IAS 1 - Presentation of Financial Statements
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1.
Regarding the presentation of the statement of financial position, which of the following
statements is correct?
a. PAS 1 requires that the line item "Property, plant
and equipment" be the first line
item to be presented in the financial statements.
b. The use of different measurement bases for different classes of assets suggests that
their nature or function differs and, therefore, that an
entity presents them as
separate line items.
c. When the statement of financial position is presented using the current and
noncurrent classification, the line item "Cash and
cash equivalents" should always be
presented first under the current assets section.
d. When an entity opts not to present its statement of
financial position using the
current and noncurrent classification, no disclosure
in the notes is necessary for
assets and liabilities expected to be realized or settled within 12 months and beyond
12 months after the reporting date.
2.
As of year-end, an entity had unsettled income taxes a. a separate line
to the government. Such liability is
item in the current
charged to the "Income taxes payable" account and liabilities section
is expected to be settled within
twelve months after the reporting date. In the statement of financial position prepared
as of year-end, the liability for the taxes is normally
shown as
a. a separate line item in the current liabilities section
b. included in "Trade and other payables" in the current liability section
c. a separate line item in the noncurrent liabilities
section
d. a separate line item in the current assets section
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b. The use of
different measurement bases for different classes of
assets suggests
that
their nature or
function differs
and, therefore,
that an entity presents them as
separate line
items.
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3.
When the entity's normal operating cycle is not clear- a. 12 months
ly identifiable, it is assumed to be
a. 12 months
b. 3 months
c. 6 months
d. no assumption
4.
This refers to presenting separately on the face of
b. Materiality and
financial statements items which are
aggregation
material and combining immaterial items with similar
items.
a. Offsetting
b. Materiality and aggregation
c. Fair presentation
d. Frequency of reporting
5.
An asset shall be classified as current when it satis- d. it is cash or
fies any of the following criteria,
a cash equivalent
except
that is restricted
a. it is expected to be realized in, or is intended for
sale or consumption in, the entity's
normal operating cycle
b. it is held primarily for the purpose of being traded
c. it is expected to be realized within twelve months
after the balance sheet date
d. it is cash or a cash equivalent that is restricted
6.
All of the following statements are correct, except
e. All of these are
a. The operating cycle of an entity is the time between correct.
the acquisition of assets for
processing and their realization in cash or cash
equivalents.
b. When the entity's normal operating cycle is not
clearly identifiable, its duration is
assumed to be twelve months.
c. Current assets include assets (such as inventories
and trade receivables) that are
sold, consumed or realized as part of the normal
operating cycle even when they are
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not expected to be realized within twelve months after
the balance sheet date.
d. Some liabilities are part of the working capital used
in the entity's normal operating
cycle. Such operating items are classified as current
liabilities even if they are due to
be settled more than twelve months after the balance
sheet date.
e. All of these are correct.
7.
A liability shall be classified as current when it satisfies any of the following criteria,
except
a. it is expected to be settled in the entity's normal
operating cycle
b. it is held primarily for the purpose of being traded
c. it is due to be settled within twelve months after the
balance sheet date
d. the entity has an unconditional right to defer settlement of the liability for at least
twelve months after the balance sheet date.
d. the entity has an
unconditional right
to defer settlement
of the liability for at
least
twelve months after the balance
sheet date.
8.
If an entity expects, and has the discretion, to refinance or roll over an obligation for
at least twelve months after the reporting period under an existing loan facility, it
classifies the obligation as non-current,
a. even if it would otherwise be due within a shorter
period.
b. only if the remaining period to maturity of the original obligation exceeds 12 months
from the end of reporting period.
c. only if the original maturity of the obligation is
longer than 12 months.
d. choices b and c
a. even if it would
otherwise be due
within a shorter
period.
9.
When an entity breaches an undertaking under a
b. the liability
long-term loan agreement on or
is classified as
before the balance sheet date with the effect that the non-current, even
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liability becomes payable on
demand, (choose the incorrect statement)
a. the liability is classified as current, even if the
lender has agreed, after the balance
sheet date and before the authorization of the financial statements for issue, not to
demand payment as a consequence of the breach
b. the liability is classified as non-current, even if the
lender has agreed, after the
balance sheet date and before the authorization of the
financial statements for issue,
not to demand payment as a consequence of the
breach
c. The liability is classified as current because, at the
balance sheet date, the entity
does not have an unconditional right to defer its settlement for at least twelve
months after that date.
d. The liability is normally classified as current, however, the liability is classified as
non-current if the lender agreed by the balance sheet
date to provide a period of
grace ending at least twelve months after the balance
sheet date, within which the
entity can rectify the breach and during which the
lender cannot demand immediate
repayment.
if the lender has
agreed, after the
balance sheet
date and before
the authorization
of the financial
statements for issue,
not to demand
payment as a consequence of the
breach
10. The judgment on whether additional items are pre- c. I, II, III
sented separately on the
statement of financial position is based on an assessment of:
I. the nature and liquidity of assets
II. the function of assets within the entity
III. the amounts, nature and timing of liabilities
IV. the need for external financing
a. I, III
b. I, II
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c. I, II, III
d. II, III, IV
11. Banks and other financial institutions present their
statement of financial position
based on
a. current and noncurrent classification
b. liquidity
c. nature of expense
d. function of expense
b. liquidity
12. Which of the following statements is correct?
a. Normally, all items of income and expense recognized in a period are included in
profit or loss. This includes the effects of changes in
accounting policies and
correction of prior period errors.
b. Other Standards deal with items that may meet the
Conceptual Framework
definitions of income or expense but are usually excluded from profit or loss.
c. The use of different measurement bases for different classes of assets suggests that
their nature or function differs and, therefore, that
they should be presented as one
line item.
d. An entity shall not present any items of income and
expense as extraordinary items
on the face of the income statement but it may do so
in the notes.
e. Entities classifying expenses by nature shall disclose additional information on the
function of expenses, including depreciation and
amortization expense and
employee benefits expense.
b. Other Standards deal with
items that may
meet the Conceptual Framework
definitions of income or expense
but are usually excluded from profit
or loss.
13. In respect of loans classified as current liabilities, if d. I, II, III
the following events occur
between the balance sheet date and the date the
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financial statements are authorized for
issue, these events qualify for disclosure as non-adjusting events in accordance with PAS
10 Events After the Reporting Period.
I. refinancing on a long-term basis
II. rectification of a breach of a long-term loan agreement
III. the receipt from the lender of a period of grace to
rectify a breach of a long-term loan
agreement ending at least twelve months after the
balance sheet date
a. I, II
b. II
c. II, III
d. I, II, III
14. The main purpose of the statement of financial posi- c. items of valtion is to reflect
ue, debts and net
a. the fair value of the entity's assets at some point in worth.
time.
b. the status of the entity 's assets in case of forced
liquidation of the firm.
c. items of value, debts and net worth.
d. the firm's potential for growth in stock values in the
stock market.
15. As a minimum, the face of the statement of financial d. Goodwill
position shall include all of the
following line items, except
a. Biological assets
b. Investment property
c. Deferred tax assets and liabilities
d. Goodwill
16. Which one of the following is not required to be pre- d. Contingent liasented as minimum information
bility.
on the face of the statement of financial position,
according to PAS 1?
a. Investment property.
