1. What is the authoritative status of the Conceptual Framework?

a. The conceptual framework has the highest level of authority.

b. In the absence of a Standard, the Conceptual Framework should be followed.
c. In the absence of a Standard or an Interpretation that specifically applies to a transaction,
management should consider the Conceptual Framework in developing an accounting policy
that results in relevant and reliable information.
d. The conceptual framework applies only when new or revised standards are developed.

2. The Conceptual Framework is intended to establish

a. Accounting standard in financial reporting
b. The meaning of “present fairly in accordance with GAAP”
c. The objectives and concepts for use in developing financial accounting standards.
d. The hierarchy of sources of GAAP

3. Which is not a purpose of the Revised Conceptual Framework?

a. To assist the IASB to develop IFRS based on consistent concepts.
b. To assist preparers to develop consistent accounting policy when no standard applies to a
particular transaction or when Standard allows a choice of accounting policy.
c. To assist all parties to understand and interpret the Standards.
d. To assist the BOA in issuing rules and regulations affecting the accountancy profession.

4. What is the primary objective of financial reporting?

a. To provide economic information that is comprehensible to all users.
b. To provide management with an accurate evaluation of their financial performance
c. To provide forecasts for future cash flows and financial performance.
d. To provide information that is useful for economic decision making.

5. The objectives of financial reporting are based on

a. The need for conservatism
b. Reporting on management stewardship
c. Generally accepted accounting principles
d. The needs of the users of information

6. Which best describes the going concern assumption?

a. When current assets exceed current liabilities
b. The ability of an entity to continue in operation for the foreseeable future
c. The potential to contribute to the flow of a cash to an entity
d. When revenue exceeds expenses
7. The economic entity assumption
a. Is inapplicable to unincorporated businesses
b. Recognizes the legal aspects of business organizations
c. Requires periodic income measurement
d. Is applicable to all forms of business organizations

8. Consolidated financial statements are prepared when a parent-subsidiary relationship exists.

a. Economic entity assumption
b. Legal entity assumption
c. Monetary unit assumption
d. Time period assumption

9. During the lifetime of an entity, accountants produce financial statements at arbitrary or

artificial
points in time in accordance with which basic accounting concept?
a. Objectivity
b. Time period assumption
c. Unit of measure
d. Continuity assumption

10. Inflation is ignored in accounting due to

a. Economic entity assumption
b. Going concern assumption
c. Monetary unit assumption
d. Time period assumption

11. Qualitative characteristics of financial statements are

a. The attributes that make the information provided in financial statements useful to users
b. Broad classes of financial effects of transactions and other events
c. Unqualitative aspects of financial position and financial performance
d. Measure the extent to which an entity has complied with all relevant standards and
interpretations

12. Fundamental qualitative characteristics of accounting information are

a. Relevance and comparability
b. Comparability and consistency
c. Faithful representation and relevance
d. Neutrality and verifiability

13. Enhancing qualitative characteristics of accounting information include

a. Relevance, faithful representation and materiality
b. Comparability, understandability, timeliness and verifiability
c. Faithful representation and timeliness
d. Materiality and understandability

14. Faithful representation includes

a. Predictive value and confirmatory value
b. Completeness, free from error and neutrality
c. Comparability and understandability
d. Timeliness and verifiability

15. The financial information is directed toward the common needs of users and is independent
of
presumptions about particular needs and desires of specific users.
a. Comparability
b. Verifiability
c. Neutrality
d. Completeness

16. Neutrality is supported by the exercise of prudence. Prudence is the exercise of care and
caution
when dealing with uncertainties in the measurement process such that
a. Assets and income are overstated
b. Liabilities and expenses are understated
c. Assets and income are not overstated and liabilities and expenses are not understated.
d. Assets, liabilities, income and expenses are not overstated.

