1 – ACCOUNTING

1 – ANSWER:
ACCOUNTING IS A SERVICE ACTIVITY. ITS
FUNCTION IS TO PROVIDE QUANTITATIVE
INFORMATION PRIMARILY FINANCIAL IN
NATURE THAT IS INTENDED TO BE USEFUL IN
MAKING ECONOMIC DECISIONS.
2 – LAW THAT REGULATES THE PRACTICE OF
ACCOUNTANCY IN THE PHILIPPINES
 2 – ANSWER:
REPUBLIC ACT 9298 – PHILIPPINE
ACCOUNTANCY ACT OF 2004
 3 – BODY AUTHORIZED BY LAW TO
PROMULGATE RULES AND REGULATIONS
AFFECTING THE PRACTICE OF THE
ACCOUNTANCY PROFESSION
 3 – ANSWER:
BOARD OF ACCOUNTANCY
4 – ANALYTICAL, TECHNICAL AND FORMAL
COMPONENTS OF ACCOUNTING
 4 – ANSWER:
IDENTIFYING (ANALYTICAL),
MEASURING (TECHNICAL),
COMMUNICATING (FORMAL)
5 – INTERNAL AND EXTERNAL TRANSACTIONS
 5 – ANSWER:
EXTERNAL TRANSACTIONS – INVOLVE TWO
ENTITIES DISTINGUISHABLE FROM EACH
OTHER (SALE, TRANSFER, INVESTMENT, LOAN)
INTERNAL TRANSACTIONS – TRANSACTIONS
OTHER THAN EXTERNAL TRANSACTIONS
(PRODUCTION LOSS, ACTS OF GOD,
DEPARTMENTAL TRANSFER)
6 – FINANCIAL VS. MANAGEMENT
ACCOUNTING
 6 – ANSWER:
MANAGEMENT – PROVIDES INFORMATION TO
PEOPLE WITHIN AN ORGANIZATION
FINANCIAL – COMPLIES WITH ACCOUNTING
STANDARDS AND PROVIDES INFORMATION
FOR STAKEHOLDERS OUTSIDE THE
ORGANIZATION
7 – FOUR ASSUMPTIONS IN ACCOUNTING
 7 – ANSWER:
(1) ECONOMIC ENTITY ASSUMPTION, (2)
MONETARY UNIT ASSUMPTION, (3) TIME
PERIOD ASSUMPTION, (4) GOING
CONCERN
8 – FOUR ACCOUNTING PRINCIPLES
 8 – ANSWER:
HISTORICAL COST, REVENUE RECOGNITION,
MATCHING PRINCIPLE, DISCLOSURE
9 – FOUR ACCOUNTING CONSTRAINTS
 9 – ANSWER:
ESTIMATES & JUDGEMENTS, MATERIALITY,
CONSISTENCY, CONSERVATISM
10 – FOUR EQUATIONS THAT SERVE AS
FOUNDATION OF ACCOUNTING
 10 – ANSWER:
ENTITY THEORY (A=L+C),
PROPRIETARY THEORY (A-L=C),
RESIDUAL EQUITY THEORY (A-L-PS=CS),
FUND THEORY (F=CI-CO)
 11 – FOUR PRINCIPAL QUALITATIVE
CHARACTERISTICS OF FINANCIAL REPORTING
 11 – ANSWER:
RELEVANCE,
RELIABILITY,
UNDERSTANDABILITY,
COMPARABILITY
12 – THREE INGREDIENTS OF RELEVANCE
 12 – ANSWER:
PREDICTIVE VALUE,
FEEDBACK/CONFIRMATORY VALUE,
TIMELINESS
13 – FIVE INGREDIENTS OF RELIABILITY
 13 – ANSWER:
FAITHFUL REPRESENTATION,
SUBSTANCE OVER FORM,
NEUTRALITY,
CONSERVATISM/PRUDENCE,
COMPLETENES
14 – CAPITAL MAINTENANCE VS.
TRANSACTION APPROACH
 14 – ANSWER:
CAPITAL MAINTENANCE - NET INCOME IS DEFINED AS THE
DIFFERENCE BETWEEN THE NET ASSETS (ASSETS MINUS
LIABILITIES) AT THE BEGINNING OF A PERIOD AND NET
ASSETS AT THE END OF THE PERIOD, EXCLUDING
OWNERS'CONTRIBUTIONS AND DISTRIBUTIONS DURING
THE PERIOD.
TRANSACTION APPROACH – NET INCOME IS CALCULATED
BY ANALYZING THE EFFECTS OF REVENUE AND EXPENSE
15 – DEFINE OBLIGATION.
 15 – ANSWER:
A JURIDICAL NECESSITY TO GIVE, TO DO OR
NOT TO DO.
16 – FIVE SOURCES OF OBLIGATION
 16 – ANSWER:
LAW, CONTRACTS, QUASI-CONTRACTS,
DELICTS, QUASI DELICTS
17 – TWO KINDS OF QUASI-CONTRACTS
 17 – ANSWER:
NEGOTIORUM GESTIO, SOLUTIO INDEBITI
18 – EXPLAIN THE CONCEPT OF DETERMINATE
AND GENERIC THINGS
 18 – ANSWER:
A THING IS DETERMINATE IF IT CAN BE
PARTICULARLY DESIGNATED OR PHYSICALLY
SEGREGATED FROM ALL OTHERS OF THE SAME
CLASS WHY GENERIC THINGS CANNOT.
19 – OBLIGATIONS OF ONE OBLIGED TO GIVE
A DETERMINATE THING
 19 – ANSWER:
EXERCISE THE RIGHT LEVEL OF DILIGENCE AND
DELIVER THE THING, FRUITS, ACCESSIONS
AND ACCESSORIES. [DTFA]
 20 – REMEDIES OF THE CREDITOR IF THE
DEBTOR FAILS TO PERFORM HIS OBLIGATION
TO DELIVER A DETERMINATE THING
 20 – ANSWER:
1) COMPEL THE DEBTOR TO MAKE THE
DELIVERY AND 2) DEMAND DAMAGES FROM
THE DEBTOR
 21 – REMEDIES OF THE CREDITOR IF THE
DEBTOR FAILS TO PERFORM HIS OBLIGATION
TO DELIVER A GENERIC THING
 21 – ANSWER:
1) HAVE THE OBLIGATION BE COMPLIED WITH
AT THE EXPENSE OF THE DEBTOR AND 2)
DEMAND DAMAGES FROM THE DEBTOR
 22 – REMEDIES OF THE CREDITOR IF THE
DEBTOR FAILS TO PERFORM HIS OBLIGATION
IN OBLIGATIONS TO DO
 22 – ANSWER:
1) HAVE THE OBLIGATION EXECUTED AT THE
EXPENSE OF THE DEBTOR AND 2) DEMAND
DAMAGES FROM THE DEBTOR
 23 – REMEDIES OF THE CREDITOR IF THE
DEBTOR PERFORMS THE OBLIGATION BUT
DOES IT POORLY OR CONTRAVENES TO THE
TENOR THEREOF IN OBLIGATIONS TO DO
 23 – ANSWER:
1) HAVE THE PERFORMANCE BE UNDONE AT
THE DEBTOR’S EXPENSE AND 2) DEMAND
DAMAGES FROM THE DEBTOR
 24 – REMEDIES OF THE CREDITOR IF THE
DEBTOR DOES WHAT HAS BEEN FORBIDDEN
HIM
 24 – ANSWER:
1) DEMAND THAT WHAT HAS BEEN DONE BE
UNDONE AND 2) DEMAND DAMAGES FROM
THE DEBTOR
25 – FOUR GROUNDS FOR LIABILITY TO PAY
DAMAGES
 25 – ANSWER:
FRAUD, NEGLIGENCE, DELAY,
CONTRAVENTION OF THE TENOR OF THE
OBLIGATION [FNDC]
26 – SIX KINDS OF DAMAGES
 26 – ANSWER:
ACTUAL, MORAL, NOMINAL, TEMPERATE,
LIQUIDATED, EXEMPLARY [MANTEL]
27 – TWO KINDS OF FRAUD IN OBTAINING
CONSENT
 27 – ANSWER:
CAUSAL FRAUD (DOLO CAUSANTE) AND
INCIDENTAL FRAUD (DOLO INCIDENTE)
28 – TWO KINDS OF OBLIGATION ACCORDING
TO TIME OF COMMISION
 28 – ANSWER:
FUTURE AND PAST FRAUD
29 – THREE KINDS OF NEGLIGENCE
 29 – ANSWER:
CONTRACTUAL (CULPA CONTRACTUAL), CIVIL
(CULPA AQUILIANA), CRIMINAL (CULPA
CRIMINAL)
30 – THREE KINDS OF DELAY
 30 – ANSWER:
MORA SOLVENDI, MORA ACCIPIENDI,
COMPENSATIO MORAE
31 – TWO KINDS OF MORA SOLVENDI
 31 – ANSWER:
EX RE AND EX PERSONA
32 – FOUR REQUISITES OF DELAY
 32 – ANSWER:
1) OBLIGATION IS DEMANDABLE AND
LIQUIDATED, 2) DEBTOR DOES NOT PERFORM
THE OBLIGATION, 3) CREDITOR DEMANDS THE
PERFORMANCE EITHER JUDICIALLY OR EXTRA-
JUDICIALLY, 4) DEBTOR FAILS TO COMPLY WITH
SUCH DEMAND
33 – FIVE CASES WHEN DELAY WILL EXIST
EVEN WITHOUT DEMAND
 33 – ANSWER:
WHEN THE LAW SO PROVIDES, WHEN THE
OBLIGATION EXPRESSLY SO DECLARES, WHEN
TIME IS OF THE ESSENCE, WHEN DEMAND
WOULD BE USELESS, IN RECIPROCAL
OBLIGATIONS WHERE ONE OF THE PARTIES
FULFILLS HIS OBLIGATION
34 – EFFECTS OF DEFAULT ON THE PART OF
THE DEBTOR
 34 – ANSWER:
SHALL BE LIABLE FOR DAMAGES & SHALL BE
LIABLE FOR ANY FORTUITOUS EVENT UNTIL
DELIVERY (DETERMINATE THINGS)
35 – EFFECTS OF DELAY ON THE PART OF THE
CREDITOR
 35 – ANSWER:
BEAR THE RISK OF LOSS AND THE EXPENSES
FOR THE PRESERVATION OF THE THING & THE
DEBTOR MAY RESORT TO THE CONSIGNATION
OF THE THING DUE
36 – TAXATION
 36 – ANSWER:
TAXATION IS A MEANS BY WHICH
GOVERNMENTS FINANCE THEIR
EXPENDITURES BY IMPOSING CHARGES ON
INDIVIDUALS AND CORPORATE ENTITIES.
