1. Which statement is true about the Conceptual d.

About entity performance but not management

Framework? performance.

a. The Conceptual Framework is not a standard. 7. Which statement is not a specific objective of financial
reporting?
b. The Conceptual Framework describes the concepts
for general purpose reporting. a. To provide information that is useful in investment and
credit decisions.
c. In case of conflict, the requirements of IFRS prevail
b. To provide information about entity resources, claims
over the Conceptual Framework.
against those resources and changes in those resources.
d. All of these statements are true about the
c. To provide information on the liquidation value of an
Conceptual Framework. entity.
2. The Conceptual Framework is intended to establish d. To provide information that is useful in assessing cash
a. Accounting standard in financial reporting flow prospects.

b. The meaning of “present fairly in accordance with 8. The assumption that an entity will not be sold or
GAAP” liquidated in the near future is known as

c. The objectives and concepts for use in developing a. Economic entity assumption
standards of financial accounting and reporting b. Monetary unit assumption
d. The hierarchy of sources of GAAP c. Time period assumption
3. Which is not a purpose of the Revised Conceptual d. Going concern assumption
Framework?
9. The economic entity assumption
a. To assist the IASB to develop IFRS based on
consistent concepts. a. Is inapplicable to unincorporated businesses

b. To assist prepares to develop consistent accounting b. Recognizes the legal aspects of business organizations
policy when no standard applies to a particular
c. Requires periodic income measurement
transaction or when Standard allows a choice of
accounting policy. d. Is applicable to all forms of business organizations
c. To assist all parties to understand and interpret the 10. Consolidated financial statements are prepared when
Standards. a parent-subsidiary relationship exists.
d. To assist regulatory agencies in issuing rules and a. Economic entity assumption
regulations for a particular industry.
b. Legal entity assumption
4. Which statement is not true concerning the Conceptual
Framework? c. Consolidation standard

a. The Conceptual Framework should be a basis for d. Neutrality

standard setting. 11. During the lifetime of an entity, accountants produce
b. The Conceptual Framework should allow practical financial statements at arbitrary or artificial points in time
problems to be solved more quickly. in accordance with which basic accounting concept?

c. The Conceptual Framework should be based on a. Objectivity

fundamental truth derived from law. b. Time period assumption
d. The Conceptual Framework should increase users’ c. Materiality
understanding and confidence in financial reporting
d. Economic entity
5. The objective of financial reporting
12. Inflation is ignored in accounting due to
a. Is the foundation for the Conceptual Framework.
a. Economic entity assumption
b. Includes the qualitative characteristics of useful
information. b. Going concern assumption

c. Is not found in the Conceptual Framework. c. Monetary unit assumption

d. All of these are correct regarding the objective of d. Periodicity assumption

financial reporting.
13. What are the attributes that make information in the
6. The overall objective of financial reporting is to provide financial statements useful to the readers?
information.
a. Qualitative characteristics of financial information
a. That is useful for decision making.
b. Quantitative characteristics of financial information
b. About assets, liabilities and equity of an equity.
c. Elements of financial statements
c. About financial performance during the period
d. Objectives of financial reporting.
14. Fundamental qualitative characteristics of accounting a. Can be depended on to represent the economic
information are conditions that it is intended to represent
a. Relevance and comparability b. Is capable of making a difference in a decision
b. Comparability and consistency c. Is understandable by reasonably informed users of
accounting information
c. Faithful representation and relevance
d. Is verifiable and neutral
d. Neutrality and verifiability
22. Which of the following statements about materiality is
15. Enhancing qualitative characteristics of accounting not correct?
information include
a. An item must make a difference or it need not be
a. Relevance, faithful representation and materiality disclosed.
b. Comparability, understandability, timeliness and b. Materiality is a matter of absolute size.
verifiability
c. An item is material if omitting, misstating or obscuring
c. Faithful representation and timeliness it could reasonably be expected to influence the
d. Materiality and understandability economic decision of primary users.

16. Faithful representation includes d. Materiality is a subquality of relevance.

a. Predictive value and confirmatory value 23. What is meant by comparability when discussing
financial accounting information?
b. Completeness, free from error and neutrality
a. Information has predictive and feedback value.
c. Comparability and understandability
b. Information is reasonably free from error.
d. Timeliness and verifiability
c. Information is measured and reported in a similar
17. Which is the best description of faithful fashion across entities.
representation?
d. Information is timely.
a. Influence on the economic decision of users
24. What is meant by consistency when discussing
b. Inclusion of a degree of caution financial accounting information?
c. Freedom from material error and bias a. Information is measured and reported in a similar
d. Comprehensibility to users fashion across points in time.

