1.

PAS 1 requires an assessment of the entity’s ability to continue as a going

concern each time financial statements are prepared. Who is responsible in
making this assessment?
a. Accountant
b. Auditor
c. Management
d. Government regulatory body

2. These are the end product of the financial reporting process and the means by
which information gathered and processed is periodically communicated to
users.
a. Financial reporting
b. Financial statements
c. Financial products
d. Accounting statements

3. Which of the following is not one of the general features of financial statements
under PAS 1?
a. Fair presentation and compliance with PFRSs
b. Going Concern
c. Cash Basis
d. Materiality and aggregation

4. Who is responsible for the preparation and the fair presentation of an entity’s
financial statements in accordance with the PFRSs?
a. Any accountant
b. Certified Public Accountant
c. Auditor
d. Management

5. This type of presentation of statement of financial position does not show

distinctions between current and noncurrent items.
a. Classified presentation
b. Unclassified presentation
c. Non-discriminating presentation
d. Awesome presentation

6. In making an economic decision, an investor needs information on the amounts

of an entity’s economic resources and claims to those resources. That investor
would most likely refer to which of the following financial statements?
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of cash flows
d. Statement of changes in equity

7. Which of the following financial statements would be dated as at a certain date?

a. Statement of financial position
b. Statement of profit or loss and other comprehensive income
c. Statement of cash flows
d. All of these
8. Imagine you are a business manager. You would be most awesome as a manager
in which of the following independent scenarios?
a. Your company has an average total assets of ₱10M during the year. At the end
of the year, your company reported profit of ₱1M. The average return of other
similar companies with the same level of assets is 30%.
b. Your adoption of accounting policy has led to the immediate recognition of
expenses. Those costs could have otherwise been allocated over several periods.
Accordingly, your company did not declare dividends during the period. This
resulted to a decline in the market value of your company’s stocks while the
prices of all other stocks in the stock market have increased.
c. You changed your company’s method of allocating costs from an accelerated
method to a straight-line method. The change met the requirements of the
PFRSs. This led to the smoothing of expenses, which increased your company’s
profit during the period by 12%, above the industry average.
d. You are great at closing deals, that’s why you’re a boss. Eager to increase your
company’s resources, you were able to obtain a ₱20M loan from a bank. Interest
expense on the loan during the year was ₱3.4M while the return on investments
of loan proceeds was 2%.

9. This comprises all “non-owner changes in equity.” It excludes owner changes in

equity, such as subscription, issuance, and reacquisition of share capital and
declaration of dividends.
a. Other comprehensive income
b. Changes in equity
c. Total comprehensive income
d. Profit or loss

10. Materiality judgment is least likely to be applied in which of the following?

a. in determining whether an item warrants separate presentation in the financial
statements or is to be aggregated with other items
b. in determining whether information could influence the decisions of users, and
therefore, must be presented in the financial statements
c. in determining whether the cost of processing and communicating information
exceeds the benefits expected to be derived from it
d. whether additional information needs to be provided, including the level of
detail and conciseness of the information’s presentation

11. It refers to the process of incorporating the effects of an accountable event in

the statement of financial position or the statement of profit or loss and other
comprehensive income through a journal entry.
a. realization
b. derecognition
c. recognition
d. posting

12. All of the following are events considered as exchange or reciprocal transfer,
except
a. purchase of investment in equity securities
b. sale of equipment for non-interest bearing note
c. subscription of the entity’s own equity instrument (i.e., contributions by
owners)
d. exchange of a note payable for an account payable
 e. borrowing of money from a bank

13. All of the following are events considered nonreciprocal transfers, except
a. declaration of cash dividends
b. declaration of stock dividends
c. payment of accounts payable
d. imposition of fines
e. theft

14. These are events involving an entity and another external party.
a. external events
b. internal events
c. transactions
d. life events

15. It is the accounting process of assigning numbers, commonly in monetary terms,

to the economic transactions and events.
a. analyzing c. classifying
b. measuring d. interpreting

16. What is the basic purpose of accounting?

a. To provide quantitative financial information about economic activities.
b. To provide all information that users need in making economic decisions.
c. To provide qualitative financial information about economic activities intended
to be useful in making economic decisions.
d. To provide quantitative financial information about economic activities
intended to be useful in making economic decisions.

