should be presented as
a. Outflow of cash
c. Addition to net income
b. Inflow and outflow of cash
d. Deduction from net
income
/
OTHERS SMALL AND MEDIUM SIZED ENTITIES
289. PFRS for SME defines small and medium sized entities as entities
A
B
C
D
That do not have public accountability
no
yes
no
yes
That submit financial statements to
regulatory bodies under SEC Rule 68
yes
no
no
yes
That publish general purpose financial
Statement for external users
no
yes
yes
no
290. Which of the following entities are required to apply the PFRS for SMEs in
Philippine financial reporting?
a.
Exelsior Enterprises with total assets of P 347M and total liabilities of
P 284 M
b.
ABC Noverlty Shoppe with total assets of P 30 M and total liabilities of
P5 M and submits financial statements to creditors, suppliers, and
regulatory bodies.
c.
ABE Insurance Company with total assets of P 340 M and total
liabilities of P 195 M
d.
Rural Bank of Capistrano, Tarlac, with total assets of P 300 M and total
liabilities of P 120 M

291. 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 managements responses to auditor comments.
292. 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 financial position of the company

Page 51

293. 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
9.2

Interim Reporting: (PAS 34)

294. Conceptually, interim financial statements can be described as emphasizing

a. Timeliness over reliability
c. Relevance over
comparability
b. Reliability over relevance
d. Comparability over
neutrality
295. For interim financial reporting, an gain on expropriation of property
occurring in the second quarter should be
a. Recognized ratably over the last three quarters
b. Recognized ratably over all four quarters with the first quarter being
restated
c. Recognized in the second quarter.
d. Disclosed by footnote in the second quarter
296. If annual major repairs made in the second quarter and paid for in the third
quarter clearly benefit the
rest of the year, when should the repairs be recognized?
a. An allocated portion in each of the last three quarters /
c. In full in
the second quarter
b. An allocated portion in each quarter of the year
d, In full in
the last quarter
297. In interim reporting, which the following should be accounted for on a time
proportion basis?
a. Depreciation
c. Productivity bonus
b. Cost of Sales
d. Inventory market decline.

298. Under PFRS 8, Operating Segment, the decision on reportable segments is

done using
a. Management approach
c.
Geographical approach
b. Business approach
d.
Either business or
geographical approach
299.

VCSS Companys four business segments have revenues and identifiable assets expressed as percentage
of VCSSs total revenues and total assets as follows:
Revenue
Assets
Aphat
64%
66%
Err
14%
18%
Rham
14%
4%
Sam
8%
12%
100%
100%
Which of these business segments are deemed to be reportable segments?
a. Aphat only
c. Aphat, Err and Rham only

Page 52

b. Aphat and Err only

d. Aphat, Err, Rham and Sam

300. The accounting policies section of the notes to financial statements 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 enterprises operations and its principal activities
301. Which one of the following changes in accounting policy may be
accounted for prospectively?
a. RR Company changed from FIFO to Weighted Average method of
inventory valuation
because management deemed it more appropriate in the
circumstances.
b. CC Corp., after complying with the requirements of PAS 16 changed
the valuation of its property and equipment from cost basis to
revalued amounts
c. AA Inc. changed from cash basis to accrual basis of accounting for
revenue and
expenses and has decided that it is impracticable to compute the
cumulative effect of the
change in accounting policy.
d. MM Enterprise changed from expensing to capitalizing borrowing costs
as allowed by an
accounting standard.
302. During the year to December 31, 2010 the following events occurred in
relation to Sancho b Company.
(1) A counting error relating to the inventory at 31 December 2009 was
discovered. This required a
reduction in the carrying amount of inventory at that date of P 28,000.
(2) The provision for uncollectible receivables at 31 December 2009 was P
30,000. During 2010
P 50,000 was
written off the 31 December 2009
receivables.
According to PAS 8 Accounting policies, changes in accounting estimates and
errors, what adjustment is required to restate Sancho's retained earnings at 31
December 2009?
a. 0
b. P 28,000
c.
P
30,000
d. P 58,000

303. Events after balance sheet date are 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
304. Adjustments of financial statements are required for those events after
balance sheet date which

Page 53

a. Have a material effect on a users 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
305. -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
306. On July 7, 2010, The fince director of Basil Company approved the financial
statements of the company for the year ended March 31, 2010. A public
announcement of its profit for the year was made on July 20, 2010. The board
of directors authorized the financial statements for issue on July 26 2010 and
they were approved by the shareholders on July 30 2010.. Under PAS10
Events after the reporting period, after what date should consideration no
longer be given as to whether the financial statements to March 31, 2010 need
to reflect adjusting and non-adjusting events?
a. July 7, 2010
c. July 26, 2010
b. July 20 2010
d. July 30, 2010
307. The Vittex Company is preparing its financial statements for the year to 30
June 2010 The board of directors reviews the final draft financial statements and
authorizes them for issue on 8 August 2010. The earnings figure and key data
are issued to the public on 19 September 2010. The financial statements are
issued to shareholders on 6 October 2010 and approved by shareholders on 10
November 2010. The period in respect of which the company should consider
events after the end of reporting period in accordance with PAS10 Events after
the reporting period, is from 30 June 2010 to
a. August 8, 2010
b. September 19, 2010
c. October 6, 2010
d. November 10, 2010
308. Are the following statements true or false according to PAS10 Events after
the reporting period?
(1) Notes to the financial statements should give details of all material
adjusting events included in those financial statements.
(2) Notes to the financial statements should give details of material nonadjusting events which could influence the economic decisions of users.
Statement
Statement (2)
Statement
Statement
(1)
(1)
(2)
a False
False
c True
False
.
.
b False
True
d True
True
.
.
309. Are the statements about the classification of each of the following events
after the end of the reporting period but before the financial statements are
authorized for issue true or false, according to PAS10 Events after the
reporting period?

Page 54

(1) A decline in the market value of investments would normally be classified

as an adjusting event.
(2) The settlement of a long-running court case would normally be classified as
a non-adjusting event.
Statement
Statement (2)
Statement
Statement
(1)
(1)
(2)
a. False
False
c True
False
.
b. False
True
d True
True
.
310. The Elder Company's draft financial statements show the profit before tax for
the year to December 31, 2010 as P 9 million. The board of directors is to
authorize the financial statements for issue on 20 March 2011 A fire occurred at
one of Elder's sites on January 13, 2011 with resulting damage costing P 7
million, only P 4 million of which is covered by insurance. The repairs will take
place and be paid for in April 2011. The P 4 million claim from the insurance
company will however be received on February 14, 2011.
Taking account of these events in accordance with PAS 10 Events after the
reporting period, what should be Elder's profit before taxes in its financial
statements?
a. P 2 million
b. P 9 million
c. P13 million
d.
P 6 million

