THEORY OF ACCOUNTS

PAS 1 – PRESENTATION OF FINANCIAL STATEMENTS

1. The components financial statements include all of the following, except

a) Statement of financial position
b) Income statement
c) Statement of cash flows
d) Statement of retained earnings
2. Which of the following must be included in the component of the financial statements?
a) A statement of retained earnings
b) Accounting policies
c) An auditor’s report
d) A directors’ report
3. A third statement of financial position at the beginning of the earliest comparative period is
required
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) In all of the above cases.
4. An entity shall prepare how many statements of financial position as a result of retrospective
application, retrospective restatement and reclassification of items in financial statements?
a) Two
b) Three
c) Four
d) One
5. Which of the following best describes “financial position”?
a) The income, expenses, and net income or loss for a period.
b) The assets, liabilities, and equity at a particular moment in time.
c) The financial assets minus financial liabilities.
d) The total assets of an entity.
6. The statement of financial position is useful for analyzing all of the following, except
a) Liquidity
b) Solvency
c) Profitability
d) Financial flexibility
7. The statement of financial position provides a basis for all of the following, except
a) Computing rate of return.
b) Evaluating the capital structure of the entity.
c) Determining the increase in cash due to operations.
d) Assessing the liquidity and financial flexibility of the entity.
8. An entity shall present
a) The statement of cash flows more prominently than the other statements.
b) The statement of financial position more prominently than the other statements.
c) The statement of comprehensive income more prominently than the other statements.
d) Each financial statement with equal prominence.
9. “Fair presentation” is achieved by all of the following, except
a) To comply with applicable PFRS.
b) To present information, including accounting policies, in a manner that provides relevant,
reliable, comparable, and understandable information.
c) To provide additional disclosures when compliance with the requirements in PFRS is
insufficient to enable users to understand the entity’s financial position and financial
performance.
d) To rectify inappropriate accounting policies used either by disclosure or by note.
10. Items of dissimilar nature or function
a) Must always be presented separately in financial statements
b) Must not be presented separately in financial statements
c) Must be presented separately in financial statements if material
d) Must be presented separately in financial statements even if immaterial
11. Which of the following statements is incorrect concerning the rule on “offsetting”?
a) An entity shall not offset assets and liabilities, and income and expenses, unless required or
permitted by PFRS.
b) Measuring assets net of valuation allowance is offsetting.
c) Gains and losses on disposal of noncurrent assets are reported by deducting from the
proceeds on disposal the carrying amount of the asset and related selling expenses.
d) Gains and losses arising from a group of similar transactions are reported on a net basis.
12. When an entity changes the end of the reporting period longer or shorter than one year, an
entity shall disclose all of the following, except
a) Period covered by the financial statements.
b) The reason for using a longer or shorter period.
c) The fact that amounts presented in the financial statements are not entirely comparable.
d) The fact that similar entities in the geographical area in which the entity operates have done
so.
13. An entity must disclose comparative information for
a) The previous comparable period for all amounts reported.
b) The previous comparable period for all narrative and descriptive information.
c) The previous comparable period for all amounts reported, and for all narrative and
descriptive information when it is relevant to an understanding of the current period’s
financial statements.
d) The previous two comparable periods for all amounts reported.
14. The presentation and classification of items shall be retained from one period to the next.
a) Consistency of presentation
b) Materiality
c) Aggregation
d) Comparability
15. An entity can charge the presentation and classification of items in the financial statements
when
a) There is a significant change in the nature of the entity’s operations
b) A review indicates that another presentation and classification would be more appropriate.
c) Required by PFRS.
d) All of these
16. An entity must present additional line items in a statement of financial position when
a) Such presentation is relevant to an understanding of the entity’s financial position.
b) Such presentation is a generally accepted practice in the sector in which the entity operates.
c) Such presentation is required by the tax authorities.
17. In presenting a statement of financial position, an entity
a) Must make the current and noncurrent presentation.
b) Must present assets and liabilities in order of liquidity.