18. The financial information is directed toward the b. Information is timely.

common needs of users and is independent of c. Information is measured similarly across the industry.
presumptions about particular needs and desires of
specific users. d. Information is verifiable.

a. Comparability 25. Which statement is true in relation to the enhancing

quality of understandability?
b. Verifiability
a. Users have a reasonable knowledge of business and
c. Neutrality economic activities.
d. Completeness b. Users are expected to have significant business
19. Neutrality is supported by the exercise of prudence. knowledge.
Prudence is the exercise of care and caution when dealing c. Financial statements shall exclude complex matters.
with uncertainties in the measurement process such that
d. Financial statements shall be free from material error.
a. Assets and income are overstated
26. According to the Revised Conceptual Framework,
b. Liabilities and expenses are understated verifiability implies
c. Assets and income are not overstated and liabilities and a. Legal evidence
expenses are not understated.
b. Logic
d. Assets, liabilities, income and expenses are not
overstated. c. Consensus

20. The qualitative characteristic of relevance includes d. Legal verdict

a. Predictive value and confirmatory value 27. The ability through consensus among measurers to
ensure that information represents what it purports to
b. Completeness and neutrality represent is an example of the concept of
c. Comparability and understandability a. Neutrality
d. Verifiability and timeliness b. Comparability
21. Accounting information is considered relevant when it c. Verifiability
d. Understandability b. If the reporting entity is the parent alone, the financial
statements are referred to as unconsolidated financial
28. When an entity has started placing its quarterly statements.
financial statements on its website, thereby reducing
ample time to get information to users, the qualitative c. If the reporting entity comprises two or more entities
concept involved is that are not linked by a parent-subsidiary relationship, the
financial statements are referred to as combined financial
a. Comparability statements.
b. Understandability d. All of these statements are true about the financial
c. Verifiability statements of a reporting entity.

d. Timeliness 35. What is the new definition of an asset under the

Revised Conceptual Framework?
29. Allowing entities to estimate rather than physically
count inventory at interim periods is an example of a a. A resource controlled by the entity as a result of past
tradeoff between event and from which future economic benefit is
expected to flow to the entity.
a. Verifiability and comparability.
b. A resource controlled by the entity and from which
b. Timeliness and comparability. future economic benefit is expected to flow to the entity.
c. Timeliness and verifiability. c. A present economic resource controlled by the entity as
d. Neutrality and timeliness. a result of past event.

30. The Conceptual Framework includes which d. A present economic resource controlled by the entity
constraint? as a result of past event and from which future economic
benefit is expected to flow to the entity.
a. Prudence
36. Which is not a characteristic of an asset under the
b. Conservatism Revised Conceptual Framework?
c. Cost a. An asset is a present economic resource.
d. All of the choices are constraints in the conceptual b. The economic resource is a right that has the potential
framework to produce economic benefits.
31. Which of the following best describes the cost-benefit c. The economic resource is controlled by the entity as a
constraint? result of past event.
a. The benefit of the information must be greater than d. Future economic benefit is expected to flow to entity
the cost of providing it. and must be probable or certain.
b. Financial information should be free from cost to users 37. What is the new definition of liability under the
of the information. Revised Conceptual Framework?
c. Cost of providing financial information is not always a. A present obligation of the entity arising from past
evident or measurable but must be considered. event the settlement of which is expected to result in an
outflow of economic benefit.
d. All of the choices are correct.
b. A present obligation of the entity arising from present
32. A reporting entity
event.
a. Is necessarily a legal entity
c. A present obligation of the entity to transfer an
b. Must be a corporate type of entity economic resource as a result of past event.

c. Is an entity that is required or chooses to prepare d. An obligation that the entity has practical ability to
financial statements avoid.

d. A regulatory government authority 38. Under the Revised Conceptual Framework, which of
the following criteria need not be satisfied for a liability to
33. A reporting entity exist?
a. Can be a single entity a. The entity has an obligation or a duty or responsibility
b. Can be a portion of a single entity that it has no practical ability to avoid.