311. The Apex Companys financial year end was October 31, 2009. Between the
date on which the financial statements for this year were completed and the
date on which they were due to be authorized for issue a number of events took
place. Which TWO of the following four events should be classified as nonadjusting events requiring disclosure only?
[1] The Apex Company announced the discontinuation of an
assembly operation
[2] The Apex Company entered into an agreement to purchase the
freehold of its
currently leased office buildings
[3] The Apex Company received P 150,000 in respect of an insurance
claim measured in
the October 31 2009 financial statements at P 90,000.
[4]A mistake was discovered in the calculation of the allowance for
uncollectible trade
receivables leading to it being understated by P 220,000 in the
October 31, 2009
financial statements
a. (1) and (2)
b. (3) and (4)
c. (1) and (3)
d.
(2) and (3)
9.4 - Related parties
312. This describes the possession of direct or indirect power to direct or cause
the direction of the
management and policies of an enterprise through
ownership by contract or otherwise
a. Principal owners
c. Related parties
c. Control
d. Immediate family
313. According to PAS 24 (2005) - Related Party Disclosures, one of the following
is not a related party
a. A subsidiaries and holding companies
c. Providers of
finance

Page 55

b. Non-executive directors
benefit plans

d. Employee

314. Which of the following situations will require disclosure as a related party?
a. In consolidated financial statements in respect to intra-group transactions
b. In related party relationships where control exists, irrespective of whether
there have been transactions
between related parties
c.. In financial statements of state-controlled enterprises of transactions with
other statecontrolled enterprises
d. In parent financial statements when they are made available or
published with the
consolidated financial statements
a.
b.
c.

315. Disclosure of related-party transactions is required by GAAP because

They do not commonly occur in the normal course of business
They cannot be presumed to be carried out on an arms-length basis and thus, the
enterprises
Financial statements are not complete and reliable without such disclosures
They usually have a greater material effect on financial statements than
transactions between
unrelated parties
d. They usually involve irregularities

316. With respect to the computation of earnings per share, which of the following
would be most indicative
of a simple capital structure?
a. Common stock, preferred stock, and convertible securities outstanding
b. Earnings derived from one primary line of the business
c. Ownership interests consisting solely common stock
d..Equity represented materially by liquid assets.
317. What is the inherent justification underlying the concept of potential diluters
in an earnings per share computation?
a. Form over substance
b. Form and substance considered equally
c. Substance over form
d. It depends on the circumstances

318. An entity should apply IFRS4 Insurance contracts to which ONE of the
following?
a. Contingent consideration receivable in a business combination
b. Product warranties issued by an entity which is a manufacturer
c. Employers' assets and liabilities under employment benefit plans
d. Reinsurance contracts issued by the entity/
319. Are the following statements about IFRS4 Insurance contracts true or false?
(1) PFRS 4 requires an insurer to consider the requirements of the IASB
Framework in selecting
accounting policies for insurance contracts.
(2) PFRS4 requires an insurer to test for the adequacy of recognized insurance
liabilities.
Statement (1)
Statement (2)

Page 56

A
B
C
D

False
False
True
True

False
True
False
True

320. Which of the following are requirements of PFRS 4 Insurance contracts?

I. An annual assessment of the adequacy of recognized insurance
liabilities
II An impairment test for reinsurance assets
III. Recognition of provisions for future claims relating to a catastrophe
a. I and II only
b. II and III only
c. I and III only
d. I,
II and III

321.

Which types of entities are required to apply PAS 30?

a. All entities
b. Banks, insurance companies and other financial institutions that are
subject to prudential supervision by regulators
c. Banks and similar financial institutions, one of whose principal activities
is to take deposits and borrow with the objective of lending and
investing, and which are within the scope of banking or similar legislation
d. Internationally active banks and similar financial institutions

322. What type of information does PAS 30 require to be disclosed about the
concentrations of assets and liabilities?
a. Concentrations of credit risk
b. Concentrations of assets, liabilities and off-balance sheet items
c. Concentration of liquidity risk
d. Concentrations of net foreigh currency positions

323. A change in accounting policy should be made in the following situations

except when
a. it is required by a Financial Accounting Standard
b. it is a management decision that is justifiable
c. it is required by the Association of CPAs in Public Accounting Practice
/
d. the change will result in more appropriate presentation of events or
transactions
324. Alexis Corp, in 2010. estimated its two-year equipment warranty costs
based on P 50 per unit sold in 2010. . Experience in 2011 indicated that the
estimate should have been based on P 60 per unit. The effect of this P10
difference from the estimate is reported
a. In 2011 income from continuing operations.
/
b. As an accounting change, net of tax, below 2010 income from continuing
operations.
c. As an accounting change requiring 2010 financial statements to be
restated.
d. As a correction of an error requiring 2010 financial statements to be
restated

Page 57

325. The estimated life of a building that has been depreciated 30 years of an
originally estimated life of 50 years has been revised to a remaining life of 10
years. Based on this information, the accountant should
a. Continue to depreciate the building over the original 50-year life.
b. Depreciate the remaining book value or the remaining life of the asset
/
c. Adjust accumulated depreciation to its appropriate balance, through net
income based on a
40-year life and then depreciate the adjusted book valance as though
the estimated life had
always been 40 years.
d. Adjust accumulated depreciation to its appropriate balance, through
retained earnings based
on a 40- year life and then depreciate the adjusted book value as
though the estimated life
had always been 40 years.
326. A change in accounting policy should be applied
a. Retrospectively only
b. Retrospectively and prospectively

c. Prospectively only
d. Currently only

327. The effect of a change in accounting policy which is inseparable from the
effect of a change in
accounting estimate should be reported
a. In the period of change and future periods if the change affects both
/
b. By restating the financial statements of all prior periods presented.
c. By showing the pro forma effects of retroactive application.
d. As a correction of error.
328. The following should be reported retrospectively by restatement of the
Retained Earnings account except for a .
a. Change from the cost method to the appraisal method of valuing
property and equipment
b. Change from FIFO method of inventory pricing to the moving average
method.
c. Change from expensing to capitalizing borrowing costs.
d. Change from the straight-line of depreciation to the double-declining
balance method.
329. Which of the following accounting change should be reported by applying
retroactively the new method?
Change 1 First-in, first-out method for inventories. to Moving weighted
average method
Change 2 - Cost Model of accounting for plant asset to Revaluation
Model.
a. Change 1 yes; change 2 no
c. Change 1 no; change
2 yes
b. Change 1 no; Change 2 no
d. Change 1 yes; change
2 yes
.
330. Prospective application of a change in accounting policy is required
a. Anytime
b. When the amount of adjustment to the opening balance of retained
earnings can be

Page 58

reasonably determined.
a. When the amount of adjustment to the opening balance of retained
earnings cannot be
reasonably determined
/
d. When ordered by management.
331. During the year to December 31, 2010 the following events occurred in
relation to KC Company.
(1) A counting error relating to the inventory at 31 December 2009 was
discovered. This required a
reduction in the carrying amount of inventory at that date of P 28,000.
(2) The provision for uncollectible receivables at 31 December 2009 was P
30,000. During 2010
P 50,000
was
written off the 31 December 2009
receivables.
According to PAS 8 Accounting policies, changes in accounting estimates and
errors, what adjustment is required to restate Sancho's retained earnings at 31
December 2009?
a. 0
b. P 28,000
c.
P
30,000
d. P 58,000

