BALIUAG UNIVERSITY

CPA REVIEW 2014-15

THEORY OF ACCOUNTS

JACF
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1. The overriding criterion by which accounting information can be judged is that of
a. Usefulness for decision making
b. Freedom from bias
c. Timeliness
d. Comparability
2. What is the quality information that gives assurance that it is reasonably free of error and
bias?
a. Relevance
b. Faithful representation
c. Verifiability
d. Neutrality
3. The conceptual framework
a. Includes conservatism which means when in doubt, choose the solution that is least
likely to overstate assets or income and understate liabilities or expenses
b. Excludes conservatism because it is inconsistent with neutrality which
encompasses freedom from bias
c. Includes conservatism as a required quality of accounting information
d. Includes conservatism as a desirable but not required quality of accounting information
4. Proponents of historical cost ordinarily maintain that in comparison with all other valuation
alternatives for financial reporting, statements prepared using historical cost are
a. Verifiable
b. Relevant
c. Indicative of the entitys purchasing power
d. Conservative
5. When economic benefits are expected to arise over several accounting periods and the
association with income can only be broadly or indirectly determined, expenses are
recognized on the basis of
a. Cause and effect association
b. Systematic and rational allocation
c. Immediate recognition
d. Realization
6. Adjustments are often prepared
a. After the statement of financial position date, but dated as of that date
b. After the statement of financial position date, and dated after that date
c. Before the statement of financial position date, but dated as of that date
d. Before the statement of financial position date, and dated after that date
7. The postclosing trial balance
a. Consists of statement of financial position accounts only
b. Will balance if a transaction is not journalized and posted, or if a transaction is
journalized and posted twice
c. Shows that the accounting equation is in the balance at the end of the accounting
period
d. All of the choices are correct regarding the postclosing trial balance
8. Reversing entries
a. Are normally prepared for accrued, prepaid and estimated items
b. Are necessary to achieve a proper matching of revenue and expense
c. Are desirable to exercise consistency and establish standardize procedures
d. Must be made at year-end
9. Which of the following statements regarding reversing entries is incorrect?
a. Deferrals are generally entered in statement of financial position accounts, thus
making reversing entries unnecessary
b. All accruals should be reversed
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c. Adjusting entries for depreciation and bad debts are never reversed
d. Reversing entries change amounts reported in the statement of financial
position for the previous period
10.A third statement of financial position at the beginning of the earliest comparative period
is required
a. When an entity applies an accounting policy retrospectively
b. When an entity makes a retrospective restatement of items in the financial statements
c. When an entity reclassifies items in the financial statements
d. In all of the above cases
11.One criticism not normally aimed at a statement of financial position is
a. Failure to reflect current value information
b. The extensive use of separate classifications
c. An extensive use of estimate
d. Failure to include items of financial value that cannot be recorded objectively
12.Items of dissimilar nature or function
a. Must always be presented separately in financial statements
b. Must not be presented separately in financial statements
c. Must be presented separately in financial statements if material
d. Must be presented separately in financial statements even if immaterial
13.An
a.
b.
c.

entity must disclose comparative information for

The previous comparable for all amounts reported
The previous comparable period for all narrative and descriptive information
The previous comparable period for all amounts reported, and for all
narrative and descriptive information when it is relevant to an understanding
of the current periods financial statements
d. The previous two comparable periods for all amounts reported

14.An entity shall classify an asset as current under all of the following conditions, except
a. The entity expects to realize, or intends to sell or consume it within normal operating
cycle
b. The entity holds the asset primarily for the purpose of trading
c. The entity expects to realize the asset within twelve months after the reporting period
d. The asset is cash or cash equivalent restricted to settle a liability for more
than twelve months after the reporting period
15.Which of the following is not a criteria for the sale of a noncurrent asset held for sale to be
highly probable?
a. Management must be committed to a plan to sell the asset
b. An active program to locate a buyer and compete the plan must have been initiated
c. The asset must be actively marketed for sale at a reasonable price in relation to the
current fair value
d. The sale should be expected to qualify for recognition as a completed sale
within one year from the end of reporting period
16.An entity shall recognize any subsequent increase in fair value less cost of disposal of a
noncurrent asset or disposal group classified as held for sale as
a. Deferred gain as component of equity
b. Deferred gain as component of liability
c. Gain entirely to be included in profit or loss
d. Gain to be included in profit or loss but not in excess of the cumulative
impairment loss previously recognized
17.Which of the following is a requirement for a component of an entity to be classified as
discontinued operation?
a. The activities must permanently cease prior to the financial statements being
authorized for issue
b. The component must comprise a separately reportable segment
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c. The asset must have been classified as held for sale in previous financial statements
d. The component must have been a cash generating unit or group of cash
generating units while being held for use