c. Can comprise more than one entity b. The obligation is to transfer an economic resource and
not the ultimate outflow of economic benefit.
d. All of these can be considered a reporting entity
c. The obligation is a present obligation that exists as a
34. Which statement is true about financial statements of result of a past event.
a reporting entity?
d. The settlement of the obligation is expected to result in
a. If the reporting entity comprises both the parent and an outflow of economic benefit.
its subsidiaries, the financial statements are referred to as
consolidated financial statements. 39. Which statement is not true about income and
expenses?
a. Income is increase in asset or decrease in liability that a. Fair value of an asset is the price that would be
results in increase in equity other than that relating to received to sell an asset in an orderly transaction
contribution from equity holders. between market participants at the measurement date.
b. Expense is decrease in asset or increase in liability that b. Value in use is the present value of the cash flows
results in decrease in equity other than that relating to expected to be derived from the use and ultimate
distribution to equity holders. disposal of an asset.
c. Income and expenses are the elements that relate to c. Fulfillment value is the absolute amount of cash
financial position. expected for the payment of liability.
d. Income encompasses revenue and gain. d. Current cost is the cost of an equivalent asset at
reporting date comprising the consideration paid and
40. It is the process of capturing for inclusion in the transaction cost.
statement of financial position or the statement of
financial performance an item that meets the definition 46. The term “revenue recognition” conventionally refers
of an element of the financial statements. to
a. Recognition a. The process of identifying transactions to be recorded
as revenue in an accounting period.
b. Measurement
b. The process of measuring and relating revenue and
c. Derecognition expenses of an entity for an accounting period.
d. Disclosure c. The earning process which gives rise to revenue
41. Under the Revised Conceptual Framework, what is the realization.
recognition principle? d. The process of identifying those transactions that result
a. It is probable that any future economic benefit in an inflow of assets from customers.
associated with the item will flow to or from the entity. 47. Which of the following is not an acceptable basis for
b. The item has a cost or value that can be measured with the recognition of expense?
reliability. a. Systematic and rational allocation
c. It is probable that any future economic benefit will flow b. Cause and effect association
to or from the entity and the element can be measured
reliably. c. Immediate recognition
d. Only items that meet the definition of an asset, liability, d. Cash disbursement
equity, income and expense are recognized.
48. Which would be matched with current revenue other
42. Derecognition is the removal of a recognized asset or than association of cause and effect?
liability from the statement of financial position and
normally occurs when a. Goodwill

a. An item no longer meets the definition of an asset or a b. Cost of goods sold

liability c. Sales commission
b. The entity loses control of the asset. d. Warranty cost
c. The entity no longer has a present obligation for the 49. Which is an application of systematic and allocation?
liability
a. Doubtful accounts expense
d. Under all of these circumstances
b. Research and development cost
43. Under the Revised Conceptual Framework, the
measurement bases include c. Salary of president

a. Historical cost d. Amortization of intangible asset

b. Current value 50. Which category of expenses is subject to immediate

recognition principle?
c. Assessed value
a. Utilities expense for the production line of a
d. Historical cost and current value manufacturer
44. Current value includes b. Repairs and maintenance expense incurred on
a. Fair value production equipment

b. Value in use c. The salary of the production foreman

c. Fulfillment value d. The salary of the President of the entity

d. Fair value, value in use, fulfillment value and current

cost PAS 1 – PRESENTATION OF FINANCIAL STATEMENTS
45. Which statement is not true about current value 1. The major financial statements include all, except
measurement?
a. Statement of financial position
b. Statement of comprehensive income c. The entity expects to realize the asset within twelve
months after the reporting period.
c. Statement of cash flows
d. The asset is cash or cash equivalent restricted to settle
d. Statement of retained earnings a liability for more than twelve months after the reporting
2. An entity shall present period.