17. The qualitative characteristic of relevance includes

a. Predictive value and confirmatory value
b. Completeness and neutrality
c. Comparability and understandability
d. Verifiability and timeliness

18. Accounting information is considered relevant when it

a. Can be depended on to represent the economic conditions that it is intended to represent
b. Is capable of making a difference in a decision
c. Is understandable by reasonably informed users of accounting information
d. Is verifiable and neutral

19. Which of the following statements about materiality is not correct?

a. An item must make a difference or it need not be disclosed.
b. Materiality is a matter of absolute size.
c. An item is material if omitting, misstating or obscuring it could reasonably be expected to
influence the economic decision of primary users.
d. Materiality is a subquality of relevance.

20. What is meant by comparability when discussing financial accounting information?

a. Information has predictive and feedback value.
b. Information is reasonably free from error.
c. Information is measured and reported in a similar fashion across entities.
d. Information is timely.

21. What is meant by consistency when discussing financial accounting information?

a. Information is measured and reported in a similar fashion across points in time.
b. Information is timely.
c. Information is measured similarly across the industry.
d. Information is verifiable.

22. The enhancing quality of understandability means that information should be understood by
a. Those who are experts in the interpretation of financial information
b. Those who have a reasonable understanding of business and economic activities
c. Financial analysts
d. CPAs

23. According to the Revised Conceptual Framework, verifiability implies

a. Legal evidence
b. Logic
c. Consensus
d. Legal verdict

24. When an entity has started placing its quarterly financial statements on its website, thereby
reducing
ample time to get information to users, the qualitative concept involved is
a. Comparability
b. Understandability
c. Verifiability
d. Timeliness

25. The usefulness of providing information in financial statements is subject to the constraint of
a. Consistency
b. Cost-benefit
c. Conservatism
d. Materiality

26. Which of the following best describes the cost-benefit constraint?

a. The benefit of the information must be greater than the cost of providing it.
b. Financial information should be free from cost to users of the information.
c. Cost of providing financial information is not always evident or measurable.
d. All of the choices are correct.

27. A reporting entity

a. Is necessarily a legal entity
b. Must be a corporate type of entity
c. Is an entity that is required or chooses to prepare financial statements
d. A regulatory government authority

28. A reporting entity

a. Can be a single entity
b. Can be a portion of a single entity
c. Can comprise more than one entity
d. All of these can be considered a reporting entity

29. Which statement is true about financial statements of a reporting entity?

a. If the reporting entity comprises both the parent and its subsidiaries, the financial statements
are
referred to as consolidated financial statements.
b. If the reporting entity is the parent alone, the financial statements are referred to as
unconsolidated financial statements.
c. If the reporting entity comprises two or more entities that are not linked by a parent-subsidiary
relationship, the financial statements are referred to as combined financial statements.
d. All of these statements are true about the financial statements of a reporting entity.

30. Under the Revised Conceptual Framework, an asset is defined as a present economic
resource
controlled by the entity as a result of past event. Which is not a characteristic of an asset?
a. An asset is a present economic resource.
b. The economic resource is a right that has the potential to produce economic benefits.
c. The economic resource is controlled by the entity as a result of past event.
d. Future economic benefit is expected to flow to entity and must be probable or certain.
31. A liability is defined as a present obligation to transfer an economic resource as a result of
past event.
Which of the following criteria need not be satisfied for a liability to exist?
a. The entity has an obligation or a duty or responsibility that it has no practical ability to avoid.
b. The obligation is to transfer an economic resource and not the ultimate outflow of economic
benefit.
c. The obligation is a present obligation that exists as a result of a past event.
d. The settlement of the obligation is expected to result in an outflow of economic benefit.

32. Which statement is not true about income and expenses?

a. Income is increase in asset or decrease in liability that results in increase in equity other than
that
relating to contribution from equity holders.
b. Expense is decrease in asset or increase in liability that results in decrease in equity other than
that relating to distribution to equity holders.
c. Income and expenses are the elements that relate to financial position.
d. Income encompasses revenue and gain.