18.Operating segments that do not meet any of the quantitative thresholds

a. Cannot be considered reportable
b. May be considered reportable and separately disclosed if management
believes that information about the segment would be useful to the users of
the financial statements
c. May be considered reportable if the information is for internal use only
d. May be considered reportable and separately disclosed if this is the practice within the
economic environment in which the entity operates
19.Which of the following statements about major customer disclosure is true?
a. A major customer is defined as one providing revenue which amounts to 10% or more
of the combined external revenue of all operating segments
b. The identities of major customers need not be disclosed
c. The entity shall disclose the total amount of revenue from major customers and the
identity of the segment reporting the revenue
d. All of these statements are true about major disclosure
20.An entity owns a number of farms that harvest produce seasonally. What is encouraged to
be done if the business is highly seasonal?
a. Additional notes should be written in the interim reports about the seasonal nature
b. Disclosure of financial information for the latest and comparative 12-month
period in addition to the interim report
c. Additional disclosure in the accounting policy note
d. No additional disclosure
21.Which is incorrect concerning presentation of comparative interim financial statements?
a. Statement of financial position at the end of the current interim period and
comparative statement of financial position at the end of the immediately preceding
year
b. Statement of comprehensive income for the current interim period and
cumulatively for the current year to date with comparative statement of
comprehensive income for the immediately preceding year
c. Statement of changes in equity cumulatively for the current year to date with
comparative statement for the comparable period of the immediately preceding year
d. Statement cash flows cumulatively for the current year to date with comparative
statement for the comparable period of the immediately preceding year
22.What is the major purpose of an imprest petty cash fund?
a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the employees
d. To effectively control cash disbursements
23.If the cash balance shown in an entitys accounting records is less than the correct cash
balance and neither the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Outstanding checks
c. Bank charges not yet recorded by the entity
d. Deposits in transit
24.What is the preferable presentation of accounts receivable from officers, employees or
affiliated entities in a statement of financial position?
a. As offers to equity
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b. By means of notes only
c. As assets but separately from other receivables
d. As trade notes and accounts receivable if they otherwise qualify as current assets

25.Which of the following is not permitted for accounting for material amount of uncollectible
accounts receivable?
a. Percentage of accounts receivable using allowance method
b. Percentage of sales using allowance method
c. Direct writeoff method
d. All of the choices are acceptable
26.Which of the following statements is incorrect regarding how the impairment assessment
is to be performed on receivables?
a. Receivables that are individually significant should be considered for impairment
separately or individually
b. Receivables that are not individually significant should be assessed for
impairment individually
c. Ant receivable individually assessed as not impaired should be included with the other
receivables that are not individually significant and collectively assessed
d. Any receivables not individually significant should be collectively assessed for
impairment
27.Entities must allocate the cost of all goods available for sale between
a. The cost of goods on hand at the beginning and the cost of goods acquired during the
period
b. The cost of goods on hand at the end and the cost of goods acquired during the period
c. The income statement and the statement of financial position
d. All of the choices are correct
28.How is a significant amount of consignment inventory reported?
a. The inventory is reported separately on the consignors statement of
financial position
b. The inventory is combined with other inventory of the consignor
c. The inventory is reported separately on the consignees statement of financial position
d. The inventory is combined with other inventory of the consignee
29.Which of the following is not an acceptable basis for valuation of inventory?
a. Historical cost
b. Standard cost
c. Prime cost
d. Current selling price less cost to complete and cost to sell
30.Which of the following statements is true regarding writedown and reversal of writedown?
a. Reversal of inventory writedown is prohibited
b. Separate reporting of reversal of inventory writedown is required
c. Entities are required to record inventory writedown in a separate loss account
d. All of the choices are true
31.When the cost of goods sold method is used to record inventory at net realizable value?
a. There is a direct reduction in the selling price of the product that results in a loss
b. A loss is recorded by debiting loss on inventory and crediting inventory
c. Only the portion of the loss attributable to inventory sold during the period is recorded
d. The NRV is substituted for cost and the loss is buried in cost of goods sold
32.Net realizable value is the general rule for valuing which of the following types of
inventory?
a. Commodities held by broker-traders
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b. Computer components for sale to manufacturers
c. Inventories priced on an item by item basis but not those priced on a total inventory
basis
d. All of the choices are measured at NRV
33.Which of the following is an incorrect combination?
Biological Asset
Agricultural Produce
a.
Trees
Felled trees
b.
Dairy cattle
Cheese
c.
Pigs
Carcass
d.
Vines
Grapes