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b. Investments accounted under the equity method.
c. Biological assets.
d. Contingent liability.
17. Which of the following item is not an element of work- b. treasury stock
ing capital?
a. temporary investments
b. treasury stock
c. good-in process
d. cash in bank
18. The ratio of total cash, trade receivables and marketable securities to current
liabilities is
a. current ratio
b. acid test ratio
c. working capital
d. receivable turnover
b. acid test ratio
19. The following statements relate to the concept of
asset. Which is false?
a. The primary characteristic of an asset is its capacity to provide the entity with
probable economic benefits.
b. There is an expiration of economic benefits when
an asset is used up in the
production of another asset.
c. A business entity may recognize an asset even if it
does not possess legal title.
d. The assets of an entity result from past transactions or other past events.
b. There is an expiration of economic
benefits when an
asset is used up in
the
production of another asset.
20. According to PAS1 Presentation of Financial State- b. I and III
ments, which of the following must
be included in an entity's statement of financial position?
I. Investment property
II. Number of shares authorized
III. Provisions
IV. Shares in an entity owned by that entity
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a. I, II, and III
b. I and III
c. III and IV
d. all of these
21. According to PAS1 Presentation of Financial State- c. I and IV
ments, which of the following must
be included in an entity's statement of financial position?
I. Cash and cash equivalents
II. Property, plant and equipment analyzed by class
III. Share capital and reserves analyzed by class
IV. Deferred tax
a. I, II, and III
b. I and III
c. I and IV
d. all of these
22. Are the following statements true or false, according d. True, True
to PAS1 Presentation of
Financial Statements?
I. Biological assets should be shown in the statement
of financial position.
II. The number of shares authorized for issue should
be shown in the statement of
financial position or the statement of changes in equity or in the notes.
a. False, False
b. False, True
c. True, False
d. True, True
23. In which section of the statement of financial position d. Non-current asshould cash that is restricted
sets
to the settlement of a liability due 18 months after the
reporting period be presented,
according to PAS1 Presentation of Financial Statements?
a. Current assets
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b. Equity
c. Non-current liabilities
d. Non-current assets
24. In which section of the statement of financial position a. Current liabilishould employment taxes that
ties
are due for settlement in 15 months' time be presented, according to PAS1 Presentation
of Financial Statements?
a. Current liabilities
b. Current assets
c. Non-current liabilities
d. Non-current assets
25. DECRY TO BELITTLE Company has a loan due for
c. Non-current liarepayment in six months' time, but
bilities
DECRY has the option to refinance for repayment two
years later. DECRY plans to
refinance this loan. In which section of its statement
of financial position should this
loan be presented, according to PAS1 Presentation of
Financial Statements?
a. Current liabilities
b. Current assets
c. Non-current liabilities
d. Non-current assets
26. A liability shall be classified as current in all of the
following instances, except
a. It is a non-trade payable due to be settled within
twelve months after balance sheet
date or within the normal operating cycle, whichever
is longer.
b. It is expected to be settled in the entity's normal
operating cycle.
c. It is held primarily for the purpose of being traded.
d. The entity does not have an unconditional right to
defer settlement of the liability
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a. It is a non-trade
payable due to
be settled within
twelve months after balance sheet
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for at least twelve months after the balance sheet
date.
27. In case of a breach of a loan covenant with the effect
that the liability becomes
payable on demand, the liability is classified as noncurrent when
a. It is not probable that further breaches or violations
will occur within twelve
months of the balance sheet date.
b. The lender has agreed, prior to the approval of the
financial statements, not to
demand payment as a consequence of the breach.
c. The lender has agreed after the balance sheet date
and before the statements are
authorized for issue to provide a grace period ending
at least twelve months after
the balance sheet date.
d. The lender has agreed on or before the balance
sheet date to provide a grace period
ending at least twelve months after the balance sheet
date for the entity to rectify
the breach.
d. The lender has
agreed on or before the balance
sheet date to provide a grace period
ending at least
twelve months after the balance
sheet date for the
entity to rectify
the breach.
28. A currently maturing long-term debt is classified as
noncurrent when
a. The borrower has the discretion to refinance or roll
over the liability for at least
twelve months after the reporting period under the
existing loan facility.
b. The lender has the discretion to refinance or roll
over the liability for at least twelve
months after the balance sheet date under the existing loan facility.
c. An agreement to reschedule payment on a
long-term basis is completed after the
reporting period but before the financial statements
are authorized for issue.
d. Equity security has in fact been issued after the
a. The borrower
has the discretion
to refinance or roll
over the liability for
at least
twelve months after the reporting
period under the
existing loan facility.
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reporting period and before the
statements are authorized for issue the proceeds
from which are used to settle the
liability at maturity date.
29. The basis for classifying assets as current or noncur- d. Inventory back
rent is the period of time
into cash, or 12
normally elapsed from the time the accounting entity months, whichevexpends cash to the time it
er is longer
converts
a. Inventory back into cash, or 12 months, whichever
is shorter.
b. Receivables back into cash, or 12 months, whichever is longer.
c. Tangible fixed assets back into cash, or 12 months.
whichever is longer.
d. Inventory back into cash, or 12 months, whichever
is longer.
30. Which of the following is/are a limitation(s) of a Bal- d. all of these
ance Sheet?
I. It does not contain certain assets and liabilities
despite its claim to be the statement
of all assets and liabilities
II. Some factors, which have a vital bearing on the
earnings of the entity, are not
disclosed
III. Personal judgment plays a great part in determining the figures on the balance
sheet.
a. I
b. II and III
c. III
d. all of these
31. Which of the following accounts would not be classi- d. 2-year Note Refied under current assets on the
ceivable
balance sheet?
a. Supplies
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b. Prepaid Insurance
c. 90-day Note Receivable
d. 2-year Note Receivable
32. In Philippine settings, current assets and current lia- b. liquidity
bilities are most commonly
presented in the balance sheet in the order of
a. materially
b. liquidity
c. chronologically
d. alphabetically
33. When classifying assets as current and non-current
for reporting purposes,
a. The amount at which current assets are carried and
reported must reflect realizable
cash values.
b. Prepayments for items such as insurance or rent
are included in an "other assets"
group rather than as current assets as they will ultimately be expensed.
c. The time period by which current assets are distinguished from non-current assets
is determined by the seasonal nature of the business.
d. Assets are classified as current if they are reasonably expected to be realized in cash,
or consumed during the normal operating cycle.
d. Assets are classified as current
if they are reasonably expected
to be realized in
cash,
or consumed during the normal operating cycle.
34. The balance sheet allows investors to assess all of c. The capital
the following except
structure of the
a. How efficient the company's assets are used.
company
b. The liquidity and financial flexibility of the company.
c. The capital structure of the company
d. The net realizable value of the company.
35. Most components of the balance sheet are reported c. historical cost
at
a. historical cost plus allowance for inflation.
b. fair value.
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c. historical cost.
d. replacement value.
36. Which statement is correct concerning presentation c. Both I and II
of information on the face of the
statement of financial position?
I. Additional line items, headings and subtotals shall
be presented on the face of the
balance sheet when such presentation is relevant to
an understanding of the entity's
financial position.