c) Must choose either the current and noncurrent or the liquidity presentation.
d) Must make the current and noncurrent presentation except when a presentation based on
liquidity provides information that is reliable and more relevant.
18. Current and noncurrent presentation provides useful information when the entity
a) Supplies goods or services within a clearly identifiable operating cycle.
b) Is a financial institution
c) Is a public utility
d) Is a nonprofit organization
19. A presentation of assets and liabilities in increasing or decreasing order of liquidity provides
information that is reliable and more relevant than a current and noncurrent presentation for
a) Financial institution
b) Public utility
 c) Government-owned entity
d) Service provider
20. An entity shall classify an asset as current under all of the following conditions, except
a) The entity expects to realize, or intends to sell or consume it within normal operating cycle.
b) The entity holds the asset primarily for the purpose of trading.
c) The entity expects to realize the asset within twelve months after the reporting period.
d) The asset is cash or cash equivalent restricted to settle a liability for more than twelve
months after the reporting period.
21. When there is much variability, the operating cycle is measured at
a) The mean value
b) The median value
c) Twelve months
d) Three years
22. The basis for classifying assets as current or noncurrent is the period of time normally required
by to convert cash invested in
a) Inventory back into cash, or 12 months, whichever is shorter.
b) Receivables back into cash, or 12 months, whichever is longer.
c) Tangible fixed assets back into cash, or 12 months, whichever is longer.
d) Inventory back into cash, or 12 months, whichever is longer.
23. Which of the following should be classified as current asset?
a) Cash surrender value of a life insurance policy of which the entity is the beneficiary.
b) Investment in equity securities for the purpose of controlling the issuing entity.
c) Cash designated for the purchase of property, plant, and equipment.
d) Trade installment accounts receivable normally collectible in 18 months.
24. An entity shall classify a liability as current under all of the following conditions, except
a) The entity expects to settle the liability within the normal operating cycle.
b) The entity holds the liability primarily for the purpose of trading.
c) The liability is due to be settled within twelve months after the reporting period.
d) The entity has an unconditional right to defer settlement of the liability for at least twelve
months after the reporting period.
25. A financial liability that is due to be settled within twelve months after the reporting period shall
be classified as noncurrent
I. When it is refinanced on a long-term basis on or before the end of the reporting period.
II. When an entity has the discretion to refinance or roll over the obligation for at least twelve
months after the reporting period under an existing loan facility.
a) I only
b) II only
c) Both I and II
d) Neither I nor II
26. When an entity breaches an undertaking under a long-term loan agreement on or before the
end of the reporting period with the effect that the liability becomes payable on demand.
I. The liability is classified as current if the lender has agreed after the reporting period and
before the issuance of the statements not to demand payment as a consequence of the
breach.
II. The liability is classified as noncurrent if the lender agreed on or before the end of the
reporting period to provide a grace period for at least twelve months after the reporting
period within to rectify the breach.
a) I only
b) II only
c) Either I or II
d) Neither I nor II
27. Which item is not a current liability?
a) Unearned revenue
b) Stock dividend distributable
c) The currently maturing portion of long-term debt
d) Trade accounts payable
28. Noncurrent liabilities include
a) Obligations not expected to be liquidated within the operating cycle.
b) Obligations payable at some date beyond the operating cycle.
c) Deferred income taxes and most lease obligations.
d) All of these
29. The two-statement approach of presenting comprehensive income includes
I. A separate income statement showing the components of profit or loss.
II. A separate statement of comprehensive income beginning with profit or loss plus or minus
the components of other comprehensive income.
a) I only
b) II only
c) Either I or II
d) Neither I nor II
30. It is the change in equity during a period resulting from transactions and other events, other
than those changes resulting from transactions with owners in their capacity as owners.
a) Profit or Loss
b) Comprehensive income
c) Other comprehensive income
d) Share capital
31. It comprises items of income and expense, including reclassification adjustments, that are not
recognized in profit or loss as required or permitted by others PFRS.
a) Comprehensive income
b) Other comprehensive income
c) Profit or loss
d) Retained profit
32. Other comprehensive income includes all of the following, except