Product After Harvest

Logs, lumber
Milk
Sausage
Wine

34.Which of the following statements is true regarding agricultural produce?

a. In all cases, an entity shall measure agricultural produce at a fair value less cost of
disposal at the point of harvest
b. The fair value of agricultural produce at the point of harvest can always be measured
reliably
c. The fair value measurement of agricultural produce stops at the time of harvest
d. All of these statements are true regarding agricultural produce
35.How should preference shares that are redeemable mandatorily be presented in the
statement of financial position?
a. Noncurrent financial liability
b. Current financial liability
c. Equity
d. Either current or noncurrent financial liability depending on redemption date
36.An entity acquired ordinary shares representing a passive interest. The investees shares
are listed on a stock exchange. Which of the following categories could this investment in
equity shares be classified?
a. Held to maturity
b. Available for sale
c. At fair value through profit or loss
d. Either as available for sale or at fair value through profit or loss
37.An entity make an irrevocable election to present in other comprehensive income changes
in fair value of
a. An investment in equity instruments that is held for trading
b. An investment in equity instruments that is not held for trading
c. A financial asset measured at amortized cost
d. A financial asset measured at fair value through profit or loss
38.Equity investments acquired by an entity which are accounted for by recognizing
unrealized holding gains or losses as component of other comprehensive income are
a. Nontrading where an entity has holdings of less than 20%
b. Trading investments where an entity has holdings of less than 20%
c. Investments where an entity has holdings of between 20% and 50%
d. Investments where an entity has holdings of more than 50%
39.If the price of the underlying is greater than the strike or exercise price, the call option is
a. At the money
b. In the money
c. On the money
d. Out of the money
40.How is the impairment test carried out for an investment in associate?
a. The goodwill is separated from the rest of the investment and is impaired tested
individually
b. The entire carrying amount of the investment is tested for impairment by
comparing the recoverable amount with the carrying amount
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c. The carrying amount of the investment should be compared with the market value
d. The recoverable amounts of all investments in associates should be assessed together
to determine whether there has been an impairment on all investments
41.Which of the following disclosures must be made when the fair value model is used for
investment property?
a. Depreciation method
b. The amount of impairment loss recognized
c. Useful life or depreciation rate
d. Net gains or losses from fair value adjustments

