Gi) ReSU- The Review School of lccourtoreg » Theory. of Gecowere TA-294: THE CONCEPTUAL FRAMEWORK Sources: Conceptual Framework/Applicable AICPA/Various test banks 1. The Conceptual Framework a. is considered a Philippirre Financial Reporting Standard (PFRS) shall prevail over the provisions of PERS in case of rare conflict. is used as a guide in developing, applying and interpreting PFRS. sets out the concepts that underlie the preparation and presentation of financial statements for internal users. ¢ 3. Which is.NOT a basic purpose of the Conceptual Framework of Accounting? ‘a. To.assist preparers of financial statements in applying PFRS. b. To assist the Financial Reporting Standards Council (FRSC) in developing PFRS: ¢. To assist auditors in forming an opinian on whether financial statements comply with PFRS ©) Fo assist the Professional Regulatory Board of Accountancy (BoA) in promulgating rules and regulations affecting the practice of accountancy in the Philippines 4. Which of the following fs NOT a function of the Conceptual Framework for Financial Reporting? 2. To provide a basis for tie use of judgment in resolving accounting issues b. To facilitate the consistent and logical formulation of Philippine Financial Re Standards To address the c statements To set out recognition, measurement, presentation . with transactions and other events ard conditions th financial statements ing pts underlying the Information preserited in general-purpose financial disclosure’ requirements dealing ‘are important in general-purpose t Which is NOT included in the scape of the FRSC Conceptual Framework? 2. Objective of financial statements Generally accepted accounting principles @ Concepts of capital and capital maintenance J. Definition, recognition and measurement of the elements of financial statements ed in the scope of the Conceptual Under the PERS Conceptual Framework (2010), which Fragework but is stil a work-in-progress? Bethe Reporting Entity Mergers and Acquisitions The Government Entity G. Consolidated & Separate F creditors ed if information ¢ interests attaching to 8. As accounting information users, LENDERS are inte That enables them to determine whether their loans, and will be paid when du 'b, ‘About profitability and stability of an entity jn order to assess the ability of the entity to provide remuneration, retirement benefits and employment opportunities. c. To regulate the activities of the entity, determine taxation policies and as 2 basi: national income and similar statisti 4. About the continuance of an entity especially when they have a long-term involvement with or are dependent on the entity ( 9, The objectives nf financial reporting for entities are based on The need for conservatism Generally Accepted Accounting Principles The need ofthe users ofthe Information Mp Reporting on management's stewards Page t of 4 pagesKeSQ - the Review School of Gecountoney TA-294 THE CONCEPTUAL FRAMEWORK 15, 17. 18, 19, 21 10. General-purpose financial reports ‘Are designed to show the value of the reporting entity Can provide all the information that primary users need ¢. Are intended to provide information to @ specific group of users d. Are largely based on estimate and judgment rather than exact depiction The Conceptual Framework, is applicable to all of the following, excep General-purpose financial reports. ©. Public and state-owned enterprises Special-purpose financial reports d. Commercial and industrial enterprises (Old) What are the two primary qualities that make accounting information useful for decision making? ‘a. Comparability and consistency €. Relevance and reliability b., Materiality and timeliness d. Reliability and comparability (Old) What are the two qualitative characteristics that relate to the presentation rather than the content of financial accounting information? a. Relevance and reliability ©. Comparability and reliability b. Relevance and understandability 4. Comparability and understandabtlity What are the two fundamental qualitative characteristics of accounting information? ‘@. Relevance and prucence Reliability and understandability b. Reliability and conservatism d. Relevance and faithful representation Accounting information is considefed to be relevant when it Is verifiable and neutral b. Isable to present complete information ¢. IS capable of making a difference in a decision d. Is understandable by reasonably informed users of counting infor If there is undue delay in reporting financial information, then it may lose it a. Relevance © Objectivity b, Reliability Conservatism Under the Conceptual Framework, it is an entity-specific aspect of relevance based on the nature and magnitude of the items to which the information relates in the context of an entity's financial report 3. Materiality c. Feedback value b. Predictive value