a) Gain and loss arising from translating the financial statements of a foreign operation.
b) Gain and loss on remeasuring available for sale financial asset at fair value.
c) The effective portion of gain and loss on hedging instrument in a cash flow hedge.
d) Dividend paid to shareholders.
33. These are amounts reclassified to profit or loss in the current period that were recognized in
other comprehensive income in the current or previous period.
a) Prior period errors
b) Reclassification adjustments
c) Unusual and irregular items
d) Correcting entries
34. Comprehensive income includes all of the following, except
a) Revenue and gains
b) Expenses and losses
c) Preference share dividends
d) Unrealized gains and losses on derivative contracts
35. Other comprehensive income must be displayed in
a) The equity section of the statement of financial position
b) A second income statement
c) The income statement
d) The statement of retained earnings
36. An entity shall present an analysis of expenses using a classification based on
a) The nature of expenses
b) The function of expenses
c) Either the nature of expenses or the function expenses within the entity, whichever
provides information that is reliable and more relevant.
d) Either the nature of expenses or the function of expenses within the entity, whichever the
entity would prefer to present.
37. Separate line items in an analysis of expenses by nature include
a) Purchases, transport costs, employee benefits, depreciation, extraordinary items.
b) Purchases, distribution costs, administrative costs, employee benefits, depreciation.
 c) Depreciation, purchases, transport costs, employee benefits, and advertising costs.
d) Cost of sales, administrative costs, transport costs, and distribution costs.
38. Separate line items in an analysis of expenses by function include
a) Purchases, transport costs, employee benefits, depreciation, extraordinary items.
b) Purchases, distribution costs, administrative costs, employee benefits, depreciation.
c) Depreciation, purchases, employee benefits, and advertising costs.
d) Cost of sales, administrative expenses and distribution expenses.
39. Information in the income statement helps users to
a) Evaluate the past performance of the entity
b) Provide a basis for predicting future performance
c) Assess the amount, timing, and risk or uncertainty of future cash flows.
d) All of these
40. What is the purpose of the notes to financial statements?
a) To present information about the basis of preparation of the financial statements and the
specific accounting policies used.
b) To disclose the information required by PFRS that is not presented elsewhere in the financial
statements.
c) To provide information that is not presented elsewhere in the financial statements but is
relevant to an understanding of the statements.
d) All of these
41. What is the “first item” presented in the notes to financial statements?
a) Statements of compliance with PFRS.
b) Summary of significant accounting policies.
c) Supporting information for items presented in the financial statements.
d) Other disclosures, including contingent liabilities, unrecognized contractual commitments
and nonfinancial disclosures.
42. An entity shall disclose in the summary of significant accounting policies
a) The measurement basis used in preparing the financial statements.
b) All the measurement bases specified in PFRS irrespective of whether used or not.
c) The measurement basis and the accounting policies used.
d) All of the accounting policy choices specified in PFRS irrespective of whether used or not.
43. The presentation of notes to financial statements in a systematic manner
a) Is voluntary
b) Is mandatory
c) Is mandatory, as far as practicable
d) Depends on the industry
44. Disclosure of information about key sources of estimation uncertainty and judgments
a) Is voluntary
b) Is mandatory
c) Is either voluntary or mandatory
d) Depends on the industry
45. The cross-reference between each line item in the financial statements and any related
information disclosed in the notes to the financial statements
a) Is voluntary
b) Is mandatory
c) Depends on the industry
d) Is either voluntary or mandatory
46. Which of the following is not a method of disclosing pertinent information?
a) Supporting schedule
b) Parenthetical explanation
c) Cross reference and contra item
d) All of these are methods of disclosing pertinent information
 47. Accounting policies disclosed in the notes typically include all of the following, except
a) The cost flow assumption used
b) The depreciation method used
c) Significant estimates made
d) Significant inventory purchasing policies
48. Which of the following should be defined as intentional distortions of financial statement?
a) Errors
b) Fraud
c) Errors and fraud
d) Neither errors nor fraud
49. The disclosure of accounting policies is important to financial statement readers in determining
a) Net income for the year
b) Whether accounting policies are consistently applied from year to year
c) The value of obsolete items included in ending inventory
d) Whether the working capital position is adequate for future operations.

