Part 1 (Source: LPU)

1.Financial accounting is shaped to a significant extent, by the environment, and in particular all of the following, except
A. The characteristics andjjjj limitations of financial accounting and financial statements
B. The many uses and users which it serves
C. The overall organization of economic activity in society
D. The means of measuring economic activity

2.The primary objective of financial reporting is to provide information

A. About a firm’s financing and investing activities B. About a firm’s economic resources and obligations
C.About a firm’s products and services D.Useful in predicting cash flows

3.The body of rules that dictates that entire profit must be recognized at the moment and in the period of sale is called
A.Cost convention C. Realization convention
B.Going concern convention D. Conservatism

4.Which of the following is not an objective of using present value in accounting measurements?
A.to capture the value of an asset or a liability in the context of a particular entity
B.To estimate fair value
C.To capture the economic difference between sets of future cash flows
D.To capture the elements that taken together would comprise a market price if one existed

5.Which of the following is true of the qualitative characteristic of understandability in relation to information in financial state ments?
A.Users should be willing to study the information with reasonable diligence
B.Users are expected to have significant business knowledge
C.Financial statements should exclude complex matters
D.Financial statements should be free from material error

6.Which of the following terms best describes the amount of cash or cash equivalent that could currently be obtained by selli ng an asset in an orderly disposal?
A.Fair value B.Realizable value C.Residual value D. Value in use

7.The process of establishing financial accounting standards

A.is a democratic process in that a majority of practicing accountants must agree with a standard before it becomes implemented.
B.is a legislative process based on rules promulgated by government agencies.
C.is based solely on economic analysis of the effects each standard will have if it is implemented.
D.is a social process which incorporates political actions of various interested user groups as well as professional research and logic.

8.Proper application of accounting principles is most dependent upon the

A.Existence of specific PFRS B.Oversight of regulatory bodies C.External audit function D.Professional judgment of the accountant

9.The implementation constraints include all of the following except

A.Materiality b. Conservatism c.Cost-benefit d. Separate entity

10.What is the quality of information that gives assurance that it is reasonably free of error and bias?
A.Relevance b. Faithful representation c.Verifiability d. Neutrality

1. Uncertainty and risk inherent in business situations should be adequately considered in financial reporting.
This statement is an example of the concept of
a. Disclosure b. Completeness c. Neutrality d. Conservatism

2. Imputing interest for certain assets and liabilities is primarily based on the concept of
a. Conservatism b. Valuation c. Consistency d. Stable monetary unit

3. Verifiability of accounting information is synonymous with

Prepared by: Sir Orly Manalang CFAS FINALS - Page 1 of 4

a. Faithful representation c. Prudence
b. Substance over form d. Completeness
4. Which of the following statements concerning the objectives of financial reporting is correct?
a. The objectives are intended to be specific in nature
b. The objectives encompass not only financial statement disclosures but other information as well
c. The objectives are the end result of the conceptual framework project
d. The objectives are directed primarily toward the needs of internal users of accounting information

5. The financial statements prepared under GAAP

a. Do not articulate with one another
b. Reflect a single measurement basis which is historical cost
c. Are not highly precise because many estimates and judgments must be made
d. Contain a limited number of future projections, such as projected sale

6. The primary measurement basis currently used to value assets in general purpose financial statements of an entity is
a. The current market price if the assets currently held by an entity were sold on the open market
b. The current market price if the assets currently held by an entity were purchased on the open market
c. The present value of the cash flows assets are expected to generate over their remaining useful lives
d. The market price of the assets at the date the assets were acquired

7. Asset measurements in conventional financial statements

a. Are confined to historical cost c. Reflect several financial attributes
b. Are confined to historical cost and current cost d. Do not reflect output values

8. Which of the following financial attributes of assets is generally considered to be the most relevant?
a. Present value b. Current exit value c. Current cost d. Historical cost

9. Choose the correct statement about generally accepted accounting principles a. They are laws
b. The Bureau of Internal Revenues enforces GAAP
c. Firms that do not comply with GAAP may suffer negative economic consequences
d. GAAP and tax principles are the same

10. The following expenditures should be expensed as incurred, except

a. Expenditures on advertising and promotional activities
b. Payments for organization expense
c. Expenditures in relocating or reorganizing part or all of the enterprise
d. Payment in advance of delivery of goods or services