42.If payment for an asset is deferred beyond normal credit terms, the difference between
the total payment and cash price equivalent should be
a. Considered interest expense of the current year
b. Included as part of the asset cost
c. Amortized as interest expense over the life of the asset
d. Amortized as interest expense over the credit period
43.Which of the following statements best describes residual value?
a. The estimated net amount currently obtainable if the asset is at the end of
the useful life
b. The present value of future cash flows to be derived from the asset
c. The amount at which the asset could be exchanged
d. The amount of cash that could currently be obtained by selling the asset in an orderly
disposal
44.What is the theoretical basis of straight line depreciation?
a. The operating efficiency of the asset decreases in later years
b. Service value declines as a function of time rather than use
c. Service value declines as a function of obsolescence rather than time
d. Physical wear and tear are more important than economic obsolescence
45.The carrying amount of an existing old building demolished to make for the construction of
a new building should be
a. Accounted for a loss
b. Capitalized as cost of the new building
c. Charged to the land
d. Charged to the new building if accounted for as inventory
46.Under the revaluation model in accounting for property, plant and equipment
a. Assets must be revalued quarterly
b. Asset must be revalued annually
c. Asset must be revalued at the discretion of management
d. There are no specific rules regarding the frequency of revaluation
47.A grant that becomes receivable as compensation for losses already incurred or for the
purpose of giving immediate financial support should be recognized as income
a. When received
b. Of the period in which it becomes receivable
c. Over 5 years using straight line
d. Over 10 years using straight line
48.Capitalization of borrowing costs
a. Shall be suspended during temporary period of delay
b. May be suspended only during extended period of delay in which active development is
delayed
c. Should never be suspended once capitalization commences
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d. Shall be suspended only during extended period of delay in which active
development is delayed
49.Which of the following is not relevant in determining value in use?
a. The expected future cash flows from the asset
b. The carrying amount of the asset
c. Expectation about possible variation in the amount and timing of future cash flows
d. The time value of money
50.Which accurately describes GAAP regarding accounting for costs of drilling dry holes?
a. Only on the successful effort method may be used
b. Only on full cost method may be used
c. Both the successful effort method and the full cost method may be used
d. Neither the successful effort method nor the full cost method may be used
51.The reason goodwill is referred to as a master valuation account is that
a. It represents the purchase price of a business that is about to be sold
b. It is the difference between the fair value of the net identifiable assets as compared
with the purchase price of the acquired business
c. The value of a business is computed without consideration of goodwill and
then goodwill is added to arrive at a master valuation
d. It is the only account in the financial statements that is based estimated value
52.When an entity successfully defended a patent from infringement by a competitor, the
cost of litigation should be charged to
a. Patent and amortized over the legal life of the patent
b. Legal fees and amortized over five years or less
c. Expense of the period
d. Patent and amortized over the remaining useful life of the patent
53.What is the maximum amortization period mandated for intangible assets?
a. 10 years
b. 20 years
c. 40 years
d. No arbitrary cap on the useful life has been established
54.Which of the following research and development costs should be capitalized and
amortized over current and future periods?
a. Labor and material costs incurred in building a prototype model
b. Cost of testing equipment that will also be used in another separate research
and development project scheduled to begin next year
c. Administrative salaries allocated to research and development
d. Research findings purchased from another company to aid a particular research project
currently in process
55.Which of the following costs should be excluded from research and development expense?
a. Modification of the design of a product
b. Acquisition of R and D equipment for use in current project only
c. Cost of marketing research for a new product
d. Engineering activity to advance the design of product to the manufacturing stage
56.Under PAS 1, which of the following items is not included in the computation of profit or
loss?
a. Unrealized fair value gain of available for sale securities
b. Investment income from associates under equity method
c. Unrealized fair value gain of biological assets
d. Post-tax gain on discontinued operations
57.If financial information provides feedback about previous evaluations, then the information
is considered to have
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a. No value
b. Fair value
c. Predictive value
d. Confirmatory value
58.Under PFRS 8, even if an entity has only one reportable segment, entity-wide information
is disclosed for the entity as a whole about its
a. Product and services
b. Geographical areas and major customers
c. Major customers, products and services
d. Geographical areas, major customers, product and services

