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Jaypaul Ocampo Acidera, CPA 2016

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ReSA•-• The Review School ()f Accoutitari_cy± Theo•_ -•- -AccolititS..
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TAPW ---: 321- r,. T,•:‘ ••, •

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.TIlE CONCEPTUAL, .- l'IkAMEW6Ric0.1' ACCOI.INTINCi ^ • - - ••

• . A primary objective of financial reporting. is .. . • . ••. . •
•• . _ • ' • a.. Assist investors in analyzing the economy •. , • , . .
, , • -‘ Assist
• investors:.
• . in,preOicting.. prospective , Cast' • , • ' .• • •
• , * Assist_ banks to cleternitne an appropriate interest rate.l'or their commercial loans - -

Assist- suppliers in determining An appropriate discount - to .0.1"rer-a particular Company •

. .."- 2. Which the f().110-'sivin' g.be.$1:. states, the purpose • general-purpose financial statements? •. . •.
,• a. 'F(') identify shareholders . • . To determine _ compliance with„ tax laws .••
- To help users Make decisions • d disclose; the Market value cyf the firm. ; ) ,•,
. • 3 - . Under. the Conceptual Framework of Financial -R.eportin.g, users of . financial information niny be .classified irto
a. Main users1(.,-.›, -(..isting. imiesti..;rs, creditors) - ,a.fid incidental users (potential investors, creditors) r
-• b.: • „Internal users (employees, customers) and external users, (investors. creditors) ;. * • •• •• • ' .
• • , . c users {management)
. . , . . and slight,• users (public, gc)verniTierit) - . . -. , , • . • , • .•
• • • •

Primary users (existing and potential •i.tiyestcirs'a.nd'creditors) and other users

. • •. .. ..
4. The Conceptual Framework is intended to ass,ist. • . • . . - •".
- .a. CPAs 411 public practice . • ; '•• c. Financial Reporting Standards Council • •
. • b. -Users of financial :statements . ;1 - • All of these - • • 2• _ • .
- 5.- Which term best describes inforin.at_iori. that . • , itifluences'the'e'conomic'deeision of.userS?... • -
• • - a. Reliable • • \
. ,•. c. Relevant s ,• . .
, ' • . •
. b.' ; ...Prospective . . . . , • . /d . t.Jrid(..xstanda.ble
. • . , •. - • ,, .
. If 'financial information that is preSented . . , in 'a balance sheet, or . income statement is misstated, and it influences ttie .
eCoriornic decisions • (3f users, that i.tilbrniati(.11 is described as • • - • •• . - •_ •
..
. a. • . Reliable
• - • •'' • - . . • , C. Prudent • ,• '• • • • '. • •
. b.. -Material . .• . . „ •• .• . . • , .,• . d. .faith..1111 . • ,. • • -
. . • • -.
• ...I:J.11(1.er the' coneeptdal Framework -for Financial ,Reporting wfdef.i of the characteristics replaces the .
•• • - • Old Conceptual Framework's characteristic? • • _ .• • •
a. -/ • Prudence . • . .-c. 'Substance over forip : •. ••
• b. Verifiability • • .d. - Faithful representation • • .•
-8. Which. of the following is NO!' an :ingredient of fiiithlItl representation . -according. to Conceptual Framework -17(:)r.• .•
• . .linancial Reporting 2010? . . . • ;• . . .
.. .• . • a:, Freedom . from error . • c. Completeness • . •
• • , Confirmatory value •- d. Neutrality. : • .•- . . .
. 9. - two linanCialr,..in.for.Tilati() -ri 'characteristics are .parts of "reliability" characteristic under the old Concept -4a!
• Framework that are •NC).1.,ONC3E1'..: explicitly., indicated as part of "faitlyt'ul` representation'7 characteristic under the
. Conceptual Framework 20107' •. . . •, •.
. - • . a. . Prudence and neutrality. • e. Prudence - and substance over form . . , .. •. •
-• 1 • b. CompleteneSS and neutrality • . - •d. Completeness and substance over lbrtn •; •
1.0.. • In respect - to information included in financial statements, the 'accoiinfing,oncepti‘6.1 .-prudetie/etisures th.at,; ••
• ,a. • ilic fltania1 .statements report what they -..purport to report . " •, •- •
• - •h. A degree ofcaution in the .exercise of judgthents .about -estimates is made : ' . .
C. Information e is provided . to users within the time period in which ii is mostlikely to •bearlo ni , their
_ . . . • . • -.,
'"• •• An appropriate
. . . . ba.latiee.iS
• . 'achieved between the relevance and the ' reliability of In.fo.rination. that has ‘.
. . .„ • . . •
• ,been included - . .• . • • • . . •
.11.. Accounting traditionally has been influenced by conservatism because -of the • , • ' 7
. • . • ' • . • . • • • .