332. The deferred tax consequence attributable to a deductible temporary

difference and operating loss carryforward is known as a deferred
a. Tax expense.
b. Tax asset
c. Tax benefit.
d.
Tax liability
333. Which of the following statements about accounting for income taxes is
true?
a. Temporary differences occur because accounting standards and income
tax laws differ as to when they recognize assets, liabilities, owners
equity, revenues, gains, expenses and losses
b. The term future taxable amount relates to a deferred tax asset
c. Future taxable amounts include revenues and gains that are included
in the tax return
before they are recognized for accounting purposes.
d. Future deductible amounts include expenses and losses that are
included in the tax return
before they are recognized for accounting purposes.
334. Among the items reported on Cord, Inc.s income statement for the year
ended December 31, 2010, were the following:
Payment of penalty
P 5,000
Insurance premium on life of an officer with Cord as owner and
beneficiary
10,000
Temporary differences amount to
a. P 0
b. P 5,000
c. P 10,000
d. P15,000
335. A deferred tax liability is computed using
a. The current tax laws, regardless of expected or enacted future tax laws.
b. Expected future tax laws, regardless of whether those expected laws have
been enacted.
c. Current tax laws, unless enacted future tax laws are different.
d. Either current or expected future tax laws, regardless of whether those
expected laws have been enacted.

Page 59

336. It is the amount of income tax paid or payable for the year as determined by
applying the provisions of the enacted tax law to the taxable income.
a. Current tax expense
c. Deferred tax benefit
b. Deferred tax expense
d. Income tax expense

337.Which of the following items qualify as an intangible asset under PAS 38?
a. Advertising and promotion on the launch of a huge project.
b. College tuition fees paid to employees who decide to enroll in an
executive MBA program at
Asian Institute of Management while working with the company.
c. Operating losses during the initial stages of the project.
d. Legal costs paid to intellectual property lawyers to register a patent /
338.\A newly set up dot.com entity has engaged you as its financial advisor.
The entity has recently completed one of its highly publicized research and
development projects and seeks your advice on the accuracy of
the
following statements made by one of its stakeholders. Which one is it?
a. Costs incurred during the research phase can be capitalized
b. Costs incurred during the development phase can be capitalized if
criteria such as
technical feasibility of the project being established are met.
/
c. Training costs of technicians used in research can be capitalized
d. Designing of jigs and tools qualify as research activities.
339.How should research and development cost be accounted for?
a. Must be capitalized when incurred and then amortized over the
estimated useful life
b. Must be expensed in the period incurred, unless contractually
reimbursable /
c. Must be either capitalized or expensed when incurred depending upon
the facts of the
situation
d. Must be expensed in the period incurred unless it can be clearly
demonstrated that the
expenditure will have significant future benefits
340.On January 1, 2010, Notion, Inc. purchased equipment for use in developing
a new product. Notion uses the straight-line depreciation method. The
equipment could provide benefits over a 10-year period. However, the new
product development is expected to take five years. The equipment has
alternative use for other product development projects. Notions 2010
expense equals
a. The total cost of the equipment
c. One-tenth of the cost
of the equipment
/
b. One-fifth of the cost of the equipment
d. Zero
341.Which of the following statement is true?
I.
Expenditure on research or from the research phase of an internal
project should be
recognized as expense when incurred.
II. If an enterprise cannot distinguish the research phase from the
development phase of an

Page 60

internal project to create an intangible asset, the expenditure on such

project is treated as if
it were incurred in the research phase only.
III. All expenditures incurred in the development phase of an internal
project should be
expensed when incurred
a. I only
b. I and II only
c. I and III only
d.
I, II and III
342.According to PAS 38 Intangible Assets, which among these criteria are
required for the
recognition of development costs of an internal project?
I. Technical feasibility of completing and the intention to complete the
intangible asset, and
the ability to use or sell the intangible asset
IV.
The ability of the intangible asset to generate probable future
economic benefit, the
existence of a market for the output of the intangible asset, or its
usefulness, if to be
used internally
III. The availability of adequate, technical, financial and other resources to
complete, use, or
sell the intangible asset
IV. The ability to measure reliably the expenditure attributable to the
intangible asset during
its development.
a. I, and IV only
b. I, II and III
c. I, II and IV only
d.
I, II, III and IV /
343.Caramoan Inc. is developing a new production process. During 2010,
P20,000, was incurred of which P 18,000 was incurred before October 1,
2010 and P2000 was incurred between October 1 and December 31,
2010. The enterprise is able to demonstrate that on October 1, 2010, the
production process met the criteria for recognition as an intangible asset.
The recoverable amount of the know embodied in the process (including
future cash outflows to
complete the process before its availability for use) is estimated to be P
5,000. The amount to be recognized as intangible asset is
a. P 20,000
b . P18,000
c. P 5,000
d. P
2,000
/
344.Refer to No. 120. During 2011, expenditure incurred by Rocamonte is P
10,000. At the end of 2011 the recoverable amount of the know-how
embodied in the process (including future cash outflows to complete the
process before it is available for use) is estimated to be P 11,000. The
amount of impairment loss to be shown in the 2010 income statement is
a. P 11,000
b. P 3,000
c.
P 1,000 /
d.
Zero
345.PAS 23 defines qualifying assets as assets that necessarily takes a
substantial period of time to get it ready for its intended use or sale. Which of
the following is not a qualifying asset?
a. Building that will take three years to construct
b. Inventories such as wine and cigars
c. Machinery that is purchased under a three-year installment period
/
d. Manufacturing plant and power generation facilities

Page 61

346.Which of the following statements concerning borrowing costs is false?

a.
Borrowing costs generally include interest costs, bank overdrafts,
amortization of discounts or premiums related to borrowings, finance
charges with respect to finance leases.
b. Borrowing costs are interest and other costs incurred by an enterprise in
relation to
borrowed funds.
c.
Per PAS 23, the benchmark treatment for borrowing costs is to
capitalize it as part of the
cost of the asset to which it relates. /
d. Borrowing costs include amortization of ancillary costs incurred in
connection with the
arrangement of borrowings, as well as exchange differences arising
from foreign currency borrowings to the extent that they are regarded
as an adjustment to interest cost.
347.Which of the following may not be considered a qualifying asset under
PAS 23?
a. A power generation plant that normally takes two years to construct
b. An expensive private jet that can be purchased from a local vendor
/
c. A toll bridge that usually takes more than a year to build
d. A ship that normally takes one to two years to complete
348.Which of the following statements concerning borrowing costs is false?
a. Borrowing costs generally include interest costs, bank overdrafts,
amortization of discounts
or premiums related to borrowings, finance charges with respect to
finance leases.
b. Borrowing costs are interest and other costs incurred by an enterprise in
relation to
borrowed funds.
c. Per PAS 23, the benchmark treatment for borrowing costs is to expense
it in the period
incurred
/
d. Borrowing costs include amortization of ancillary costs incurred in
connection with the
arrangement of borrowings, as well as exchange differences arising from
foreign currency
borrowings to the extent that they are regarded as an adjustment to
interest cost.
349.Which of the following is not a disclosure requirement under PAS 23?
a. Accounting policy adopted for borrowing costs.
b. Amount of borrowing costs capitalized during the period.
c. Segregation of assets that are qualifying assets on the balance sheet
or as a disclosure in
the footnotes to financial statements
/
d,, Capitalization rate used to determine the amount of borrowing costs
eligible for
capitalization.
350.Capitalization of borrowing costs
a. Shall be suspended during temporary periods of delay
b. May be suspended only during extended periods of delay in which
active development is