37 – THREE INHERENT POWERS OF THE STATE
 37 – ANSWER:
POLICE POWER (FOR PUBLIC
GOOD/WELFARE), POWER OF EMINENT
DOMAIN (FOR PUBLIC USE), POWER OF
TAXATION (FOR REVENUE)
38 – SIX INHERENT LIMITATIONS ON THE
POWER OF TAXATION
 38 – ANSWER:
• TAX MUST BE LEVIED FOR PUBLIC PURPOSE
• THE POWER OF TAXATION CANNOT BE DELEGATED
• THE RULE AGAINST DIRECT DOUBLE TAXATION
• GOVERNMENT INSTRUMENTALITIES AND AGENCIES
WHICH THE GOVERNMENT EXERCISES SOVEREIGN
POWERS ARE EXEMPT FROM TAX
• THE POWER OF TAXATION IS LIMITED TO THE
TERITTORIAL JURISDICTION OF THE TAXING STATE
• THE TAX LAWS CANNOT APPLY TO THE PROPERTY OF
FOREIGN GOVERNMENTS (INTERNATIONAL COMITY)
39 – FOUR CONSTITUTIONAL LIMITATIONS ON
THE POWER OF TAXATION
 39 – ANSWER:
• NO LAW IMPAIRING THE OBLIGATIONS OF
CONTRACTS WILL BE PASSED
• NO PERSON CAN BE IMPRISONED FOR DEBT OR
NON-PAYMENT OF A POLL TAX
• THE RULE ON TAXATION MUST BE UNIFORM
AND EQUITABLE
• INSTITUTIONS AND PROPERTIES THAT SERVE
RELIGIOUS OR CHARITABLE PURPOSES WILL BE
EXEMPT FROM TAX
40 – THREE BASIC PRINCIPLES OF A SOUND
TAX SYSTEM
 40 – ANSWER:
FISCAL ADEQUACY, THEORETICAL JUSTICE,
ADMINISTRATIVE FEASIBILITY
41 – SIX ESSENTIAL CHARACTERISTICS OF TAX
 41 – ANSWER:
IT IS: A FORCED CONTRIBUTION, LEGISLATIVE
IN NATURE, POPORTIONATE IN CHARACTER,
PAYABLE IN MONEY, IMPOSED FOR THE
PURPOSE OF RAISING REVENUE, TO BE USED
FOR PUBLIC PURPOSE
42 – THREE CLASSIFICATION OF TAXES AS TO
SUBJECT MATTER
 42 – ANSWER:
PERSONAL/CAPITATION/POLL TAX, PROPERTY
TAX, EXCISE TAX
43 – TWO CLASSIFICATION OF TAXES AS TO
WHO BEARS THE BURDEN
 43 – ANSWER:
DIRECT AND INDIRECT TAXES
44 – TWO CLASSIFICATIONS OF TAXES AS TO
DETERMINATION OF AMOUNT
 44 – ANSWER:
SPECIFIC TAX. AD VALOREM TAX
45 – TWO CLASSIFICATIONS OF TAXES AS TO
PURPOSE
 45 – ANSWER:
GENERAL AND SPECIAL TAXES
46 – THREE CLASSIFICATIONS OF TAXES AS TO
PROPORTIONALITY
 46 – ANSWER:
PROGRESSIVE, REGRESSIVE, PROPORTIONAL
47 – THREE FORMS OF INCOME TAX PAYERS IN
THE PHILIPPINES
 47 – ANSWER:
INDIVIDUALS, CORPORATIONS, PARTNERSHIPS
OTHER THAN GENERAL PROFESSIONAL
PARTNERSHIPS
48 – FIVE KINDS OF TAXABLE INDIVIDUALS
 48 – ANSWER:
RESIDENT CITIZEN, NON-RESIDENT CITIZEN,
RESIDENT ALIEN, NON-RESIDENT ALIEN
ENGAGED IN TRADE/BUSINESS IN THE
PHILIPPINES, NON-RESIDENT ALIEN NOT
ENGAGED IN TRADE/BUSINESS IN THE
PHILIPPINES BUT WITH INCOME FROM
WITHIN THE PHILIPPINES
49 – THREE KINDS OF TAXABLE
CORPORATIONS
 49 – ANSWER:
DOMESTIC CORP., RESIDENT CORP., NON-
RESIDENT CORP. BUT WITH INCOME FROM
WITHIN THE PHILIPPINES
 50 – INDIVIDUAL TAXPAYERS TAXED ON
INCOME FROM WITHIN THE PHILIPPINES
 50 – ANSWER:
RC, NRC, RA, NRA EIBWTP
 51 – INDIVIDUAL TAXPAYERS TAXED ON
INCOME FROM OUTSIDE THE PHILIPPINES
 51 – ANSWER:
RESIDENT CITIZEN
52 – TAXABLE INDIVIDUAL TAXED ON GROSS
INCOME FROM WITHIN THE PHILIPPINES
 52 – ANSWER:
NON-RESIDENT ALIEN NOT ENGAGED IN
BUSINESS IN THE PHILIPPINES BUT WITH AN
ISOLATED INCOME FROM WITHIN THE
PHILIPPINES
53 – TAXABLE CORPORATIONS TAXED ON NET
INCOME FROM WITHIN THE PHILIPPINES
 53 – ANSWER:
DOMESTIC CORPORATION, RESIDENT
CORPORATION
54 – TAXABLE CORPORATIONS TAXED ON NET
INCOME FROM OUTSIDE THE PHILIPPINES
 54 – ANSWER:
DOMESTIC CORPORATION
55 – TAXABLE CORPORATIONS TAXED ON
GROSS INCOME FROM WITHIN THE
PHILIPPINES
 55 – ANSWER:
NON-RESIDENT CORPORATION
56 – HOW ARE TAXABLE PARNERSHIPS TAXED?