a. 1..)tfticu1ty in measuring net income on the accrual basis „ •• •. • •. ,• ,•-.•

. •• b. - .1..;,arge number of transactions recorded in any one period' • . ‘• . • -• _ .
• •C, Inherent uncertainties of many accout.itirig.theastirements • . •-
•• • ••• • ..Probability of Undetected . errors in the finan c ial statements • • .• .
Which ofthe Ibliowing . terms describing _int.b.riiiatioti in the financial statements are .properly matched?
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c. , 1.. .rucle.nt 'and . relevant

_ . a• Understandable
•• • . . .
and comparable .
. • •
• . •;• - • .
. .. - t).• Reliable and verifiable . • titibi.ased.-.and neutral . .• L. • .
13. , 'tinder the Coticeritua.1:'Frat.n(4ork . ..1:br Financial Reporting - 201.10, „which of the :ti)1 . 1ovv.ing ,statertien.ts is N(...)1."' a .featurc.!
• , of financial . information's "comparability" • _ characteristic?..,.. .• =,• •.
• - . Comparability is
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.•• 4 •
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... . •
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•. b.,• A 6)triparisorp requires at least two items. . .
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altlicingli.ielated, to i i7.1.1.3 4: 1rabilit.31, - Tica the sairie,„ is • •• -•
• • • (1: -. • Comparability . is theg()al., consistencyhelps‘,to achieve that gcial • • • • •• , '• •
• • •
makers and the decisions they make so that financial. information would be ..useftil? • , • •
• • '.1•4 What links the decision ,
•

.• a. •-. , -Relevance ' •• ; c. T..Ti.iderstan.(iabi.lity • . . : • •. .

.- \ b. Reliability , • d. Materiality • • • • • .
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PREVVEEK MATERIALS in THEORY of ACCOUNTS (October 2016 Batch) - Page 2: -••_ . v.. •
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• Issuance of i nter i m li.vriativ4-.3a1 stateinc.iits trade-off between • . '• "• ••
• - a, * Relevance tnd reliability. • . c, '1'ii.litelinc:ss,and materiality • . .• . ".
• ,v . v.vb. Reliability and periodicity. , • d, v,. - t.liide.rStaii.clibility and timeliness' , • •
, 16.. Which of the blowing is trueregarding the ,qualitative chara c teristic of 'understandability' in relation . to irifor.friatici.r.i • • • ,
. • •• • ••
- sttvitei.r.ients? • • ‘. • .• . • • - •
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- •ai. Users should be willino to-study the 1..ii.forivill -iti(vin with reasonable:diligenCe . v- •
• :-b. Users. are expected to have. signilit:;atvit,business ktiowledgc. • . • , . v/ •• --• "4, iv •
.• . . .. . . • .•. , . . . . • • . • .•_. „
c. v statements should be tree from ii.r4terial error •-• • - • • • '•
•, •
, • • - ...,f4nancial,statements's1. -iotil(lexcit.idev conip•leX viiiiatterS . • - •
• •mseltilnes of •prtv,L-)viditig . iiiti)riji.ati,o,ivi v in. financial statements . is NOT subject .• to the constraint of - .rv • v, . •
v. • •4.,13alaric,-e
, . between . - benefit and cost
• . _ • -c. • Consistency
• * • v - v • v . • • • , '
-•. • • -, b. '.illince'l-
13:4;. .)etwc'en. qualitative characteristics . Timeliness • - -• v •
. • .18, Which underlying asstitriptic)n - is spec?fi c- .alty, indicated Conceptual Framework for Financial . Reporting ' ,OH)?
• . . . • c, • ..
„ a, -•Accrual basis v . v c. Monetary, unit . • -\ • - ,
Cioing- concert/ •_• d. Accounting entity' v
. yv•1.9. `..1"h.ev continuity (going .(v:once.rn) , .assumpt. ion is the basis for the rule that: . •. •v -v • . - *
v• a.lhe iflcore statei.il-ent should not include, material *ail:1i; and losses that are - both. -‘ unusual, and -
- • in.freqiient • •- •. • • -• •' • • -• •
v. •. -. b.v•il'rt...4asury stock Should not be reported in the balance sheet as an 'asset •• '-• . . • ,
C. 4:1Tie. cost . of i.nstalling a .i.i7iach.ine slii(itikl not be included in the recorded v cost O.-(1' th.e" machine, but rather '• • ,v - • '
....._. --• expensed, immediately •-: - '" . • v- • 2 ..
• ,d. llie cost of-,operating-assets should,vbc - allbcated to expense systematically over their :useful 'lives • .v • •-
• • , •-•
.. . - 20. Preparation (7.-)..t7ccvyilsk'..?lidateti when a' io,tiretit-siili-sidiary'relationship exists . is an t'v.if the • v - •
v• • , • • .•
- . a. 1.!,,c(),no.triic entity asssuitription ,•v , - Comparability characteristic - • , v . v . - v* * •
• v., b. v Relevance cha.ri(,-teristvics VV V •CL Neutrality characteristic.: • v•v : .
v . ee(v).nc)iii.ic• entity. assumption V V •. . • .V . - v
•Requires periodic income measurement -•. •- .
, • .• • • „ . •
. b. Is appl i cable - to. unincorporated businesses , . . •.‘ . .
• , • •
= '•=c, . Recognizes, the - legal- aspects of business entities - . • . •. -