J. Confirmatery value The quality of financial information that means numbers and descriptions 1 happened is a. Relevance € Completeness b. Neutrality d. Faithful representation itch what really existed of Under the Conceptual Framework, what are the three ingredients of ‘faithful representation characteristic? Completeness, prudence and substance aver form Neutrality, conservatism and completeness Prudence, substance over form and neutrality Completeness, neutrality and freedom from error Which of the following terms best describes information in financial statements t a. Understandable ©. Relevant b. « Reliable d. Unbiased iat is neutral? Conservatism or prudence is best described as selecting an account a. Overstates liabilities and expenses b. Understates assets and net income . Has the least favorable impact on owners’ equity d, Is least likely to mislead users of aecounting information ing information that Under the Conceptual Framework, what are the enhar information? a. Relevance, reliability, comparability and understandability b. Comparability, verifiability, timeliness and understandability c. Relevance, faithful representation, prudence and comparability J. Consistency, going concer, materiality and faithful representation ing. qualitative characteristics of accounting Page 2 of 4 pagesFeSO. The Reviow Schiol of Accourtanay TA-294 THE CONCEPTUAL FRAMEWORK 23. The financial information must be comprehensible or intelligible if it 1s to be usefvl and that users must have reasonable knowledge of business and economic activities, a. Relevance c) Understandability b. Reliability d. Comparability 24. Determine the FALSE statement about consistency and comparability, ‘a Consistency, although related.to comparability, is not the same; comparability is the goal while consistency helps to actiieve such goal. b. Consistency refers to the use of the same methods for the same items, either from period to periad within a reporting entity or ini a single period across entities. c. Comparability ‘5 the qualitative characteristic that enables users to identify and understand similarities in, and differences among, items. d. Comparability is not uniformity; permitting alternative accounting methods for the same economic phenomenon does nat in any way diminish comparability. 25; Consistency in financial reporting requires that ‘a. Gainsand losses should not appear in the income statement bb. Effect of changes in accounting treatment be properly disciosed ¢, Accqunting procedures be adopted that give a consistent rate of return d. Expenses be reported as charges against the period In which they are incurred 26. In financial reports, comparability is more often being sacrificed for a. Prudence b. Relevance © Objectivity d. Conservatism 27. It is the qualitative characteristic that helps assure users that information faithfully represents the economic phenomenon it purports to represent so that different knowledgeable and independent ‘observers could reach consensus that a particular depiction is a faithful representation. . ‘a, Relevance b. Verifiabiity © Comparability d. Feedback value 28. The usefulness of providing information in the financial statements is subject to the constraint of a. Cost b. Reliability Consistency d. Representational faithfulness 29. What are the elements that are directly related to the measurement of financial position? a. Assets and liabilities b. Assets, liability and equity c. Assets, liability, income arid equity - d, Assets, liability, expanses, income and equity | 30. What are the elements that are directly related to the measurement of performance? |. What a. Gains and losses b. _ Income and expenses c. "Assets, income and expenses d. Assets, liability, expenses, income and equity 31, Determine the TRUE statement regarding the concepts of revenues, gains and income. a. Gains cover both income and revenue b._Revenues'cover both income and gains Income covers both revenues and gains d. Income, revenues and gains are one and the same 32. When should an item that meets the definition of an element of financial statements be recognized? a. When the element has a cost or value that can be measured with reliability, | When the entity obtains control of the rights or obligations associated with the item © When it is probable that any future etoriomic benefit associated with the item will flow to. ‘or from the entity. 4. When it is probable that any future econontic benefit associated with the item will flow to ct from the entity and the iterr: has a cost or value that can be measured with reliability Page 3 of 4 pagesReSO - The Review School of Uecconecarey TA-294 THE CONCEPTUAL FRAMEWORK 33, What are the measurement bases used in preparing the financial statements? a. Historical cost and realizable value. b. Historical cost, current cost and realizable value ©. Historical cost, realizable value and present value J. Historical cost, current cost, realizable value'and present value 34. Which of the following best describes realizable (settlement) value? ‘a. Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition bi Assets are carried at the amount of cash or cash equivalents that would have to be paid it the same or an equivalent asset was acquired currently.» © Assets are Carried at the amount of cash or cash equivalents that could currently be ‘obtained by selling the asset in an orderly disposal. d. Assets are carried at the present value of the future net cash inflows that the item is. expected to generate in the normal course of business, 35, What. are the two capital concepts included in the scope of the Conceptual Framework? @. “Financial and physical capital b, Borrowed and invested capital Accounting and economic capital d. Monetary and non-monetary capital ; 36, Which one of the following statements best describes the “going concen’ a. The expenses of an entity exceed its income b. When current liabilities of an.entity exceed current assets The ability of the entity to continue in operation for the foreseeable future The potential to contribute to the flow of cash and cash equivalents to-the entity sssumption? 37, The accounting basis sed in measuring financial performance where an income (expense) is recognized 2s earned (incurred), regardless whether or not cash is teceived (paid) ‘a. Cash basis ©. Modified accrual basis D. Accrual basis Modified cash basie Items 38 to 40 are based on the following statements issued by ASC! “Accounting is & service activity. Nis function is (0 provide quantitative information, primariy financial In nature whou economic entities, that is intended to be useful inymaking economic decisions, ASC (Accounting Standards Council 1s now known as FRSC (Financial Reporting Standards Gouna) 38. One of the’basic features of financial accounting Is the 2. Difect measurement of economic resources and obligations and changes in them in terrns ‘of money. b: Direct measurement of economic resources and obligations and changes in them in terms ‘of money and sociological impact. Direct measurement of economic resotirces and obligations and-changes in them in terms of money and psychological impact. 4, Direct measurement of economic resources and obligations and changes in them in. terms of money and sociological and psychological impact 39. The information provided by financial reporting pertains to ‘. Individual business enterprises, rather than to industries or an economy asia whole or to members of society as consumers, b, Business industries, rather than to individual enterprises or an economy as a whole or to members of society as consumers.” * Individual business enterprises, industries, and an economy as a whole, rather than to members of society a5 consumers, d. An economy as a whole and to members of society as consumers, rather than to individual enterprises or industries. 49. During @ period when an enterprise is under the direction of a particular management, financial reporting will DIRECTLY provide information about ‘a. Management performance but not enterprise performance b. Enterprise performance but not management performance c. Both enterprise performance and management performance d._ Neither enterprise performance nor management performance Page 4 of 4 pages “KSA The Review School of lccounstoncy, « Theory of Occomeds TA-295: BASIC ACCOUNTING PROCESS Sources: Conceptual Framework/Applicable AICPA/Various test banks 1. Economicidata on the transactions and other accountable events of an entity are collected by means of a. Journals Accounting records b. Accounts d. Source documents 2. The first step in the accounting cycle is to a. Post journal entries to general ledger accounts b. Analyze transactions from source documents Adjust the general ledger accounts d. Record transactions in a journal 3. The debit and credit analysis of a transaction normally takes place 2. After the preparation ofthe financial statements D. before an entry is recorded in the journal when the entry is posted fo the ledger 4. when the trial balance is prepared 4, What is the effect of a credit sale of inventories? ‘2. Total assetsWpcrease €. Total assets remain unchanged bs Total labilties increase 4. Total shareholders” equity decreases 5. Which transaction would have a net effect of increasing assets and equity? Sale of goods on account Retirement of treasury shares Payment of an expense in cash Collection of a trade account receivable 6, The accounting equation must remain in balance ‘a. Only when journal entries are made b. Only at the time the trial baiance is prepared Throughout each step in the accounting cycle d. Only when formal financial statements are prepared 7. Which of the following documents does NOT initiate an entry to be made in the accounts? a. Sales invoice c. Purchase invoice b. Credit memorandum d. Purchase order ‘What is the book of “original” entry? 