1. The excess of the fair value of leased property at the inception of the lease over its cost or carrying
amount should be classified by the lessor as
a. Unearned income from a sales-type lease.
b. Unearned income from a direct-financing lease.
c. Manufacturer’s or dealer’s profit from a sales-type lease.
d. Manufacturer’s or dealer’s profit from a direct financing lease.
2. In a lease that is recorded as a sales-type lease by the lessor, interest revenue
a. Should be recognized in full as revenue at the lease’s inception.
b. Should be recognized over the period of the lease using the straight-line method.
c. Should be recognized over the period of the lease using the interest method.
d. d. Does not arise.
3. Under IFRS what is the interest rate used by lessees to capitalize a lease when the implicit rate cannot
be determined?
a. The prime rate.
b. The lessor’s published rate.
c. The lessee’s average borrowing rate.
d. The lessee’s incremental borrowing rate.
4. Justification for the method of determining periodic deferred tax expense is based on the concept of
a. Matching of periodic expense to periodic revenue.
b. Objectivity in the calculation of periodic expense.
c. Recognition of assets and liabilities.
d. Consistency of tax expense measurements with actual tax planning strategies.
5. Temporary differences arise when revenues are taxable
After they are recognized in financial income
income
a.
Yes
b.
Yes
c.
No
d.
No
Before they are recognized in financial
Yes
No
No
Yes
6. Which of the following differences would result in future taxable amounts?
a. Expenses or losses that are deductible after they are recognized in financial income.
b. Revenues or gains that are taxable before they are recognized in financial income.
c. Expenses or losses that are deductible before they are recognized in financial income.
d. Revenues or gains that are recognized in financial income but are never included in taxable income.
7. A temporary difference that would result in a deferred tax liability is
a. Interest revenue on government bonds.
b. Accrual of warranty expense.
c. Excess of tax depreciation over financial accounting depreciation.
d. Subscriptions received in advance.
8. A deferred tax liability is computed using
a. The current tax laws, regardless of expected or enacted future tax laws.
b. Expected future tax laws, regardless of whether those expected laws have been enacted.
c. Current tax laws, unless enacted future tax laws are different.
d. Either current or expected future tax laws, regardless of whether those expected laws have been
enacted.
9. Which of the following is true regarding reporting deferred taxes in financial statements prepared in
accordance with IFRS?
a. Deferred tax assets and liabilities are classified as current and noncurrent based on their expiration
dates.
b. Deferred tax assets and liabilities may only be classified as noncurrent.
c. Deferred tax assets are always netted with deferred tax liabilities to arrive at one amount presented on
the balance sheet.
d. Deferred taxes of one jurisdiction are offset against another jurisdiction in the netting process.
10. Toller Corp. reports in accordance with IFRS. The controller of the company is attempting to prepare
the presentation
of deferred taxes on Toller’s financial statements. Which of the following is correct about the presentation
of deferred tax assets and liabilities under IFRS?
a. Current deferred tax assets are netted against current deferred tax liabilities.
b. All noncurrent deferred tax assets are netted against noncurrent deferred tax liabilities.
c. Deferred tax assets are never netted against deferred tax liabilities.
d. Deferred tax assets are netted against deferred tax liabilities if they relate to the same taxing
authority
11. A retained earnings appropriation can be used to
a. Absorb a fire loss when a company is self-insured.
b. Provide for a contingent loss that is probable and reasonably estimable.
c. Smooth periodic income.
d. Restrict earnings available for dividends.
12. Financial statements are structured representation of the financial position and financial performance
of an entity. To meet the objective of providing information about financial position, financial
performance and cash flows of an entity, financial statements should provide information about all of
the following, except
A. Assets, liabilities and equity
B. Income and expenses, including gains and losses
C. Contributions by and distribution to owners in their capacity as owners.
D. Nature of the entity’s business activities
13. Which statement is true concerning fair presentation of financial statements?
I.
Fair presentation requires the faithful representation of the effects of transactions, other events
and condition.
II.
In virtually all circumstances, an entity achieves a fair presentation by compliance with applicable
SEC and tax regulations.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
14. Which statement is incorrect concerning “materiality and aggregation”? A.
An entity shall present separately each material class of similar items.
B. An entity shall present separately material items of a dissimilar nature or function.
C. If a line item is not individually material, it is aggregated with other items either in the financial
statements or in the notes.
D. An entity shall provide a specific disclosure required by PFRS even if the information is not
material.
15. The line items in the statement of financial position include all of the following, except
A. Investment property
B. Total of assets classified as held for sale
C. Biological assets
D. Property, plant and equipment analyzed by class
16. When an entity breaches an undertaking under a long-term loan agreement on or before the end of
the reporting period with the effect that the liability becomes payable on demand
I.
The liability is classified as current if the lender has agreed after the reporting period and before
the issuance of the statements no to demand payment as a consequence of the breach.
II.
The liability is classified as noncurrent if the lender agreed on or before the end of the reporting
period to provide a grace period for at least twelve months after the reporting period within which to rectify
the breach.