d. , Is applicable to all vf7ornts (if blisir.iess • • • . . • _ -v . •_

.22. Which One (:)f the Ibilowingterms best- describes assets rt.ico.i'de,d at amount s ' that represent immediate purchase cost of -
. . an equivalent asset? ,v 'v v. • . v, .. • . . ,
•. • • • •. v • . _ . • • . •
- a. • Historical cost _ v• • c.; ' Present value . . .• "
.• b. .. Realizable value V V • , •. d.' Current Cost V ..
,..)•23.. Which capital ',concept requires the use ofciir,eni cost basis. , , . •' v . v v

s.vd• Financial capital concept' v - '.• c. :Roth financial md physical capital concepts - . v '1- . -•
• b• Physical capital concept . •
financial not physical capitalconcept . • .

hich •among the tiv.).1lowi.rig equations. best•-exemplities the PROPRIETARY

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24. W theory of accounting?, *- , •
Assets L•ia•bili‘•ties+
• _.
• Capita l -
.. •
.• . . •
_
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_ •- v , . .• , v•
•-h. Assets —Liabilities Capital; 7 . - - . •

• Assets - Preferred . •• , Vv
• d. _- Asset • • . . - v. .

• ) V -
. 25. -.1)i-()per applic.atii.v)ii_ ofaccounting principles, is IVIOS . 1 .',clepeil(lt- iit upon the V . v • :v . , .
•
• •a.• • Existence of specific . guidelines c External audit i'vtirictiori *. •
. _ Oversight o.lregillatc)i-y t')().dies d-, •viv)1..feSsi(-
(:) .)ivial•judgin.ent, of thc, accoimtant - Vv
:File International Accounting Standards (LAS) are . - '.• • ,
_ • a• . Rules-based rather than V principkshase 1 c. Rased on regulations not concepts v. ••
•' b. 1.3-riri.cip-le-1-)aseti rather than rti.le-s,baSed. V - cl, v- Focused Ofl quantitative rules v.,
.• • '• v-27. Ihe name' that is presently used..f.'or -standards/ issued by the International Accounting Standards Board is: •- ,v. V.
V -• •. • ,
v- a. - International Accotirit.iiig Standards (lAS)
' b. International Generally Accepted Accounting Principles ( -1.GA/‘.13) • v• • v,
V . • ,V - - v
. • ' C. 1.t.iternati()rial Financial Accounting Interpretat i ons
V
• V d. International"Fi.nanCial.'Reporting
•. . . , Standards (Ii- v'ftS) . ' . , • vv •
28. - 111-e,purpose ot the International Financial eporting Standards v(IIRS) .is to
''S • •
R •• '
v .v
- •'. -a.- Issue eirf7(-)rceable standards which regulate the financial reporting of ñiultinational entities . .
h. 1.)eviel()P a uni1orii currency in which the ifitikAticial transactions of entities throughout the world would .
• • • he measured .• • . . • • • •_v •
Promote unilbnn accotinti.iig, standards among the countries of the World .•
-Arbitrate v accounting disputes- between auditors and international entities
74• International Financial Reporting Standards are applicable tov . tl-ie
-
entities: . , ,•
a.. N . ','.)tf.i)r-pr()lit entities • ... c.V Government ,busiti.es•rs ettcrprises ,
.V v(ic.):Yerrimeiltv activities V. -• . d. Public 'sector non-profit cirgar.i.izitivc_si.iis

