Theory of Accounts SETA INSTRUCTIONS: Select the best following questions, Mark only one an: e swer for answer sheet provided. Strictly NO” ERASURES “sr oythe Erasures will render your examinati WARS Use PENCILNO. 2 only, GOODLUCKI.» NST Sheet INVALID, answer for each of the @ Financial Reporting Stand: oe anes 19 Standards Council (FRSC) was o a. The it . The - Phil The-Phippine Institute of Certified Public Accountants b. The Board of Accountancy (BOA) c. The Association of CPAs in Public Practice (ACPAPP) ee and PICPA D The chairman of the FRSC should have been or presently a senior practitioner in a+ Public accountancy b. Commerce and industry 7 which statement is (are) correct regarding Pt A” Reporting Standards (PFRSs)? a. PFRSs set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events that are important in general purpose financial statements. b. PFRSs are not designed to apply to the general purpose financial statements and other financial reporting of all profit-oriented entities. c. PFRSS are designed to apply to not-for-profit activities in \e private sector. il of the above age TT aid tt Theory of Accounts SETA 4. Which fit aad or the accounting standard-setting process in the Phitppi (Ux a Preparation of a draft of proposed Philippine Financial 6 4 Reporting Standards (PFRS) by a Task Force organiz. — ea crgeanie ae b. Exposure of the proposed draft for comments and suggestion to PICPA members, FINEX members and other interested parties. c. Approval of the final PFRS by the Profession Regulation Commission. 4. Publication in the Official Gazette or in newspaper of gegeral circulation of the proposed draft. 5,-Sfandards approved by the FRSC include paragraphs in bold type and plain type, which have equal authority. Paragraphs in plain type indicate the main principles. = boi. ‘Any limitation of the scope of a PFRS is made clear in the standard. T a. True, True b. False, True c. False, False d. True, False 6. The Philippine Interpretation Committee (PIC) members were ¢ appointed by the ____ and include accountants in public * D¥ practice, the academe and regulatory bodies and users of financial statements a. SE c, BOA b. PRC d. FRSC BR 7. General purpose financial statements are financial statements prepared in accordance with a financial reporting framework that is designed to: 3. meet the particular information needs of a wide range of users b, meet the particular information needs of a group of users c. meet the common information needs of a wide range of users. 4. meet the common information needs of a group of users a a ey Page TTReen A hich of the followin: ke Fage TP SETA statements framework isfinco eee regarding the conceptual a. The framework is con financial statements, WAN Seneral-purpose The framework applies to financial sta reporting enterprises beth in the priv public sector In cases where there is conflict be and an PFRS, the requirement of prevail X b. tements of busin ess ate Sector and in the ‘tween the framework f the framework, will FERS ‘The FRSC conceptual framework assists the FRSC - I. In the development of PSAS Il. In the review of existing PFRSs IIL. In promoting the harmonization of accounting standards ? a. Land I only ©. Ionly 7 d. UT only 1@_users of financial statements who are interested in formation that enables them to determine whether their a fis, and the interest attaching to them, will be paid when due ©. suppliers Creditors d. investors a. Have an interest in information about the continuance of an enterprise especially when they have a long-term invoivement with or are dependent on the enterprise. “ustemes” ‘Are interested in information which enables them to assess the ability of the enterprise to provide retirement benefits and employment opportunities. ~ Are interested in information that enables them to determine whether their loans and the interest attaching to them will be paid when due. Lende«> d. Are concerned with the risk inherent in and return provided by their investments and need information, to ave does, Tok. openisthB5.14 “waewiniiccoma zal ‘Theory of Accounts SETA help them determine whether they should buy or sell the lowing is a fundemental quality of useful CC. accounting information? a, Conservatism. . Faithful representation. b. Compara! ity. d. Consistency. py .23-According to the conceptual framework, predicive, and + 5 are ingredients of. ity. Faithful representation, No Yes Yes 1st choie No. |. Qualitative characteristics are non-quantitative aspects of an . ys position and performance and changes in financial A position Under the financial capital maintenance concent, @ profit is earned only if the physical productive capacity (or operating capability) of the enterprise (or the resources or funds needed to achieve that capacity) at the end of the period exceeds the physical productive capacity at the beginning of the period, biter excluding