PAS 10 – EVENTS AFTER REPORTING PERIOD

50. Events after end of the reporting period are events, favorable or unfavorable, that
a) Occur between the end of the reporting period and the date of the next annual financial
statements.
b) Occur between the end of the reporting period and the date of the next interim or annual
financial statements.
c) Occur between the end of the reporting period and the date when the financial statements
are authorized for issue.
d) Occur between the end of reporting period and the date of the next interim statements.
51. Adjusting events are those that
a) Provide evidence of conditions that existed at the end of the reporting period.
b) Are indicative of conditions that arose after the end of the reporting period.
c) Are indicative of conditions that arose before the end of the reporting period.
d) Provide for conditions that existed after the date the financial statements were issued.
52. Financial statements are said to be authorized for issue when
a) The financial statements are filed with the SEC.
b) The shareholders approve the financial statements at their annual meeting.
c) The management is required to submit the financial statements to a supervisory body made
up solely of nonexecutives and the supervisory body approves the financial statements.
d) The management reviews the financial statements and authorizes them for issue.
53. Which of the following statements about events after the end of reporting period is true?
I. A decline in value of investments would normally be classified as an adjusting event.
II. The settlement of a long-running case would normally be classified as a nonadjusting event.
a) I only
b) II only
c) Both I and II
d) Neither I nor II
54. All of the following events after reporting period should be classified as nonadjusting, except
a) The entity announced the discontinuation of assembly operation
b) The entity entered into an agreement to purchase the leased building
c) Destruction of a major production plant by fire
d) A mistake in the calculation of allowance for uncollectible accounts receivable

PAS 24 - RELATED PARTY DISCLOSURES

55. A party is related to an entity if the party, directly or indirectly through one or more
intermediaries
a) Controls, is controlled by or is under common control with the entity
 b) Has an interest in the entity that gives it significant influence over the entity
c) Has joint control over the entity
d) All of these
56. Related parties include all of the following, except
a) Parent, subsidiary and fellow subsidiaries
b) Associate
c) Key management personnel and close family members of such individuals
d) Two ventures simply because they share joint control over a joint venture
57. Close family members of an individual include all of the following, except
a) The individual’s spouse and children
b) Children of the individual’s spouse
c) Dependents of the individual or the individual’s spouse
d) Brother or sister of the individual
58. Unrelated parties include all of the following, except
a) Two entities simply because they have a common director
b) Providers of finance simply by virtue of their normal dealing with an entity
c) Customers with whom an entity transacts a significant volume of business, merely by virtue
of the resulting economic dependence
d) Postemployment benefit plan for the benefit of employees
59. Which of the following would not be considered key management personnel compensation?
a) Short-term benefits
b) Share-based payments
c) Termination benefits
d) Reimbursement of “out of pocket” expenses
60. All of the following fall within the definition of an entity’s related party, except
a) Joint venture in which the entity is a venture
b) A postemployment benefit plan for the benefit of the employees of the entity
c) An executive director of the entity
d) The partner of a key manager is major supplier of the entity
61. Which of the following is not a required minimum disclosure about related party transaction?
a) The amount of related party transaction.
b) The amount of the outstanding balance and the terms and conditions including guarantee.
c) The amount of similar transaction with unrelated parties to establish that comparable
related party transaction has been entered at arm’s length.
d) Provision for doubtful debt related to the outstanding balance.
62. All of the following are related party transactions, except
a) Transferred inventory to a shareholder owning forty percent of the entity’s ordinary shares.
b) Sold an entity car to the wife of the managing director.
c) Sold an asset to an associate
d) Took out a huge bank loan