II. PAS 1 does not prescribe the order or format in
which items are to be presented.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
37. For accounting purposes, the "operating cycle concept"
a. Causes the distinction between current and noncurrent items to depend on whether
they will affect cash within one year.
b. Permits some assets to be classified as current
even though they are expected to be
realized beyond one year from the end of the reporting period.
c. Has become obsolete.
d. Affects the income statement but not the balance
sheet.
b. Permits some
assets to be classified as current
even though they
are expected to be
realized beyond
one year from the
end of the reporting period.
38. The operating cycle of a business is that span of time
which
a. Coincides with economy's business cycle which
runs from one trough of the
company's business activity to the next.
b. Corresponds with its natural business year which
runs from one trough of the
particular firm's business activity to the next.
d. Runs from cash
disbursement for
items of inventory
through their sale
to the
realization of cash
from sale
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c. Is set by the industry's trade association usually on
an average length of time for all
firms which are members of the association.
d. Runs from cash disbursement for items of inventory through their sale to the
realization of cash from sale.
39. The current asset section of a balance sheet most
likely will include:
a. all deferred income taxes resulting from interperiod
income tax allocation
b. goodwill arising in a business combination accounted for as acquisition
c. rent receivable for a security deposit on a lease
d. a receivable from a customer not collectible for
over one year
d. a receivable
from a customer
not collectible for
over one year
40. Which one of the following assets is similar to certain c. long term paycurrent assets, but is not one?
ment of expense
a. Accounts receivable
b. Prepaid insurance
c. long term payment of expenses
d. short-term investment in equity security
41. A corporation paid a six year insurance premium on c. Deferred
January 1, Year 1 ,for P12,000. It
charges
recorded the prepayment in two asset accounts -one
with a P2,000 debit balance and
one with a P10,000 debit balance. Under which of the
following captions should the
account with the P10,000 balance be classified on a
balance sheet dated January, Year 1?
a. Operational assets
b. Other assets
c. Deferred charges
d. Current assets
42. Which of the following statements is true?
a. deferred charges are distinguished from prepaid
expenses on the basis of the time
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a. deferred
charges are distinguished from pre-
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over which their benefits will be realized.
b. working capital is a very useful measure because
it reveals how much would be left
if all the assets were to be sold and the proceeds were
used to pay all the current
liabilities.
c. the normal operating cycle of a business is the
average length of the time from cash
expenditure, to inventory, to sale and back to accounts receivable.
d. Retained earnings often is restricted (or appropriated) to ensure that cash will be
available for plant expansion earnings are restricted
the cash cannot be spent
paid expenses on
the basis of the
time
over which their
benefits will be realized.
43. A public utility reports noncurrent assets as the first c. Industry pracitem on its balance sheet. This
tice
is an example of
a. Improper statement presentation
b. Conservatism
c. Industry practice
d. Substance over form
44. Deferred tax assets and liabilities shall be classified b. Noncurrent
on the balance sheet as
a. Current
b. Noncurrent
c. Partly current and partly noncurrent
d. Part of equity
45. A liability shall be classified as a current liability when
it satisfies any of the
following criteria, except
a. It is expected to be settled in the entity's normal
operating cycle.
b. It is primarily held for the purpose of being traded.
c. It is expected to be realized within twelve months
after the balance sheet date.
d. It is cash or a cash equivalent that is restricted from
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d. It is cash or
a cash equivalent that is restricted from being exchanged or used
to
settle a liability for at least
twelve months af-
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being exchanged or used to
settle a liability for at least twelve months after the
balance sheet date
ter the balance
sheet date
46. Which obligations are classified as current liabilities a. I and III
even if they are due to be
settled after more than twelve months from the end of
the reporting period?
I. Trade payables and accruals for employee and other
operating cost that are part of
the entity's working capital
II. A portion of long-term interest-bearing liabilities
III. Bank overdrafts arising from settlements of purchases of inventory
IV. Dividends payable
a. I and III
b. I, III, and IV
c. III only
d. all of these
47. When an entity breaches a covenant under a
d. II only
long-term loan agreement on or before
the balance sheet date with the effect that the liability
becomes payable on demand, the
liability is classified as noncurrent when
I. The lender has agreed after the balance sheet date
and before the financial
statements are authorized for issue not to demand
payment as a consequence of the
breach.
II. The lender has agreed on or before the balance
sheet date to provide a grace period
ending at least twelve months after the balance sheet
date for the entity to rectify
the breach.
a. Both I and II
b. Neither I nor II
c. I only
d. II only
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48. A corporation owed the following notes payable,
d. All are current liwhich will mature during the
abilities
coming year. The corporation plans to settle the notes
as follows:
Note payable A: Refinance by issuing a new 10 year
bond
Note payable B: Give the holder merchandise inventory
Note payable C: Give the creditor a long term investment in equity instruments of
another entity
Which note is properly classified as a current liability?
a. Note payable A
b. Note payable B
c. Note payable C
d. All are current liabilities
49. Which of the following statements is (are) correct? c. II is true
I. Presentation of assets or liabilities by order of liquidity can be chosen anytime
should management so desires it.
II. A liability held primarily for the purpose of being
traded is to be classified as current
a. I is true
b. I and II are true
c. II is true
d. I and II are not true
50. The operating cycle of an enterprise
a. is the time between the acquisition of materials
entering into a process and their
realization in cash or an instrument that is readily
convertible into cash.
b. causes the distinction between current and noncurrent items to depend on whether
they will affect cash within one year.
c. is the period of time normally elapsed from the time
the enterprise expends cash to
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a. is the time between the acquisition of materials entering into a
process and their
realization in cash
or an instrument
that is readily convertible into cash
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the time it converts trade receivables back into cash.
d. Is a period of one year.
51. An operating cycle
a. is twelve months or less in length
b. is the average time required for a company to
collect its receivable
c. is used to determine current assets when it is
longer than one year
d. starts with inventory and ends with cash
c. is used to determine current assets when it is
longer than one
year
52. Working capital is
d. Current assets
a. The group assets which enables the business to less current liabilioperate profitably
ties.
b. Capital which has been reinvested in the business.
c. Unappropriated retained earnings.
d. Current assets less current liabilities.
53. How is working capital defined?
a. Current assets
a. Current assets minus current liabilities
minus current liab. Total current assets
bilities
c. Capital contributed by shareholders
d. Capital contributed by shareholders plus retained
earnings
54. Of the following items, the one which should be classified as a current asset is
a. Trade installment receivables normally collectible
in 18 months.
b. Cash designated for the redemption of callable
preferred stock.
c. Cash surrender value of a life insurance policy of
which the company is beneficiary.
d. A deposit on machinery ordered, delivery of which
will be made within sixteen
months.
a. Trade installment receivables normally
collectible in 18
months.
55. According to PAS 1, a liability shall be classified as
current when (choose the
incorrect one)
c. It is due to settled within twelve
months after bal-
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a. It is expected to be settled in the entity's normal
operating cycle.
b. It is held primarily for the purpose of being traded.
c. It is due to settled within twelve months after balance sheet date or within the
normal operating cycle, whichever is longer.
d. The entity does not have an unconditional right to
defer settlement of the liability
for at least twelve months after the balance sheet
date.
ance sheet date or
within the
normal operating
cycle, whichever is
longer.