 56 – ANSWER:
SAME RULES AS CORPORATIONS
57 – CASH
 57 – ANSWER:
ANY ITEM THAT IS ACCEPTABLE BY BANK OR
OTHER FINANCIAL INSTITUTION FOR DEPOSIT
AT FACE VALUE. AN ITEM IS CONSIDERED
CASH IF IT IS UNRESTRICTED AND
IMMEDIATELY AVAILABLE FOR USE IN
CURRENT OPERATION
58 – COMMON ITEMS THAT COMPRISE CASH
 58 – ANSWER:
COINS, CURRENCIES, CHECKS, BANK DRAFTS,
MONEY ORDERS (THOSE THAT ARE
ACCEPTABLE BY BANK FOR DEPOSIT); SAVINGS
ACCOUNT, CHECKING ACCOUNT (CASH IN
BANK THAT ARE NOT RESTRICTED AND
AVAILABLE FOR USE IN OPERATIONS)
59 – MEASUREMENT OF CASH
59 – ANSWER:
FACE VALUE
60 – MEASUREMENT OF CASH IN FOREIGN
CURRENCY
 60 – ANSWER:
CURRENT EXCHANGE RATE
61 – CASH OF THE ENTITY WHEN IT IS HELD BY
A FINANCIAL INSTITUTION IN BANKRUPTCY OR
FINANCIAL DIFFICULTY
 61 – ANSWER:
DR. RECEIVABLE, LOSS CR. CASH
(ENTRY TO WRITE DOWN ASSET TO
ESTIMATED REALIZABLE VALUE)
62 – CASH EQUIVALENT
 62 – ANSWER:
EXCESS CASH IS INVESTED TO GAIN
MAXIMUM BENEFIT FROM THE ASSET. THE
INVESTMENT IS CONSIDERED A CASH
EQUIVALENT IF ITS MATURITY PERIOD IS
INITIALLY NO LONGER THAB THREE MONTHS
63 – RESTRICTED DEPOSITS IN FOREIGN
INVESTMENT
 63 – ANSWER:
LONG TERM INVESTMENT
64 – OVERDRAFT
 64 – ANSWER:
THE CREDIT BALANCE IN THE CASH IN BANK
ACCOUNT RESULTS FROM THE ISSUANCE OF
CHECKS IN EXCESS OF THE DEPOSITS.
OVERDRAFT IS NOT PERMITTED IN THE
PHILIPPINES.
65 – ACCOUNTING TREATMENT FOR
OVERDRAFT
 65 – ANSWER:
IF THERE IS ONLY ONE ACCOUNT IN THE BANK:
MATERIAL (LIABILITY), IMMATERIAL (OFFSET
AGAINST OTHER ACCOUNTS IN OTHER BANKS)
IF THERE ARE MORE THAN ONE ACCOUNTS IN
THE SAME BANK: OFFSET AGAINST THE OTHER
ACCOUNTS IN THE SAME BANK
66 – BANK COMPENSATING BALANCE
 66 – ANSWER:
IF LEGALLY RESTRICTED – CURRENT/NON-
CURRENT ASSET DEPENDING ON RELATED
LOAN “CASH HELD AS COMPENSATING
BALANCE”
IF NOT LEGALLY RESTRICTED OR SILENT - CASH
67 – STALE CHECKS
 67 – ANSWER:
IN BANKING PRACTICE, CHECKS BECOME
STALE IF NOT ENCASHED WITHIN 6MONTHS
FROM THE TIME OF ISSUANCE
68 – ACCOUNTING TREATMENT FOR STALE
CHECKS
 68 – ANSWER:
MATERIAL – DR. CASH CR. ACCOUNTS PAYABLE
IMMATERIAL – DR. CASH CR. MISCELLANEOUS
INCOME
69– CASH SHORTAGE/OVERAGE
 69 – ANSWER:
CASHIER IS HELD RESPONSIBLE – DR.
RECEIVABLE FROM CASHIER CR. CASH
REAL CAUSE IS UNIDENTIFIABLE – DR. LOSS
FROM CASH SHORTAGE CR. CASH
70 – IMPREST SYSTEM
 70– ANSWER:
SYSTEM OF CONTROL OF CASH WHICH
REQUIRES THAT ALL CASH RECEIPTS SHOULD
BE DEPOSITED INTACT AND ALL CASH
DISBURSEMENT SHOULD BE MADE BY MEANS
OF CHECK.
71 – PETTY CASH FUND UNDER IMPREST
SYSTEM
 71 – ANSWER:
IN IMPREST SYSTEM, PAYMENT OF EXPENSES
REQUIRES NO FORMAL ENTRIES. PETTY CASHIER
GENERALLY REQUIRES A SIGNED PETTY CASH
VOUCHER FOR SUCH PAYMENTS AND PREPARES
MEMO ENTRY IN THE PETTY CASH JOURNAL.
PETTY CASH DISBURSEMENT SHOULD BE
REPLENISHED ONLY BY MEANS OF CHECK AND
NOT FROM UNDEPOSITED COLLECTION
 72 – IMPREST SYSTEM: ENTRY WHEN
DISBURSING FROM THE PETTY CASH
FUND,ENTRY TO REPLENISH PETTY CASH
FUND, WHEN NO REPLENISHMENT IS MADE
 72 – ANSWER:
1) NO ENTRY
2) DR. EXPENSES CR. CASH IN BANK
3) DR. EXPENSES CR. PETTY CASH FUND
73 – PETTY CASH FUND UNDER FLUCTUATING
FUND SYSTEM
 73 – ANSWER:
UNDER FLUCTUATING FUND SYSTEM, CHECKS
DRAWN TO REPLENISH THE FUND DO NOT
NECESSARILY EQUAL THE PETTY CASH
DISBURSEMENT. EXPENSES ARE IMMEDIATELY
RECORDED AND PCF FLUCTUATES FROM TO
TIME.
 74 – FLUCTUATING FUND SYSTEM: ENTRY
WHEN DISBURSING FROM THE PETTY CASH
FUND, ENTRY TO REPLENISH PETTY CASH
FUND, WHEN NO REPLENISHMENT IS MADE
 74 – ANSWER:
1) DR. EXPENSES CR. PETTY CASH FUND
2) DR. PETTY CASH FUND CR. CASH IN BANK
3) NO ENTRY
75 – TWO KINDS OF FORTUITOUS EVENTS
 75 – ANSWER:
ACTS OF GOD (CASO FORTUITO) & ACTS OF
MAN (FORCE MAJEURE)
 76 – FOUR CASES WHERE THE OBLIGOR
BECOMES LIABLE FOR FORTUITOUS EVENTS
 76 – ANSWER:
WHEN THE LAW EXPRESSLY SO PROVIDES,
WHEN IT HAS BEEN AGREED UPON BY THE
PARTIES, WHEN THE NATURE OF THE
OBLIGATION REQUIRES THE ASSUMPTION OF
RISK, WHEN THE DEBTOR IS IN LEGAL DELAY
77 – PRESUMPTIONS ON RECEIPT OF
PRINCIPAL OR LATER INSTALLMENTS
 77 – ANSWER:
WHEN THE CREDITOR MAKES NO
RESERVATION AS TO THE INTEREST OR PRIOR
INSTALLMENTS, IT IS PRESUMED THAT THEY
HAVE BEEN PAID
 78 – THREE REMEDIES OF CREDITOR TO
ENFORCE PAYMENT OF HIS CLAIMS AGAINST
DEBTOR
 78 – ANSWER:
ACCION DIRECTA, ACCION SUBROGATORIA,
ACCION PAULIANA
79 – THREE INSTANCES WHERE RIGHTS ARE
NOT TRANSMISSIBLE
 79 – ANSWER:
IF THE LAW PROHIBITS TRANSMISSION, IF THE
PARTIES AGREED AGAINST TRANSMISSION, IF
THE RIGHT BY NATURE IS NOT TRANSMISSIBLE
80 – EIGHT PRIMARY CLASSIFICATIONS OF
OBLIGATIONS UNDER THE CIVIL CODE
 80 – ANSWER:
PURE, CONDITIONAL, WITH A PERIOD,
ALTERNATIVE, FACULTATIVE, JOINT, SOLIDARY,
DIVISIBLE
81 – TWO TYPES OF CONDITION ACCORDING
TO EFFECT ON DEMANDABILITY OF
OBLIGATION
 81 – ANSWER:
SUSPENSIVE AND RESOLUTORY
82 – THREE TYPES OF CONDITION ACCORDING
TO WHOSE WILL THE CONDITION DEPENDS
UPON
 82 – ANSWER:
POTESTATIVE, CASUAL, MIXED
83 – POSSIBLE VS. IMPOSSIBLE CONDITION
 83 – ANSWER:
POSSIBLE – ONE THAT IS CAPABLE OF
FULFILLMENT IN ITS NATURE AND BY LAW,
IMPOSSIBLE – ONE THAT IS NOT
84 – POSITIVE VS. NEGATIVE CONDITION
 84 – ANSWER:
POSITIVE – SOMETHING HAS TO HAPPEN
NEGATIVE – SOMETHING SHOULD NOT
HAPPEN (BOTH WITHIN A PERIOD OF TIME)
85 – DIVISIBLE VS. INDIVISIBLE OBLIGATION
 85 – ANSWER:
DIVISIBLE – CAPABLE OF PARTIAL