Page 62

delayed
c. Should never be suspended once capitalization commences
d. Shall be suspended only during extended periods of delays in which
active development is
delayed

351.All of the following are included in short-term employee benefits except

a. Wages, salaries, social security contributions
b. Non-monetary benefits such as, medical care, housing, cars, subsidized
goods for current
employees
c. Termination benefits and post-employment benefits
d. Profit sharing and bonuses payable, short-term compensated absences
352.According to PAS19 Employee benefits, which ONE of the following terms
best describes benefits which are payable as a result of an entity's decision
to end an employee's employment before the normal retirement date?
a. Post-employment benefits
b. Defined contribution plans
c. Termination benefits
d. Defined benefit plans
353.According to PAS19 Employee benefits, which of the following statements
best describes 'other long-term employee benefits'?
a. Benefits not falling due wholly within twelve months of the end of the
period in which the service is rendered
b. Benefits which fall due within twelve months of the end of the period in
which the service is rendered
c. Benefits payable as a result of an entity's decision to end an employee's
employment before the normal retirement date
d. Benefits which are payable after completion of employment
354.Should the following items be included in plan assets, according to IAS19
Employee benefits?
(1) Assets held by a long-term employee benefit fund.
(2) Qualifying insurance policies.
Item (1)
Item (2)
a.
No
No
b.
No
Yes
c.
Yes
No
d.
Yes
Yes
355.The Palu Company has issued a range of share options to employees. In
accordance with PFRS2 Share-based payment, what type of share-based
payment transaction does this represent?
a. Asset-settled share-based payment transaction
b. Equity-settled share-based payment transaction
c. Cash-settled share-based payment transaction
d. Liability-settled share-based payment transaction
356.If the payment of employees compensation for future absences is probable,
the amount can be reasonably estimated and the obligation relates to rights
that vest or accumulate, the compensation should be
a. Accrued if attributable to employees services not yet rendered
b. Accrued if attributable to employees services already rendered

Page 63

c. Accrued if attributable to employees services whether already rendered

or not
d. Recognized when paid
357.Under which category should the following items be accounted for
according to PAS19 Employee benefits?
(1) Lump sum benefit of 1% of the final salary for each year of
service.
(2) Actuarial gains.
a. Lump sum benefit should be accounted for under defined benefit plans
Actuarial gains should be accounted for under defined benefit plans
b.. Lump sum benefit should be accounted for under short term employee
benefits
Actuarial gains should be accounted for under defined benefit plans
c.. Lump sum benefit should be accounted for under defined benefit
plans
Actuarial gains should be accounted for under defined contribution
plans
d. Lump sum benefit should be accounted for under short term
employee benefits
Actuarial gains should be accounted for under defined contribution
plans
358.In accordance with PFRS2 Share-based payment, how, if at all, should an
entity recognize the change in the fair value of the liability in respect of a
cash-settled share-based payment transaction?
a. Should not recognise in the financial statements but disclose in the
notes thereto
b. Should recognize in the statement of changes in equity
c. Should recognize in other comprehensive income
d. Should recognize in profit or loss
359.Under IFRS2 Share-based payment, in which ONE of the following will a
cash-settled share-based payment give rise to an increase?
a. A current asset
b. A non-current asset
c. Equity
d. A liability
360.Are the following statements about a cash-settled share-based payment
transaction true or false, according to IFRS2 Share-based payment?
(1) The fair value of the liability should be remeasured at the end of each
reporting period.
(2) The fair value of the liability should be remeasured at the date of
settlement.
Statement (1)
Statement (2)
a.
False
False
b.
False
True
c.
True
False
d.
True
True

361.The classification of a lease is normally carried out

a. At the end of the lease term
c. After a cooling off period of
one year

Page 64

b. At the inception of the lease

necessary

d. When the entity deems it to be

362.Lease M does not contain a bargain purchase option, but the lease term is
equal to a substantial portion of the estimated economic life of the leased
property. Lease P transfers ownership of the property to the lessee at the
end of the lease term. . How should the lessee classify these leases?
Lease M
Lease P
Lease M
Lease P
a. Capital lease Operating lease
c. Operating lease
Capital lease
b. Capital lease Capital lease
d. Operating lease
Operating lease
2. In January 2010, Kris Co. made long-term improvements to a recently leased
building. The lease agreement provides for neither a transfer of title to Kris nor
a bargain purchase option. The present value of the minimum lease payments
is not a substantial portion of the buildings market value, and the lease term is
half of the buildings economic life. Should assets be recognized for the building
and the leasehold improvements?
Building
Leasehold improvements
Building
Leasehold Improvement
a.
Yes
Yes
c.
Yes
No
b.
No
Yes
d.
No
No
363.Where there is a lease of land and buildings and the title to the land is not
transferred, generally the lease is treated as if
a. Both land and buildings are finance leases
b. Land is operating lease; building is finance lease
c. Both land and buildings are operating leases
d. Land is finance lease; building is operating lease
364.The excess of the fair value of leased property at the inception of the lease
over its cost or carrying amount should be classified by the lessor as
a. Unearned income from a sales-type lease.
b. Unearned income from a direct-financing lease.
c. Manufacturers or dealers profit from a sales-type lease.
d. Manufacturers or dealers profit from a direct-financing lease.
365.As an inducement to enter a lease, Graf Co., a lessor, granted Zep, Inc., a
lessee, 12 months of free rent under a 5-year operating lease. The lease was
effective on January 1, 2004, and provides for monthly rental payments to
begin January 1, 2005. Zep made the first rental payment on December 30,
2004. In its 2004 income statement, Graf should report rental revenue in an
amount equal to
a. Zero.
b. Cash received during 2000.
c. One-fourth of the total cash to be received over the life of the lease.
d. One-fifth of the total cash to be received over the life of the lease.

3. An entity will primarily generate and expend cash in one primary economic
environment. According to PAS 21 The effects of changes in foreign exchange
rates, the correct term for the currency of this primary economic environment
is the
a. presentation currency
c. reporting currency

Page 65

b. functional currency

d. foreign currency

4. According to PAS21 The effects of changes in foreign exchange rates, at which

rate should an entity's non-current assets be translated when its functional
currency figures are being translated into a different presentation currency?
a. The historical exchange rate
b. The closing rate/

c. The average rate

d. The spot exchange rate

366. Exchange differences arising from translation of financial statements of a

foreign entity should be
accounted for as
a. Accumulated translation adjustment as a component of stockholders
equity
b. Accumulated translation adjustment as a component of net income
c. Loss on foreign exchange as a component of net income
d. Retained earnings

160. Which of the following is a period cost?

a. Selling expense
c. Manufacturing overhead
b. Materials inventory
d. Direct labor
162. 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.
163. The fixed portion of the semivariable cost of electricity for a manufacturing
plant is a
a.
b.