56. A currently maturing long-term debt is classified as
noncurrent when
a. an agreement to reschedule payment on a
long-term basis is completed after the end
of reporting period but before the statements are
authorized for issue.
b. equity security has in fact been issued after the end
of reporting period but before
the statements are authorized for issue, the proceeds
from which are used to settle
the liability on the date of maturity.
c. the lender has the discretion to refinance or roll
over the liability for at least twelve
months after the end of reporting period under an
existing loan facility.
d. the borrower has the discretion to refinance or roll
over the liability for at least
twelve months after the end of reporting period under
an existing loan facility
d. the borrower
has the discretion
to refinance or roll
over the liability for
at least
twelve months after the end of reporting period under an existing
loan facility
57. Some borrowing agreements incorporate covenants
which have the effect that the
liability becomes payable on demand if certain conditions related to the covenants are
breached. In these circumstances, the liability is classified as noncurrent when:
d. The lender has
given the lender,
on or before
the balance sheet
date, a grace period
to rectify the
a. The lender has agreed, prior to the approval of the breach ending
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financial statements, not to
demand payment as a consequence of the breach.
b. It is not probable that further breaches or violations
will occur within twelve
months of the balance sheet date.
c. The lender has agreed after the balance sheet date
and before the statements are
authorized for issue to provide a grace period ending
at least twelve months after
the balance sheet date.
d. The lender has given the lender, on or before the
balance sheet date, a grace period
to rectify the breach ending at least twelve months
after the balance sheet date.
at least twelve
months after the
balance sheet
date.
58. The current assets section of a balance sheet should
never include
a. a receivable from a customer not collectible for
over one year.
b. the premium paid on short-term bond investment.
c. goodwill arising from the purchase of a going business not expected to be disposed
of within 12 months from end of reporting period.
d. customers' accounts with credit balances.
c. goodwill arising
from the purchase
of a going business not expected
to be disposed
of within 12
months from end
of reporting period.
59. PAS 1 requires an entity to include in a complete set
of financial statements a
statement of financial position as at the beginning of
the preceding period whenever the
entity retrospectively applies an accounting policy or
makes a retrospective restatement
of items in its financial statements, or when it reclassifies items in its financial
statements. The purpose of this requirement is
a. to discourage auditors from subsuming in retained
earnings unaccounted
differences in accounts and required reconciliations
b. to promote vigilance on entities over errors and to
discourage frequent changes in
c. to provide information that is
useful in analyzing
an entity's financial statements
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accounting policies
c. to provide information that is useful in analyzing an
entity's financial statements
d. all of these
60. Which of the following statements is incorrect?
a. Comprehensive income includes all revenues, expenses, gains, losses, and prior
period adjustments.
b. PAS 1 requires an entity to disclose income tax
relating to each component of other
comprehensive income.
c. The presentation of disclosures on dividends in the
statement of profit or loss and
other comprehensive income is not permitted.
d. An entity may present components of other comprehensive income gross of tax or
net of tax on the face of the statement of profit or loss
and other comprehensive
income.
a. Comprehensive income includes all revenues, expenses,
gains, losses, and
prior
period adjustments.
61. PAS 1 requires an entity to disclose reclassification
adjustments and income tax
relating to each component of other comprehensive
income. Reclassification
adjustments are
a. the amounts reclassified to profit or loss in the
current period that were currently or
previously recognized in other comprehensive income.
b. the amounts reclassified to total comprehensive
income that were previously
recognized in equity.
c. the amounts that previously caused the statement
elements to be misstated.
d. the amounts that previously recognized using an
inappropriate accounting policy
a. the amounts reclassified to profit or loss in the
current period that
were currently or
previously recognized in other
comprehensive income.
62.
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Which of the following statements is correct regarding the provisions of PAS 1?
a. PAS 1 requires the presentation of an income statement that includes items of
income and expense recognized in profit or loss.
Items of income and expense not
recognized in profit or loss should be presented in
the statement of changes in
equity, together with owner changes in equity.
b. PAS 1 labels the statement of changes in equity
comprising profit or loss, other items
of income and expense and the effects of changes in
accounting policies and
correction of errors as 'statement of recognized income and expense.
c. PAS 1 requires an entity to disclose income tax
relating to each component of other
comprehensive income.
d. PAS 1 permits non-owner changes in equity to be
presented together with owner
changes in equity in the statement of changes in
equity.
c. PAS 1 requires
an entity to disclose income tax
relating to each
component of other
comprehensive income.
63. Identify the correct statement.
a. PAS 1 does precludes presenting financial statements based on a 53-week period or
longer, because the resulting financial statements are
likely to be materially different
from those that would be presented for one year.
b. When the method of presentation adopted by an
entity is the classification based on
liquidity, the entity need not disclose amounts of assets or liabilities expected to be
recovered or settled after more than twelve months.
c. For financial institutions, such as banks, a presentation of assets and liabilities based
on the current/noncurrent presentation is more appropriate.
d. An entity is permitted to present some of its assets
d. An entity is permitted to present
some of its assets
and liabilities using a
current/non-current classification
and others in
order of liquidity.
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and liabilities using a
current/non-current classification and others in order
of liquidity.
e. The Function of Expense Method should be used in
income statement presentation
and the Nature of Expense should be used in the
notes. Entities are prohibited from
using the Nature of Expense Method in presenting of
income statements.
64. As a minimum, the face of the income statement shall c. I, II, III, IV, V, VII
include line items that present
the following amounts for the period:
I. revenue
II. finance costs
III. share of the profit or loss of associates and joint
ventures accounted for using the
equity method
IV. tax expense
V. a single amount comprising the total of (i) the
post-tax profit or loss of
discontinued operations and (ii) the post-tax gain or
loss recognized on the
measurement to fair value less costs to sell or on the
disposal of the assets or
disposal group(s) constituting the discontinued operation
VI. a single amount comprising the total of the
post-tax profit or loss on early
extinguishment of long-term financial debts
VII. profit or loss
a. I, II, V, VII
b. I, II, III, IV, V, VII
c. I, II, III, IV, V, VII
d. all of these
65. When an entity opts to present the income statement c. Director's remuclassifying expenses by
neration
function, which of the following is not required to be
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disclosed as "additional
information"?
a. Depreciation expense.
b. Employee benefits expense.
c. Director's remuneration.
d. Amortization expense.
66. Which of the following items is not classified as "oth- a. Extraordinary
er comprehensive income"?
gains from extina. Extraordinary gains from extinguishment of debt guishment of debt
b. Foreign currency translation adjustments
c. Minimum pension liability equity adjustment for a
defined-benefit pension plan
d. Unrealized gains for the year on FVOCI investments
67. Which of the following statements is correct regard- a. Accumulated
ing reporting comprehensive
other comprehenincome?
sive income is
reported in the
a. Accumulated other comprehensive income is re- shareholders' eqported in the shareholders' equity
uity
section of the statement of financial position.
section of the
b. A separate income statement is required.
statement of financ. Comprehensive income must include all changes cial position.
in shareholders' equity for the
period.
d. Comprehensive income is reported in the year-end
statements but not in the interim
statements.