a. The statement of financial position more prominently 8. An entity shall classify a liability as current under all of
the following conditions, except
b. The income statement more prominently
a. The entity expects to settle the liability within the
c. The statement of cash flows more prominently normal operating cycle.
d. Each statement with equal prominence b. The entity holds the liability primarily for the purpose
3. When an entity changes the end of the reporting of trading.
period longer or shorter than one year, an entity shall c. The liability is due to be settled within twelve months
disclose all of the following, except after the reporting period.
a. Period covered by the financial statements. d. The entity has the right at the end of reporting period
b. The reason for using a longer or shorter period. to defer settlement of the liability for at least twelve
months after the reporting period.
c. The fact that amounts presented in the financial
statements are not entirely comparable. 9. A financial liability that is due to be settled within
twelve months after the reporting period shall be
d. The fact that similar entities in the geographical area in classified as noncurrent
which the entity operates have done so.
a. When it is refinanced on a long-term basis before the
4. An entity must disclose comparative information for issue of financial statements.
a. The previous comparable period for all amounts b. When the entity has the right at the end of the
reported. reporting period to roll over an obligation for at least
twelve months after the and of reporting period.
b. The previous comparable period for all narrative and
descriptive information. c. When it is refinanced on a long-term basis after the end
of reporting period.
c. The previous comparable period for all amounts
reported, and for all narrative and descriptive information d. Under all of these circumstances.
when it is relevant to an understanding of the current
period’s financial statements. 10. When an entity breaches under a long-term loan
agreement on or before the end of the reporting period
d. The previous two comparable periods for all amounts with the effect that the liability becomes payable on
reported. demand, the liability is classified as
5. When the classification of items in the financial a. Current under all circumstances
statements is changed, the entity
b. Noncurrent under all circumstances
a. Must not reclassify the comparative amounts
c. Current if the lender agreed after the reporting period
b. Can choose whether or not to reclassify and before the issuance of the statements not to
demand payment as a consequence of the breach.
c. Must reclassify the comparative amounts unless it is
impracticable to do so. d. Noncurrent if the lender agreed after the end of the
reporting period to provide a grace period for at least
d. Must reclassify current year amounts only.
twelve months after the reporting period.
6. In presenting a statement of financial position, an
11. The items which are reclassified to profit or loss in the
entity
current period but were recognized in other
a. Must make the current and noncurrent presentation. comprehensive income in the current or previous period
are
b. Must present assets and liabilities in the order of
liquidity. a. Prior period errors

c. Must choose either the current and noncurrent or the b. Correcting entries
liquidity presentation.
c. Unusual and irregular items
d. Must make the current and noncurrent presentation
d. Reclassification adjustments
except when a presentation based on liquidity provides
information that is reliable and more relevant. 12. All of the following components of OCI should be
reclassified to profit or loss, except
7. An entity shall classify an asset as current under all of
the following conditions, except a. Gain and loss arising from translating the financial
statements of a foreign operation.
a. The entity expects to realize, or intends to sell or
consume it within normal operating cycle. b. Gain and loss on remeasuring debt investment at
FVOCI.
b. The entity holds the asset primarily for the purpose of
trading.
c. The effective portion of gain or loss on hedging b. Occur between the year-end and the date of the next
instrument in a cash flow hedge interim or annual financial statements.
d. Gain or loss on remeasuring equity investment at c. Occur between the year-end and the date when
FVOCI. financial statements are authorized for issue.
13. What is the purpose of reporting comprehensive d. Occur between the end of reporting period and the
income? date of the next interim statements.
a. To report transactions with owners 19. Financial statements are said to be authorized for
issue when
b. To report a measure of overall performance of the
entity a. The financial statements are filed with the SEC.
c. To replace net income with a better measure b. The shareholders approve the financial statements at
their annual meeting.
d. To combine income from continuing operations with
discontinued operations c. The management is required to submit the financial
statements to a supervisory body.
14. An entity shall present an analysis of expenses using a
classification based on d. The management reviews the financial statements and
authorizes them for issue.
a. The nature of expenses.
20. Which event after the reporting period would require
b. The function of expenses. adjustment of the financial statements?
c. Either the nature of expenses or the function of a. Loss of plant as a result of fire
expenses within the entity, whichever provides
information that is reliable and more relevant. b. Changes in the quoted market prices of securities held
as an investment
d. Either the nature of expenses or the function of
expenses within the entity, whichever the entity would c. Loss on inventory resulting from major flood loss
prefer to present.
d. Loss on settlement of lawsuit the outcome of which
15. What is the purpose of the notes to financial was deemed uncertain at year end.
statements?
21. Which subsequent event would generally require
a. To provide disclosures required by IFRS. disclosure in the financial statements?
b. To correct improper presentation in financial a. Retirement of the company president
statements
b. Settlement of litigation when the event that gave rise
c. To provide recognition of amounts not included in to the litigation occurred prior to the end of reporting
financial statements period
d. To present management response to auditor comments c. Employees strike
16. What is the “first item” presented in the notes to d. Issue of a large amount of ordinary shares
financial statements?
a. Statement of compliance with IFRS.
PAS 24 RELATED PARTY DISCLOSURES
b. Summary of significant accounting policies
22. Related parties include all of the following, except
c. Supporting information for items presented in the
financial statements a. Parent, subsidiary and fellow subsidiaries