PERFORMANCE
INDIVISIBLE – INCAPABLE OF PARTIAL
PERFORMANCE
86 – EFFECT OF FULFILLMENT OF SUSPENSIVE
CONDITION AND THE TWO EXCEPTIONS TO IT
 86 – ANSWER:
IT RETROACTS TO THE DAY OF THE
CONSTITUTION OF THE OBLIGATION EXCEPT
IN RECIPROCAL AND UNILATERAL
OBLIGATIONS
 87 – RIGHTS OF THE PARTIES (DEBTOR AND
CREDITOR) BEFORE THE FULFILLMENT OF THE
CONDITION
 87 – ANSWER:
CREDITOR – BRING APPROPRIATE ACTIONS
FOR THE PRESERVATION OF HIS RIGHT
DEBTOR – RECOVER WHAT HE HAS PAID BY
MISTAKE
88 – EFFECT WHEN THE DEBTOR VOLUNTARILY
PREVENTS THE FULFILLMENT OF THE
CONDITION
 88 – ANSWER:
THE OBLIGATION BECOMES IMMEDIATELY
DEMANDABLE
89 – AUDITING
 89 – ANSWER:
A SYSTEMATIC PROCESS OF OBJECTIVELY
OBTAINING AND EVALUATING EVIDENCE
REGARDING ASSERTIONS ABOUT ECONOMIC
ACTIONS OR EVENTS TO ASCERTAIN THE
DEGREE OF CORRESPONDENCE BETWEEN
THESE ASSERTIONS AND ESTABLISHED
CRITERIA AND COMMUNICATING THE RESULTS
TO INTERESTED USERS
90 – ASSURANCE VS. NON-ASSURANCE
ENGAGEMENTS
 90 – ANSWER:
THE OBJECTIVE OF ASSURANCE
ENGAGEMENTS IS TO EXPRESS AN OPINION
THAT ENHANCES THE DEGREE OF
CONFIDENCE THAT INTENDED USERS CAN
HAVE. NON-ASSURANCE ENGAGEMENTS ARE
THOSE SERVICES PERFORMED BY CPAs WHICH
DO NOT INVOLVE THE EXPRESSION OF AN
OPINION
91 – ASSERTION-BASED VS. DIRECT
REPORTING ENGAGEMENT
 91 – ANSWER:
ASSERTION-BASED – CLIENT PREPARES THE FS
AND AUDITOR EXPRESSES AN OPINION
REGARDING THE FS
DIRECT REPORTING – THE CLIENT DOES NOT
PREPARE THE FS, THE AUDITOR DOES IT OR
OBTAINS A REPRESENTATION FROM A THIRD
PARTY WHO DOES IT, AND EXPRESSES AN
OPINIO REGARDING THE FS
92 – REASONABLE VS. LIMITED ASSURANCE
ENGAGEMENT
 92 – ANSWER:
REASONABLE ASSURANCE – INDEPENDENT
FINANCIAL STATEMENT AUDIT
LIMITED ASSURANCE – REVIEW OF NON-
FINANCIAL PERFORMANCE, HUMAN
RESOURCES, INTERNAL CONTROL
93 – THREE TYPES OF AUDIT
 93 – ANSWER:
EXTERNAL AUDIT, OPERATIONAL AUDIT,
COMPLIANCE AUDIT
94 – THREE TYPES OF AUDITORS
 94 – ANSWER:
INTERNAL AUDITOR, EXTERNAL AUDITOR,
GOVERNMENT AUDITOR
95 – FIVE ELEMENTS OF AN ASSURANCE
ENGAGEMENT
 95 – ANSWER:
THREE PARTY RELATIONSHIP, APPROPRIATE
SUBJECT MATTER, SUITABLE CRITERIA,
SUFFICIENT APPROPRIATE EVIDENCE,
WRITTEN ASSURANCE REPORT/OPINION
96 – FIVE FORMS OF APPROPRIATE SUBJECT
MATTER
 96 – ANSWER:
FINANCIAL PERFORMANCE/CONDITIONS (FS),
NON-FINANCIAL PERFORMANCE/CONDITIONS
(EFFICIENCY AND EFFECTIVITY), PHYSICAL
CHARACTERISTICS (CAPACITY OF FACILITY),
SYSTEMS & PROCESSES (INTERNAL CONTROL
& IT SYSTEM), BEHAVIOR (CORPORATE
GOVERNANCE, HUMAN RESOURCE
PRACTICES)
97 – FIVE CHARACTERISTICS OF SUITABLE
CRITERIA
 97 – ANSWER:
RELEVANCE, COMPLETENESS, RELIABILITY,
NEUTRALITY, UNDERSTANDABILITY (RRCUN)
98 – FIVE GENERALIZATIONS REGARDING THE
RELIABILITY OF EVIDENCE
 98 – ANSWER:
EVIDENCE IS MORE RELIABLE WHEN:
1) OBTAINED FROM INDEPENDENT SOURCES;
2) RELATED CONTROLS ARE EFFECTIVE (IF
GENERATED INTERNALLY);
3) DIRECTLY OBTAINED BY PRACTIONER THAN BY
INFERENCE (OBSERVATION VS INQUIRY)
4) IN DOCUMENTARY FORM THAN ORAL
5) ORIGINAL DOCUMENTS THAN PHOTOCOPIES OR
FASCIMILES
 99 – FACTORS THAT LIMIT THE AUDITOR
FROM PROVIDING ABSOLUTE ASSURANCE
 99 – ANSWER:
SAMPLING RISKS, HUMAN WEAKNESSES
/NON-SAMPLING RISKS, RELIANCE ON
MANAGEMENT’S REPRESENTATION,
INHERENT LIMITATIONS OF THE CLIENTS
ACCOUNTING AND INTERNAL CONTROL
PROCESS, NATURE OF EVIDENCE
 100 – FOUR SOURCES OF NEED FOR
INDEPENDENT FINANCIAL STATEMENT AUDIT
 100 – ANSWER:
CONFLICT OF INTEREST BETWEEN
MANAGEMENT AND USERS OF FINANCIAL
STATEMENTS, EXPERTISE, REMOTENESS,
FINANCIAL CONSEQUENCES
101 – TEN GENERALLY ACCEPTED AUDITING
STANDARDS
 101 – ANSWER:
TECHNICAL TRAINING AND PROFICIENCY,
INDEPENDENCE, PROFESSIONAL CARE,
PLANNING, INTERNAL CONTROL
CONSIDERATION, EVIDENTIAL MATTER,
GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, INCONSISTENCY, DISCLOSURE,
OPINION
102 – SIX ELEMENTS OF A SYSTEM OF
QUALITY CONTROL
 102 – ANSWER:
LEADERSHIP RESPONSIBILITIES FOR QUALITY
ON AUDITS, RELEVANT ETHICAL
REQUIREMENTS, ACCEPTANCE AND
CONTINUANCE OF CLIENT RELATIONSHIPS,
HUMAN RESOURCES AND ASSIGNMENT,
ENGAGEMENT PERFORMANCE, MONITORING
 103 – RESPONSIBILITIES OF THE
ENGAGEMENT PARTNER DURING THE
ENGAGEMENT PERFORMANCE
 103 – ANSWER:
DIRECTION, SUPERVISION,REVIEW, MANAGE
CONSULTATION
104 – ACCOUNTS RECEIVABLE
 104 – ANSWER:
ACCOUNTS RECEIVABLE REFERS TO SHORT-
TERM AMOUNTS DUE FROM BUYERS TO A
SELLER WHO HAVE PURCHASED GOODS OR
SERVICES FROM THE SELLER ON CREDIT AND
NOT SUPPORTED BY A PROMISSORY NOTE
105 – ADVANCES TO AFFILIATES
 105 – ANSWER:
SIMILAR TO ACCOUNTS RECEIVABLE BUT
INVOLVES A PARENT AND ITS SUBSIDIARY OR
AFFILIATE AND IS CONSIDERED NON-CURRENT
ASSET AND LONG-TERM INVESTMENT
106 – SPECIAL DEPOSITS ON CONTRACT BIDS
 106 – ANSWER:
ARE RECEIVABLES FROM PROSPECTIVE
CUSTOMERS WHICH ARE TO BE RETURNED
WHEN THE BIDDING PROCESS IS COMPLETED.
THE PURPOSE OF THESE DEPOSITS IS TO
GUARANTEE THAT THE BIDDER WILL TAKE ON
THE JOB IF SELECTED. CURRENT IF
COLLECTIBLE CURRENTLY
107 – INITIAL MEASUREMENT OF ACCOUNTS
RECEIVABLES
 107 – ANSWER:
AN ACCOUNTS RECEIVABLE IS A FINANCIAL
INSTRUMENT AND FINANCIAL INSTRUMENTS
ARE INITIALLY CARRIED AT FAIR VALUE PLUS
TRANSACTION COSTS THAT ARE DIRECTLY
ATTRIBUTABLE TO THE ACQUISITION OF THE
INSTRUMENT. THE FAIR VALUE IS USUALLY THE
TRANSACTION PRICE OR THE FAIR VALUE OF
THE CONSIDERATION GIVEN.