A. I only
B. II only
C. Either I or II
D. Neither I nor II
17. Other comprehensive income includes all of the following, except
A. Gain and loss arising from translating the financial statements of a foreign operation.
B. Gain and loss on remeasuring available for sale financial asset.
C. The effective portion of gain and loss on hedging instrument in a cash flow hedge.
D. Dividend paid to shareholders.
18. These are amounts reclassified to profit or loss in the current period that were recognized in other
comprehensive income in the current or previous period.
A. Prior period errors
B. Reclassification adjustments
C. Unusual and irregular items
D. Correcting entries
19. What is the “first item” presented in the notes to financial statements?
A. Statement of compliance with PFRS.
B. Summary of significant accounting policies.
C. Supporting information for items presented in of the financial statements.
D. Other disclosures, including contingent liabilities, unrecognized contractual commitments and
nonfinancial disclosures.
20. Nonfinancial disclosures include all of the following, except
A. The unlimited life of the entity
B. The domicile and legal form of the entity, its country of incorporation and registered office address.
C. Description of the nature of the entity’s operations and its principal activities.
D. The name of the parent and the ultimate parent of the group.
21. Under PAS 10, which of the following statements is true regarding events after reporting period?
I.
Adjusting events after reporting period are events that provide evidence of conditions that existed
at the end of the reporting period.
II.
Nonadjusting events after reporting period are events that are indicative of conditions that arose
after the end of reporting period.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
22. Adjusting events after reporting period include all of the following, except
A.
The settlement of a court case after the issuance of the financial statements that confirms
that the entity has a present obligation.
B.
The bankruptcy of a customer which occurs after the reporting period and before issuance of
statements resulting to a loss on a trade receivable account.
C.
The discovery of fraud or errors after reporting period and before issuance of statements that
show that the financial statements were incorrect.
D.
Determination after the reporting period and before the issuance of the statements of the cost of
assets purchased before the end of reporting period.
23. Non adjusting events after reporting period include all of the following, except
A. A major business combination after the reporting period.
B. Expropriation of major assets by government after reporting period.
C. Destruction of a major production plant by fire on or before the end of reporting period.
D. Announcing a plan to discontinue an operation after reporting period.
24. A party is related to an entity if the party, directly or indirectly through one or more intermediaries I.
Controls, is controlled by or is under common control with the entity.
II. Has an interest in the entity that gives it significant influence over the entity.
III. Has joint control over the entity.
A and II only
B. I and III only
C. II and III only
D. I, II and III
25. Which of the following is not related party of an entity?
A. A shareholder of the entity owning 30% of the ordinary shares
B. An entity providing banking facilities to the entity
C. An associate of the entity
D. Key management personnel of the entity
26. A related party transaction is a transfer of resources, services or obligations between
A. Related parties, regardless of whether a price is charged.
B. Related parties only when a price is charged.
C. unrelated parties, regardless of whether a price is charged.
D. unrelated parties only when a price is charged.
27. These are the specific principles, bases, conventions, rules and practice applied by an entity in
preparing and presenting financial statements.
A. Accounting policies
B. Accounting principles
C. Accounting standards
D. Accounting concepts
28. It is an adjustment of the carrying amount of an asset or a liability or the amount of the periodic
consumption of an asset that results from the assessment of the present status and expected future
benefit and obligation associated with the asset and liability.
A. Change in accounting estimate
B. Change in accounting policy
C. Correction of a prior period error
D. Change in reporting entity
29. This means “applying a new accounting policy to transactions, other events and conditions as if that
policy had always been applied”.
A. Retrospective application
B. Retrospective restatement
C. Prospective application
D. Prospective restatement
30. This means “applying a new accounting policy to transactions occurring after that date at which the
policy changed”.
A. Retrospective application
B. Prospective application
C. Retrospective restatement
D. Prospective restatement
31. This means “correcting the recognition, measurement and disclosure of amounts of elements of
financial statements as if a prior period error never occurred.”
A. Retrospective application
B. Retrospective restatement
C. Prospective application
D. Prospective restatement
32. An entity changes its accounting policy if I.
It is required by law.
II. The change will result in providing reliable and more relevant information about the entity’s financial
position financial performance and cash flows.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
33. 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
34. An entity shall prepare a statement of cash flows and present it as
A. Supplementary financial statement
B. Note to financial statement
C. Supporting schedule for the amount appearing as cash and cash equivalent
D. An integral part of the entity’s basic financial statements.
35. Which of the following statements is/are true?
I. Accounting is a service activity intended to fulfill a useful function in society
II. Accounting involves the art of recording, classifying and summarizing transaction and events,
and interpreting
the results thereof.