68. Which of the following statements is incorrect?
a. The choice of method of presenting expenses is not
irrevocable. If the other method
is expected to present more relevant information, a
change should made. However,
changes between permitted accounting policies
should not be made so often so as
not to violate the principle of consistency.
b. In a single-statement presentation, all items of in24 / 49
d. Dividends received from investments in associates accounted for using the
equity
method are not
recognized in profit or loss but may
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come and expense are presented
together in one statement.
c. In a two-statement presentation, the first statement
('income statement') presents
income and expenses recognized in profit or loss and
the second statement
('statement of comprehensive income') begins with
profit or loss and presents, in
addition, items of income and expense that PFRSs
require or permit to be recognized
outside profit or loss.
d. Dividends received from investments in associates
accounted for using the equity
method are not recognized in profit or loss but may
be recognized in other
comprehensive income.
be recognized in
other
comprehensive income.
69. Which of the following statements is incorrect?
a. An investor in an associate may present in its other
comprehensive income its share
in the associate's other comprehensive income.
b. An investor in an associate shall present in profit
or loss its share in the associate's
profit or loss.
c. An investor in an associate shall not recognize
dividends received from the associate
in its profit or loss but may recognize the dividends
received in its other
comprehensive income.
d. Dividends received by an investor from its associate are accounted for as reduction
in the investment in associate account.
c. An investor
in an associate
shall not recognize dividends received from the
associate
in its profit or loss
but may recognize
the dividends received in its other
comprehensive income.
70. Which of the following is not included in comprehen- d. gains on reissive income?
suance of treasury
a. translation differences related to foreign operashares
tions
b. fair value gains or losses on FVOCI securities.
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c. fair value gains or losses on FVPL securities.
d. gains on reissuance of treasury shares
71. Which of the following is not included in comprehen- d. gains on retiresive income?
ment of ordinary
a. Remeasurements of the net defined benefit liability shares
(asset)
b. revaluation gains on property, plant, and equipment
c. fair value gains or losses on investment properties.
d. gains on retirement of ordinary shares
72. Income and expenses for the period is presented in d. a or b
a. a statement of profit or loss and other comprehensive income
b. a separate income statement and a statement of
comprehensive income
c. income statement only
d. a or b
73. Components of other comprehensive income are presented in the
a. statement of profit or loss and other comprehensive income
b. separate income statement
c. notes
d. statement of changes in equity
a. statement of
profit or loss and
other comprehensive income
74. It comprises items of income and expense including c. Other comprereclassification adjustments
hensive income
that are not recognized in profit or loss as required or
permitted by other PFRSs.
a. Comprehensive income
b. Profit or loss elements
c. Other comprehensive income
d. Nominal accounts
75. The components of other comprehensive income ex- c. Fair value gains
clude
and losses on
a. Changes in revaluation surplus
FVPL securities
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b. Remeasurements of the net defined benefit liability
(asset)
c. Fair value gains and losses on FVPL securities
d. Effective portion of a cash flow hedge
76. Identify the incorrect statement.
a. An entity shall not present any items of income or
expense as extraordinary items, in
the statement of profit or loss and other comprehensive income or the separate
income statement (if presented), but such items may
be disclosed in the notes.
b. An entity shall disclose the amount of income tax
relating to each component of
other comprehensive income, including reclassification adjustments, either in the
statement of profit or loss and other comprehensive
income or in the notes.
c. An entity may present components of other comprehensive income either net of
related tax effects, or before related tax effects with
one amount shown for the
aggregate amount of income tax relating to those
components.
d. An entity may present reclassification adjustments
in the statement of profit or loss
and other comprehensive income or in the notes.
a. An entity shall
not present any
items of income or
expense as extraordinary items, in
the statement of
profit or loss and
other comprehensive income or the
separate
income statement
(if presented), but
such items may
be disclosed in the
notes.
77. An entity sold FVOCI securities during the year. In
preparing the statement of profit
or loss and other comprehensive income, the entity
should
a. compute the gain by deducting the historical cost
of the FVOCI from the proceeds
b. should not present the gain in the statement of
profit or loss and other
comprehensive income but in equity
c. make a reclassification adjustment for the cumulative unrealized gains or losses
d. recognize directly in equity any
cumulative unrealized gains or losses on the FVOCI
sold
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previously recognized in equity.
d. recognize directly in equity any cumulative unrealized gains or losses on the FVOCI
sold
78. Reclassification adjustments may arise on which of
the following?
a. on settlements of employee pension benefits under
a defined benefit plan
b. changes in revaluation surplus
c. on derecognition of FVOCI securities
d. when a hedged forecast transaction affects profit
or loss
d. when a hedged
forecast transaction affects profit
or loss
79. Reclassification adjustments will not arise on all of
the following, except
a. derecognition of foreign operation
b. changes in remeasurements of the net defined
benefit liability (asset)
c. on derecognition of FVOCI
d. changes in revaluation surplus
a. derecognition of
foreign operation
80. An entity shall present an analysis of expenses rec- d. a or b
ognized in profit or loss using a
classification based on
a. Function
b. Nature
c. Liquidity
d. a or b
81. Increases in revaluation surplus are presented in the b. item of other
statement of profit or loss and
comprehensive inother comprehensive income as
come
a. income
b. item of other comprehensive income
c. revenue
d. not presented
82. Are the following statements true or false, according c. True, False
to PAS1 Presentation of
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Financial Statements?
I. Provisions should be recognized in the statement
of financial position.
II. A revaluation surplus on non-current assets
should be recognized in profit or loss.
a. False, False
b. False, True
c. True, False
d. True, True
83. Are the following statements true or false, according d. True, True
to PAS1 Presentation of
Financial Statements?
I. An entity presenting a single statement of profit or
loss and other comprehensive
income should present a statement of changes in
equity
II. An entity presenting a separate income statement
and a statement of comprehensive
income should present a statement of changes in
equity
a. False, False
b. False, True
c. True, False
d. True, True
84. What is the purpose of reporting comprehensive income?
a. To report changes in equity due to transactions
with owners.
b. To report a measure of overall enterprise performance.
c. To replace net income with a better measure.
d. To combine income from continuing operations
with income from discontinued
operations and extraordinary items.
85. All of the following are not acceptable methods of
reporting other comprehensive
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b. To report a
measure of overall enterprise performance
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income and its components, except
a. In a statement of comprehensive income.
b. In a statement of income
c. In the notes only
d. In a statement of changes in equity.
a. In a statement
of comprehensive
income
86. Accounting income is a concept in which:
a. income is measured as the amount of "real wealth"
that an entity could consume
during a period and be as well off at the end of that
period as it was at the beginning
b. the transactions approach is used to record income, expenses, gains and losses
throughout the reporting period
c. market values adjusted for the effects of inflation
or deflation are used to calculate
real wealth
d. income equals the change in market value of the
firm's outstanding common stock
for the period
b. the transactions
approach is used
to record income,
expenses, gains
and losses
throughout the reporting period
87. Which of the following items would cause earnings to
differ from comprehensive
income for an enterprise in an industry not having
specialized accounting principles?
a. Unrealized loss on investments classified as FVOCI
securities.
b. Unrealized loss on investments classified as held
for trading securities.
c. Loss on exchange of similar assets.
d. Loss on exchange of dissimilar assets.
a. Unrealized loss
on investments
classified as FVOCI securities.