Period cost
Yes
Yes

Product cost
No
Yes

c.
d.

Period cost
No
No

Product cost
Yes
No

164. . .
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.
165. 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.
166. 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

Page 66

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.
170. 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.
171. 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
c. Factory overhead control
d. Work-in-process control
173 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. Customers requirement for early completion of job.
c. Managements failure to include the job in the production schedule.
d. Managements requirement that the job be completed before the annual
factory vacation closure.
174 In a traditional job order cost system, the issue of indirect materials to a
production department increases
a. Stores control.
c. Factory overhead control.
b. Work in process control .
d. Factory overhead applied.
175. Angela Decor Inc. incurred direct labor overtime premium of P250,000 during
October, 2010. As Angelas 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 managers failure to include the job in the preceding months
production schedule.
d. Factory managers decision to complete all jobs before the annual
machinery maintenance in December.
178. 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
179. 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
182. 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

Page 67

a. Yes
b. Yes
183.
a.
b.
c.
d.

Yes
No

c. No
d. No

Yes
No

The economic order quantity formula assumes that

Periodic demand for the good is known.
Carrying costs per unit vary with quantity ordered.
Costs of placing an order vary with quantity ordered.
Purchase costs per unit differ due to quantity discounts.

184. Mary Joys shipbuilding company construct huge sailing vessels. Mary Joys
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.
185. 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.
188. 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 Queens production supervisor was:
a. Effective
c. Both effective and efficient
b. Efficient
d. Neither effective nor
efficient.
189. What standard cost variance represents the difference between actual
factory overhead incurred and budgeted factory overhead based on actual
hours worked?
a. Volume variance
c. Efficiency variance
b. Spending variance
d. Quantity variance
190. 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

191. Leni Co. develops computer programs to meet customers special

requirements. How should Gram categorize payments to employees who
develop these programs?
a.
b.

Direct costs Value-adding costs

Yes
Yes
Yes
No

Direct costs
c.
No
d. No

Value-adding costs
No
Yes

192. 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
193. .
In a quality control program, which of the following is(are) categorized
as internal failure costs?

Page 68

I.
II.
III.

Rework.
Responding to customer complaints.
Statistical quality control procedures.
a. I only
b. II only
c. III only

d. I, II, and III

367. The Palau Company has issued a range of share options to employees. In
accordance with IFRS2 Share-based payment, what type of share-based
payment transaction does this represent?
a. Asset-settled share-based payment transaction
b. Equity-settled share-based payment transaction/
c. Cash-settled share-based payment transaction
d. Liability-settled share-based payment transaction
368. In accordance with PFRS 2 Share-based payment, how, if at all, should an
entity recognize the change in the fair value of the liability in respect of a cashsettled share-based payment transaction?
a. Should not recognize in the financial statements but disclose in the notes
thereto
b. Should recognize in the statement of changes in equity
c. Should recognize in other comprehensive income
d. Should recognize in profit or loss
369. Are the following statements about a cash-settled share-based payment
transaction true or false, according to PFRS2 Share-based payment?
(1) The fair value of the liability should be remeasured at the end of each
reporting period.
(2) The fair value of the liability should be remeasured at the date of
settlement.
Statement (1)
Statement (2)
a. False
False
b. False
True
c. True
False
d. True
True

5. Money loses purchasing power at such a rate that comparison of amounts from
transactions and
events that have occurred at different times, even within the same
accounting period, is
misleading. This financial accounting problem is addressed through
b. Fair value accounting
c. Price-level accounting
c. Revaluation of Property
d. Peso Accounting
6. Which of the following situations is an indication of hyperinflation?
a. The general population prefers to keep its wealth in monetary assets.
b. The general population regards monetary amounts in terms of the local
currency
c. Sales and purchases on credit, but only if the period is long, take place
at prices that are
hedged to compensate for expected purchasing power loss during the
credit period
d. The cumulative inflation rate over thee years is approaching or exceeds
100%.

Page 69

7. Which of the following statements is (are) true in relation to accounting for

hyperinflationary
economies?
I. If the functional currency is one of a hyperinflationary economy, the
financial statements
should be stated in terms of the measurement unit current at balance
sheet date, whether
such financial statements are based on historical cost or current cost
approach
V. The gain or loss on the net monetary position shall be included in profit
or loss and separately disclosed
VI.
Nonmonetary items carried at revalued amounts are restated from the
date of revaluation and not from the date of acquisition
VII.
Assets and liabilities linked by agreement to changes in prices, such
as index-linked bonds and loans are adjusted in accordance with the
agreement in order to ascertain the amount outstanding at balance
sheet date
a. I and II only
b. I and IV only
c. I, III and IV only
d. All
statements are true

370. Should the following costs be included in the consideration transferred in a business
combination, according to IFRS3 Business combinations?
(1) Costs of maintaining an acquisitions department.
(2) Fees paid to accountants to effect the combination.
Cost (1)
Cost (2)
a.
No
No
b.
No
Yes
c.
Yes
No
d.
Yes
Yes
371. Are the following statements about an acquisition true or false, according to IFRS3
Business combinations?
(1) The acquirer should recognise the acquiree's contingent liabilities if
certain
conditions are met.
(2) The acquirer should recognise the acquiree's contingent assets if
certain conditions are met.
Statement (1)
Statement (2)
a.
False
False
b.
False
True
c.
True
False
d.
True
True
372. The excess of the consideration transferred plus the amount of any non-controlling
interest in the acquiree over the identifiable assets and liabilities recognized is ________
.
a) goodwill
c. Gain from acquisition
b) minority interest
d. cost of acquisition

373. A parent entity is acquiring a majority holding in an entity whose shares are dealt in
on a recognised market. Under IFRS3 Business combinations, which TWO of the
following measurement bases may be used in measuring the non-controlling interest at
the acquisition date?
A The nominal value of the shares in the acquiree not acquired
B. The fair value of the shares in the acquiree not acquired
C. The non-controlling interest in the acquiree's assets and liabilities at book
value
D. The non-controlling interest in the acquiree's assets and liabilities at fair
value

Page 70

a. A and B

b. B and D

c. A and C

d. C and D

374. For entities wanting to use the cost model of accounting, the revaluation of a
subsidiarys assets would be undertaken in the:
a. subsidiarys records;
b parent entitys records;
c. consolidation worksheet;
d. notes to the consolidated financial statements.
375. In a business combination the revaluation of non-current assets in the records
of the subsidiary, means that the subsidiary has effectively adopted the:
a. parent-entity model of consolidation;
b. proprietary model of accounting;
c. cost model of accounting;
d. revaluation model of accounting.
376. In a business combination, an acquirer's interest in the fair value of the net assets
acquired exceeds the consideration transferred in the combination. Under IFRS3
Business combinations, the acquirer should (select one answer)
a. recognise the excess immediately in profit or loss
b. recognise the excess immediately in other comprehensive income
c. reassess the recognition and measurement of the net assets acquired and the
consideration transferred, then recognise any excess immediately in profit or
loss
d. reassess the recognition and measurement of the net assets acquired and the
consideration transferred, then recognise any excess immediately in other
comprehensive income