59.Which of the following cannot be shown as part of cash in the current asset section of the
balance sheet?
a. Customers check in payment of past due account
b. Cash in a special checking account for payroll
c. Unrestricted compensating balance for a loan
d. Cash deposited with a utility company
60.Which of the following is/are not considered as a change in accounting policy under PAS 8?
I. The application of accounting policy for transactions, other than events or conditions
that differ in substance from those previously occurring
II. The application of a new accounting policy for transactions, other events or conditions
that did not occur previously or were immaterial
a. I only
b. II only
c. I and II
d. None, I and II are considered as a change in accounting policy
61.In interim reporting, which of the following should be accounted for on a time proportion
basis?
a. Depreciation
b. Costs of sales
c. Productivity bonus
d. Inventory value decline
62.Analyze the following statements: 1st statement: Segment reporting standard shall be
applied by entities whose equity of debt securities are publicity traded 2nd statement:
Segment reporting standard shall be applied by entities that are in the process of issuing
equity or debt securities in public securities markets. 3rd statement: If an entity whose
securities are publicly traded prepares financial statements that comply with IFRS, that
entity is encouraged to disclose financial information by segment voluntarily.
a. True, true, true
b. True, false, true
c. True, true, false
d. True, false, true
63.If a single financial report contains both consolidated financial statements of an entity
whose securities are publicly traded and the separate financial statements of the parent or
one or more subsidiaries, segment information need be presented only on the
a. Basis of the parent or one or more subsidiaries financial statements
b. Basis of the parent and one or more subsidiaries financial statements
c. Basis of the parent financial statements
d. Basis of the consolidated financial statements
64. Sometimes an entity disposes of a group of assets, possibly with some directly associated
liabilities, together in a single transaction. Such a disposal group may be a group of , a
single cash-generating unit, or part of a cash-generating unit. The group may include any
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assets and any liabilities of the entity, including current assets, current liabilities and
assets excluded from the measurement requirements of this IFRS.
a. product-generating units
b. expense-generating units
c. revenue-generating units
d. cash-generating units
65.The entity shall measure a non-current asset that ceases -to be classified as held for sale
(or ceases to be included in a disposal group classified as held for sale) at the lower of its
carrying amount before the asset (or disposal group) was classified as held for sale,
adjusted for any depreciation, amortization or revaluations that would have been
recognized had the asset (or disposal group) not been classified as held for sale, and one
of the choices below:
a. its recoverable amount at the date of the subsequent decision not to sell.
b. its fair value at the date of the subsequent decision not to sell.
c. its carrying amount at the date of the subsequent decision not to sell.
d. its disposable amount at the date of the subsequent decision not to sell.
66.Analyze the following statements. [I] Nothing in the IFRS is intended to prohibit or
discourage an entity from publishing a complete set of financial statements In its interim
financial report. 2nd statement: the IFRS prohibits or discourages an entity from including in
condensed interim financial statements more than the minimum line items or selected
explanatory notes as set out in the IFRS
a. True, true
b. False, false
c. False, true
d. True, false
67.If an entity publishes a set of condensed financial statements in its interim financial
reports, those condensed statements shall include, at a minimum, [I] each of the headings
and subtotals that were included in its most recent annual financial statements and the
selected explanatory notes a required by the IFRS. [II] Additional line items or notes shall
be included if their omission would make the condensed interim financial statements
misleading. [III] Basic and diluted earnings per share shall be presented on the face of an
income statement.
a. [I]-[III]
b. [I]-[II]
c. [II]-[III]
d. [I]
68.International Financial Reporting Standards (IFRs) are Standards and Interpretations
adopted by the International Accounting Standards Board (IASB). They comprise: [I]
International Financial Reporting Standards; [II] International Accounting Standards; [III]
Interpretations developed y the International Financial Reporting Interpretations
Committee (IFRIC) or the former Standing Interpretations Committee (SIC).
a. I, II, III
b. I, II
c. I, III
d. II, III
69.A complete set of financial statements normally includes a [statement of financial position]
balance sheet, statement of comprehensive income, [ an income statement], a statement
of changes in financial position (which may be presented in a variety of ways, from
example, as a statement of cash flows or a statements of funds flows), and those notes
and other statements and explanatory material that are an integral part of the financial
statements
a. The statement is true
b. The statement is false
c. The statement is sometimes true but most of the time false
d. The statement is sometimes true but most of the time true
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70.An adjustments 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
of, and expected future benefits and obligations associated with, assets and liabilities.
a. Accounting policies
b. Accounting estimate
c. Material omissions
d. Prior period errors