108 – SUBSEQUENT MEASUREMENT OF
ACCOUNTS RECEIVABLE
 108 – ANSWER:
ACCOUNTS RECEIVABLE IS SUBSEQUENTLY
MEASURED AT NET REALIZABLE VALUE OR
ESTIMATED RECOVERABLE AMOUNT
109 – FOB SHIPPING POINT VS. FOB
DESTINATION
 109 – ANSWER:
FOB SHIPPING POINT – THE OWNERSHIP OF THE
GOODS IS TRANSFERRED TO THE BUYER UPON
SHIPMENT THUS ALL RISKS AND
RESPONSIBILITIES (SUCH AS TO PAY FOR
FREIGHT EXPENSES) ARE ALSO TRANSFERRED.
FOB DESTINATION – THE OWNERSHIP OF THE
GOODS IS TRANSFERRED TO THE BUYER UPON
ARRIVAL TO THE BUYER’S RECEIVING DOCK
110 – FREIGHT PREPAID VS. FREIGHT COLLECT
 110 – ANSWER:
REGARDLESS OF WHO IS OBLIGED TO INCUR
THE EXPENSE:
FREIGHT PREPAID – THE SELLER HAS PAID FOR
THE SHIPPING COSTS
FREIGHT COLLECT – THE BUYER WILL PAY FOR
THE SHIPPING COSTS
111 – ENTRY TO RECORD SALE ON ACCOUNT
UNDER FOB SHIPPING POINT FREIGHT
PREPAID. SELLING PRICE (10,000); FREIGHT
(100)
 111 – ANSWER:
DR. ACCOUNTS RECEIVABLE 10,100 CR. SALES
10000; CASH 100
112 – ENTRY TO RECORD SALE ON ACCOUNT
UNDER FOB SHIPPING POINT FREIGHT
COLLECT. SELLING PRICE (10,000); FREIGHT
(100)
 112 – ANSWER:
DR. ACCOUNTS RECEIVABLE 10,000 CR. SALES
10,000
113 – ENTRY TO RECORD SALES ON ACCOUNT
FOB DESTINATION FREIGHT PREPAID. SELLING
PRICE (10,000); FREIGHT (100)
 113 – ANSWER:
DR. ACCOUNTS RECEIVABLE 10,000; FREIGHT-
OUT 100; CR. SALES 10,000; CASH 10,000
 114 – ENTRY TO RECORD SALE ON ACCOUNT
FOB DESTINATION FREIGHT COLLECT. SELLING
PRICE (10,000); FREIGHT (100)
 114 – ANSWER:
DR. ACCOUNTS RECEIVABLE 9,900; FREIGHT-
OUT 100; CR. SALES 10,000
115 – GROSS METHOD VS. NET METHOD IN
ACCOUNTING FOR SALES ON ACCOUNT
 115 – ANSWER:
GROSS METHOD – AN INVOICE IS RECORDED AT
FULL PRICE WITHOUT REGARD TO ANY CASH
DISCOUNTS OFFERED.
NET METHOD – ASSUMES THE RETAILER ALWAYS
TAKES ADVANTAGE OF THE DISCOUNTED CASH
PRICE AND RECORDS THE PURCHASED INVENTORY
AT THE DISCOUNTED PRICE. THEREFORE, INVOICE IS
RECORDED NET OF DISCOUNT
116 – ENTRY TO RECORD SALE ON ACCOUNT
USING GROSS METHOD. SELLING PRICE
(10,000); TERMS (2/10, N/30)
 116 – ANSWER:
DR. ACCOUNTS RECEIVABLE 10,000; CR. SALES
10,000
117 – ENTRY TO RECORD SALE ON ACCOUNT
USING NET METHOD. SELLING PRICE (10,000);
TERMS (2/10, N/30)
 117 – ANSWER:
DR. ACCOUNTS RECEIVABLE 9,800; CR. SALES
9,800
 118 – ENTRY TO RECORD COLLECTION OF
ACCOUNTS WITHIN THE DISCOUNT PERIOD
UNDER GROSS METHOD. SELLING PRICE
(10,000); TERMS (2/10, N/30)
 118 – ANSWER:
DR. CASH 9,800; SALES DISCOUNT 200;
ACCOUNTS RECEIVABLE 10,000
 119 – ENTRY TO RECORD COLLECTION OF
ACCOUNTS WITHIN THE DISCOUNT PERIOD
UNDER NET METHOD. SELLING PRICE
(10,000); TERMS (2/10, N/30)
 119 – ANSWER:
DR. CASH 9,800; CR. ACCOUNTS RECEIVABLE
9,800
 120 – ENTRY TO RECORD COLLECTION OF
ACCOUNTS BEYOND THE DISCOUNT PERIOD
UNDER GROSS METHOD. SELLING PRICE
(10,000); TERMS (2/10, N/30)
 120 – ANSWER:
DR. CASH 10,000; CR. ACCOUNTS RECEIVABLE
10,000
 121 – ENTRY TO RECORD COLLECTION OF
ACCOUNTS BEYOND THE DISCOUNT PERIOD
UNDER NET METHOD. SELLING PRICE
(10,000); TERMS (2/10, N/30)
 121 – ANSWER:
DR. CASH 10,000; CR. ACCOUNTS RECEIVABLE
9,800; SALES DISCOUNT FORFEITED 200
122 – DIRECT WRITE-OFF VS. ALLOWANCE
METHOD
 122 – ANSWER:
DIRECT WRITE-OFF – BAD DEBTS ARE
CHARGED AS SOON AS IT IS APPARENT THAT
AN INVOICE WILL NOT BE PAID.
ALLOWANCE METHOD – AN ESTIMATE OF THE
FUTURE AMOUNT IS CHARGED PERIODICALLY.
IT IS PREFERRED BECAUSE IT REFLECTS THE
ESTIMATED REALIZABLE VALUE OF ACCOUNTS
RECEIVABLE.
 123 – ENTRY TO RECORD PROVISION FOR
DOUBTFUL ACCOUNTS UNDER ALLOWANCE
METHOD
 123 – ANSWER:
DR. DOUBTFUL ACCOUNTS EXPENSE; CR.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
 124 – ENTRY TO RECORD WRITE-OFF OF
RECEIVABLE UNDER ALLOWANCE METHOD
 124 – ANSWER:
DR. ALLOWANCE FOR DOUBTFUL ACCOUNTS;
CR. ACCOUNTS RECEIVABLE
125 – ENTRY TO RECORD WRITE-OFF OF
RECEIVABLE UNDER DIRECT WRITE-OFF
METHOD
 125 – ANSWER:
DR. BAD DEBTS EXPENSE; CR. ACCOUNTS
RECEIVABLE
 126 – ENTRY TO REVERSE WRITE-OFF OF
ACCOUNTS RECEIVABLE UNDER ALLOWANCE
METHOD
 126 – ANSWER:
DR. ACCOUNTS RECEIVABLE; CR. ALLOWANCE
FOR DOUBTFUL ACCOUNTS
127 – ENTRY TO REVERSE WRITE-OFF OF
ACCOUNTS RECEIVABLE UNDER DIRECT
WRITE-OFF METHOD
 127 – ANSWER:
DR. ACCOUNTS RECEIVABLE; CR. BAD DEBTS
EXPENSE
128 – CLASSIFICATION OF BAD DEBTS EXPENSE
AS AN OPERATING EXPENSE (ADMINISTRATIVE
OR SELLING EXPENSE)
 128 – ANSWER:
IF GRANTING OF CREDIT AND COLLECTION OF
ACCOUNTS ARE UNDER THE CHARGE OF THE
SALES MANAGER, DOUBTFUL ACCOUNTS
SHALL BE CONSIDERED AS DISTRIBUTION
COST. IF UNDER AN OFFICER, IT IS
ADMINISTRATIVE EXPENSE. IN THE ABSENCE
TO THE CONTRARY IT IS ADMIN EXPENSE.
129 – INVENTORIES
 129 – ANSWER:
INVENTORIES ARE ASSETS HELD FOR SALE, OR
IN THE PROCESS OF PRODUCTION, OR TO BE
CONSUMED IN THE PRODUCTION PROCESS.
130 – CONSIGNED GOODS
 130 – ANSWER:
RECORDED BY THE CONSIGNOR USING A
MEMORANDUM ENTRY. STILL INCLUDED IN
THE INVENTORY OF THE CONSIGNOR.
131 – NORMAL VS. ABNORMAL INVENTORY
SHORTAGE
 131 – ANSWER:
NORMAL SHORTAGE IS CLOSED TO COST OF
GOODS SOLD. ABNORMAL SHORTAGE IS
TREATED AS OUTRIGHT EXPENSE.