88. Comprehensive income excludes changes in equity c. Dividends paid
resulting from which of the
to stockholders
following?
a. Loss from discontinued operations.
b. Effect of changes in accounting estimate to current
operations
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c. Dividends paid to stockholders.
d. Unrealized loss on securities classified as FVOCI.
89. Which of the following options for displaying compre- d. I and II.
hensive income is(are)
preferred under PAS 1?
I. A continuation of profit or loss at the bottom of the
statement of profit or loss and
other comprehensive income.
II. A separate statement that begins with profit or loss.
III. In the statement of changes in equity.
a. I.
b. II.
c. II and III.
d. I and II.
90. Which of the following is not classified as other comprehensive income?
a. Remeasurements of the net defined benefit liability
(asset).
b. Subsequent decreases of the fair value of FVOCI
securities that have been previously
written down as impaired.
c. Decreases in the fair value of securities measured
at amortized cost.
d. None of the above.
c. Decreases in
the fair value of securities measured
at amortized cost.
91. When a full set of general-purpose financial statements are presented,
comprehensive income and its components should
a. Appear as a part of discontinued operations, extraordinary items, and cumulative
effect of a change in accounting principle.
b. Be reported net of related income tax effect, in total
and individually.
c. Appear in a supplemental schedule in the notes to
the financial statements.
d. Be displayed in a financial statement that has the
same prominence as the other
d. Be displayed in
a financial statement that has the
same prominence
as the other
components of
a complete set
of financial statements
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components of a complete set of financial statements.
92. Which of the following is deducted from goods avail- d. Ending inventoable for sale to determine cost of
ry
goods sold?
a. Purchases
b. Freight in
c. Beginning inventory
d. Ending inventory
93. The account Freight-out is shown on the income
statement as a
a. component of the cost of goods sold. .
b. deduction from sales.
c. selling expense
d. general and administrative expense.
c. selling expense.
94. Which of the following names is not associated with b. Statement of fithe income statement?
nancial position
a. Profit or loss
b. Statement of financial position
c. Statement of Operations
d. a and c
95. The income statement heading will specify which of b. a period of time
the following?
a. a point in time
b. a period of time
c. a or c
d. a and c
96. HIATUS BREAK Co. engages in a buy-and-sell business. During the year, HIATUS
prepared two income statements covering the same
period. One statement is prepared
using the nature of expense method while the other
one is prepared using the function
of expense method. Which of the following statements is correct regarding these income
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b. The sum of
the amounts in
the line items "net
change in inventories" and "net
purchases" in the
nature of expense
method income
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statements?
a. The nature of expense method income statement
will show higher profit than the
function of expense method.
b. The sum of the amounts in the line items "net
change in inventories" and "net
purchases" in the nature of expense method income
statement equals the amount of
"cost of sales" in the function of expense method
income statement.
c. The same disclosure requirements apply whether
HIATUS uses the nature of
expense method or the function of expense method.
d. A "gross profit" line item will appear in both income
statements.
97. Sales revenue less cost of goods sold is called
statement equals
the amount of
"cost of sales" in
the function of expense method income statement
a. gross profit.
a. gross profit.
b. cost of sales
c. net earnings.
d. earnings before income taxes.
98. The "bottom line" in a statement of profit or loss and d. total compreother comprehensive income is
hensive income
a. profit or loss
b. other comprehensive income
c. gross profit
d. total comprehensive income
99. Amounts earned by an entity from its main operating b. revenues
activities are
a. income
b. revenues
c. gains
d. b or d
100. Is a retailer's Interest Expense an operating expense b. non-operating
or a non-operating expense?
expense
a. operating expense
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b. non-operating expense
c. a or b
d. neither a nor b
101. The income statement line item gross profit will ap- b. multiple-step
pear on which income statement
format?
a. single-step
b. multiple-step
c. a or b
d. neither a nor b
102. The income statement format that segregates the op- b. multiple-step
erating income and expenses
from the non-operating income and expenses is the
a. single-step
b. multiple-step
c. a or b
d. neither a nor b
103. Interest earned on investments would appear in
which section of a multiple-step
income statement?
a. non-operating
b. operating
c. would not appear
d. as part of gross income
d. as part of gross
income
104. When alternative acceptable accounting methods ex- b. greatest amount
ist, a better quality of earnings
of assets currently
generally is produced from selecting an accounting
method that has the effect of
reporting the
a. greatest amount of retained earnings currently.
b. greatest amount of assets currently.
c. lowest amount of future earnings.
d. lowest amount of current earnings
105. Which of the following items would not be reported d. Discontinued
on a statement of profit or loss
operations
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and other comprehensive income?
a. Revaluation losses
b. Prior period adjustments
c. Share in associate's revaluation gain
d. Discontinued operations
106. Gains or losses from extraordinary items should be d. not specifically
shown on the income statement
identified as extraa. immediately following income from continuing op- ordinary items
erations.
b. after discontinued operations.
c. as an item in other revenues and expenses.
d. not specifically identified as extraordinary items
107. Which of the following best describes an income
statement?
a. It reports income and expenses for a specific accounting period.
b. It reports the amount and composition of assets
and liabilities for a specific
accounting period.
c. It reports investment activities for a specified accounting period.
d. It reports cash receipts and cash disbursements
for a specific accounting period.
a. It reports income and expenses for a specific
accounting period.
108. The Income Statement:
d. I only
I. reflects the current operating performance of the
entity.
II. indicates whether the entity is healthy and growing
or not.
III. explains the changes in assets, liabilities and equity of the entity.
IV. is a snapshot of a entity's operations at a given
time.
a. I, II & IV
b. II & III
c. I, II, III & IV
d. I only
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109. Gross profit is the difference between net sales and d. freight-out incost of goods sold. Which of the
curred by the sellfollowing most likely will not affect gross profit?
er
a. write-down of inventories
b. freight incurred by the consignor in delivering consigned goods to the consignee
c. allowance for sales returns
d. freight-out incurred by the seller
110. Which of the following statements is (are) correct? b. V only
I. Under the accrual basis of accounting, income is
recognized in the period in which
cash is received.
II. Net sales minus Cost of goods sold equals income
from operations.
III. The combination of Selling expenses and Administrative expenses is referred to as
total expenses.
IV. Cash basis of accounting best measures profitability during a short time interval.
V. Gross profit minus all other expenses recognized
in profit or loss except cost of sales
is best defined as the profit or loss for the year.
a. III and V
b. V only
c. III, IV and V
d. all of these
111. Depreciation is a process of allocating the cost of a c. rational and sysbuilding over its useful life in a(n)
tematic manner
a. equal and equitable manner.
b. accelerated and accurate manner.
c. rational and systematic manner.
d. conservative market based manner
112. The cost of a depreciable long-lived asset is expensed
a. when it is paid for.
b. as the asset benefits the company.
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b. as the asset
benefits the company
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c. in the period in which it is acquired.
d. in the period in which it is disposed of.