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30. (.,,..)n,ce an ae,c( .)untirig 'standard is established, • . • .
• • • • • • • '
a•• IThe'standard is continually reviewedo t is,necessary: . ..
b. The standard is not reviewed, unless -Secttrit.i.cs andExchange r.Cotritrtission. - • (St
- .',C) • makes - a .
. • .. c, •The task ofreviewirtg thc standard to see ifi -noditicati()n iS,:n.ecesskiry is given to .PICPA • •. s .
• . d. The principle of consistency states that no reviSi(nis slik .m.ijkl ever be iiiade to the standard .
' • • the process •of eStablish.i.rig• financial accounting standards • , . •- • .
- • - -a. .Es . a democratic . -prc.)cess.in . • . that :a irtajority ,. of prac .• . t iein. s ,
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, ., accountants • .must 'a.gree•
_ with
• ,a standard
, be.lb.re
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•- i.n.-iplementect • . •, • , • , ..• . . ; •
• •. " .•

h.: .I.s a'. legislative process oturtiles,proniulgat.eils , by govertarierit agencies _ . - • ;

: • e Is bas,t.lid Solely on economic analysis of the ef.feetc.,aelf standard will 'have if it isitiaplerne.ti • - .ted---;
• s' .1 • •
• • • . • •- .
d. Is a social process wicIt incorporates political actions, of various interested. - user groups ,a4well as• • -2 .
• professional .reSpare.h stind : logic - ,•, •'• '
32..„ J.i.eneral.ly accepted . accounting principles • ." • ... • . . s
. • ,• . - •.a. Are fundanenta1 tiliths or a.x.ionis that can be derived fi-,om. laws O.fria.tti.re S• •
•• •h. Derive their authority from • 'coal , Cowl proceedings . - • • , ••••. • • , •:: . ,• • \‘:
C. Ijeri.),i- e, 'their credikility, and authority, froin.' general recognition and acceptance by the accounting •• •
. • . - profession. J , •
• :, r. • •
•-
• • ,
t• • '
. • •.
• have been srieeitied,ip detail in the FRSC, conceptual•framework- - . • - • , .••
33. Y.I'() qualify as generally accepted, accounting principle must . • ' . s , •
• . . a. Usually. gnide, corporate Managers in preparing:,financiat statements, which will he understood by
widely scattered stockholders , , • .-
• b. Guide 'corporate . managers in preparing financial statements, 'which - will be used for . collective
. • bargaining agreements with trade unions • . _• .
•.„ ..c. . Guide 'entrepreneur of . the• , choice.. !.-)f.' an , 'accounting . • 'entity . . like a • 'sole. proprictors.hip,.
. partnership . or
corporation . sS .
. d.' • Receive substantial authoritatiVe. -stipp).rt • •• • . . , •• •
•• 34.. 'Which (.)f•th.efol.lowing statements regarding a.cc() -untiiig: theory is incorrect? ••• • . •
• a,. ACcounOng -. theory can • be defined as a coherent set of .•hypothetica), conceptutril, and . pragmatic
• principles thatifi.,-irrn a ,general fram'e'of. refert:m.ce f( .):r • a field' of. inquiry. • . •' ••' . ,
, b.. '7 ;Accounting - theory .. .has developed primarily jn response to government regulations. • . .
• -C Accounting concepts are ,c•()thpon,ents, Orf. accounting theic-)ry.,. • . ••• ‘, • .- •
• • d. ACCOtitili.ng concepts are 'IturtiatFmade• • • • ," • . :
••
'N()17 . 1.)I.R.:F•,(2'. .FI.,,Y involved in the accounting.stati(lardsciting due process in the .Philippines? . „. .
„.. •• • .
• . • a. t•tnancial Reporting Standards . C. . , Bureau of Internal Revenue'
. h, • , (2o.-triinission • s. . , • Board of AccouOtatte.y... • , • , • • s• •
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.,̀.' '1J1.13 , ,ACCOUNTING . •- .: • , ••. -