PAS 8 – ACCOUNTING POLICIES, ESTIMATES AND ERRORS

63. Accounting changes are often made and the monetary impact is reflected in the financial
statements even though in theory this may be a violation of the accounting concept of
a) Materiality
b) Consistency
c) Prudence
d) Objectivity
64. Which of the following is not classified as an accounting change?
a) Change in the accounting policy
b) Change in accounting estimate
c) Error in the financial statements
d) All of these are classified as an accounting change
65. These are the specific principles, bases, conventions, rules, and practice applied by an entity in
preparing and presenting financial statements.
a) Accounting Policies
b) Accounting Principles
c) Accounting Standards
d) Accounting Concepts
66. What is retrospective application of a change in accounting policy?
a) Applying a new accounting policy to transactions as if that policy had always been applied.
b) Applying a new accounting policy to transactions occurring after the date at which the policy
is changed.
c) Correcting the recognition, measurement and disclosure of amounts of elements of financial
statements as if a prior period error never occurred.
d) All of these
67. Which of the following is not treated as a change in accounting policy?
a) A change from average cost to FIFO for inventory
b) A change to a different method of depreciation
c) A change from full cost to successful effort in the extractive industry
d) A change from cost recovery to percentage of completion
68. An entity changes an accounting policy if
I. It is required by law
II. The change will result in providing reliable and more relevant information about the entity’s
financial position, financial performance and cash flow.
a) I only
b) II only
c) Both I and II
d) Neither I nor II
69. How is a change in accounting policy reported?
I. A change in accounting policy required by PFRS shall be reported in accordance with the
transitional provisions therein.
II. If the PFRS contains no transitional provisions or if an accounting policy is changed
voluntarily, the change shall be reported retrospectively.
a) I only
b) II only
c) Either I or II
d) Neither I nor II
70. A change in accounting policy requires that the cumulative effect of the change for prior periods
be shown as an adjustment to
a) Beginning retained earnings for the earliest period presented
b) Net income for the period in which the change occurred
c) Comprehensive income for the earliest period presented
d) Shareholders’ equity for the period in which the change occurred
71. A change in measurement basis
a) Is not an accounting change
b) Is a change in accounting policy
c) Is a change in accounting estimate
d) Is a correction of an error
72. When it is difficult to distinguish a change in an accounting policy from a change in an
accounting estimate, the change is treated as
a) Change in accounting estimate with appropriate disclosure
b) Change in accounting policy
c) Correction of an error
d) Initial adoption of an accounting policy
73. Which is the proper time period to record the effect of a change in accounting estimate?
a) Current period and prospectively
b) Current period and retrospectively
c) Retrospectively only
 d) Current period only
74. An example of a correction of an error in previously issued financial statements is a change.
a) From FIFO method of inventory valuation to average cost method
b) In the service life of plant assets based on changes in the economic environment
c) From cash basis of accounting to accrual basis of accounting
d) In the tax assessment related to a prior period.