113. Amortization is the process of
a. valuing an asset at its fair value.
b. increasing the value of an asset over its useful life
in a rational and systematic
manner.
c. allocating the cost of an asset to expense over its
useful life in a rational and
systematic manner.
d. writing down an asset to its fair value each reporting period.
c. allocating the
cost of an asset
to expense over its
useful life in a rational and
systematic manner
114. Total comprehensive income is (choose the incorrect
statement)
a. the change in equity during a period resulting from
transactions and other events,
other than those changes resulting from transactions
with owners in their capacity
as owners.
b. includes increases or decreases in revaluation surplus during the period.
c. includes both unrealized gains or losses on FVPL
securities and FVOCI.
d. includes only changes in assets that are not recognized in profit or loss but rather
credited directly in equity (e.g. revaluation surplus
and changes in fair values of
FVOCI)
d. includes only
changes in assets
that are not recognized in profit or
loss but rather
credited directly in
equity (e.g. revaluation surplus and
changes in fair values of
FVOCI)
115. The major distinction between the multiple-step and a. Operating and
single-step income statement
nonoperating data
formats is the separation of
a. Operating and nonoperating data
b. income tax expense and administrative expenses
c. cost of goods sold expense and administrative
expenses.
d. The effect on income taxes of extraordinary items
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and the effect on income taxes of
profit or loss from ordinary activities
116. Which of the following should be included in general d. No, No
and administrative expenses?
(Item #1) Interest; (Item #2) Advertising
a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No
117. Accumulated other comprehensive income should d. No, No
be reported on the balance sheet
as a component of (Item #1) Retained earnings; (Item
#2) Additional paid-in capital
a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No
118. Which of the following changes during a period is not b. Stock dividends
a component of other
issued to sharecomprehensive income?
holders.
a. Unrealized gains or losses on FVOCI
b. Stock dividends issued to shareholders.
c. Foreign currency translation adjustments.
d. Minimum pension liability adjustments
119. Corrections of errors are reported in
a. Other comprehensive income.
b. Other income/(expense).
c. Retained earnings.
d. Stockholders' equity
c. Retained earnings.
120. Which of the following changes during a period is not b. Treasury share,
a component of other
at cost.
comprehensive income?
a. Minimum pension liability.
b. Treasury share, at cost.
c. Foreign currency translation adjustment on foreign
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operation.
d. Reclassification adjustments
121. All of the following components are shown in the
statement of profit or loss and
other comprehensive income net of applicable income taxes except
a. Gain or loss on valuation adjustments of FVOCI
b. Cumulative effect of a change in accounting principle.
c. Discontinued operations.
d. Remeasurements of the net defined benefit liability
(asset)
b. Cumulative effect of a change in
accounting principle.
122. PAS 1 requires an entity to include in a complete set
of financial statements a
statement of financial position as at the beginning of
the preceding period whenever the
entity retrospectively applies an accounting policy or
makes a retrospective restatement
of items in its financial statements, or when it reclassifies items in its financial
statements. The purpose of this requirement is
c. to provide information that is
useful in analyzing
an entity's financial statements
a. to discourage auditors from subsuming in retained
earnings unaccounted
differences in accounts and required reconciliations
b. to promote vigilance on entities over errors and to
discourage frequent changes in
accounting policies
c. to provide information that is useful in analyzing an
entity's financial statements
d. any of these
123. Which of the following statements is incorrect regard- d. When an ining financial statement
come statement is
presentation?
presented it is part
of a complete set
a. PAS 1 affects only the presentation of owner
of financial
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changes in equity and of comprehensive
income. It does not change the recognition, measurement or disclosure of specific
transactions and other events required by other
PFRSs.
b. PAS 1 requires an entity to present all owner
changes in equity in a statement of
changes in equity.
c. All non-owner changes in equity are required to be
presented in one statement of
profit or loss and other comprehensive income or in
two statements
d. When an income statement is presented it is part
of a complete set of financial
statements and shall be displayed immediately after
the statement of comprehensive
income.
statements and
shall be displayed
immediately after
the statement of
comprehensive
income.
124. Which of the statements is false?
a. A loss caused
by impairment in
a. A loss caused by impairment in the value of an
the value of an
intangible asset should be classified
intangible asset
as an extraordinary item.
should be classib. If a franchise becomes worthless prior to the end fied
of its estimated useful life, the
as an extraordiunamortized balance in the franchise account should nary item.
be immediately written off as
an impairment loss.
c. A lease bonus payment made in advance should be
debited to a leasehold account,
which is an asset account.
d. Leasehold improvements should be amortized
over the shorter of the term of the
lease or the useful life of the improvements.
125. Which of the following statements is(are) correctly
stated?
I. The write-off of intangible assets generally should
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d. III only
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be reported as part of continuing
operations but disclosed in the notes as an extraordinary item.
II. For an item to be disclosed in the notes as extraordinary but presented as part of
continuing operations in the profit or loss, the event
or transaction which gave rise
to it should either be unusual in nature or infrequency
of occurrence.
III. An income statement is usually not sufficient to
describe total change in equity
during a period.
IV. The income statement of a period should include
and properly describe all items of
income and expenses that do not result from transactions with owners.
V. An income statement is sufficient to describe the
total change in owners' equity
during a period because changes arise from sources
other than profit oriented
activities.
a. I, III, IV
b. I, III, V
c. III, IV
d. III only
126. Which of the following items belong to the classes of c. III, IV and V only
expenses?
I. expenditures to acquire assets
II. distribution to owners
III. costs of assets used to produce revenue
IV. costs of assets ceasing to provide future economic benefits
V. costs of assets that have expired during the period
a. all of these
b. I, III, IV and V only
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c. III, IV and V only
d. III and IV only
127. The method of income determination which meab. yes, no
sures the results of enterprise
transactions and involves the determination of the
amount of revenue earned by an
entity during a given period and the amount of expenses applicable to that revenue is
known as the:
(Item #1) Transaction approach; (Item #2) Economic
approach
a. no, yes
b. yes, no
c. no, no
d. yes, yes
128. Conventionally, accountants measure income
a. as a change in the value of owners' equity
b. by applying a value-added concept
c. by using a transaction approach
d. by equity method
c. by using a transaction approach
129. According to current standards, profit or loss for the
period
a. Is the same as comprehensive income.
b. Excludes certain income and expenses that are
included in comprehensive income.
c. Include certain income and expenses that are excluded from comprehensive income.
d. Include certain losses that are excluded from comprehensive income.
b. Excludes certain income and
expenses that are
included in comprehensive income.
130. Comprehensive income includes which of the follow- a. Yes, No
ing?
(Item #1) Operating income; (Item #2) Investments by
owners
a. Yes, No
b. Yes, Yes
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c. No, Yes
d. No, No
131. Comprehensive income includes which of the follow- b. Yes, Yes
ing?
(Item #1)Gross margin; (Item #2) Operating income
a. Yes, No
b. Yes, Yes
c. No, Yes
d. No, No
132. Comprehensive income includes which of the follow- b. Yes, Yes
ing?
(Item #1) Fair value gains; (Item #2) Gross Margin
a. Yes, No
b. Yes, Yes
c. No, Yes
d. No, No
133. Comprehensive income includes which of the follow- a. Yes, No
ing?