33. It is the process of capturing for inclusion in the statement of financial position or the
statement of
financial performance an item that meets the definition of an element of the financial statements.
a. Recognition
b. Measurement
c. Derecognition
d. Disclosure

34. Under the Revised Conceptual Framework, what is the recognition principle?
a. It is probable that future economic benefit associated with the item will flow to or from the
entity.
b. The item has a cost or value that can be measured with reliability.
c. It is probable that the element of financial statements can be measured reliably.
d. Only items that meet the definition of an asset, liability, equity, income and expense are
recognized.

35. Derecognition is the removal of a recognized asset or liability from the statement of financial
position
and normally occurs when
a. An item no longer meets the definition of an asset or a liability
b. The entity loses control of the asset.
c. The entity no longer has a present obligation for the liability
d. Under all of these circumstances

36. Under the Revised Conceptual Framework, the measurement bases include
a. Historical cost
b. Current value
c. Assessed value
d. Historical cost and current value

37. Current value includes

a. Fair value
b. Value in use
c. Fulfillment value
d. Fair value, value in use, fulfillment value and current cost

38. Fair value of an asset is

a. The price that would be received to sell an asset in an orderly transaction between market
participants at the measurement date.
b. The present value of the cash flows to be derived from the use and ultimate disposal of an
asset.
c. The discounted amount of cash expected for the payment of liability.
d. The cost of an equivalent asset comprising the consideration paid and transaction cost.

39. The term “revenue recognition” conventionally refers to

a. The process of identifying transactions to be recorded as revenue in an accounting period.
b. The process of measuring and relating revenue and expenses of an entity.
c. The earning process which gives rise to revenue realization.
d. The process of identifying those transactions that result in an inflow of assets from customers.

40. Which of the following is not an acceptable basis for the recognition of expense?
a. Systematic and rational allocation
b. Cause and effect association
c. Immediate recognition
d. Cash disbursement
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS

MAY 2024 CPALE BATCH 95

ACCOUNTING PROCESS

1. Which is done first among the following steps in the accounting cycle?
a. Financial statements are prepared.
b. Adjusting entries are recorded
c. Nominal accounts are closed
d. A postclosing trial balance is prepared.

2. Which is not in logical order in the accounting cycle?

a. Closing entries, postclosing, reversing entries
b. Trial balance, adjusting entries, financial statements
c. Adjusting entries, reversing entries, closing entries
d. Posting, trial balance, adjusting entries

3. Which is an optional step in the accounting cycle?

a. Adjusting entries
b. Closing entries
c. Financial statements
d. Reversing entries

4. The double entry accounting system means

a. Each transaction is recorded with two journal entries.
b. Each item is recorded in a journal entry and then in a general ledger.
c. The dual effect of each transaction is recorded with a debit and a credit.
d. All of these are choices regarding double entry system.

5. Debits
a. Increase assets and decrease liabilities, expenses, revenue and equity
b. Increase assets and expenses and decrease liabilities, revenue and equity
c. Increase assets and equity and decrease liabilities, expenses and revenue
d. Decrease assets and expenses and increase liabilities, revenue and equity

6. Which is not a possible combination of a journal entry?

a. Increase in asset and increase in liability.
b. Decrease in equity and increase in liability.
c. Decrease in liability and decrease in asset.
d. Increase in asset and decrease in equity.

7. A general journal
a. Chronologically lists transactions and other events expressed in terms of debit and credit.
b. Contains one record for each asset, liability, equity, revenue and expense.
c. Lists all the increases and decreases in each account in one place.
d. Contains only adjusting entries.

8. A simple journal entry

a. Consists of one debit and one credit.
b. Consists of two debits and one credit.
c. Consists of one debit and two credits.
d. Is a memorandum entry.

9. A chart of accounts is
a. A flowchart of all transactions.
b. An accounting manual.
c. A journal.
d. A list of all account titles in the general ledger.
 Page 2

10. Posting is the process of transferring information from

a. Source document to the journal.
b. Journal to the source document.
c. Journal to the general ledger.
d. General ledger to the journal.