132 – THREE ITEMS THAT COMPRISE THE COST
OF INVENTORY
 132 – ANSWER:
COST OF PURCHASE, COST OF CONVERSION,
OTHER COSTS TO BRING THE INVENTORY TO
ITS PRESENT LOCATION OR CONDITION
133 – ACCOUNTING TREATMENT WHEN
INVENTORIES ARE PURCHASED WITH
DEFERRED SETTLEMENT TERMS
 133 – ANSWER:
DIFFERENCE BETWEEN INSTALLMENT PRICE
AND NORMAL CREDIT TERM PRICE IS TREATED
AS INTEREST EXPENSE. INVENTORY IS
VALUATED AT NORMAL CREDIT TERM PRICE.
134 – ACCOUNTING TREATMENT FOR
STORAGE COST
 134 – ANSWER:
STORAGE COSTS FOR GOODS IN PROCESS ARE
CAPITALIZED. WHILE STORAGE COSTS FOR
FINISHED GOODS ARE EXPENSED OUTRIGHT.
135 – THREE CURRENTLY ACCEPTABLE
INVENTORY VALUATION METHODS
 135 – ANSWER:
SPECIFIC IDENTIFICATION, FIRST IN – FIRST
OUT, WEIGHTED AVERAGE METHODS
136 – TWO SYSTEMS OF KEEPING RECORDS OF
INVENTORY
 136 – ANSWER:
PERPETUAL AND PERIODIC INVENTORY
SYSTEMS
137 – SUBSEQUENT MEASUREMENT OF LOAN
AND NOTES RECEIVABLES
 137 – ANSWER:
AMORTIZED COST
138 – VALUATION OF INVENTORIES
 138 – ANSWER:
LOWER OF COST AND NET REALIZABLE VALUE
139 – NET REALIZABLE VALUE FORMULA
 139 – ANSWER:
NET REALIZABLE VALUE = INVENTORY MARKET
VALUE – COSTS TO COMPLETE AND SELL THE
GOODS
14O – 1) ENTRY TO WRITE-DOWN INVENTORY
TO NET REALIZABLE VALUE. COST (1,000); NRV
(800)
2) ENTRY TO RECORD REVERSAL OF
INVENTORY WRITE-DOWN. NEW NRV (1,100)
 140 – ANSWER:
1) DR. LOSS ON INVENTORY WRITE-DOWN
200; CR. MERCHANDISE INVENTORY 200
2) DR. MERCHANDISE INVENTORY 200; CR.
LOSS ON INVENTORY WRITE-DOWN 200
 141 – ACCOUNTING FOR PURCHASE
COMMITMENTS. PURCHASE COMMITMENT
(1,200 UNITS @ 2.00); DEC. 31 MARKET PRICE
(1.80); PURCHASE DATE MARKET PRICE (1.75)
 141 – ANSWER:
DEC 31 – DR. LOSS ON PURCHASE
COMMITMENT 240; CR. PURCHASE
COMMITMENTS LIABILITY 240
PURCHASE DATE – DR. PURCHASES 2100;
PURCHASE COMMITMENTS LIABILITY 240;
LOSS ON PURCHASE COMMITMENT 60; CR.
ACCOUNTS PAYABLE 2,400
 142 – RULES IN CASE OF LOSS OF
DETERMINATE THING WITH AND WITHOUT
DEBTOR’S FAULT
 142 – ANSWER:
WITH DEBTOR’S FAULT – DEBTOR IS OBLIGED
TO PAY DAMAGES
WITHOUT DEBTOR’S FAULT – THE OBLIGATION
IS EXTINGUISHED
143 – RULES IN CASE OF DETERIORATION OF
THE DETERMINATE THING WITH AND
WITHOUT DEBTOR’S FAULT
 143 – ANSWER:
WITH DEBTOR’S FAULT – CREDITOR MAY
CHOOSE BETWEEN RECISSION + DAMAGES OR
FULFILLMENT + DAMAGES
WITHOUT DEBTOR’S FAULT – THE
IMPAIRMENT SHALL BE BORNE BY THE
CREDITOR
 144 – RULES IN CASE OF IMPROVEMENT OF
DETERMINATE THING BY NATURE OR BY TIME
AND AT THE EXPENSE OF THE DEBTOR
 144 – ANSWER:
BY NATURE OR BY TIME – THE IMPROVEMENT
SHALL BE FOR THE BENEFIT OF THE CREDITOR
AT THE EXPENSE OF THE DEBTOR – THE
DEBTOR CAN ONLY BE GRANTED
USUFRUCTUARY RIGHTS
145 – RULES IN CASE OF FULFILLMENT OF
RESOLUTORY CONDITION
 145 – ANSWER:
THE OBLIGATION IS EXTINGUISHED, THE
PARTIES SHALL RETURN TO EACH OTHER
WHAT THEY HAVE RECEIVED, AND THE SAME
RULES APPLY IN CASE OF LOSS,
DETERIORATION OR IMPROVEMENT OF THE
TIHING (ART. 1189)
146 – CONCEPT OF RECIPROCAL OBLIGATIONS
 146 – ANSWER:
IN A RECIPROCAL OBLIGATION, EACH PARTY IS
A DEBTOR AND A CREDITOR OF THE OTHER
147 – REMEDIES OF THE INJURED PARTY IN
RECIPROCAL OBLIGATION
 147 – ANSWER:
RECISSION WITH DAMAGES OR FULFILLMENT
OF THE OBLIGATION WITH DAMAGES (BUT
NOT BOTH)
148 – PERIOD VS. DAY CERTAIN
 148 – ANSWER:
PERIOD – SPACE OF TIME
DAY CERTAIN – A POINT IN TIME WHICH MUST
NECESSARILY HAPPEN ALTHOUGH IT MAY NOT
BE KNOWN WHEN
149 – FIVE KINDS OF PERIOD
 149 – ANSWER:
EX DIE (SUSPENSIVE), IN DIEM (RESOLUTORY),
LEGAL, VOLUNTARY, JUDICIAL
150 – INSTANCES WHEN THE COURT MAY FIX
THE PERIOD
 150 – ANSWER:
WHEN IT CAN BE INFERRED THAT A PERIOD
WAS INTENDED, WHEN THE DURATION OF
THE PERIOD DEPENDS UPON THE WILL OF THE
DEBTOR
151 – PRESUMPTIONS AS TO WHO HAS THE
BENEFIT OF THE PERIOD
 151 – ANSWER:
IT IS PRESUMED TO HAVE BEEN ESTABLISHED
FOR THE BENEFIT OF BOTH THE CREDITOR
AND THE DEBTOR
152 – FIVE INSTANCES WHEN THE CREDITOR
MAY DEMAND IMMEDIATE PAYMENT IN
OBLIGATIONS WITH A PERIOD
 152 – ANSWER:
WHEN THE DEBTOR BECOMES INSOLVENT,
FAILS TO FURNISH THE GUARANTEES OR
SECURITIES THAT HE HAS PROMISED, IMPAIRS
THE SAID GUARANTEES OR SECURITIES BY HIS
OWN ACT OR BY FORTUITOUS EVENT UNLESS
HE GIVES A NEW AND SIMILAR ONE, VIOLATES
ANY UNDERTAKING, ATTEMPTS TO ABSCOND
[IFIVA]
153 – TWO KINDS OF OBLIGATIONS
ACCORDING TO THE NUMBER OF
PRESTATIONS
 153 – ANSWER:
SIMPLE AND COMPOUND OBLIGATIONS
154 – TWO KINDS OF COMPOUND
OBLIGATIONS
 154 – ANSWER:
CONJUNCTIVE AND
DISJUNCTIVE/DISTRIBUTIVE
 155 – WHO HAS THE RIGHT TO CHOOSE
PRESTATION IN ALTERNATIVE OBLIGATIONS
 155 – ANSWER:
THE DEBTOR, UNLESS EXPRESSLY GIVEN TO
THE CREDITOR
156 – TWO LIMITATIONS ON DEBTOR’S RIGHT
TO CHOOSE
 156 – ANSWER:
THE DEBTOR MUST COMPLETELY PERFORM
THE PRESTATION CHOSEN (NOT PART OF ONE
AND PART OF ANOTHER UNDERTAKING), HE
CANNOT CHOOSEE THOSE PRESTATIONS
WHICH ARE IMPOSSIBLE OR UNLAWFUL OR
COULD NOT HAVE BEEN THE OBJECT OF THE
OBLIGATION
 157 – THREE INSTANCES WHEN THE
OBLIGATION CEASES TO BE ALTERNATIVE AND
BECOMES A SIMPLE OBLIGATION
 157 – ANSWER:
WHEN THE DEBTOR HAS COMMUNICATED HIS
CHOICE TO THE CREDITOR, WHEN ONLY ONE
PRESTATION REMAIN PRACTICABLE, WHEN
THE CREDITOR HAS COMMUNICATED HIS
CHOICE TO THE DEBTOR IF THE RIGHT TO
CHOOSE HAS BEEN EXPRESSLY GIVEN TO HIM
158 – FIVE RULES IN CASE OF LOSS OF THINGS
OR IMPOSSIBILITY OF SERVICES WHICH ARE
ALTERNATIVELY THE OBJECT OF THE
OBLIGATION BEFORE THE CHOICE OF THE
DEBTOR IS COMMUNICATED (RIGHT IS WITH
DEBTOR)
158 – ANSWER:
MAHABA