PFRS 5 – DISCONTINUED OPERATION AND ASSET HELD FOR SALE

1. It is a group of assets to be disposed of by sale or otherwise, together as a group in a single

transaction, and liabilities directly associated with those assets that will be transferred in the
transaction.
a) Disposal group
b) Discontinued operation
c) Noncurrent asset
d) Cash generating unit
2. A noncurrent asset or disposal group shall be classified as held for sale when
a) The sale is highly probable
b) The asset is available for immediate sale in the present condition
c) The sale is probable and the asset is available for sale in the present condition
d) The sale is highly probable and the asset is available for immediate sale in the present
condition
3. Which of the following is not one of the criteria for the sale of a noncurrent asset held for sale
to be highly probable?
a) Management must be committed to a plan to sell the asset
b) An active program to locate a buyer and complete the plan must have been initiated
c) The asset must be actively marketed for sale at a reasonable price in relation to the current
fair value
d) The sale should be expected to qualify for recognition as a completed sale within two years
from the date of classification of the asset as “held for sale”
4. An entity shall classify a noncurrent asset or disposal group as “held for sale” when
a) The carrying amount of the asset or disposal group is recovered through a sale
b) The carrying amount of the asset or disposal group is recovered through continuing use
c) The noncurrent asset or disposal group is to be abandoned
d) The noncurrent asset or disposal group is idle or retired from active use
5. A noncurrent asset that is to be abandoned should not be classified as held for sale because
a) The carrying amount is recovered principally through continuing use
b) It is difficult to value
c) It is unlikely that the noncurrent asset will be sold within 12 months
d) It is unlikely that there will be an active market for the noncurrent asset
6. An entity shall measure a noncurrent asset or disposal group classified as held for sale at
a) Carrying amount
b) Fair value less cost of disposal
c) Lower of carrying amount and fair value less cost of disposal
d) Higher of carrying amount and fair value less cost of disposal
7. Which statement is incorrect concerning noncurrent asset or disposal group held for sale?
a) An entity shall present a noncurrent asset held for sale and the assets of a disposal group
classified as held for sale under current assets separately from other assets.
b) The liabilities of a disposal group classified as held for sale shall be presented under current
liabilities separate from other liabilities.
c) The assets and liabilities of a disposal group classified as held for sale shall not be offset as a
single amount.
d) An entity shall depreciate a non-current assets classified as held for sale or while it is part of
a disposal group classified as held for sale.
8. An entity shall recognize any subsequent increase in fair value less cost of disposal of a
noncurrent asset or disposal group classified as held for sale as
a) Deferred gain as component of equity
b) Deferred gain as component of liability
c) Gain entirely to be included in profit or loss
d) Gain to be included in profit or loss but not in excess of the cumulative impairment loss
previously recognized
9. An entity classified a noncurrent asset accounted for under the cost model as held for sale at the
current year-end. The entity decided at the end of the following year not to sell the asset but to
continue to use it. The asset should be measured at the end of the following year at
a) The lower of carrying amount and recoverable amount
b) The higher of carrying amount or recoverable amount
c) The lower of carrying amount on the basis that it had never been classified as held for sale
and recoverable amount
d) The recoverable amount
10. A discontinued operation is component of an entity that either has been disposed of or is
classified as held for sale and
a) Represents a separate major line of business or geographical area of operations
b) Is part of a single coordinated plan to dispose a separate major line of business or
geographical area of operations
c) Is a subsidiary exclusively with a view to resale
d) All of these
11. Which of the following is a requirement of a component of an entity to be classified as
discontinued operation?
a) Its activities must permanently cease prior to the financial statements being authorized for
issue
b) It must comprise a separately reportable segment
c) Its assets must have been classified as held for sale in previous financial statements
d) It must have been a cash generating unit or group of cash generating units while being held
for use
12. The results of discontinued operation shall be presented
a) As a single amount below the income from continuing operations
b) With details of revenue and expenses side by side with continuing operations
c) As a single amount in the statement of retained earnings
d) In the accompanying notes to financial statements
13. When an entity discontinued an operation and disposed of the discontinued operation, the
transaction should be reported as a gain or loss on disposal reported as
a) A prior period adjustment
b) An another income and expense item
c) An amount after continuing operations and before net income
d) A bulk sale of plant assets included in income from continuing operations.
14. Which of the following statements in relation to a discontinued operation is true?
I. When the discontinued criteria are met after the end of the reporting period, the
operation shall retrospectively be separately presented as a discontinued operation
II. The net cash flows attributable to the operating, investing and financing activities of a
discontinued operation shall be separately presented.
a) I only
b) II only
c) Both I and II
d) Neither I nor II
PFRS 8 – OPERATING SEGMENT

15. An operating segment is a component of an entity

a) That engages in business activities from which it may earn revenue and incur expenses,
including revenue and expenses relating to the transactions with other components of the
same entity.
b) Whose results are regularly reviewed by the chief operating decision maker to make
decisions about resources to be allocated to the segment and asses its performance
c) For which discrete information is available
d) All of these
16. What is the function of the chief operating decision maker?
a) To allocate resources to the operating segments only
b) To assess the performance of the operating segments only
c) To provide information to financial statement users about operating segments
d) To allocate resources to the operating segments and assess the performance of operating
segments
17. Operating segments are identified on the basis of internal reports about components of an
entity that are regularly reviewed by a chief operating decision maker in order to allocate
resources to the segment and assess its performance.
a) Management approach
b) Risk and reward approach
c) Matrix approach
d) Geographic segment approach
18. When is an operating segment reportable?
a) The segment internal and external revenue is 10% or more of the combined external and
internal revenue of all operating segments
b) The segment profit or loss is 10% or more of the greater between the combined profit of all
profitable operating segments and the combined loss of all unprofitable segments.
c) The assets of the segments are 10% or more of the total assets of all operating segments
d) All of these
19. Operating segments that do not meet any of the following thresholds
a) Cannot be considered reportable
b) May be considered reportable and separately disclosed if management believes that
information about the segment would be useful to the users of the financial statements
c) May be considered reportable if the information is for internal use only
d) May be considered reportable and separately disclosed if this is a practice within the
economic environment in which the entity operates
20. Which is true concerning the 75% overall size test for operating segments
a) The total external and internal revenue of all reportable segments is 75% or more of the
entity’s external revenue
b) The total external revenue of all reportable segments is 75% or more of the entity’s external
and internal revenue
c) The total external revenue of all reporting segments is 75% or more of the entity’s external
revenue
d) The total internal revenue of all reporting segments is 75% or more of the entity’s internal
revenue
21. Revenue of a segment includes
a) Only sale to unaffiliated customers
b) Sales to unaffiliated customers and intersegment sales
c) Sales to unaffiliated customers and interest revenue
d) Sales to unaffiliated customers and other revenue and gains
22. All of the following information about each operating segment must be reported, except
a) Unusual items
b) Interest revenue
 c) Cost of goods sold
d) Depreciation and amortization expense
23. In presenting segment information, for which of the following must a reconciliation be made?
a) Revenue
b) Operating profit or loss
c) Assets and liabilities
d) All of these
24. What is the reasonable upper limit for the number of segment that an entity must disclose?
a) Two
b) Five
c) Six
d) Ten
25. Which of the following statements about major customer disclosure is true?
a) A major customer is defined as one providing revenue which amounts to 10% or more of the
combined external revenue of all operating segments
b) The identities of major customers need to be disclosed
c) The entity shall disclose the total amount of the revenue from major customers and the
identity of the segment reporting the revenue
d) All of these statements are true about major customer disclosure