d. Other disclosures, including contingent liabilities and b. Associate

non financial disclosures c. Key management personnel and close family members
17. The presentation of notes to financial statements in a of such individuals
systematic manner d. Two ventures simply because they share joint control
a. Is voluntary over a joint venture

b. Is mandatory 23. Close family members of an individual include all of

the following, except
c. Is mandatory, as far as practicable
a. The individual’s spouse and children
d. Depends on the industry
b. Children of the individual’s spouse
c. Dependents of the individual or the individual’s spouse
PAS 10 – EVENTS AFTER REPORTING PERIOD
d. Brother or sister of the individual
18. Events after the end of the reporting period are
favorable or unfavorable events that 24. The minimum disclosures about related party
transactions include all, except
a. Occur between the end of the reporting period and the
date of the next annual financial statements. a. The amount of the transaction
b. The amount of outstanding balance
c. Allowance for doubtful accounts related to outstanding d. The change is required by law.
balance
30. Which method is required for reporting a change in
d. The amount of similar transaction with unrelated accounting policy?
parties
a. Cumulative effect approach
25. Related party transactions include all, except
b. Retrospective approach
a. Transferred goods from inventory to subsidiary
c. Prospective approach
b. Sold an asset to the wife of the chief operating officer
d. Averaging approach
c. Sold goods to another entity owned by daughter of the
managing director 31. A change in accounting policy requires that the
cumulative effect of the change for prior periods be
d. Took out a huge bank loan shown as an adjustment to
26. Which is not a mandated disclosure about related a. Beginning retained earnings for the earliest period
party transactions? presented.
a. Relationship between parent and subsidiaries. b. Net income for the period in which the change
occurred.
b. Names of all associates that an entity has dealt with
during the year. c. Comprehensive income for the earliest period
presented.
c. Name of the entity’s parent and if different, the
ultimate controlling party. d. Shareholders’ equity for the period in which the change
occurred.
d. If neither the entity’s parent nor the ultimate
controlling party produces financial statements available 32. Which of the following is not treated as a change in
for public use, then the name of the next most senior accounting policy?
parent that does so.
a. A change from FIFO inventory valuation to average cost
b. A change from cash basis to accrual basis of accounting
PAS 8 – ACCOUNTING POLICIES, ESTIMATES AND ERRORS
c. A change from cost model to fair model in measuring
27. Which is the first step within the hierarchy of investment property
guidance when selecting accounting policies?
d. A change to a new IFRS requirement
a. Apply a standard from IFRS if it specifically relates to
the transaction 33. Which is the proper time period to record the effect of
a change in accounting estimate?
b. Apply the requirements in IFRS dealing with similar and
related issue a. Current period and prospectively

c. Consider the applicability of the definitions, recognition b. Current period and retrospectively
criteria and measurement concepts in the Conceptual c. Retrospectively
Framework
d. Current period
d. Consider the most recent pronouncements of other
standard setting bodies 34. When it is difficult to distinguish a change in an
accounting policy from a change in an accounting
28. In the absence of an accounting standard that applies estimate, the change is treated as
specifically to a transaction, what is most authoritative
source in developing an accounting policy? a. Change in accounting estimate with appropriate
disclosure
a. Apply the requirements in IFRS dealing with similar and
related issue. b. Change in accounting policy

b. The definition, recognition criteria and measurement of c. Correction of an error

asset, liability income and expense in the Conceptual d. Initial adoption of an accounting policy
Framework.
35. What is the treatment if an entity has included in the
c. Most recent pronouncement of other standard setting consolidation this year a subsidiary that was appropriately
body. excluded from consolidation last year?
d. Accounting literature and accepted industry practice. a. An accounting change that should be reported
29. Which is the reason why entities are permitted to prospectively.
change accounting policy? b. An accounting change that should be reported
a. The change would allow the presentation of a more retrospectively
favorable profit picture c. A correction of an error
b. The change would result in providing more reliable and d. Neither an accounting change nor a correction of an
relevant information about financial position, financial error.
performance and cash flows.
c. The change is made by the internal auditor.