11. A general ledger is defined as

a. A group of transactions.
b. A group of all statement of financial accounts.
c. A group of all income statement accounts.
d. The entire group of accounts.

12. A subsidiary ledger is

a. A listing of the components of account balances.
b. A backup system to protect against record destruction.
c. A listing of accounts before closing entries.
d. A listing of accounts of a subsidiary.

13. Which statement regarding a trial balance is incorrect?

a. A trial balance is a test of the equality of the debit and credit balances in the ledger.
b. A trial balance is a list of all of the open accounts in the ledger with their balances.
c. A trial balance proves that no errors of any kind have been made during the accounting period.
d. A trial balance helps to localize errors within an identifiable time period.

14. A trial balance may prove that debits and credits are equal, except
a. An amount could be entered in the wrong account.
b. A transaction could have been entered twice.
c. A transaction could have been omitted.
d. All of these items may prove that debits and credits are equal.

15. Adjusting entries affect

a. One nominal account and one real account.
b. Two nominal accounts.
c. Two real accounts.
d. No particular combination of nominal and real accounts.

16. Which of the following least resembles a typical adjusting entry?

a. Debit an asset and credit revenue.
b. Debit an expense and credit liability.
c. Debit revenue and credit liability.
d. Debit an asset and credit liability.

17. Adjusting entries

a. Are prepared after the end of reporting period but dated as of the end of reporting period.
b. Are necessary to conform with accounting standards.
c. Include both accruals and deferrals.
d. All choices are correct about adjusting entries.

18. What is the adjusting entry for ending inventory?

a. Debit ending inventory and credit beginning inventory
b. Debit beginning inventory and credit ending inventory
c. Debit ending inventory and credit income summary
d. Debit income summary and credit ending inventory
 Page 3

19. What is the adjusting entry for doubtful accounts?

a. Debit doubtful accounts and credit accounts receivable
b. Debit doubtful accounts and credit allowance for doubtful accounts.
c. Debit allowance for doubtful accounts and credit doubtful accounts.
d. Doubtful accounts do not require an adjusting entry.

20. What is the adjusting entry for depreciation?

a. Debit depreciation and credit asset
b. Debit asset and credit accumulated depreciation
c. Debit depreciation and credit accumulated depreciation
d. An adjusting entry is not required for depreciation

21. What is the adjusting entry for accrued expenses?

a. Debit accrued expenses and credit expense.
b. Debit expenses and credit accrued expense
c. Debit expenses and credit income
d. No need to adjust accrued expense.

22. What is the adjusting entry for prepaid expenses assuming the expense method is used?
a. Debit prepaid expenses and credit expenses.
b. Debit expenses and credit prepaid expenses
c. Debit prepaid expenses and credit accrued expense
d. It is not necessary to adjust prepaid expenses.

23. What is the adjusting entry for prepaid expenses assuming the asset method is used?
a. Debit prepaid expenses and credit accrued expenses
b. Debit expenses and credit accrued expenses
c. Debit expenses and credit prepaid expenses
d. No adjusting entry

24. What is the adjusting entry for accrued income?

a. Debit accrued income and credit income
b. Debit income and credit accrued income
c. Debit accrued income and credit accrued expenses
d. No adjusting entry

25. What is the adjusting entry for unearned income if the income method is used?
a. Debit unearned income and credit income
b. Debit income and credit unearned income
c. Debit accrued income and credit unearned income
d. No adjusting entry

26. What is the adjusting entry for unearned income if the liability method is used?
a. Debit income and credit unearned income
b. Debit accrued income and credit unearned income
c. Debit unearned income and credit income
d. No adjusting entry

27. Accrual is best defined as adjusting entries where

a. Cash flow precedes revenue or expense recognition
b. Revenue or expense recognition precedes cash flow
c. Cash flow and revenue or expense recognition are simultaneous
d. Revenue and expenses are recognized in the absence of cash flow evidence