any distributions to, and contibutions from, ‘owners during the period. T c. True, False True a. ee 4. False, True b. False, ISAAC the process of incorporating in the balance sheet or income statement an item that meets the definition of an bial nts. element of financial statemer a. zation . Recognition b, Allocation d. Measurement Fae eonnertccom.an Fon Open istPas.24 Teese rococoA C Theory of Accounts eee sera “Which of the following is a condit recognition of an asset? — necessary for the a, It is probable that future econor mic benefits the terse ye cost of mee te ralabie the asset can be Measureg b. The cost of the asset can be measured reliably © It is probable that future econo mic benefits wi the enterprise or the cost of th rs the on fe asset can be meascnes 4. It is probable that future economic the e1 benefits will flow to Se and the asset is paid for “RS regards the relationshi Framework, are the follo\ I. The Conceptual Frat IL. In cases of cox Framework prevai Statement 1 ip between PFRS and the Con cept wing statements true or false? mework Is a reporting standard the requirements of the Conceptual ver those of the relevant PS Statement II wa 2. False True b. True True © False False e FRSC Conceptual Framework identifies two fundamental qualitative characteristics that make the information in financial statements useful to investors, creditors and others. ‘These characteristics are: 1 Compara Mi, Relevance. MIL. Subjectivity. a. Iandv b. Faithful Representation Understandability. |. Vand V “The qualitative characteristic of Faithful Representation of financial information means that the information are: ‘Theory of Accounts SETA 1, IH, 1V and V 11,111, IV and V only; b. 1, Ul and IV only; d. 11, I and V only. 20.11 is the undiscounted amount of cash or cash equivalent ‘expected to be paid to satisfy the liabilities in the normal WA course of business a. present value: . “Settle b. Zurrent cost 4. A 2 Ferlying theme of the conceptu ‘a. decision usefulness. 3 b, understangability. Two fundamental qualities that make accounting ioh useful for decision making are ©. relevance and faithful representation. 4. reliability and comparability. E : tude user The,"Pam of franca Iformaton inl 2 SIP aT aS ernployees, customers, government and thei 9 he Under the financial capital concept, capi 1) productive capacity of the enterprise. T- 3 True, True true, False b. Fale, false Gi. Fal 24, n-eéCordance with PAS 1, an entity must present additional fe items in a statement of financial position when __suct ‘sentation is a generally accepted practice in the sector in Which the entity operates. An entity shall present the statement. of cash flows more prominently than the other statements. stor , nds, Sup regarded as the agencies, and the publ 5 & 1. Reliable IV. Costless. . True, False As yautral a terial respects. a. True, True . True, TIL. Free from erro” Complete in all ma e b. False, False d. False, True area Ty ‘eer Ton Openr Pape Coe meena Ton OpentatPas Te Bae oD sad‘Theory of Accounts SETA 2 25: Deferred tax assets and liabilities shail Statement of Financial P Pe (Classified on the mn as.noncurrent, T~ Due to measurement problems, some , some enterprise resoun and obligations are not reported on the Statement of Fineness Position. "F 2. True, True c. True, False b. False, Fal d. False, True 2 amount of any cumulative preferen : 7 Sa Preference dividends not Jobb. names of the recipients ofthe dividends; . addresses of all shareholders who are entitled to ri the dividends; ini 4. asschedule of cumulative dividends paid in prior periods. the computation of'profit? | o r @._ Finance cost. xe gain on change on value of available for sale Post-tax « aay gain on change in value of biological assets Vihat is the purpose of reporting comprehensive income? jn (loss) on discontinued operations. Be * owners X b. To report a measure of overall enterprise performance ¢. To replace net income with a better estimate d. To combine income from continuing operations and extraordinary items Page SoH sa b fi Theory of Accounis seTA 29. The statement of changes in equity includes reconciliation between: —S a. the carrying amount of retained earings at the beginning and the end of the period. X b. the carrying amount of total equity at the beginning and the end of the period. ‘c. the carrying amount of each component of equity at the beginning and the end of the period separately disclosing changes resulting from: (i) profit or loss, (i) each item of comprehensive income, and (iii) the amounts of Investments by, and dividends and other distributions to, ‘owners. X, d. the carrying amount of property, plant and equipment he following is¢fiGEan application of accrual 30. Which of the flowing 6EEEEN =P 2. Recording advertising fees earned at the time the work is A done. b. Recording telephone expense when the monthly bil received. advertising fees earned at the time the cash payment is received. 