2. Trial balance Ledger: b. Journal d. Book of Genesis 9. What function do accounting journals serve in the accounting process? a. Recording Summarizing b. Classifying 4. Reporting 10. What function do accounting ledgers serve in the accounting process? a. Recording ¢. Summarizing b. Classifying d. Reporting 11. Credits are used to record increases in 2. Expenses, liabilities and equity ¢. Revenues, dividends and assets b. Revenues, liabilities and equity 4, Assets, revenues, liabilities and equity 12. Which special journal is used to recoid a cash sale transaction? a, Sales journal c. Cash receipts journal b. Purchase journal d. Cash disbursements journal 13. When special journals are used, adjusting, closing and reversing entries are recorded in the ‘a. Cash disbursement journal General journal b. Cash receipts journal d. Purchases journal 414. "Posting" is a terminology that refers to the process of transferring accounting information from ‘a. Journals to general ledger accounts <. Source documents to journals b. General ledger accounts to journals. d.__‘Journals to source documents Page 1 of 3 pagesReSU - The Review School of ecourtoncy, TA-295 BASIC ACCOUNTING PROCESS 15. A subsidiary ledger is a. A listing of accounts balances just before closing entries are prepared b. Allisting of the components of account balances in the general ledger c. A backup system to protect against unexpected destruction of records d. listing of accounts of a subsidiary company owned by a parent company 16. How do you call a listing of all the general leciger accounts in a systematic form? a. Subsidiary ledger Voucher b. Chart of accounts d. Accounts 17. Which is an example of a nominal (temporary) and contra account? 3. Accumulated depreciation . Distribution costs b. Sales returns and allowances d. Discount on bonds payable 18, Which is an example of a real (permanent) and adjunct account? a. Freight- ¢. Allowance for bad debts b. Freight-out d. Premium on bonds payable 19, Which of the following constitutes both transposition and sliding errors? ‘a. A transaction amounting to P 1,234 recorded in the journal as P 1,243 b. A transaction amounting to P 345.00 posted in the ledger as P 34.50 ¢. A transaction amounting to P 656,000 unintentionally not recorded in the journal . A transaction amounting to P 780.00 recorded in the journal as P 8,700.00 20. A trial balance that is in balance proves that ‘a. No significant errors exist in the ledger accounts b. Total debit and total credit in the ledger accounts are equal ¢. All transactions have been entered in ‘he journal completely d._Allentries have been posted from the journal to the ledger correctly 21, When total debit exceeds total credit in the income statement columns of the worksheet, this indicates a. Net loss. c. Zero profit b. Net income d. No meaningful amount 22, When total debit exceeds total credit in the balance sheet columns of the worksheet, this indicates a. Net loss Zero profit b. Net income ¢. No meaningful amount 23. Adjusting entries involve ‘2. Only real accounts ¢. Only capital accounts b. Only nominal accounts d. One real and one nominal account 24, Accrued expense is an expense that is ‘Already paid and incurred b. Already paid but not yet incurred ¢. Already incurred but not yet paid d. Not yet incurred and not yet paid 25. Prepaid expense can be best described as en amount ‘a, Paid and matched with earnings b. Paid but not matched with earnings . Not paid and not matched with earnings d. Not paid but matched with earnings 26. The advanced receipt of rental fee is recorded by debiting cash and crediting unearned rent, this approach of recording is known as ‘a, Asset method c. Liability method b. Expense method d. Income method 27. If the advanced payment of an expense was initially Fecorded in an asset account, then the adjusting entry will involve ‘a. A debit to expense and a credit to an asset account in the amount of the expired cost b. A debit to expense and a credit to an asset account in the amount of the unexpired cost . Adebit to an asset account and a credit to expense in the amount of the expired cost d. A debit to an asset account and a credit te expense in the amount of the unexpired cost Page 2 of i pages S)ReSQ - the Review School of Gecounfameg BASIC ACCOUNTING PROCESS 28. Which of the following accounts is affected by the closing entries? a. Asset accounts b. Capital accounts . Liability accounts >. d. None of the choices 29. When business operations result in @ profit, the Inconre Summary account is. 2. Not used at all b. Used for adjusting entries . Debited and the capital account Is credited d. Credited and the capital account