28. Which statement is not true about accrual and deferral?

a. An accrued expense is an amount not paid and currently matched with earnings.
b. A prepaid expense is an amount paid and not currently matched with earnings.
c. An accrued income is an amount not collected and currently matched with expenses.
d. A deferred income is an amount collected and currently matched with expenses.
 Page 4

29. Closing entries are

a. Made at the end of accounting period
b. Prepared after adjusting entries and financial statements have been prepared
c. Prepared for the purpose of reducing all nominal accounts to zero
d. All choices are correct about closing entries

30. Which of the following closing procedures is unique to a corporation?

a. Close each revenue account to the income summary account.
b. Close each expense account to the income summary account.
c. Close the income summary account to the retained earnings account.
d. Close the owner’s drawing account to the owner’s capital account.

31. The postclosing trial balance

a. Provides a convenient listing of balances that can be used to prepare financial statements.
b. Does not include nominal accounts.
c. Is identical to the statement of financial position.
d. Proves that accounts have been closed properly.

32. Reversing entries

a. Are normally prepared for accruals and prepayments.
b. Are necessary to achieve a proper matching of revenue and expense.
c. Are desirable to exercise consistency and establish standardized procedures.
d. Must be made at year-end.

33. Reversing entries apply to

a. All adjusting entries
b. All deferrals
c. All accruals
d. All closing entries

34. A reversing entry should never be made for an adjusting entry that
a. Accrues unrecorded revenue.
b. Accrues unrecorded expenses.
c. Adjusts expired costs from asset account to an expense account.
d. Adjusts unexpired costs from an expense account to an asset account.

35. Which should be reversed assuming prepayments are initially recorded in nominal accounts?
a. Adjusting entry to record ending inventory
b. Adjusting entry to record doubtful accounts
c. Adjusting entry to record depreciation
d. Adjusting entry to record portion of rental received in advance that is unearned at year-end.

End
 CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila

FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS

MAY 2024 CPALE BATCH 95

PAS 1 – PRESENTATION OF FINANCIAL STATEMENTS

1. What is the objective of financial statements?

a. To provide information about the financial position, financial performance and changes in the
financial position useful to a wide range of users
b. To prepare a statement of financial position and statement of comprehensive income
c. To present relevant, reliable, comparable and understandable information
d. To prepare financial statements in accordance with all applicable standards

2. An entity shall present

a. The statement of financial position more prominently
b. The income statement more prominently
c. The statement of cash flows more prominently
d. Each statement with equal prominence

3. 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.

4. 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.

5. When the classification of items in the financial statements is changed, the entity
a. Must not reclassify the comparative amounts
b. Can choose whether or not to reclassify
c. Must reclassify the comparative amounts unless it is impracticable to do so.
d. Must reclassify current year amounts only.

6. In presenting a statement of financial position, an entity

a. Must make the current and noncurrent presentation.
b. Must present assets and liabilities in the 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.

7. 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.

8. 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 the right at the end of reporting period to defer settlement of the liability for at least
twelve months after the reporting period.
 Page 2

9. When an entity breaches 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, the liability is classified as
a. Current under all circumstances
b. Noncurrent under all circumstances
c. Current if the lender agreed after the reporting period and before the issuance of the statements
not to demand payment as a consequence of the breach.
d. Noncurrent if the lender agreed after the end of the reporting period to provide a grace period for
at least twelve months after the reporting period.

10. All of the following components of OCI should be reclassified to profit or loss, except
a. Gain and loss arising from translating the financial statements of a foreign operation.
b. Gain and loss on remeasuring debt investment at FVOCI.
c. The effective portion of gain or loss on hedging instrument in a cash flow hedge
d. Gain or loss on remeasuring equity investment at FVOCI.