71.Misstatement of items are material if they could, individually or collectively, influence the
economic decisions of users taken on the basis of the financial statements. Materiality
depends on the size and nature of the omission or misstatement judged in the surrounding
circumstances. The size or nature of the item, or a combination of both, could be the
determining factor.
a. Accounting policies
b. Accounting estimate
c. Material omissions
d. Prior period errors
72.The principal issues in accounting for property, plant and equipment are the (I) recognition
of the assets ,(II) the determination of their carrying amounts and (III) the depreciation
charges, (IV) impairment losses to be recognized
a. I, II, III
b. IV, II, III
c. I, II
d. I, IV
73.Property, plant and equipment excludes the following except one:
a. Property, plant equipment classified as held for sale
b. Biological assets related to agricultural activity
c. Land on which the trees are planted
d. Mineral rights and mineral reserves such as oil, natural gas and similar nonregenerative resources
74.In determining whether an asset that incorporates both intangible and tangible elements,
an entity uses judgment to assess which element is more significant. A computer software
for a computer-controlled machine toll that cannot operate without that specific software is
a. Not an integral part of the related hardware and it is treated as property, plant and
equipment
b. An integral part of the related hardware but treated as intangible asset.
c. An integral part of the related hardware but not treated as property, plant and
equipment
d. An integral part of the related hardware and it is treated as property, plant and
equipment.
75.In determining whether an asset that incorporates both intangible and tangible elements,
an entity uses judgment to assess which element is more significant. For example, the
operating system of a computer. When the software is not an integral part of the related
hardware, computer software is treated
a. As property plant and equipment
b. As intangible asset
c. Not as property plant and equipment
d. Not as intangible asset
76.The IFRS on impairment of assets is not applicable to those listed below except one
a. Inventories
b. Assets arising from construction contracts
c. Deferred tax assets
d. Investment property that is measured at cost
77.The IFRS on impairment of assets is not applicable to those listed below except one
a. Non-current assets (or disposal groups) classified as held for sale
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b. Intangible assets
c. Biological assets related to agricultural activity that are measured at fair values less
estimated point-of-sale costs
d. Assets arising from employee benefits
78.Under IFRS, they refer to government, government agencies and similar bodies whether
local, national or international.
a. Government
b. Republic
c. National government
d. Local government
79.This is an action by government design to provide an economic benefit specific to an
entity or range of entities qualifying under certain criteria. For IFRS, they do not include
benefits provided only indirectly through action affecting general trading conditions, such
as the provision of infrastructure in development areas or the imposition of trading
constraints and competitors
a. Government grants
b. Government assistance
c. Government aid
d. Government fund
80.A financial instrument that derive it value from another underlying item such as share
price, exchange rate or interest rate. A
a. Derivative
b. Financial asset
c. Financial liability
d. Equity instrument
81.All of the following are characteristics of a derivative, except D
a. Must contain an underlying and a notional
b. There is no payment or there is a small payment for the derivative on the date of the
contract.
c. Readily settled at a future date by a net cash payment.
d. Requires either initial or substantial net investment.
82.Borrowing costs mat include : [I] interest on bank overdrafts and short-term and long-term
borrowings, [II] amortization of discounts or premiums relating to borrowings, [III]
amortization of ancillary costs incurred in connection with the arrangement of borrowings,
[IV] finance charges in respect of finance leases recognized , [V] exchange differences
arising from currency borrowings to the extent that they are regarded not as an
adjustment to interest costs
a. [I]-[V]
b. [I]-[IV]
c. [I]-[III]-[V]
d. [I]-[III]
83.Examples of qualifying assets are [I] inventories that require a substantial period of time to
bring them to a saleable condition, [II] inventories that are routinely manufactures or
otherwise produced in large quantities on a repetitive basis over a short period of time,
[III] manufacturing plants, [IV] power generation facilities and [V] investment properties
a. [I]-[V]
b. [I]-[IV]
c. [I]-[III]-[V]
d. [I]-[III]
84.The reports that may portray the financial effects of transactions and other events by
grouping them into broad classes according to their economic characteristics.
a. Financial statements
b. Financial budgets
c. Financial projections
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d. Segment reports
85.These broad classes are termed the elements of financial statements. The elements
directly related to the measurement of financial position in the balance sheet are : (I)
assets (II) liabilities (III) income (IV) expenses
a. III, IV & V
b. I, II, III & V
c. I. II & III
d. I, I, IV & V
86.Qualitative characteristics are the attributes that make the information provided in
financial statements useful to users, the four qualitative characteristics are:
a. Understandability, relevance, reliability and neutrality
b. Understandability, relevance, reliability and substance over form
c. Understandability, relevance, reliability and comparability
d. Understandability, relevance, reliability and faithful representation