• 36. -file recording phase of,finanCial.accotinting•Cover, the following sleps, IXCE1I• • , 's • . .• • •

• Business cloctitrietits °arc . received/prepared e. transactions are posted to the ledger . • -

•b. . Transactions are journah..zed • d, Financial statements are prepared .• tr •• -

• 3.7._ It is an .:a.ccc)ttnt.ing device for:accumulating increases' and decreases • relating to a particular acottnting . value such as ani' •
-•• .asset or aliability.• -• •. •- • • • • - . • .
.• 'a. Acc o. unt.. •'. ‘' • balance - . , , •
- • . • . • _ _ . • . • .
• •• • . b.' . Journal . • • . • , • , d Worksheet
. • • , _ • •
The ,c1c)uble etitry conceptin aCcOunting. ille1,111.s which. (-.).1.7t.he
- _ . •. .•
• a.• The debit-credit convention intist not be used _ .• ••• • . -'
•11,' Ortly two accounts tviftTected by each transaction recording • • • -

• e. At least two accounts are affected by each transaction recorded, -• ' --: • • ••; .
d. /1,:For every
• . . :asse•t incrased„,• a revenue or liability',
• .• ttnistalso be 'increased • • • - ' . k - • .. -

• 39. Which of the the •science - aspect o.f.s . accounting'?

a. Interpreting the ititi)rirtatiOn presented in the .financial- stateni.erits through ratios . and trend analysis. -
. - • • • . . •
Attesting to the fairness'of -presentacion, 'of:itin.ancial condition and operating results ' •• . • • . •:
' C. Exercise,ot creative skill and judgment . •
• S cL Applying the rules of debit and credit. •.' -" • . • • • ‘'..• • . • • ,
• .410. •Which one -.of these - "i.$ not art:long the .i.-,41. teria . t6 consider' eVent, as; accountabie?,: - •
a.. It Must have already happened . • . •
• .
. b.. Its ..aniott.tlt can he measured rel..i,a1..)\ ly . • •
- • - . • . • .
• .. . e.. 1-t•nl.us' tincrease.'or decrease an c l ement •• • . „ •
• • •d. it must he classifiedas an'ex.terfial'event riitlie- i 7than' an internal eyeiit.,• . • • • -• • .

S , •. •. . .

.41; .'r.To post in accounting means to:.

• •-•a. Copy the inforinatiari about account changes' :frotri 'the • ledger and place it into• the journal: • . • •
.
.
: . • • •
• : • Copy -t.110;, itifortnation, sabout account changesti.(:).in the joixr.n.a.1,'and•place . it.into the 1.eclger. . •--
• -. -