 159 – FOUR RULES IN CASE OF LOSS OF
THINGS OR IMPOSSIBILITY OF SERVICES
WHICH ARE ALTERNATIVELY THE OBJECT OF
THE OBLIGATION BEFORE THE CHOICE OF THE
CREDITOR IS COMMUNICATED (RIGHT IS WITH
CREDITOR)
159 – ANSWER:
MAHABA
160 – RULES IN CASE OF LOSS OF PRINCIPAL
THING AND SUBSTITUTE BEFORE
SUBSTITUTION
 160 – ANSWER:
BEFORE SUBSTITUTION:
PRINCIPAL – FORTUITOUS EVENT
(EXTINGUISHED), DEBTOR’S FAULT (LIABILITY
TO PAY DAMAGES)
SUBSTITUTE – NO EFFECT, FORTUITOUS EVENT
OR DEBTOR’S FAULT
 161 – RULES IN CASE OF LOSS OF PRINCIPAL
THING AND SUBSTITUTE AFTER SUBSTITUTION
 161 – ANSWER:
PRINCIPAL – NO EFFECT, FORTUITOUS EVENT
OR DEBTOR’S FAULT
SUBSTITUTE – FORTUITOUS EVENT
(EXTINGUISHED), DEBTOR’S FAULT (LIABILITY
TO PAY DAMAGES)
162 – THREE KINDS OF SOLIDARY
OBLIGATIONS
 162 – ANSWER:
PASSIVE SOLIDARITY, ACTIVE SOLIDARITY,
MIXED SOLIDARITY
163 – FIVE TERMS FOR SOLIDARY
OBLIGATIONS
 163 – ANSWER:
JOINTLY AND SEVERALLY, INDIVIDUALLY AND
COLLECTIVELY, IN SOLIDUM, MANCOMUNADA
SOLIDARIA, JUNTOS O SEPARADAMENTE
58 – FOUR TERMS FOR JOINT OBLIGATION
 58 – ANSWER:
PROPORTIONATELY, PRO RATA,
MANCOMUNADA, MANCOMUNADA SIMPLE
 59 – THREE EXEMPTIONS TO THE JOINT
OBLIGATION PRESUMPTION MAKING THE
OBLIGATION SOLIDARY
 59 – ANSWER:
WHEN THE OBLIGATION EXPRESSLY SO STATES,
WHEN THE LAW REQUIRES SOLIDARITY, WHEN
THE NATURE OF THE OBLIGATION REQUIRES
SOLIDARITY
60 – EXPLAIN THE CONCEPT OF EXISTENCE OF
SOLIDARITY DESPITE DIFFERENT PERIODS AND
CONDITIONS
 60 – ANSWER:
GIVE AN EXAMPLE
61 – EFFECT OF UNAUTHORIZED ASSIGNMENT
OF CREDITOR’S RIGHT
 61 – ANSWER:
THE NON-ASSIGNING CREDITORS MAY
RECOVER THEIR RESPECTIVE SHARES FROM
THE ASSIGNING CREDITOR IN CASE THE
ASSIGNEE WHO HAS COLLECTED THE DEBT
FAILS TO GIVE THEM THEIR SHARES
62 – THREE DEFENSES AVAILABLE TO
SOLIDARY DEBTORS
 62 – ANSWER:
THOSE DERIVED FROM THE NATURE OF THE
OBLIGATION, THOSE PERSONAL TO THE
DEBTOR BEING SUED, THOSE PERSONAL TO
OTHER DEBTORS
63 – FIVE CHARACTERISTICS OF JOINT
INDIVISIBLE OBLIGATION
 63 – ANSWER:
ALL CREDITORS MUST MAKE THE DEMAND, THE
DEMAND MUST BE MADE AGAINST ALL DEBTORS,
THE RENUNCIATION MADE BY A JOINT CREDITOR
EXTINGUISHES ONLY HIS OWN SHARE, ONLY THE
DEBTOR WHO DOES NOT COMPLY WITH HIS
UNDERTAKING SHALL BE LIABLE FOR DAMAGES,
INSOLVENCY OF A DEBTOR SHALL NOT MAKE THE
OTHERS LIABLE FOR DAMAGES
64 – THREE OBLIGATIONS DEEMED DIVISIBLE
 64 – ANSWER:
WHEN THE OBLIGATION HAS FOR ITS OBJECT
THE EXECUTION OF A CERTAIN NUMBER OF
DAYS OF WORK, THE ACCOMPLISHMENT OF
WORK BY METRICAL UNITS, ANALOGOUS
THINGS SUSCEPTIBLE OF PARTIAL
PERFORMANCE
65 – THREE OBLIGATIONS DEEMED
INDIVISIBLE
 65 – ANSWER:
OBLIGATIONS TO GIVE DEFINITE THINGS,
THOSE NOT SUSCEPTIBLE OF PARTIAL
PERFORMANCE, THOSE THAT ARE TREATED
INDIVISIBLE BY PROVISION OF LAW, THOSE
INTENDED BY THE PARTIES TO BE INDIVISIBLE
66 – TWO FUNCTIONS OF PENAL CLAUSE
 66 – ANSWER:
TO PROVIDE LIQUIDATED DAMAGES, TO
STRENGTHEN THE COERCIVE FORCE OF THE
OBLIGATION
67 – FOUR KINDS OF PENAL CLAUSE
 67 – ANSWER:
LEGAL, CONVENTIONAL; SUBSIDIARY, JOINT
 68 – EXCEPTIONS WHEN ASIDE FROM
PENALTY, INTEREST AND DAMAGES MAY ALSO
BE DEMANDED
 68 – ANSWER:
WHEN THERE IS STIPULATION TO THAT
EFFECT, THE DEBTOR REFUSES TO PAY THE
PENALTY, THE DEBTOR IS GUILTY OF FRAUD IN
THE PERFORMANCE OF THE OBLIGATION
69 – CASES WHEN THE COURT MAY REDUCE
THE PENALTY
 69 – ANSWER:
WHEN THE OBLIGATION HAS BEEN PARTLY
COMPLIED WITH, THE OBLIGATION HAS BEEN
IRREGULARLY COMPLIED WITH, THE PERNALTY
HAS BEEN INIQUITOUS OR UNCONSCIONABLE
EVEN IF THERE HAS BEEN NO PERFORMANCE
70 – EFFECT OF NULLITY OF PRINCIPAL
OBLIGATION, PENAL CLAUSE
 70 – ANSWER:
THE NULLITY OF THE PRINCIPAL OBLIGATION
CARRIES WITH IT THE NULLITY OF THE PENAL
CLAUSE, THE NULLITY OF THE PENAL CLAUSE
DOES NOT CARRY WITH IT THE NULLITY OF
THE PRINCIPAL OBLIGATION
22 – FORMULA FOR TAXABLE INCOME
 22 – ANSWER:
GROSS INCOME XXX
LESS: DEDUCTIONS XXX
TAXABLE INCOME XXX
23 – TAXABLE INCOME BRACKETS UNDER THE
GRADUATED INCOME TAX TABLE
 23 – ANSWER:
NOT OVER 250,000
OVER 250,000 BUT NOT OVER 400,000
OVER 400,000 BUT NOT OVER 800,000
OVER 800,000 BUT NOT OVER 2,000,000
OVER 2,000,000 BUT NOT OVER 8,000,000
OVER 8,000,000
24 – TAX AMOUNT AND RATES UNDER THE
GRADUATED INCOME TAX TABLE
 24 – ANSWER:
0%
20%
30,000 + 25% OF EXCESS OVER 250,000
130,000 + 30% OF EXCESS OVER 500,000
490,000 + 32% OF EXCESS OVER 2,000,000
2,410,000 + 35% OF EXCESS OVER 5,000,000
 25 – THREE RULES ON CENTAVOS IN THE
COMPUTATION OF INDIVIDUAL INCOME TAX
 25 – ANSWER:
1) CENTAVOS ARE ALLOWED IN THE GROSS
INCOME AND DEDUCTIONS
2) IN THE TAXABLE INCOME, 50 CENTS OR
MORE ARE CONSIDERED P1.00
3) IN THE TAXABLE INCOME, CENTAVOS LESS
THAN 50 CENTS ARE DISREGARDED
26 – RULE # 1: THOSE WHOSE GROSS ANNUAL
SALES OR RECEIPTS AND OTHER NON-
OPERATING INCOME DO NOT EXCEED THE
THRESHOLD OF P3,000,000
 26 – ANSWER:
1) WITH INCOME LEVEL NOT OVER P250,000
– EXEMPT FROM INCOME TAX
2) WITH INCOME LEVEL P250,000 AND
ABOVE – [OPTION 1] 8% ON GROSS SALES
OR RECEIPTS IN EXCESS OF 250,000
[OPTION 2] GRADUATED TAX ON THE TAXABLE
INCOME
27 – RULE # 2: THOSE WHOSE GROSS SALES
OR RECEIPTS AND OTHER NON-OPERATING
INCOME EXCEED THE THRESHOLD OF
P3,000,000
 27 – ANSWER:
GRADUATED TAX ON THE TAXABLE INCOME
28 – INCOME TAX RULE ON MIXED INCOME
EARNERS
 28 – ANSWER:
ON COMPENSATION INCOME: GRADUATED
RATES + ON INCOME FROM BUSINESS OR
PROFESSION: RULES # 1 AND 2
 29 – MR. A, A RESIDENT CITIZEN, HAD A
GROSS COMPENSATION INCOME OF P240,00
IN 2018. HOW MUCH WAS THE INCOME TAX?