is debited 30. Which of the following accounts would NOT be subject to a closing entry? . Gain on sale of equipment b. Gain on sale of treasury shares ¢. Gain on sale of investment in debt securities d. Gain on extinguishment of financial liabilities 31. Reversing entries are done a. At the end of the accounting period b. To correct erroneous entries made during the period ¢. To reverse the effect of certain closing entries made at year-end 4. To simplify the subsequent recording of certain kinds of recurring transactions Adjusting & Reversing Entries ADJUSTING ENTRIES tic siaic 17 te tee ete eceneeS Expense (creates payable) _ | Income (A)Liability method TA-295 37. Adjusting entries that may be reversed include PREPAID items that ‘a. Create an asset account when adjusted b. Greate a liability account when adjusted c. Create an income account when adjusted d. Create an expense account when adjusted 38. Which of the following part of the accounting cycle may be omitted (.e., optional)? 1). Post-closing trial balance is prepared. Il). Certain adjusting entries are reversed. 111) Journal entries are posted to the ledgers. a. Land I Mand In b. Land IIT d. 1, Mand In (unearned) | _(B) Income method | °4 |~ DEFERRALS Expense (A)Asset method —[ 5. | set (prepaid) (B)Expense method i 2 eet (Depreciation, amortization, bad debts, etc. | 3 | | 39. The manner in which accounting records are organized and employed within @ business including the Installation of accounting procedures for the accumulation and reporting of financial data is Known as, ‘a. Voucher system b. Accounting system c. Financial accounting d. Electronic data processing 40. Determine the correct statement '._ The accounting cycle is part of the accounting process b. The accounting system is part of the accounting cycle ©. The accounting process is part of the accounting cycle 4d. The accounting system is part of the accounting process Page 3 of 3 pages| ReSUh- The Review School of Decorritomn » Theory of Occouite TA-296: STATEMENT oF COMPREHENSIVE INCOME & ACCOUNTING CHANGES Sources: PAS 1/PAS 8/Conceptual Framework/RPCPA/Applicable AICPA/Various test banks » 3. Amventity’s revenue may result from ‘A decrease in an asset from primary operations ‘A decrease in a liability from primary operations ~ An increase in an asset from incidental transactions d, An increase in a liability from incidental transactions 4, They refer to increases in.equity from peripheral or incidental transactions of an entity. a, Revenues Comprehensive income b. Dividends Gains - 2 tt refers to 8 decrease in economic benefits n the form of a decrease in asset or an increase in labily resulting in a decrease in equity other than distributions to owners, : a Asset tneame | B. Uabity @) txvense-- 6. Expense is recognized 3. When it has been paid for When itis probable that economic benef can be measured aby ‘when itis probable that the outflow of economic benefit has occurred @ When itis propable that an outfow of economic beneit has pccurved and it can be measured reliably-— 7. In §gancial reporting, the term ‘probable’ means that the probability that an event will o ‘More than the probability that the event will not occur . Less than the probability that the event will not occur —~ iy Erte c. Same as the probability that the event will not occur YR Pare Highly uncertain Pace. ee b 8, It is the process that involves the simultaneous.recognition of reyenue and expenses that result directly froga the same transactions or events, ‘Matching of cost with revenue Immediate recognition Matching of revenue with cost d. Systematic and rational allocation 9. If an asset provides ‘benefits for several periods, its cost is allocated to the periods benefited in the absence of a more direct basis for relating the cost to revenue. ‘Associating cause and effect ~ €. Immediate recognition Systematic and rational allocation 4. Installment method 10, Which of the following illustrates the expense recognition principle of associating cause anci effact? Depreciation of property ~ €. Allocation of insurance cost Sales commissions d. Officers’ salaries eo Soues Wein. 111, The write-off of a worthless patent is an example,ef which expense recognition principle? ‘a. Systematic and rational allocation Immediate recognition” b. Cause and effect association Profit maximization 2 Ung i raat approach, net income (profit) is computed as the excess of, Income over expenses ~ , Total assets over total liabilities c.Ending capital over beginning capital 4. Beginning capital over ending capital Page 1 of 4 pagesKeSU - the Review School of ecourfaneg TA-296 STATEMENT of COMPREHENSIVE INCOME & ACCOUNTING CHANGES D 13. Under the capital maintenance approach, net income (profit) is computed as the excess of @. Beginning over ending capital, including the effect of Investments and