4. Adjusting unearned advertising fees to the proper balance at the gaé-orthe month. a. To select and apply snap) te accounting policies vide additional disclosures when compliance with speci is insufficient to understand the entity's financial position and performance,” ¢. To comply with applicable PFRS. a 4. Allaf the above 32.When preparing financial statements, management is required to make an assessment of an enterprise’s. ability to continue as 2 going concern which’ should be at Jeast five’ xs from the balance sheet date. = years from the ilco. mde astra sama Fon Open eiraS. TATheory of Accounts SETA The reporting period of an ent erpris the decision of management 4- eee a. True, True ©. True, False - False, d. False, True ly depends on ch _of the following losses “comprehensive income? OC} S'S 8. losses from discontinued operations. b. losses arising on translating the financi foreign operation. losses on equipment. losses gnized in other ial statements of a the revaluation of property, plant and Management considers extraordinary items ch statement isifalsé? 34 First statement: Comprehensive income reports an expanded version of income to je certain types of gains and losses B Not included in traditional income statements. ‘Second statement: Comprehensive income is the total change in shareholders’ equity that occurred during the period. = a. The first statement only b. The second statement only ¢. Both statements oe statements a 3 the classification of expenses by_function method is used ° for the presentation of an income statement, additional information on the following items must be disclosed: f % Revenue b . expensed. Gains on revaluation of assets extraordinary item should be reported separately on the statement of comprehensive income as a component Page TOF ac “TeROpantsPOSt4 “Theory of Accounts ark Before discontinued Net of ‘operations of a Income taxes segment of a business a. Yes Yes b. Yes No « No No 4. No, ‘Yes practi PAS 1, the calculation of total comprehensive 8 income includes which of the following? Income from Distribution Continuing operations to owners a. No ‘No b. Yes No c Yes Yes 4. No Yes 38. Under PAS 1, comprehensive income includes changes in 4 equity resulting from ; © Investments by Distributions to Dp» Owners: owners: Bt a No No b. No Yes c Yes No a. Yes Yes 30. Are the following statements true or false, according to PAS ? Pa § mn ions. should be recognized in the, * Seren of tne ition, F — NOES yqircse fang? tion surplus on_non-current, aséts f Comprehensive should be recognized in the statement o igh income and not in the Statement of Changes in Equity. Statement atement(2) Statement(1) Statement(2) se fale true false False true d. true tue Assets to be sold, consumed or realized as part of the entity's normal operating cycle are: ROT rea % ZTheory of Accounts, SETA |. Current assets . Non-current assets Classified as currefit or non-current in accordar other criteria. nce with . all of the’ above > ogo hich statement ig{correct Foncerning the presentation of the Statement OF Eampprehiensive Income? a. The functi expense method means that expense: agaiegated according. to. their nature, for men depreciation, purchases, employee " benefits and advertising... i yy b. The naturé oF’ EYpense method classifies ‘expenses according to their function as part of cost of sales, Cost of distribution and cost of administrative activities, ¢. Because the nature of expense method or the function of expense method has merit for the different types of entities, the standard requires management to select the more relevant and reliable presentation. d. If the function of expense method is used, no additional disclosure is required about the nature of expenses. 42. Which of the following should be disclosed in the summary of significant accounting policies? Composition of Inventory plant assets pricing a. Yes Yes. b, No Yes © No No 4a. Yes No 43. PAS 1 requires the use of the cost of sales method because this presentation often provides more relevant information to users than nature of expense method. Notes are normally presented in the following | summary of ‘significant accounting polices, statement of compliance with PRFSs; supporting information for iter + Page TE ‘Theory of Accounts SETA Presented on the face of the FS; and lastly, other disclosures: Including contingent liabilities and non-financial disclosures. a. True, True eT b. False, False a 44, PAS 18 (Revenue) deals with D3 Construction contracts. b. The extraction of mineral ores. ‘A# ©. Distributions of profits to holders of equity investments in Proportion to their holdings of a particular class of capital. 4. None of the above 45.