(Item #1) Loss on Discontinued Operations; (Item #2)
Investment by Owners
a. Yes, No
b. Yes, Yes
c. No, Yes
d. No, No
134. Periodic net earnings are conventionally measured
by a
a. Transactions approach.
b. Transactions approach including recognition of unrealized gains and losses in other
comprehensive income.
c. Capital maintenance approach.
d. Market value approach including recognition of all
realized gains and some
unrealized losses.
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a. Transactions
approach.
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135. Which of the following statements is incorrect?
b. When preparing financial statea. Reports prepared at the request of an entity's man- ments, the acagement are not general purpose
countant shall
financial statements if they are prepared specifically never assume that
to meet the needs of
the
management only.
business will conb. When preparing financial statements, the accoun- tinue to operate intant shall never assume that the
definitely.
business will continue to operate indefinitely.
c. Applying accrual accounting results in more accurate measurement of profit or loss
for the period than cash basis accounting.
d. One objective of financial reporting is to help financial statement users evaluate the
cash flows of the reporting entity.
136. Which of the following statements is incorrect?
c. Profit or loss
for the period proa. Management motivations can influence the acvides a good meacounting policy choices made.
sure of a busib. Performance evaluation is an objective of financial ness's debt-payreporting.
ing
c. Profit or loss for the period provides a good mea- ability.
sure of a business's debt-paying
ability.
d. PAS 1 requires that the components of total comprehensive income should be
presented prominently in the financial statements
rather than in the notes.
137. Which of the following statements is incorrect?
a. Total comprehensive income
a. Total comprehensive income for the period profor the period provides a good measure of a business's
vides a good meadebt-paying ability.
sure of a busib. PAS 1 requires an entity to disclose reclassification ness's
adjustments and income tax
debt-paying abilirelating to each component of other comprehensive ty.
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income.
c. PAS 1 requires the presentation of dividends recognized as distributions to owners
and related amounts per share in the statement of
changes in equity or in the notes.
Dividends are distributions to owners in their capacity as owners and the statement
of changes in equity presents all owner changes in
equity.
d. PAS 1 requires an entity to disclose comparative
information in respect of the
previous period, i.e., to disclose as a minimum two of
each of the statements and
related notes.
138. Which of the following statements is incorrect?
b. The single-step
and multistep ina. The relationship of current assets and current lia- come statements
bilities provides a good measure of
result in different
a business's debt-paying ability.
profit or loss
b. The single-step and multistep income statements figures.
result in different profit or loss
figures.
c. The difference between gross sales and net sales
is equal to the sum of sales
discounts and returns and allowances.
d. Components of comprehensive income are not
permitted to be presented in the
statement of changes in equity.
139. Which of the following statements is incorrect regard- d. An unrealized
ing comprehensive income?
loss on investments in FVOCI is
a. Comprehensive income is a broad measure of the not recognized in
changes in equity over a period
current earnings
except for contributions from, or distributions to,
and is not a facowners. Comprehensive income
tor in measuring
includes all income items which ultimately increase comprehensive inequity from transactions related
come.
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to non-owner sources.
b. Comprehensive income is broader than profit or
loss and includes certain items of
income and expenses not included in profit or loss.
c. Comprehensive income includes any type of inflow
which culminates to an earning
process, other than from an owner acting in his capacity as owner.
d. An unrealized loss on investments in FVOCI is not
recognized in current earnings
and is not a factor in measuring comprehensive income.
140. PAS 1 requires the presentation of dividends recog- d. statement of
nized as distributions to owners
changes in equity
and related amounts per share in the
or in the notes
a. in the notes
b. statement of financial position or in the notes
c. statement of income, statement of changes in equity, or in the notes
d. statement of changes in equity or in the notes
141. Which of the following statements is incorrect?
d. The choice of
one of the metha. Items of Other Comprehensive Income may be pre- ods of presentsented in the statement of profit
ing expenses is iror loss and other comprehensive income gross of tax revocable, hence,
or net of tax.
once
b. The statement of profit or loss and other compre- chosen it must not
hensive income does not include
be changed untransactions with owners in their capacity as owners. less the going conSuch transactions are
cern assumption
presented in the statement of changes in equity.
becomes
c. All non-owner changes in equity should be present- inappropriate.
ed in a single statement or in two
statements.
d. The choice of one of the methods of presenting
expenses is irrevocable, hence, once
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chosen it must not be changed unless the going concern assumption becomes
inappropriate.
142. Are the following statements true or false, according a. False, False
to PAS1 Presentation of
Financial Statements?
I. Dividends paid should be recognized in the statement of profit or loss and other
comprehensive income.
II. A loss on disposal of assets should be recognized
in the statement of changes in
equity.
a. False, False
b. False, True
c. True, False
d. True, True
143. To prepare a statement of changes in owner`s equity c. the beginning
you need to know
balance in the
capital account
a. the owners' names
b. the date the company started
c. the beginning balance in the capital account
d. the address of the company
144. The first row in a statement of changes in equity is
most likely the
a. profit
b. owners' investments
c. distribution to owners
d. beginning capital
d. beginning capital
145. The statement of changes in equity may prominently d. Components of
display all of the following,
comprehensive inexcept
come for the period
a. Effect of changes in accounting policies
b. Correction of prior period errors
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c. Dividends to owners
d. Components of comprehensive income for the period
146. The preferred method of presenting statement of
changes in equity in current PFRSs
is
a. horizontal presentation where
each component
is presented in
a. horizontal presentation where each component is columns and
presented in columns and
reconciled downreconciled downwards.
wards.
b. vertical presentation where there are at least two
columns representing information
for the current period and the comparative period
c. dramatic presentation
d. high definition and 3D
147. The heading for the statement of changes in equity
contains
a. name of the
business, name of
the statement, and
a. name of the business, name of the statement, and period covered
period covered
b. name of the business, name of the statement, and
current date
c. name of the business, current date, and period
covered
d. name of the business, name of the owner, and
period covered
148. Elements in the equity section is normally reported in c. Permanency
order of:
a. Classes of share capital
b. Time to maturity
c. Permanency
d. Liquidity
149. A complete set of financial statement does not include:
a. a statement of retained earnings
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a. a statement of
retained earnings
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b. a cash flow statement
c. notes to financial statements
d. statement of profit or loss and other comprehensive income
150. Regarding the preparation of a statement of changes c. Components of
in equity, which of the
comprehensive income not presentfollowing statements is incorrect?
ed in the statea. PAS 1 Presentation of Financial Statements rement of profit or
quires an entity to present, in a
loss and other
statement of changes in equity, all owner changes in comprehensive inequity.
come are presentb. All non-owner changes in equity (i.e. comprehen- ed in the statesive income) are required to be
ment of changes
presented in one statement of profit or loss and other in
comprehensive income or in
equity.
two statements (a separate income statement and a
statement of comprehensive
income).
c. Components of comprehensive income not presented in the statement of profit or
loss and other comprehensive income are presented
in the statement of changes in
equity.
d. Components of comprehensive income are not
permitted to be presented in the
statement of changes in equity
151. An entity shall present a statement of changes in
equity showing in the statement all
of the following, except
a. components of total comprehensive income for the
period
b. total comprehensive income for the period
c. the effects of retrospective application or retrospective restatement
d. reconciliation of each component of equity
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a. components of
total comprehensive income for the
period