withdrawals by owners B._ Beginning over ending capital, excluding the effect of investments and withdrawals By owners. Ending over beginning capital, including the effect of investments and withdrawals by owners. © Ending ever beginning capital, exchuding the effect of investments and withdrawals by owners. — A 14. The income statement presentation wherein expenses are classified according to their function, as part of o of sales, selling activities, administrative activities and other operating activities: Cost of sales method —~ /* =) c. Account form Nature of expense method seh d. Report form 15, Whigh of the following is NOT considered in the cost of goods sold? Office Supplies— cc. Raw Materials Work-In-Process. d. Finished Goods © 16. Which of the following is NOT considered as a distribution cost? ‘a, Salesmen’s commission Freight-out b. Depreciation of delivery equipment Freight-in. — 17. Which item is no longer allowed to be shown on the face of the income statement? ‘a. Finance cost Extraordinary items ~ b. Tax expense Share of income or loss of associates @ 18,A transaction that is material in amount, unusual in nature and infrequent in occurrence should be presented in the incdme statement separately as a a. Prior period error Component of income from continuing operations~ [Component of income from discontinued operations, after tox Component of income from discontinued operations, before tax to 19. The results of discontinued operations should be presented a single amount in the ‘statement of changes in equity Statement of financial position and in the notes thereto income statement, after tax, separately from income from continuing operations P& income statement, before tax, separately from income from continuing operations shall dsclove on the face ofthe income statement the allocation of profit or loss between 2 Barent and subsidiary companies B. Ordinary and extraordinary activities Continuing and discontinued operations © Non-contreling (minority) imerest and overs ofthe parent Pe ~ 21, Comprehensive income refers to the changes in equity other than changes resulting from distribution to ‘and contributions from owners. Which of these is nat.a component of comprehensive income? 4 As |, EQUITY, a. Losses Expenses | Beet b. Revenue Dividends — “eto . si : 22. It igabe total of income less expenses, excluding the components of other comprehensive inc Profit or loss~ c, Accumulated profit or loss Retained earnings d. Total comprehensive income 1) 23. These are items of income and expenses that are rot) recognized in profit or loss as required or permitted by PFRS. ‘a. Retained earnings Total comprehensive income b, Accumulated profit or loss Other comprehensive income ~ (©. 24. Which item is.no¢.2 component of other comprehensive income? ‘a. Changes in revaluation surplus Foreign currency translation gain or loss © ives gaan sero aod scan © Unrealized gain or loss from derivative contracts designated as cash flow hedge 4 25, The statement of comprehensive income stiall include information about 1). Profit or loss TI) Changes in equity Gia oenare aera Land 11- © Mand ut b. Land IIT d, 1, Mand itt Page 2 of 4 pages 4 St Pp chonges + Echmate Yel “¢ Gatetned) Mpeg oihecal Provic RSM - The Review School of Asian TA-296 YVautery — eehmpebeely CED STATEMENT of COMPREHENSIVE INCOME & ACCOUNTING CHANGES : ce 5 Spektiet User 26. A change in accounting estimate is considered as a(n) . Irregular book adjustment . b. Change in accounting policy Normal recurring adjustment . Correction of prior period error requiring restatement of financial statements “~ 27, Prospective application of the effect of change in estimate means that thé change ie applied to traggpctions from the @ dete of change Balance sheet dace Begining of the year of change 4, Date of issuance of financial statement a. Shown as adjustment to retained earnings ~ Sone ager eRe 22-1 Is the eaclfioprincple, basis, convention, rule and practice adopted by an entity in preparing and resenting the financial statements coe Ag ese Prior period error once, GAA ¢ Accounting policy Accankny Polly € Accounting estimate 3 d. Generally accepted accounting principles 30. A change in accounting poliey-shall be effected when: 1). Itis required by an accounting standard or its interpretation / 11) It helps an entity-save on corporate taxes by way of understating periodic income 1) The ‘change results in financial statements providing more relevant or reliable financial information about the reporting entity a. land I Jand UL b. Mand 11 1, Wand 1 31. A change in accounting poley as required by-an accounting standard shal be a. "Ignored B. Applied retrospectively ‘Applied currently and prospectively ® ‘Aerled in acortonce withthe sional provisions. the reloed standard © 32. A change in accounting policy made by an entity voluntarily shall be Ignored Applied retrospectively. Applied currently and prospectively ~ . Treated as a change in accounting estimate 35, WED Of the following terms best describes applying a new accounting policy to transactions as iC that policy had giways been applied? 