11. The presentation of notes to financial statements in a systematic manner is mandatory, as far as practical.
What is the purpose of the notes to financial statements?
a. To provide disclosures required by IFRS.
b. To correct improper presentation in financial statements
c. To provide recognition of amounts not included in financial statements
d. To present management response to auditor comments

12. What is the “first item” presented in the notes to financial statements?
a. Statement of compliance with IFRS.
b. Summary of significant accounting policies
c. Supporting information for items presented in the financial statements
d. Other disclosures, including contingent liabilities and nonfinancial disclosures

13. An entity shall disclose in the summary of significant accounting policies

a. The measurement basis used
b. The measurement basis whether used or not
c. The measurement basis used and accounting policies applied
d. Neither measurement basis nor accounting policies applied

PAS 10 – EVENTS AFTER REPORTING PERIOD

14. Events after the end of the reporting period are favorable or unfavorable events that
a. Occur between the end of the reporting period and the date of the next annual financial statements.
b. Occur between the year-end and the date of the next interim or annual financial statements.
c. Occur between the year-end and the date when financial statements are authorized for issue.
d. Occur between the end of reporting period and the date of the next interim statements.

15. 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.
d. The management reviews the financial statements and authorizes them for issue.

16. An entity was sued in October 2024 for breach of contract, Based on the advice of council, the entity
recognized a P2,000,000 estimated lawsuit loss on December 31, 2024. The lawsuit was settled in
February 2025 in the amount of P2,200,000 before the 2024 financial statements were available for issue.
What is the appropriate accounting procedure for the 2024 statements?
a. Recognize the P200,000 loss in the 2025 statements.
b. Recognize the entire P2,200,000 loss in the 2024 statements.
c. Report P200,000 as retrospective adjustment to the 2024 statements
d. Recognize the entire P2,200,000 loss in the 2025 statements.
 Page 3

17. On March 21, 2025, an entity issued its 2024 financial statements. On February 28, 2025, the entity’s
manufacturing plant was severely damaged by a storm and had to be shut down. Total property loss
amounted to P5,000,000. The amount of business disruption loss is unknown. How should the impact of
the storm be reflected in the 2024 financial statements?
a. Provide no information
b. Accrue and disclose the property loss but no accrual or disclosure of the business disruption loss
c. Do not accrue the property loss or the business discerption loss but disclose them in the notes to
financial statements
d. Accrue and disclose the property loss and the business disruption loss

PAS 24 RELATED PARTY DISCLOSURES

18. 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 venturers simply because they share joint control over a joint venture

19. 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

20. The minimum disclosures about related party transactions include all, except
a. The amount of the transaction
b. The amount of outstanding balance
c. Allowance for doubtful accounts related to outstanding balance
d. The amount of similar transaction with unrelated parties

21. Related party transactions include all, except

a. Transferred goods from inventory to subsidiary
b. Sold an asset to the wife of the chief operating officer
c. Sold goods to another entity owned by daughter of the managing director
d. Took out a huge bank loan

22. Which is not a mandated disclosure about related party transactions?

a. Relationship between parent and subsidiaries.
b. Names of all associates that an entity has dealt with during the year.
c. Name of the entity’s parent and if different, the ultimate controlling party.
d. If neither the entity’s parent nor the ultimate controlling party produces financial statements
available for public use, then the name of the next most senior parent that does so.

PAS 8 – ACCOUNTING POLICIES, ESTIMATES AND ERRORS

23. Which is the first step within the hierarchy of guidance when selecting accounting policies?
a. Apply a standard from IFRS if it specifically relates to the transaction
b. Apply the requirements in IFRS dealing with similar and related issue
c. Consider the applicability of the definitions, recognition criteria and measurement concepts in the
Conceptual Framework
d. Consider the most recent pronouncements of other standard setting bodies