PAS 34 – INTERIM FINANCIAL REPORTING

26. Interim financial reports shall be published

a) Once a year at any time in that year
b) Within a month of the half year-end
c) On a quarterly basis
d) Whenever the entity wishes
27. Interim financial reports should include as a minimum
a) A complete set of financial statements
b) A condensed set of financial statements and selected notes
c) A statement of financial statements and income statement only
d) A condensed statement of financial position, income statement and statement of cash flows
only
28. An entity owns a number of farms that harvest produce seasonally. What is the disclosure
suggestion if the business is highly seasonal?
a) Additional notes should be written in the interim reports about the seasonal nature
b) Disclosure of financial information for the latest and comparative 12-month period in
addition to the interim period
c) Additional disclosure in the accounting policy note
d) No additional disclosure
29. Interim financial reporting should be viewed
a) As a special type of reporting that need not follow international financial reporting
standards
b) As useful only if the activity is evenly spread throughout the year so that the estimates are
necessary
c) As reporting for an integral part of an annual period
d) As reporting for a separate accounting period
30. Which is incorrect concerning presentation of comparative interim financial statements?
a) A statement of financial position at the end of the comparative interim period and
comparative statement of financial position at the end of the immediately preceding year
b) Income statements for the current interim period and cumulatively for the current year to
date with comparative income statement for the immediately preceding year
c) Statement of changes in equity cumulative for the current year to date with comparative
statement for the comparable period of the immediately preceding year
d) Statement of cash flows cumulatively for the current year to date with comparative
statement for the comparable period of the immediately preceding year
THEORY OF ACCOUNTS

CASH AND RECEIVABLES

1. Which of the following should be considered cash?

a) Certificates of deposit
b) Money orders
c) Money market saving certificates
d) Treasury bills
2. Which of the following should not be considered cash?
a) Petty cash funds and change funds
b) Certified checks and personal checks
c) Coin, currency and available funds
d) Postdated checks and IOUs
3. Travel advances should be reported as
a) Supplies
b) Cash because they represent the equivalent of money
c) Investments
d) None of these
4. Which of the following items should not be included in “cash”?
a) Coins and currency in the cash register
b) Checks from other parties presently in the cash register
c) Amounts on deposit in checking account at the bank
d) Postage stamps on hand
5. All of the following may be included under the heading of “cash”, except
a) Currency
b) Money market certificates
c) Checking account balance
d) Savings account balance
6. In which account are postage stamps classified?
a) Cash
b) Office supplies
c) Receivables
d) Inventory
7. What is compensating balance?
a) Saving account balance
b) Margin account with broker
c) Temporary investment serving as collateral for loan
d) Minimum deposit required to be maintained in connection with borrowing arrangement
8. Deposits held as compensating balance
a) Usually do not earn interest
b) If legally restricted and held against short-term credit may be included in cash
c) If legally restricted and held against long-term credit may be included among current assets
d) None of these
9. Bank overdraft, if material, should be
a) Reported as a deduction from the current asset section
b) Reported as a deduction to cash
c) Netted against cash and a net cash amount reported
d) Reported as a current liability