11. Which accounting assumption or principle is being violated if a company provides financial reports in connection with a new product introduction?
a. Economic entity b. Periodicity c. Revenue recognition d. Full disclosure

12. The valuation basis used in conventional financial statement is

a. Replacement cost c. Original cost
b. Fair value d. A mixture of cost and value

13. The information provided by financial reporting pertains to

a. Individual business enterprises and an economy as a whole or to members of society as consumers
b. Individual business enterprises and an economy as a whole, rather than to industries or to members of society as consumers
c. Individual business enterprises, rather than to industries or an economy as a whole or to members of society as consumers
d. Individual business enterprises, industries and an economy as a whole, rather than to members of society as consumers

14. During a period when an entity is under the direction of a particular management, financial reporting will directly provide information about
a. Both entity performance and management performance
b. Management performance but not entity performance
c. Entity performance but not management performance
d. Neither entity performance nor management performance

15. The following are not considered items of “Cash and Cash equivalents”, except a. Certificate of time deposit
b. Three-month treasury note maturing on January 31 of the succeeding year purchased from the entity on
November 15 of the current year
c. Three-year treasury note maturing on January 31 of the succeeding year sold by the entity on November
15 of the current year
d. Post-dated checks issued on the balance sheet date

16. Accounting for inventories applying the lower of cost of net realizable value is an example of the application of
a. Materiality b. Conservatism c. Comparability d. Consistency
17. Reporting inventory at the lower of cost or net realizable value is a departure from the accounting principle of
a. Historical cost b. Consistency c. Conservatism d. Full disclosure
18. Under PAS 38, which of the following is not part of the definition of intangible assets?
a. Identifiable non-monetary assets c. Future economic benefits
b. Lacking physical substance d. With finite life

19. The cost of intangible asset acquired by way of government grant is recorded at
a. Fair value c. Either “a” or “b”
b. Nominal amount plus direct costs d. Neither “a” nor “b”

20. Which of the following factors is not considered in determining the useful life of an intangible asset?
a. Initial cost c. Expected usage of the asset
b. Legal or contractual provisions d. Expected actions of competitors

21. If there is evidence that an impairment loss on loan receivable has been incurred, the loss is equal to the
a. Excess of the present value of cash flows related to the loan over the carrying amount of the loan receivable
b. Excess of the carrying amount of the loan receivable over the present value of the cash flows related to the loan
c. Excess of the carrying amount of the loan over the principal amount of the loan
d. Excess of the principal amount of the loan over its carrying amount

22. Amortization of intangible assets results primarily from application of the

a. Full disclosure principle c. Matching principle
b. Revenue principle d. Cost principle

23. Which of the following should not be amortized over the periods of estimated benefit?
a. Development costs that resulted in a successful product
b. Lease rights paid to owner of property for the usufruct
c. Costs incurred in organizing a corporation
d. Patent right purchased from an inventor

24. For which of the following assets is it most appropriate to test for impairment at least annually? a. Land
b. A patent with a legal life of 20 years
c. A trademark with an expected indefinite life
d. A building wherein declining balance method of depreciation is being used

25. An entity has a portfolio of marketable equity securities which it does not intend to sell in the near term. How should the entity classify these
securities and how should it report unrealized gains and losses from these securities?
a. Trading securities and component of income
b. Financial assets at fair value through other comprehensive income and component of shareholders’ equity
c. Trading securities and component of shareholders’ equity
d. Financial assets at fair value through other comprehensive income and component of income

26. The option to designate financial assets at FVPL and the election to classify financial assets at FVOCI are available to an entity’s management
a. On initial recognition and subsequent thereof c. On initial recognition only
b. Subsequent to initial recognition only d. Not available

27. The option to designate financial assets at FVPL and the election to classify financial assets at FVOCI are
a. Revocable c. Irrevocable
b. Mandatory d. Revocable under certain circumstances

28. The cost of property acquired by installment is equal to

a. List price b. Cash purchase price c. Invoice price d. Installment price

29. This is the estimated amount that an entity would currently obtain from disposal of the asset, after deducting the estimated costs of disposal, if the
asset were already of the age and in the condition expected at the end of its useful life
a. Value in use c. Salvage value
b. Fair value less costs to sell d. Depreciable value

30. Which of the following is not a major characteristic of a plant asset?

a. Possesses physical substance c. Acquired for use
b. Acquired for resale d. Yields services over a number of years