2. Prospective spplication= , Prospective restatement Retrospective application @ Retrospective restatement 34 Retrospective application means that any effect of a charige in accounting policy should be reported as a. An extraordinary item b. Acurrent adjustment to profit or loss . A component of discontinued operation ‘A catch-up adjustment to the opening balance of retained earnings“ 35. Prospective application of a change in accounting policy is required when a. Retrospective application will tend to overstate the equity position b. Retrospective application will tend to understate the equity position ©. The amount of adjustment to the opening balance of retained earnings can be reasonably determined The ‘amount of adjustment to the opening balance of retained earnings cannot be reasonably determined Page 3 of 4 pagesReSU - the Review School of Oeccoutancy TA-296 STATEMENT of COMPREHENSIVE INCOME & ACCOUNTING CHANGES 36. Which is considered as a change in accounting policy rather than a change in accounting estimate? Revision of an intangible asset's useful life Change in the residual value of a building used as plant site Change in inventory valuation from FIFO to weighted average method “d. Change in depreciation method from straight line to double declining balance method ~ N37. Achange in reporting entity and measurement basis is treated as a change in accounting Paley Concept Estimate Assumption er policy, then the change is treated as a race a. Prior period error ~ D 39. Prior period errors include all of the following, except ‘a, Effects of mathematical mistakes b. Mistakes in applying accounting policies Oversights or misinterpretation of facts and fraud Effects of a change in the estimated useful life of an asset “ 40. Prior period errors discovered in the current period are reported as ‘a. Extraordinary items, Component of current income from ordinary activities ‘Adjustments to the opening balance of retained earnings ~ Component of current income fram continuing operations Page 4 of 4 pagess ih 2 CD) RSM. the Reem Sal cenetaney » Ther, of Bacon TA-297: STATEMENT OF FINANCIAL POSITION & NOTES To THE FINANCIAL STATEMENTS ‘Sources: PAS 1/PAS 10/PAS 24/PAS 37/Applicable AICPA/Various test banks 1 “Thastatement of financial position of a reporting entity presents a structured summary of the Assets, liabilities and equity at the reporting date Cash receipts and payments of cash during the period ©. Profits and losses not reported in incame of the period d, Revenue and expenses arising during the reporting period 2, Which of the following is an essential characteristic of an asset? 3. An asset ts tangible ‘An asset is obtained at a cost An asset provides future economic benefits The claims to an asset's benefits are legally enforceable 3. Which of the following statements best-describes a lability? a. An excess of equity over current asset ‘A present obligation of the entity arising from past events ©. Resources to meet financial commitments as they fall due . The residual interest in the assets of the entity after deducting all of its liabilities 4. Under PAS 1, assets in the statement of financial position are broadly classified into Current and non-current ©. Depreciable and non-depreciable ». Tangible and intangible ¢. Monetary ahi non-monetary 5. Under PAS 1, which of the following does NOT refer to @ current asset? . & Its held primarily for the purpose oF being traded It is expected to be realized within 12 moriths after the balance sheet (BS) date Itis.a cash or cash equivalent restricted for more than 12 months from 8S date &, Its expected to be realized, sold or consumer within the entity's normal operating cycle 6. Under PAS 1, which of the following does NOT describe a current liability? a. It is held primarily for the purpose of being traded b. Itis expected to be settled within the entity's normal operating cycle <. it is due to be settied within twelve months after the balance sheet date © The entity has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date 7. When an entity BREACHES an undertaking under a long-term Joan agreement with the effect tat the lability becomes payable an demand, the lability ie lacsied as 2. Current, only ifthe lender demands immediate payment as a consequence ofthe breach © Gurrent, even ifthe lender has agreed rot to demand payment as a conseauence of the breach © Non-current, only if the lender demands immediate payment as a consequence of the breach 4d. Non-current, even if the lender has agreed not to demand payment as a consequence of the breach 