III. Accounting is an art but not a science
IV. Accounting provides quantitative financial information intended to be useful in making
economic decisions
a. I, II, III, IV
b. I, II, III
c. I, II, IV
d. II, III, IV
36. The branch of accounting concerned with the presentation of financial information primarily for use of
third person outside of business enterprise.
a. Financial Accounting
c. Government Accounting
b. Management Accounting
d. All of the above
37. General-purpose information is
a. not intended to satisfy the specialized needs of individual users.
b. intended to satisfy the specialized needs of individual users
c. not intended to satisfy the common needs of individual users.
d. Provided by managerial accounting.
38. The specific methods used by accountants in carrying out t5he general guidelines provided by GAAP,
including the numerous rules specifying how financial data should be recorded, classified,
summarized and reported are referred to as
a. accounting postulates
c. accounting procedures
b. accounting conventions
d. accounting principles
39. “Goods and services used (“expenses”) during the fiscal period can be associated with the revenue
earned during the same fiscal period”. This postulate referred to as
a. Matching
b. Going concern
c. Historical Cost
d. Specific-separate entity
40. “Exception to the application of accounting theory are permitted if the amount involve is not material;
financial reporting is concerned only with information that is significant enough to affect evaluations or
decisions.” This convention is called
a. Prudence
b. Objectivity
c. Consistency
d. Materiality
41. “The same accounting procedures for a given entity should be used from one period to the next.
Changes may however be made if it will result in more accurate or useful information for decision
making provided it disclosed”. The convention is called
a. Prudence
b. Objectivity
c. Consistency
d. Materiality
42. Information has the quality of relevance when
I.
It influences the economic decisions of users by helping them evaluate past, present or future
events or confirming or correcting their past evaluations.
II.
It is free from bias and error and can be depended upon by users to represent faithfully that which
it either purports to represent or could reasonably be expected to represent.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
43. To be reliable (choose the correct one)
A. The information must represent faithfully the transactions it purports to represent.
B. Transactions are accounted for in accordance with their legal from and not with their
substance and economic reality.
C. The information must be neutral, that is, free from bias.
D. The information must be complete within the bounds of materiality and cost.
44. Which statement is incorrect concerning constraints on relevant and reliable information?
A. In achieving a balance between relevance and reliability, the overriding consideration is how best to
satisfy the economic decision-making needs of users.
B. The balance between benefit and cost is a pervasive constraint rather than a qualitative characteristic.
C. The cost of providing information should exceed the benefits derived from the information.
D. To provide information on a timely basis, it may often be necessary to report before all aspects of
transaction or event are known, thus impairing reliability.
45. Which statement is incorrect concerning materiality?
A.
Information is material if its omission or misstatement could influence the economic decision of
users taken on the basis of the financial statements.
B.
Materiality depends on the absolute size of the item or error judged in the particular
circumstances of its omission or misstatement.
C.
Materiality provides a threshold or cutoff point for useful information rather than being a primary
qualitative characteristic.
D.
Materiality of items depends on their individual or collective influence on the economic decision of
users.
46. Which of the following statements is true in relation to the term “understandability”?
I.
An essential quality of information provided in financial statements is that it is readily
understandable by users.
II.
Information about complex matters even if relevant should be excluded from financial statements
merely on the grounds that it may be too difficult for certain users to understand.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
47. An important implication of this qualitative characteristic is that users are informed of the accounting
policies employed, changes in those policies and the effects of such changes.
A. Consistency
B. Comparability
C. Full disclosure
D. Materiality
48. Which of the following statements in relation to “comparability” is true?
I.
The need for comparability should not be confused with where uniformity and should not be
allowed to become an impediment to the introduction of improved accounting standards.
II.
It is appropriate for an entity to leave its accounting policies unchanged when more relevant and
reliable alternatives exist.
A. I only
B. II only
C. Both I and II
D. Neither I nor II
49. Technically, this arises in the course of the ordinary regular activities of an entity and is referred to by
a variety of different names including sales, interest, dividends, royalties and rent.
A. Income
B. Gain
C. Profit
D. Revenue
50. Current cost is the
A.
Amount of cash or cash equivalent paid or the fair value of the consideration given at the time of
acquisition.
B.
Amount of cash or cash equivalent that would have to be paid if the same or an equivalent
asset was acquired currently.
C.
Amount of cash or cash equivalent that could currently be obtained by selling the asset in an
orderly disposal.
D.
Discounted value of the future net cash inflows that an item is expected to generate in the normal
course of business.
51. Which is the correct sequence for recording transactions and preparing financial statements?
A. Journal, ledger, trial balance, financial statements
B. Ledger, trial balance, journal, financial statements
C. Financial statements, trial balance, ledger, journal
D. Ledger, journal, trial balance, financial statements
52. Which financial statement covers a period of time?
A. Statement of financial position
B. Income statement
C. Statement of cash flows
D. Both income statement and statement of cash flows
53. It is the accounting device that is used to store the recorded monetary information from the entity’s
transactions and events.
A. Account
B. Journal
C. Ledger
D. Source document
54. Accumulated depreciation is an example of
A. Nominal and adjunct account
B. Real and adjunct account
C. Nominal and contra account
D. Real and contra account