87.The qualitative characteristics that describes that users are assumed to have a reasonable
knowledge of business and economic activities and accounting and a willingness to study
the information with reasonable diligence is
a. Understandability
b. Relevance
c. Reliability
d. Neutrality
88.That kind of accounting concerned with providing information to management in making
decisions about the operations of the business
a. Responsibility accounting
b. Cost accounting
c. Management accounting
d. Correct answer no given
89.Management accounting
a. Is governed by generally accepted accounting principles
b. Draws from disciplines other than accounting
c. Is geared primarily to the past rather than the future
d. Places more emphasis on precision of data compared with financial accounting which
does snot
90.How many the following be used in calculating the break-even point in units?
Contribution
Contribution
Fixed cost
margin per unit
Fixed cost
margin per
unit
a. Denominator
Numerator
c. Numerator
not used
b. Denominator
not used
d. Numerator
denominator
91.The contribution margin increase when sales volume remain the same and
a. Variable cost per unit decrease
b. Variable cost per unit increase
c. Fixed costs decrease
d. Fixed costs increase
92.Cost is the amount measured by the current monetary value of economic resources given
up or to be given in obtaining goods and services. Costs may be classified as unexpired or
expired. Which of the following costs is not always considered to be expired immediately
upon being recognized?
a. Cost of goods sold
b. Depreciation expense for plant machinery
c. Sales salaries
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d. Loss from bankruptcy of a major debtor not provided for in the annual adjustment.
93.In retailing enterprises, the income statement includes cost of goods sold. Cost of goods
sold is, in effect, purchases adjusted for change in inventory. In manufacturing company,
the purchases account is replaced by which account?
a. Inventory
b. Cost of goods sold
c. Finished goods d.
Cost of goods
manufactured
94.This Framework sets out the concepts that underlie the preparation and presentation of
financial statements for
a. External users
b. Internal users
c. Internal and external users
d. Not among the choices
95.This framework is not a Philippine Financial Reporting Standard (PFRS) and hence does not
define standards for any particular measurement or disclosure issue.
a. The statement is sometimes true but most of the time false
b. The statement is sometimes false but most of the time true
c. The statement is true
d. The statement is false
96.An adjusting entry will not take the format of which one of the following entries?
a. A debit to an expense account and a credit to an asset account
b. A debit to an expense account and a credit to a revenue account
c. A debit to an asset account and a credit to a revenue account
d A debit to an liability account and a credit to a revenue account
97.Which of the following pairs of transactions ad special journals is properly matched?
Transaction
Journal
a. Collect cash on account
Sales Journal
b. Pay Voucher for purchase of
Voucher Register
merchandise on account
c. Prepare adjusting entries
General Journal
d. Sell merchandise for cash
Sales Journal
98.Which of the following statements is / are true?
STATEMENT 1: PAS 32 defines a financial instrument as any contract the gives rise to both a
financial asset of one entity and a financial liability or equity of another entity.
STATEMENT 2: Financial instrument encompasses financial asset, financial liability and an
equity instrument characterized by a contract that involves two parties; and which gives rise
to a financial asset of one party and financial liability or equity instrument of another party.
a. Statement 1 is true.
b. Statement 2: is true.
c. Both statements are true.
d. Both statements are false.
99.Which of the following is / are correct example / s of financial instrument?
1. Cash in the form of notes
and coins
2. Cash in the form of checks
3. Cash in bank
4. Trade accounts
5. Notes and loans
6. Debt securities
7. Equity securities

Asset
Bearer

Liability
Issuer

Payee
Depositor
Customer
Debtor
Issuer
Investor

Drawer
Bank
Seller
Lender
Investor
Issuer

a. 1, 2, 6, 7
b. 1, 2, 3, 7
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c. 1, 4, 5, 6,
d. 1, 3, 5, 6,
100. Any asset that is cash; a contractual right to receive cash or another financial asset
from another entity; a contractual right to exchange financial instruments with another
entity under conditions that are potentially favorable; and an equity instrument of another
entity.
a. Financial asset
b. Financial liability
c. Financial equity
d. All of the above

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