17. Accounting provides which type of information?

a. quantitative
b. financial information
c. qualitative
d. all of these

18. General purpose financial statements are

a. those statements that cater to the common and specific needs of a wide range of
external users.
b. those statements that cater to the common needs of a wide range of external
users and internal users.
c. those statements that cater to the common needs of a limited range of external
users.
d. those statements that cater to the common needs of a wide range of
external users.

19. External users are those

a. who do have the authority to demand financial reports tailored to their specific
needs.
b. who do not have the authority to demand financial reports tailored to their
common needs.
c. who do not have the authority to demand financial reports tailored to
their specific needs.
d. who belong to countries other than the domicile country of the reporting entity
 20. The primary objective of financial reporting is to provide
a. information about economic resources, claims to these resources, and
changes in them.
b. information useful for investment and credit decisions.
c. information useful in predicting future cash flows.
d. all of these

21. Which of the following statements is false?

a. Accountable events are those that have an effect in an entity's assets, liabilities,
equity, income or expenses.
b. The term “recognition” as used in accounting refers to the process of
incorporating the effects of an accountable event in the statement of
financial position or the statement of profit or loss and other
comprehensive income through a memo entry.
c. External events are those that involve the reporting entity and an external
party.
d. The Board of Accountancy consists of a chairperson and six members.

22. Which of the following statements is true?

a. In current practice, accounting provides only quantitative information that is
useful in making economic decisions.
b. External users are those who do not have the authority to demand
financial reports tailored to their specific needs.
c. Under the stable monetary unit assumption, the owners of the business and the
business are viewed as a single reporting entity. Therefore, the personal
transactions of the owners are recorded in the books of accounts.
d. The practice of accountancy in the Philippines is regulated under R.A. 9892.

23. Which of the following statements correctly refer to the accounting process?
I. Measuring is the accounting process of analyzing business activities as to
whether or not they will be recognized in the books.
II. Recognition refers to the process of including the effects of an event in the
totals of the statement of financial position or the statement of profit or loss and
other comprehensive income through memo entries.
III. Disclosure of events in the notes to financial statement without including their
effect in the totals of the statement of financial position or statement of profit or
loss and other comprehensive income is not an application of the recognition
principle.
IV. An accountable event is an event that has an effect on the assets, liabilities or
equity of an entity and its effect can be measured reliably.
V. Sociological and psychological matters are within the scope of accounting.
a. I, II, III, IV and V
b. I, II, III and IV
c. IV
d. III and IV

24. Which of the following statements is true?

I. Loss from theft is classified as a nonreciprocal transfer.
II. Internal events are changes in economic resources by actions of other entities
that do not involve transfers of resources and obligations.
III. Nonreciprocal transfers involve the transfer of resources in only one direction,
either from an entity to other entities or from other entities to the entity.
IV. Internal events are sudden, substantial, unanticipated reductions in resources
not caused by other entities.
V. Fire, earthquake and flood are examples of accountable events classified as
internal events.
a. I, II, III and V
b. I, III and V
c. II, III, IV and V
d. I, III, IV and V

25. Asset measurements in conventional financial statements

a. are confined to historical cost.
b. are confined to historical cost and current cost.
c. reflect several financial attributes.
d. do not reflect output values.

26. During the lifetime of an entity, accountants produce financial statements at

arbitrary points in time in accordance with which basic accounting concept?
a. Cost/benefit constraint
b. Periodicity assumption
c. Conservatism constraint
d. Matching principle

27. What accounting concept justifies the use of accruals and deferrals?
a. Going concern assumption
b. Materiality constraint
c. Consistency characteristic
d. Monetary unit assumption

28. The assumption that a business enterprise will not be sold or liquidated in the
near future is known as the
a. economic entity assumption.
b. monetary unit assumption.
c. conservatism assumption.
d. going concern.

29. Valuing assets at their liquidation values rather than their cost is inconsistent
with the
a. periodicity assumption.
b. matching principle.
c. materiality constraint.
d. historical cost principle.

30. When products or other assets are exchanged for cash or claims for cash, they
are said to be
a. allocated.
b. realized.
c. recognized.
d. earned.

31. A soundly developed conceptual framework of concepts and objectives should

a. increase financial statement users' understanding of and confidence in financial
reporting.
b. enhance comparability among companies' financial statements.
c. allow new and emerging practical problems to be more quickly soluble.
d. all of these.