377. This represents assistance by the government in the form of transfers of

resources to an enterprise in return return for past or future compliance with
certain conditions relating the operating activities of the enterprise.
a. Government assistance
c. Forgivable loans
b.. Government grants
d. Government
appropriations
378.This is the action by government designed to provide an economic benefit
specific to an enterprise or
range or enterprise of enterprises qualifying under certain criteria.
a. Government grants
c. Forgivable loan
b. Government assistance
d. Government
appropriations
379.Which of the following are considered as government grants under PAS 20?
II. Free technical or marketing advice and the provision of guarantees
II. Government procurement policy that is responsible for increased sales
of an enterprise
III. Provision of infrastructure by improvements to the general transport
and communication
network
IV Supply of improved facilities (irrigation or water reticulation) which is
available on an
ongoing indeterminate basis for the benefit of the entire local
community
a. I and II only
b. I, II and III only
c. I, II, III, IV.
d.
None will qualify

Page 71

380. Fred Commercial obtained an interest-free loan of P 500,000 and a cash

grant of P 400,000 from the City of Ligao. The cash grant is a partial subsidy
for the annual salary of five of its employees for the year 2008 . How should
Fred Commercial account for these events?
a. Only the cash grant should be taken to Equity, as additional paid-in
capital
b. Only the cash grant should be recognized as income
c. Both the cash grant and the interest-free loan should be taken to
Equity, as additional paidin capital
d. Both the cash grant and the interest-free loan should be recognized as
income
381.PAS 20, Government Grants provides two approaches to accounting for
government grants :
(1) capitalization approach and (2) income approach. Arguments in support
of the income
approach include the following except:
a. Government grants are considered earned through compliance with the
condition and
meeting envisaged obligations
b. Government grants are receipts from a source other than shareholders or
capital providers
c. Government grants represent an incentive provided by the government
without related
costs
d. Government grants are considered as extension of fiscal policies similar to
income and other
taxes
382.The following statements relate to the recognition of the government
grants. Which is false?
a.. Grants related to depreciable assets are usually recognized as income over
the periods and in
the proportions in which depreciation on those assets is charged.
b. Grants related to non-depreciable assets are usually recognized to
income immediately.
c. A government grant that becomes receivable as compensation for
expenses or losses already
incurred for the purpose of giving immediate financial support to the
enterprise with no
future related cost should be recognized as income of the period in
which it becomes
receivable.
d.. For grants received as a part of a package of financial or fiscal aides to
which a number of
conditions are attached, such grant is recognized when the condition
giving rise to costs and
expenses occur, and the costs and expenses are likewise recognized.
383.Which of the following statements is false concerning repayment of
government grants?
a. Repayment of a grant related to income should be applied first against
any unamortized
deferred credit set up in respect of the grant.
b. The excess of the repayment over the deferred credit set up (or when no
deferred credit
exists) should be recognized immediately as an expense

Page 72

c. A government grant that becomes repayable should be accounted for as

a revision to an
accounting policy
d.. Repayment of a grant related to an asset should be recorded by
increasing the carrying
amount of the asset or reducing the deferred income balance by the
amount repayable.

384. 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
385. Which of the following costs are not included in point of sale costs?
a. Commissions to brokers and dealers
b. Transfer taxes and duties
c. Levies by regulatory agencies
d. Transport and other costs necessary to get the assets to the market

386. 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
387. Which of the following is not considered a biological asset?
a. Trees in a plantation forest
c. Dairy cattlere
b. Land related to agricultural activity
d. Grape vines
388. Which of the following is not an agricultural activity?
a. Rice farming
b. Hog raising
c. Ocean fishing
d. Vegetable planting
389. When agricultural produce is harvested, the harvest should be accounted for
by using PAS 2- Inventories or another applicable Philippine accounting
standard. For PAS 41, cost at date of harvest is deemed to be
a.
Its fair value less estimated point-of-sale costs at point of harvest
b. The historical cost of the harvest /
c. The historical cost less accumulated depreciation
d. Market value
390. Greenfields Company had a plantation forest that is likely to be harvested
and sold in 30 years. The income should be accounted for in the following
way:
a. No income should be reported until first harvest and sale in 30 years.
b. Income should be measured annually and reported using a fair value
approach that
recognizes and measures biological growth.
c. The eventual sale proceeds should be estimated and matched to the
profit and loss account
over the 30-year period.
d. The plantation forest should be valued every 5 years and the increase in
value should be
shown in the statement of recognized gains and losses.

Page 73

391. A gain or loss arising on the initial recognition of biological asset and from
change in the fair value less estimated point-of-sale costs of a biological asset
should be included in
a.
The net profit or loss for the period
/
b.
The statement of recognized gain and losses
c.
A separate revaluation reserve
d.
A capital reserve within equity
392. Which of the following statements regarding biological assets and
agricultural produce is (are) true?
I. The gain or loss on value change of a biological asset due to price
change and physical
change is taken to profit and loss.
II. A gain is recognized in the income statement when agricultural produce
are harvested,
ready for sale.
III. An entity that owns a mango orchard reports both the land and the fruit
trees at fair value a
biological assets.
a. I and II only
b. I and III only
c. II and III only
d.
I, II and III

393. A statement of functional expenses is required for which of the following

private nonprofit organizations?
a Colleges.
c. Voluntary health and welfare organizations. *
b Hospitals.
d. Performing arts organizations.
394. The statement of financial position (balance sheet) Founders Library, a private
not-for-profit organization should report separate peso amounts for the librarys
net assets according to which of the following classifications?
a Unrestricted and permanently restricted.
b Temporarily restricted and permanently restricted.
c Unrestricted and temporarily restricted.
d Unrestricted, temporarily restricted, and permanently restricted. *
395. Chicago Museum, a private not-for profit organization, has both regular and
term endowments. On the museums statement of financial position (balance
sheet), how should the net assets of each type of endowment be reported?
Term endowments
Regular endowments
a. Temporarily restricted
Permanently restricted *
b. Permanently restricted
Permanently restricted
c. Unrestricted
Temporarily restricted
d. Temporarily restricted
Temporarily restricted
396. Kerry College, a private not-for-profit college, received P25,000 from Ms. Mary
Smith on April 30, 2011. Ms. Smith stipulated that her contribution be used to
support faculty research during the fiscal year beginning on July 1, 2011. On July
15, 2011, administrators of Kerry awarded research grants totaling P25,000 to
several faculty in accordance with the wishes of Ms. Smith. For the year ended
June 30, 2011, Kerry College should report the P25,000 contribution as
a Temporarily restricted revenues on the statement of activities.
b Unrestricted revenue on the statement of activities.
c Temporarily restricted deferred revenue on the statement of activities.
d An increase in fund balance on the statement of financial position.

