1.

Investors and creditors use income statement information for each of the following,
except
a. To evaluate the future performance of the entity.
b. To provide a basis for predicting future performance.
c. To help assess the risk and uncertainty of achieving future cash flows.
d. All of these are provided by an income statement.

2. IFRS requires that a single amount be disclosed within the income statement for
a. The post-tax profit or loss on discontinued operations and the pretax gain or loss on the
disposal of discontinued operational assets.
b. The pretax profit or loss on discontinued operations and the post-tax gain or loss on the
disposal of discontinued operational assets.
c. The pretax profit or loss on discontinued operations and the pretax gain or loss on the
disposal of discontinued operational assets.
d. The post-tax profit or loss on discontinued operations and the post-tax gain or loss on the
disposal of discontinued operational assets.

3. Which statement is correct in relation to the income statement?

a. Additional disclosure is required for the function of expense when the nature of expense
classification is used.
b. Additional disclosure is required for the nature of expense when the function of expense
classification is used.
c. No additional disclosure is required for nature of expense under any circumstance
d. Additional disclosure is always required for the function of expense.

4. The results of discontinued operations should be presented as a single amount after tax in
a. Statement of financial position
b. Statement of changes in equity
c. Income statement separately from income from continuing operations
d. Income statement as component of income from continuing operations

5. Which criterion is not required to be met in order for an operation to be classified as

discontinued?
a. The operation should represent a separate major line of business or geographical area.
b. The operation is part of a single plan to dispose of a separate major line of business or
geographical area.
c. The operation is a subsidiary acquired exclusively with a view to resale.
d. The operation must be sold within three months after the reporting period.

6. Disposal group is defined to include

a. Current assets and directly associated liabilities
b. Noncurrent assets and directly associated liabilities
c. Current assets and noncurrent assets
d. Current assets, noncurrent assets and directly associated liabilities
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7. All of the following are required to appear in the statement of changes in equity, except
a. Cumulative effect of change in accounting policy and correction of error
b. Total comprehensive income
c. Profit or loss
d. Net cash received from issue of shares during the period

8. Financing cost is reported in which section of the statement of comprehensive income?

a. Gross profit
b. Noncontrolling interest
c. Operating activities
d. Income from continuing operation.

9. Application of the full disclosure principle

a. Is theoretically desirable but not practical because the costs of complete disclosure exceed
the benefits.
b. Is violated when important financial information is buried in the notes.
c. Is demonstrated by supplementary information presenting the effects of changing prices.
d. Requires that the financial statements be consistent and comparable.

10. The full disclosure principle is best described by which of the following?
a. All information related to an entity's business and operating objectives is required to be
disclosed in the financial statements.
b. Information about each account balance appearing in the financial statements is to be
included in the notes to the financial statements.
c. Enough information should be disclosed in the financial statements so a person wishing to
invest in the shares of the company can make a profitable decision.
d. Disclosure of any financial facts significant enough to influence the judgment of an
informed reader.

11. Which of the following is not commonly required disclosure of accounting policies?
a. The measurement basis used in the financial statements
b. Personnel involved in drafting the summary of significant accounting policies
c. Disclosures required by other IFRS
d. The nature of an entity’s operations and the policies that the users need to know

12. The disclosure of accounting policies is important to financial statement readers in determining
a. Net income for the year.
b. Whether accounting policies are consistently applied from year to year.
c. The value of obsolete items included in ending inventory.
d. Whether the working capital position is adequate for future operations.
13. If a business entity entered into certain related party transactions, it would be required to
disclose all of the following information, except
a. Nature of the relationship between the parties to the transactions.
b. Nature of any future transactions planned between the parties and the terms involved.
c. Peso amount of the transactions.
d. Amounts due from or to related parties at the end of reporting period.

14. Events that occur after the end of current period but before the financial statements are issued
and provide evidence about conditions that existed at year-end and affect the realizability of
accounts receivable should be
a. Discussed only in the management commentary section of the annual report.
b. Disclosed only in the notes to the financial statements.
c. Used to record an adjustment to bad debt expense for the year.
d. Used to record an adjustment directly to the retained earnings account

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15. Which of the following subsequent events would generally require disclosure but no
adjustment of the financial statements?
a. Retirement of the company president
b. Settlement of litigation when the event that gave rise to the litigation occurred prior to the
statement of financial position date.
c. Employees strike
d. Issue of a large amount of ordinary shares.
16. Which should be disclosed in the summary of significant accounting policies?
a. Executory contract
b. Cumulative effect of change in accounting policy
c. Claim of equity holders
d. Depreciation method followed

17. An entity changed the method of pricing inventories from average cost to FIFO. What type of
accounting change does this represent?
a. A change in accounting estimate for which the financial statements for prior periods
included for comparative purposes should be presented as previously reported.
b. A change in accounting policy for which the financial statements for prior periods included
for comparative purposes should be presented as previously reported.
c. A change in accounting estimate for which the financial statements for prior periods
included for comparative purposes should be restated.
d. A change in accounting policy for which the financial statements for prior periods included
for comparative purposes should be restated.
18. All of the following statements are true regarding a change in accounting policy as preferable
or as an improvement, except
a. Diversity in situations and characteristics of the items encountered in practice require the
use of professional judgment.
b. Changes in accounting policy are appropriate only when the newly adopted generally
accepted accounting policy is more relevant and reliable than the existing one.
c. Changes in accounting policy are appropriate only when an entity demonstrates an
improved income tax effect.
d. All of the statements are true.

19. A required format for the presentation of statement of financial position is

a. Prescribed by the standard.
b. Not prescribed but details are found in the Conceptual Framework
c. Not prescribed and no guidance is provided in the standard.
d. Not prescribed but guidance is provided in the standard for a suitable format

20. Which is not a line item in the statement of comprehensive income?

a. Revenue
b. Profit or loss of discontinued operations
c. Profit or loss attributable to noncontrolling interest
d. Ending inventory

1. A 19. D
2. D 20. D
3. B
4. C
5. D
6. D
7. D
8. D
9. C
10. D
111. B
12. B
13. B
14. C
15. D
16. D
17. D
18. C