8. The REFINANCING (rolling over) of a currently maturing long-term debt on a long-term basis completed on oF before the balance sheet date requires that such debt be classified as a “3. Current lability, Non-current liability Current liability or non-current liability, at the option of the debtor d. Non-adjusting event that shall be disclosed in the notes to the financial statements 9. The REFINANCING (rolling over) of a currently maturing long-term debt on a long-term basis of an entity completed after the balance sheet date requires that such debt be classified as a a. Current liability, iF the entity expects, and has the discretion, to refinance the debt b. Current liability, the discretion of the entity to refinance the debt notwithstanding Non-current liability, if the entity has no discretion or expectation to refinance the debt © Nowccurent ably, the entity expect, ana has the aheeton’ Ge renanee re en 10. Offsetting of assets and liabilities is 2 Alowed inal cscs sac lowed uness nt parted by Pras 3 Novatloned ina ses (©) hersiowed anes permitted by PERS Page 1 of 3 pagesROSA - the Review School of Uecowrtoney, TA-297 STATEMENT of FINANCIAL POSITION & NOTES to the FS 4 11; The balance sheet format wherein assets section is shown side-by-side with liabilities & equity section. ‘Account form / Acrzamc) Foon G_Funetional presentation B. Report form )Jecmee\ Foon d. Natural presentation 12, Which of the following is NOT an acceptable presentation of the statement of financial position? ‘a. Assets presented in the order of liquidity b. Non-contralling interests presented within equity Provisions presented as part of the liability section Deferred tax liabilities presented as part of current liabilities % 13, Which is NOT required to be presented as a line item on the face of the statement of financial position? Biological assets . Investment property Contingent lability 4. Investments accounted under equity method @ 14, An obligation is NOT a contingent liability but should be recognized as a provision when 4 ‘Obligation is unusual in nature and occurs infrequently ‘Amount Is measurable and settlement of obligation is probable ©. Amount is measurable and settlement of obligation is frequent d, Obligation is unusual in nature and settlement of obligation is probable C15. These provide narrative description or disaggregation of items disclosed on the face of the financial statements and information about items that do nat qualify for recognition. 2. Financial reports © otes to the financial statements b. Value-added statements ‘Summary of significant accounting policies < 16. What is the purpose of information presented in notes to the financial statements? ‘a. To present management's responses to auditor comments b. To correct improper presentation in the financial statements To provide disclosures required by generally accepted accounting principles To provide recognition of amounts not included in the total of the financial statements 17, The application of Philippine Financial Reporting Standards, with additional disclosures if necessary, is presumed to result in financial statements that achieve ‘Aggregation. ¢. Comparable information Fair presentation d. Consistency of presentation 18, What is the normal order of presenting the notes to the financial statements? ‘A). Statement of measurement basis and accounting policies applied B). Supporting information or computation for line items presented and aggregated in the FS C) Statement of compliance with Philippine Financial Reporting Standards (PFRS) D) Commitments, contingencies, and other required financial and non-financial disclosures 2. AC,B,0 CA,B,D . b. CAD. CB,A,0 19. Which i NOT included inthe ‘accounting policies” section of the notes to the FS? ; “the measurement basis used in preparing the FS : © The supporting computation for terns aggregated on the face of the FS © The accounting polices used that are relevant to an understanding ofthe FS i G._ Whether company 's using FIFO 01 weighted average method for costing inventory 3 20. An entity is required to present the following non-financial disclosures, EXCEPT a. Domicile and legal form of the entity Description of the nature of entity’s operation. ‘Names of major shareholders and board members d. Name of parent and ultimate parent of the group of companies. c 21. Under PAS 24, related parties do NOT include a Alien - ce | Be. Associates © Entities that have a common director Sie Seticiields maar dene) Key management personnel and thelr close family members sna ‘ 22. Which of the following is NOT a related party as envisaged by PAS 24? a. A director of the entity = b. The parent company of the entity ha ‘The son of the chief executive officer of the entity Oe rece. A shareholder of the entity that holds 1% stake in the entity Lobient 262 age 2 of 3 pages