Page 74

397. Good Hope, a private not-for-profit voluntary health and welfare

organization, received a cash donation of P500,000 from Mr. Charles Peobody
on November 15, 2011. Mr. Peobody requested that his donation be used to
acquire equipment for the organization. Good Hope used the donation to
acquire equipment costing P500,000 in January of 2012. For the year ended
December 31, 2011, Good Hope should report the P500,000 contribution on its
a Statement of activities as unrestricted revenue.
b Statement of financial position as temporarily restricted deferred revenue.
c Statement of financial position as temporarily unrestricted deferred
revenue.
d Statement of activities as temporarily restricted revenue. *
398. On the statement of activities for a not-for-profit performing arts center,
expenses should be deducted from
I
Unrestricted revenues.
II
Temporarily restricted revenues.
III
Permanently restricted revenues.
a. I, II, and III
b. I and II c. I only. d. II only.
399. Gamma Pi, a private not-for-profit fraternal organization, should prepare a
statement of financial position and which of the following financial statements?
I
Statement of activities.
II
Statement of changes in fund balances.
III
Statement of cash flows.
a. I, II, and III
b. III only
c. II and III
d. I and III.
400. United Ways, a private not-for-profit voluntary health and welfare
organization, received a contribution of P10,000 from a donor in 2011. The
donor did not specify any use restrictions on the contribution; however, the
donor specified that the donation should not be used until 2012. The governing
board of United Ways spent the contribution in 2012 for fund-raising expenses.
For the year ended December 31, 2011, United Ways should report the
contribution on its
a Statement of financial position as deferred revenue.
b Statement of activities as unrestricted revenue.
c Statement of financial position as an increase in fund balance.
d Statement of activities as temporarily restricted revenue.
401. The statement of cash flows for a private not-for-profit hospital should report
cash flows according to which of the following classifications?
I Operating activities
II Investing activities
III Financing activities
a I, II, and III b. II and III c. I only.
d. I and III.
402. For Guiding Light, a nongovernmental nonprofit religious organization, net
assets that can be expended in accordance with the wishes of the governing
board of the organization should be reported as
I Unrestricted
II Temporarily restricted
III Permanently restricted.
a I only.
b. Both I and II c. I, II, and III. d. Either I or II.
403. A statement of financial position (balance sheet), which reports unrestricted,
temporarily restricted, and permanently restricted net assets, is required for
which one of the following organizations?
I A public university.

Page 75

II A private, not-for-profit hospital

a. Both I and II b. I only c. Neither I nor II d. II only *
404. A storm broke glass windows in the building of Lea Meditators, a not-for-profit
religious organization. A member of Leas congregation, a professional glazier,
replaced the windows at no charge. In Leas statement of activities, the
breakage and replacement of the windows should
a Not be reported.
b Be reported by note disclosure only.
c Be reported as an increase in both expenses and contributions. *
d Be reported as an increase in both net assets and contributions.
405. The Jones family lost its home in a fire. On December 25, 2011, a
philanthropist sent money to the Amer Benevolent Society, a not-for-profit
organization, to purchase furniture for the Jones family. During January 2012,
Amer purchased this furniture for the Jones family. How should Amer report the
receipt of the money in its 2011 financial statements?
a As an unrestricted contribution.
b As a permanently restricted contribution.
c As a temporarily restricted contribution.
d As a liability. *
406. If the Pel Museum, a not-for-profit organization, received a contribution of
historical artifacts, it need not recognize the contribution if the artifacts are to
be sold and the proceeds used to
a Support general museum activities.
b Repair existing collections.
c Acquire other items for collections.
d Purchase buildings to house collections.

a
b
c
d

407. A large not-for-profit organizations statement of activities should report the

net change for net assets that are:
Unrestricted
Permanently restricted
Yes
Yes *
No
No
Yes
No
No
Yes
408. Which of the following classifications is required for reporting of expenses by
all not-for-profit organizations?
a Natural classification in the statement of activities or notes to the financial
statements.
b Functional classification in the statement of activities or notes to the
financial statements. *
c Functional classification in the statement of activities and natural
classification in a matrix format in a separate statement.
d Functional classification in the statement of activities and natural
classification in the notes to the financial statements.
409. Rosary Botanical Gardens, a private not-for-profit organization, established a
$500,000 quasi endowment on September 1, 2001. On the gardens statement
of financial position at December 31, 2001, the assets in this quasi endowment
should be included in which of the following classifications?
a Temporarily restricted net assets.
b Unrestricted net assets. *
c Permanently restricted net assets.

Page 76

d Either temporarily or permanently restricted net assets, depending on the

expected term of the quasi-endowment.
410. During 2011, an alumnus of Smith College, a private not-for-profit college,
transferred P100,000 to the college with the stipulation that it be spent for
library acquisitions. However, the alumnus specified that none of the cash
transferred could be spent until the college had matched the entire amount
transferred with donations from other alumni by December 31, 2012. As of
December 31, 2011, the college had received matching cash donations of only
P5,000 from other alumni, and the college estimated that it was reasonably
possible that it would not reach the goal of P100,000 by December 31, 2012. If
the funds are not matched by December 31, 2012, the cash will be returned to
the alumnus. On the colleges statement of financial position at December 31,
2011, the cash transfer of P100,000 would be included in the amount reported
for
a. Liabilities.
c. Temporarily restricted net assets
b. Unrestricted net assets
d. Permanently restricted net assets.
411. Which of the following private, nonprofit entities is required to report
expenses both by function and by natural classification?
a Hospitals.
b Voluntary health and welfare organizations.
c Colleges and universities.
d Performing arts organizations.
412. During the year ended December 31, 2011, the James Community
Foundation, a private nonprofit organization, received the following contributed
services:
I Anderson & Anderson, attorney-at-law, contributed their services which
involved advice related to the foundations regular endowments.
II Senior citizens participated in a telethon to raise money for a new music
building.
Which of these contributed services should be included in unrestricted
revenues, gains, and other support on James Community Foundations
statement of activities for the year ended Dec. 31, 2011?
a. Both I and II. b. Neither I nor II
c. II only
d. I only.
413. On December 30, 2011, the Board of Trustees of Henry Museum, a private
not-for-profit organization, designated P4,000,000 of unrestricted net assets for
the construction of an addition to its building. What effect does this designation
have on the museums unrestricted and temporarily restricted net assets which
are reported on the statement of financial position (balance sheet) at December
31, 2011?
Unrestricted net assets
Temporarily restricted net assets
a.
No effect
Increase
b.
Decrease
Increase
c.
Decrease
No effect
d.
No effect
No effect
414. For a private, not-for-profit organization, when is a donors conditional promise
to give considered to be unconditional?
a When the condition is partially met.
b When the possibility that the condition will not be met is remote.
c When the conditional promise is made.
d When the cash or other assets promised are received.