29 – ANSWER:
P0.00
 30 – MR. B, A RESIDENT CITIZEN, HAD A
GROSS COMPENSATION INCOME OF P300,000
IN 2018.
30 – ANSWER:
P10,000
 31 – MR. C, A RESIDENT CITIZEN, HAD A
GROSS COMPENSATION INCOME OF
P2,100,000 IN 2018. HOW MUCH WAS THE
INCOME TAX?
31 – ANSWER:
P522,000
 32 – MR. D IS IN BUSINESS WITH THE
FOLLOWING DATA IN A YEAR: GROSS SALES
(P2,000,000), BUSINESS EXPENSES
(P1,800,000). HOW MUCH WAS THE INCOME
TAX?
32 – ANSWER:
P0.00
 33 – MR. E IS IN BUSINESS WITH THE
FOLLOWING DATA IN A YEAR: GROSS SALES
(P2,000,000), BUSINESS EXPENSES (P900,000).
HOW MUCH WAS THE INCOME TAX?
 33 – ANSWER:
OPTION 1 (P140,000)
OPTION 2 (P220,000)
 34 – MR. F IS IN BUSINESS WITH THE
FOLLOWING DATA IN A YEAR: GROSS SALES
(P4,000,000), BUSINESS EXPENSES
(P2,900,000). HOW MUCH WAS THE INCOME
TAX?
34 – ANSWER:
P220,000
 35 – MISS F HAD THE FOLLOWING DATA IN
2018: GROSS RECEIPTS FROM PROFESSION
(P4,500,000); EXPENSES ON THE PRACTICE OF
PROFESSION (P2,500,000); GROSS
COMPENSATION INCOME AS A CEO IN A
PRIVATE CORPORATION (P6,000,000). HOW
MUCH WAS THE INCOME TAX?
35 – ANSWER:
P2,410,000
36 – RULES ON THE COMPUTATION OF
INCOME TAX OF MARRIED TAXPAYERS
 36 – ANSWER:
EACH SPOUSE SHALL COMPUTE HIS OR HER
INCOME TAX SEPERATELY; AND ANY INCOME
THAT CANNOT BE DEFINITELY IDENTIFIED AS
INCOME EXCLUSIVELY EARNED BY EITHER OF
THE SPOUSES WILL BE DIVIDED EQUALLY
BETWEEN THEM IN THE DETERMINATION OF
TAXABLE INCOME.
 37 – SPOUSES MR. A (OPTION 2) AND MRS. A (OPTION 1)
HAD THE FOLLOWING DATA IN A YEAR:
• GROSS SALES OF MR. A FROM BUSINESS (P4,500,000)
• GROSS RECEIPTS OF MRS. A FROM PRACTICE OF
PROFESSION (P900,000)
• GROSS RENT INCOME (P500,000)
• COST AND EXPENSES, BUSINESS OF MR. A (P2,500,000)
• COST AND EXPENSES, PROFESSION OF MRS. A (P20000)
• EXPENSES ON RENTAL PROPERTY (P200,000)
 37 – ANSWER:
MRS. A – OPTION 1 (630,000); MRS. A –
OPTION 2 (683,000)
 38 – FINAL TAX ON INTEREST FROM
CURRENCY DEPOSITS, TRUST FUNDS AND
DEPOSIT SUBSTITUTES (INDIVIDUALS)
 38 – ANSWER:
20% FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT
NRA-NETB)
39 – FINAL TAX ON ROYALTIES (INDIVIDUALS)
 39 – ANSWER:
FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT NRA-
NETB):
20% – IN GENERAL
10% – ON BOOKS AS WELL AS LITERARY AND
MUSICAL COMPOSITIONS
40 – FINAL TAX ON PRIZES (INDIVIDUALS)
 40 – ANSWER:
FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT NRA-
NETB):
P10,000 OR LESS – GRADUATED INCOME TAX
RATE
MORE THAN P10,000 – 20%
41 – FINAL TAX ON WINNINGS (INDIVIDUALS)
 41 – ANSWER:
FOR ALL INDIVIDUAL TAXPAYERS (EXCEPT NRA-
NETB):
IN GENERAL – 20%
FROM PCSO AND LOTTO AMOUNTING TO
P10,000 OR LESS – EXEMPT
42 – FINAL TAX ON INTEREST INCOME FROM A
DEPOSITORY BANK UNDER THE EXPANDED
FOREIGN CURRENCY DEPOSIT SYSTEM
(INDIVIDUALS)
 42 – ANSWER:
FOR CITIZENS AND RESIDENT ALIEN – 15%
43 – FINAL TAX ON CASH AND/OR PROPERTY
DIVIDENDS RECEIVED BY AN INDIVIDUAL
FROM A DOMESTIC CORPORATION/ JOINT
STOCK COMPANY/ INSURANCE OR MUTUAL
FUND COMPANIES/ REGIONAL OPERATING
HEADQUARTER OF MULTINATIONAL
COMPANIES (INDIVIDUALS)
 43 – ANSWER:
FOR CITIZENS AND RESIDENT ALIEN – 10%
FOR NRA-ETB – 20%
44 – FINAL TAX ON SHARE OF AN INDIVIDUAL
IN THE DISTRIBUTABLE NET INCOME AFTER
TAX OF A PARTNERSHIP (EXCEPT GPPS)/
ASSOCIATION, A JOINT ACCOUNT, A JOINT
VENTURE OR CONSORTIUM TAXABLE AS
CORPORATION OF WHICH HE IS A MEMBER
OR CO-VENTURE
 44 – ANSWER:
FOR CITIZENS AND RESIDENT ALIEN – 10%
FOR NRA ETB – 20%
 45 –
CAPITAL GAINS TAX FROM SALE, EXCHANGE
OR OTHER DISPOSITION OF REAL PROPERTY
LOCATED IN THE PHILIPPINES, CLASSIFIED AS
CAPITAL ASSET (INDIVIDUALS)
 45 – ANSWER:
FOR ALL INDIVIDUAL TAXPAYERS– 6%
 46 – FINAL TAX FOR INTEREST INCOME FROM
LONG-TERM DEPOSIT (5 YEARS) OR
INVESTMENT IN THE FORM OF SAVINGS,
COMMON OR INDIVIDUAL TRUST FUNDS,
DEPOSIT SUBSTITUTES, INVESTMENT
MANAGEMENT ACCOUNTS AND OTHER
INVESTMENTS EVIDENCED BY CERTIFICATES IN
SUCH FORM PRESCRIBED BY THE BANGKO
SENTRAL NG PILIPINAS (BSP)
 46 – ANSWER:
FOR ALL INDIVIDUAL TAXPAYERS - EXEMPT
 47 – FINAL TAX RATES ON INCOME FROM
PRETERMINATED LONG-TERM DEPOSIT OR
INVESTMENT… (INDIVIDUALS)
 47 – ANSWER:
4 TO LESS THAN 5 YEARS – 5%
3 TO LESS THAN 4 YEARS – 12%
LESS THAN 3 YEARS – 20%
 48 – NET CAPITAL GAINS TAX FROM SALE OF
SHARES OF STOCK NOT TRADED IN THE STOCK
EXCHANGE
 48 – ANSWER:
FOR CITIZENS AND RESIDENT ALIEN – 15%
FOR NRA ETB/NETB – 5% TO AMOUNT NOT
EXCEEDING P100,000 AND 10% TO ANY
AMOUNT EXCEEDING P100,000
49 – INCOME TAX FOR NON-RESIDENT ALIENS
NOT ENGAGED IN TRADE OR BUSINESS IN THE
PHILIPPINES
 49 – ANSWER:
25% OF GROSS INCOME DERIVED FROM ALL
SOURCES WITHIN THE PHILIPPINES