<7h€ Stage of completion of a transaction may be determined 1D bya variety of methods including the following, except a, Surveys of work performed. b. Services performed to date as a percentage of total services to be performed. ¢. The proportion that costs incurred to date bear to the estimated total costs of the transaction. 4. Progress payments and advances received from \ 246. when the outcome of the transaction involving the rendering 7) Of services_cannot_be estimated reliably, the revenue is recognized © a. In reference to the stage of completion of the transaction @& % . Only to the extent of costs incurred that are expected to ® be recoverable ‘c. Upon cash. 4. Upor compl lection Of the services to be rendered 477Revenue should be measured at a. Fair value of the consideration received or receivable b. Cost of the consideration received or receivable c. Amount of cash received or receivable 4d. Book value of the consideration received or receivable ‘ope 137 aa owas‘Theory of Accounts SETA 48. Interest should be recognized 9 a. On an accrual basis in accordance with the substance of the relevant agreement. 2b. When the shareholder's right to received payment is established. dy _ Using the effective interest method as set out in PAS ff 39/PFRS 9. d. Ona time proportion basis without taking into account the a on the asset, 49 4vccordance with PAS 18, an entity shall disclose: ’a. The accounting policies adopted for the recognition of 9 revenue including the methods adopted to determine the 6 stage of completion of transactions involving the rendering of services. 0% b. The amount of each si recognized during the per c. The amount of revenue arising from exchanges of goods or services included in each significant category of revenue. d. Allgéatie above. saeaiiich of the following isnot 2 condition_for recognition of fn ‘nue from sale of goods*— Cf Cy vere Mite incurred or to be incurred in respect of the transaction can be measured reliably nineues b. The seller has transferred to the buyer signifi ; hip. ened en vement associated with ng, continuing involv ciated ane control over the 9 the owparship and effective be measured reliably. 4. a Speationnt of revenue can jal i sidered cash for financial 52-Which of the following Is at oon jorting purposes? Fpetty cash funds and change und 7 . orders, certi 7 Dein, currency, and available funds & Postdated checks and 1.0.U.'s — Fon OpentaPis Ie Page 14 0f 22 Bs icant category of revenue D nal checks“ I Testi seta 52, The‘Smount reported as "Cash" “normaly shoujseneanseseeat oO" # company’s balance sheet 2. Postdated are Cash ina payrol serene Paveble to the company feceveh te b. &. Undelivered 7 @._ penty sed checks written and signed by the company, 53. If the cash balance in a company's i Y's bank statement is m A Hat eta Sane hs A Sateen ere the bank has made any errors, there must be 2 Deposits credited by the bank but not yet recorded by the “company =" Outstanding checks x Bete a ese 5 Bbnoral amounts of wasted matenals, labor oF other Production costs . storage costs, unless those costs are necessary in the production process before a further production stage :» administrative overheads that contribute to bringing inventories to their present location and condition 53-The weighted average inventory costing method is particularly suitable to inventory where: a. dissimilar products are stored in separate locations; b. the entity. carries stocks of raw materials, workin progress and finished goods; ¢. goods have distinct use-by dates and the goods produced first must be sold earliest; 4d, homogeneous products are mixed together. 63. Which of the following inventory estimating procedure is allowed even for annual reporting purposes? Gross Profit Method —___Retail Inventory Method a Allowed ‘Allowed b. Not Allowed lowed Gi Allowed Not Allowed as Allowed Not Allowed (The FIFO formula assumes that the items of Inventory that were purchased or produced last_are sold first, and J consequently the items remaining in Taventory at the end of the period are those earlier purchased or produced. F . _ Inventories are [Usually written down to net realizable value D sitemby item. 7 c. True, False d. False, True Tee 7 oreo = Ton Openistbas iaPrec ce An, = SS Wh Statement S (are) Grrect Wegaruing reesngon of _PWENENNS aS ANE? - a PHONONS FE S RF PEBITADS VLE AW al ESE o PRCOGMERE SS SLEWEENSS fh The pear the nte-cown oF es ars F & The amount of any reversa} of any wrte-donn of inventores, arising from an increase in net reaizatie value. sha be recognized as 2 rection in the emrount of invertones recogadad as an expense in the penod 9 RK ceatzadie value of inventories may fall below cost for a number of reasons inchuding: 1. Product obsolescence. II. Physical deterioration of inventones. III. An increase in the expected replacement costs of the 68. Which of the followil a. Trees in a plant ¢. Hogs and poultry d. Strawberry plants a aa ss re Measured at fair value less costs to ition and at each subsequent reporting |