Page 77

415. Which of the following transactions would result in an increase in unrestricted

net assets for the year ended December 31, 2001?
I A private, not-for-profit hospital earned interest on investments that were
board-designated.
II A private not-for-profit voluntary health and welfare organization received
unconditional promises to give(pledges) which will not be received until the
beginning of 2002. The donors placed no restrictions on their donations.
a. Both I and II b. I only
c. II only d. Neither I nor II.
416. During 2011, Margaret Billinglsey, a prominent art collector, donated several
items in her collection to the Darrwin Museum, a private, not-for-profit
organization. Ms. Billingsley stipulated that her contribution be shown to the
public, that is should be preserved, and not be sold. Darrwins accounting policy
is to capitalize all donations of art, historical treasures, and similar items. On the
date of donation, what was the effect of Ms. Billingsleys donation on Darrwins
financial statements?
a Temporarily restricted net assets increased.
b Reclassification caused a simultaneous increase in permanently restricted
net assets and decrease in temporarily restricted net assets.
c There was no effect on any class of Darrwins net assets.
d Permanently restricted net assets increased.
417. Which of the following transactions or events would cause an increase in
unrestricted net assets for the year ended December 31, 2011?
I A private not-for-profit voluntary health and welfare organization spent a
restricted donation which was received in 2010. In accordance with the
donors wishes, the donation was spent on public health education during
2011.
II. During 2011, a private, not-for-profit college earned dividends and interest
on term endowments. Donors placed no restrictions on the earnings of term
endowments. The governing board of the college intends to use this
investment income to fund undergraduate scholarships for 2012.
a. II only * b. I only c. Neither I nor II
d.
Both I and II.
418. An arrangement where a donor makes an initial gift to a trust or directly to the
not-for-profit organization, in which the not-for-profit organization has a
beneficial interest but is not the sole beneficiary is known as a
a. Donor-imposed condition c.
Share-the-wealth agreement.
b. Donor-imposed restriction
d. Split-interest agreement.
419. Under which of the following cases should joint costs be allocated between
fund-raising and the appropriate program or management and general function?
a An appeal for funds accompanied by a statement of the mission of the notfor-profit entity.
b An appeal for funds accompanied by a brochure explaining why funds are
needed and how they will be used.
c An organization seeks the involvement of the public in the attainment of
their mission by telling people what they should do about particular issues
in addition to fund-raising appeals.
d An appeal for funds and education materials sent to a person based on
his/her presumed ability to provide financial support.
420. Depending on the extent of discretion that the not-for-profit recipient has over
the use or subsequent disposition of the assets, gifts in kind may be treated as
Agency transaction Contributions
Agency transaction
Contributions
a.
No
No
c.
Yes
Yes

Page 78

b.

No

Yes

d.

Yes

No

421. Elizabeth Hospital, a nonprofit hospital affiliated with a religious group, should
prepare which of the following financial statements?
Statement of changes
Statement
Statement of changes
Statement
in net assets
of operations
in net assets
of
operations
a.
Yes
No
c.
Yes
Yes
b.
No
Yes
d.
No
No
422. For private sector health care organization, which of the following is included
in patient service revenue?
a Contractual adjustments.
b Charity care.
c Significant revenue under capitation agreements.
d Unrestricted contributions.
423. When functional classifications are used by private sector health care
organizations, they should be based on
a. Net present value
c.
Percentage allocations.
b. Full cost allocations *
d. Resale value.
424. How are nonrefundable advance fees representing payments for future
services to be accounted for by nonprofit continuing care retirement
communities?
a. As revenue
c.
As
other
financing
sources.
b. As a liability
d. In a trust fund.
425. On the statement of operations for a nonprofit, nongovernmental hospital,
which of the items below is included in the amount reported for revenue and
gains over expenses and losses?
I Unrealized loss on other than trading securities. The securities are included
in unrestricted net assets.
II Contributions received from a donor that cannot be used until next year.
a. I only.
b. II only.
c. Both I and II.
d. Neither I nor II.
426. Unrealized gains on investments which are permanently restricted s to use by
donors are reported by a private, nonprofit hospital on the
Statement of operations
Statement of changes in net assets *
Statement of cash flows
Statement of operations and statement of cash flows.

427. It is the process of analyzing, recording, classifying, summarizing and

communicating all transactions involving the receipt and disposition of
government funds and property and interpreting the results thereof.
a Government auditing
c. Government budgeting
b National government
d. Government accounting
428. It is the system of prescribing the procedures for recording, appropriations,
allotments and obligations.

Page 79

a
b

Fund accounting
Budgetary accounting

c. Obligation accounting
d. Management accounting

429. It is the government mechanism which provides the ceiling or maximum

amount which an agency can commit the resources of the government.
a Fund accounting
c. Obligation accounting
b Budgetary accounting
d. Financial accounting
430. It is the government mechanism which provides the ceiling or maximum
amount which an agency can commit the resources of the government.
a Fund accounting
c. Obligation accounting
b Budgetary accounting
d. Financial accounting
431. It is a statement of estimated receipts and estimated expenses of the
government which serves as basis for a general appropriation bill.
a National government budget
c. Statement of financial position
b Local government budget
d. Statement of operations
a

432. It is the legislative consideration, review and approval of the national budget.
Preparation b. Authorization c. Execution
d. Accountability
433. It is the authorization by the legislative body to make payment out of
government funds under specified conditions and for specified purposes.
a Appropriation
b Obligation
c Allotment
d Authorization
434. It is the amount committed to be paid by the government arising from an act
of a duly authorized administrative officer and which binds the government to
the immediate and eventual payment of money.
Obligation
b. Appropriation
c. Allotment d. Fund Release
435. It is the authorization from the Department of Budget and Management to an
agency to incur obligation up to a specified amount that must be within the
legislative appropriation.
a Obligation
b. Appropriation
c. Allotment
d. Commitment
436. It provides uniform accounting for incurring and liquidating obligations. The
books used in this phase of accounting are the general journal, the journal and
analysis of obligations, the journal of disbursements by officers, the journal of
warrants issued and the journal of checks issued.
a Obligation
accountingc Advice of allotment
system
d Comprehensive fund release
b Obligation of allotment
system
437. Which government body keeps the general accounts of government,
promulgates accounting rules and regulation, and submits to the President and
Congress an annual financial report of the government?
a
Commission on Audit
b
Department of Budget and Management Bureau of treasury
c
Bureau of Treasury
d Department of finance

a
b
c
d

438. Which government body is responsible for the design, preparation and
approval of the accounting system of government agencies?
Commission on Audit
Department of Budget and Management
Bureau of Treasury
Department of Finance

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439. This financial statement is submitted by government accountants to

the commission on Audit. It shows the excess (deficit) of income over
expenditures for the fiscal period then ended.
a Statement of financial position
c Statement of operations
b Preliminary trial balance
d.
Final trial balance
440. Personal services include
a. Traveling, training and seminar, telephone, internet, staff development
b. Advertising, rent, insurance and gasoline
c. Salaries, allowances and bonuses
d. Bank charges, interest, losses on foreign exchange transactions
441. Which of the following describes the role of the Bureau of Treasury in relation
to government
accounting responsibility?
a. To design, prepare and approve the accounting system of government
agencies
b. To receive and keep national funds and manage or control the
disbursements thereof
c. To keep the general accounts of the national government
d. To prepare the annual financial report of the national government, its
instrumentalities and
Government-owned or controlled corporations
`