24. In the absence of an accounting standard that applies specifically to a transaction, what is most
authoritative source in developing an accounting policy?
a. Apply the requirements in IFRS dealing with similar and related issue.
b. The definition, recognition criteria and measurement of asset, liability income and expense in the
Conceptual Framework.
c. Most recent pronouncement of other standard setting body.
d. Accounting literature and accepted industry practice.
 Page 4

25. In determining which accounting policy is suitable, an entity should look into
a. IFRS and IFRIC
b. IFRS and Conceptual Framework
c. IFRIC and Conceptual Framework
d. IFRS, IFRIC and Conceptual Framework

26. Which of the following is not treated as a change in accounting policy?

a. A change from FIFO inventory valuation to average cost
b. A change from cash basis to accrual basis of accounting
c. A change from cost model to fair model in measuring investment property
d. A change to a new IFRS requirement

27. A change in accounting policy includes all of the following, except

a. The initial adoption of an accounting policy to carry asset at revalued amount
b. The change from cost model to revaluation model in measuring property, plant and equipment
c. A change in the measurement basis
d. A change from one method of depreciation to a different method of depreciation

28. 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

PFRS 5 DISCONTINUED OPERATION AND ASSET HELD FOR SALE

29. 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.

30.An entity shall classify a noncurrent asset as held for sale when
a. The carrying amount of the asset is recovered through a sale.
b. The carrying amount of the asset is recovered through continuing use.
c. The noncurrent asset is to be abandoned.
d. The noncurrent asset group is idle or retired from active use.
31. 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.

32. Which is not a criterion for an operation to be classified as discontinued?

a. The operation should represent a separate major line of business or geographical area.
b. The operation is part of a single plan to dispose of a separate major line of business or geographical
area.
c. The operation is a subsidiary acquired exclusively with a view to resale.
d. The operation must be sold within three months of the year-end.

33. Which is not required for component’s results to be classified as discontinued operations?
a. Management must have entered into a sale agreement
b. The component is available for immediate sale
c. The operation and cash flows of the component will be eliminated from the operations of the entity
as a result of the disposal
d. The entity will not have any significant continuing involvement in the operation of the component
after disposal
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PFRS 8 – OPERATING SEGMENT

34. Which quantitative threshold is not a requirement in qualifying a reportable segment?

a. The segment revenue, both external and internal, 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 profitable
segments and combined loss of unprofitable segments
c. The segment assets are 10% or more of the combined assets of all operating segments
d. The segment liabilities are 10% or more of the combined liabilities of all operating segments

35. Which statement is not true with respect to a chief operating decision maker?
a. The term chief operating decision maker identifies a function and not necessarily a manager.
b. In some cases, the chief operating decision maker could be the chief operating officer.
c. The board of directors acting collectively could qualify as the chief operating decision maker.
d. The chief internal auditor who reports to the board of directors usually plays a very important role
and would generally qualify as chief operating decision maker

36. Which of the following statements about major customer disclosure is not 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 must be disclosed.
c. The entity shall disclose the total amount of revenue from major customers.
d. The entity shall disclose the identity of the segment reporting the revenue from major customers.

PAS 34 – INTERIM FINANCIAL REPORTING

37. 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 condensed statement of financial position and a condensed income statement.
d. A condensed statement of financial position and a condensed statement of cash flows.

38. Interim financial report shall be published

a. Once a year at anytime during the year
b. Within a month of the half year-end
c. On a quarterly basis
d. Whenever the entity wishes because interim reports are not required

39. An entity preparing interim financial statements should

a. Defer recognition of seasonal revenue
b. Use the same accounting principles followed in preparing the latest annual financial statements
c. Allocate revenue and expenses evenly over the quarters, regardless of occurrence
d. Disregard temporary decreases in the market value of inventory

40. If an entity does not prepare interim reports

a. The year-end financial statements are deemed not to comply with IFRS.
b. The year-end compliance of financial statements with IFRS is not affected.
c. The year-end financial statements shall not be acceptable under local jurisdiction.
d. Interim financial reports must be included in year-end financial statements.

End