32. A Standard sometimes contains requirements that depart from the Conceptual
Framework. In such cases,
a. the requirements of the Conceptual Framework will prevail over those of the
Standard.
b. the departure is explained in the ‘Basis for Conclusions’ on that
Standard.
c. the entity’s management shall formulate its own accounting policy and
disregards both the requirements of the Conceptual Framework and the
Standard.
d. A Standard should never depart from the Conceptual Framework.

33. The overall objective of financial reporting is to provide information

a. about an entity's assets, liabilities, and equity.
b. about an entity's financial performance during a period.
c. that is useful to primary users in making economic decisions about
providing resources to the entity.
d. that allows owners to assess management's performance.

34. The two primary qualities that make accounting information useful for decision
making are
a. comparability and consistency.
b. materiality and timeliness.
c. relevance and reliability.
d. faithful representation and relevance.

35. According to the Conceptual Framework, predictive value relates to

Relevance Faithful representation
a. Yes Yes
b. No Yes
c. Yes No
d. No No

36. Which of the following is considered a qualitative factor in making materiality

judgments?
a. the context of an item in relation to the current economic state of the
environment where the entity operates.
b. 10% of profit or loss, in absolute terms
c. 5% of total revenues
d. 1% of total assets

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

a. An item must make a difference; otherwise, it need not be reported.
b. Materiality is affected by an item’s relative size and/or importance.
c. An item is material if its inclusion or omission would influence or change the
judgment of a reasonable person.
d. All of these are correct statements about materiality.
38. The Filipino adage “Aanhin mo pa ang damo pag patay na ang kabayo” relates
to which of the following qualitative characteristics?
a. Relevance
b. Timeliness
c. Faithful representation
d. Comparability

39. When information about two different entities has been prepared and presented
in a similar manner, the information exhibits the characteristic of
a. relevance.
b. reliability.
c. consistency.
d. comparability.

40. According to the Conceptual Framework, physical count of inventory is an

example of
a. direct verification.
b. indirect verification.
c. timeliness.
d. relevance.

41. Information is considered relevant when it

a. can be depended on to represent the economic conditions and events 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.

42. The quality of information that gives assurance that it is reasonably free of error
and bias and provides a true, correct and complete depiction of what it purports
to represent is
a. relevance.
b. faithful representation.
c. verifiability.
d. neutrality.

43. Information is neutral if it

a. provides benefits which are at least equal to the costs of its preparation.
b. can be compared with similar information.
c. has no impact on a decision maker.
d. is free from bias toward a predetermined result.

44. Decision makers vary widely in the types of decisions they make, the methods of
decision making they employ, the information they already possess or can
obtain from other sources, and their ability to process information.
Consequently, for information to be useful there must be a linkage between
these users and the decisions they make. This link is
a. relevance.
b. reliability.
c. understandability.
d. materiality.
 45. Which of the following is considered a pervasive constraint by the Conceptual
Framework?
a. Cost constraint
b. Verifiability
c. Conservatism
d. Cost restraint

46. Which of the following is not an element that is directly related to the
measurement of an entity’s financial position?
a. assets
b. liabilities
c. equity
d. income

47. The revised Conceptual Framework defines an asset as

a. a resource controlled by the entity as a result of past events and from which
future economic benefits are expected to flow to the entity.
b. a present economic resource controlled by the entity as a result of past
events. An economic resource is a right that has the potential to produce
economic benefits.
c. a physical object that can produce economic benefits for the entity.
d. All of these.

48. Which of the following is most likely to result in the recognition of a liability?
a. Customers become entitled to rebates for their past purchases.
b. Intention to acquire inventories in a future period.
c. Entering into a purchase contract for future delivery.
d. Agreeing on an irrevocable future commitment that is not burdensome at
present.

49. Which of the following is not an indication of an economic resource’s potential

to produce economic benefits for the entity?
a. The resource cannot be used in the entity’s operations but has a resale value.
b. The resource has no use to the entity but it can be exchanged for another
resource with another party.
c. The entity does not intend to sell or use the resource but instead distribute it to
the owners as dividends.
d. The economic benefits from the resource were already consumed by the
entity.

50. Which of the following correctly reflects the Conceptual Framework definitions
of income and expenses?
Income Expenses
a. Increase in assets Increase in liabilities
b. Decrease in assets Decrease in liabilities
c. Owner contributions Owner distributions
d. Decrease in equity Increase in equity