• • .Ic. Copy the infortriat. ion. 'about aCcOunt :changestictil-the •source doeurrientS„-and,..rei..-,ord it in the ledger,. .
• (2,opy..the infortna,tion about account 'changes from the journa.L., place it into the ledger,- and then delete -A J.• .O.
• it from the jcytErtilil..' • . •, . . • •• . .• • .,. A.
,
a. 0110 pag•e, •• . . . . `'. ..
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42. ,A\ control device that helps niiiiimiie and localii.e accounhing eri.'‘o.rS is known as ,• • .-•'•
. a.' Subsidiary
•. ledger • -7. •. • c Irial balance. • „ '• •z ., • "•,- •
•• „ b. • W(fri(sheei.. . • •d (hart; faec()u.tits_ • • • ., • ' •
. ,• 43. In the accounting cycle, a'WorkshetA is prepared: ,-- I- - • •••. .• •
• , ;• .a After , • entries arc entered in the journal and posted to the ledger • • , • • • -;
• -•- - • 1), )1:3e.1()re .adjusting entries are entered in thr journal and pasted tO.the ledger ••` . - • • _
r. AS .6: substitute lbr financial statements -• • •• • • .2; • . • -• •
.• • •. -- • .d. 0.nly for the purpose. of preparing • reversing entries
,• • , • •• _ . • -‘ • • . .
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.44 What is normal order of accounts iii. the unadjusted -trial balance?. 's •. • ; . •,-., ; •- ,
• . •••• a, • ;Assets, equity, ity, income,. expeiists, and finallliabilities.' '.• ,•. • : • _ ••' . . . s. • . . .
. . .
• •,-b: All .account,s with debit balances. then all•accounts with credit.balances • • •• • .•-
c.- ASsets, liabilities; equity .; •. ,• '1 . . ••
. . • Assets. liabilities. equity. income, and...11.riallY expenses' • . ,• • -• . . • • -
. _ . • . •
.• , 45. •Adjusting ' entries • are needed because ati entity:: . • • , • 's • . .•.•• • • •-•
•a• I-Ias•expenSes• - • . . - - •- • • s • • •• • •‘ • • •
. • Uses the accrual basis of a.crountirig- . •. . . -•• •. •, • • • • • •
_.. • • . . • • • . • . , • • , .
,• ;, 'c• USes. - the. rash. basis of accounting rather than the accrual basis
•• . . • • -•
. • Flas 'earned revenue during the period by selling products ' from its eentraiOperations•
•. adjusting entry at the end .:of the :accounting year to reflect revenues canted but not yet collected or 'recorded •••
.a. .11.11)eerea.,s,e. "• , c.• 7..Noi,al.Tect assets • • -• -. ;
b. • Not al1Ict income ..for. the current period - • d. Increase assets' • : . • ..•-•-• • • ‘,
• , -• 47, Which ofthe followiti.g is an example of a' clo;;;;nk, entry? . • ... • ; . ; •, . .
a• Posting' the ending inventory balance in a . perpetual ; i•riVt-:'. •ii.tory system' ; •;• . ; •
r
•
. b., .1 raiisterri.tig ati-artio,unt .entered in a - wrong account to the appropriate - account. • k, •' . . (- - • .
,„„ .• , •• • ''s •
,. •• r. fra.tisterring,; the balance in the had debt expense account to thp. income •simi -mary.acronnt.
• .• • d. r Frail sferti.rkg the balance_ in a •temporary arc()utit lq a contra account - , • -; •. ,.•
- • , 48. Ihe effect (..) .f c•losin.g- entries is to • . • . . - . • •• • • •-• - • . . • •• • .•
• . •. • , . .
„ • • a; '‘ Change .assets -• • -.• • . • • . ; • ••• •
. • _ • ,z '.• •-• .• , -; • -- ;
. •• • b.:- Change liabilities , .• - , ;
; • • . • • • •• _ .
••-' • • r.- • •• -Change retained earnings ,, ; • . • •• . . • • • - - • ••,....;• ; • .••• . • • ., • • • .
• ,; change debit -t)alatiee,s'o.if accounts' into credits and vice-versa • • •. •- '‘ . , •
. • • - • • •, • -•-• ,•-
. • -• An appropriate reversing entry: •-‘, ,
a.• Must be made because tlie'y are ,required by accountingstandards . - • • . . •-
- . :• • • • - • . . • - • .•, • - • •
•: , .„. c•lae(,;I• the first day of the. next accounting period- • • • • . ; _ • .• • . . . ..; , •,
. • - is usually made for adjusting entries that affect deterred items Only
* d. Is often used to correctentries „• • • • • which • • wereinitiall:y based on estimates • _. • ' • • .
•. • • • •; 50.- • As a:general rule, which of tile .17()11.owiiig is notsubjert to reversal? . • : • • ••'' . . .
• . . • — • , . ,• . • . - • . . s •..• • •, .•--
•a.. • Accrued expenses.. • „, , • -- • , • , • • -- .• ,•
' 1)7:: .-AC:crued ..revenues' ,• , - . • : • . „ , • - • •
. ••••-;C.--- - 'Prepaid expenses recorde0, as assets tipon.,\pa:;Iiient . • • •, ' , .
-. . D-eferred revenues recorded as revenue upo.n. receipt . • . .• • . • • - -
••k,ACQQPNTING . c.f1A.N(...7!ES'. • •-••'• • • •, .. . • .• •
. . . . . •• • . . _ . -• - -• .
• • • • • 51, Which financial statement is._superseded..byfhe ent
Statem e of (.2on- i pi,- e-liensive Income as a•basic component of•general-'
purpose, lirian.cial,stat.einen.ts? ,• • _ • • ; • • • ..,• _ -• •.. • . . - • ,• .
. . •. ,
• -• •• a. Balance sheet • . •; • c.- Statement of cash.flows •- • • •.• .
, . . .
- . b: Income , statement , •- • _ • . . • - • Statement at.'clianges equity. .
,
52: What is the purpose ()1. reporting coniftrekiensive ii.ricamo:? ..:. • .‘
a. .1 o replace net income with a .1,..)ell.er j-neastire.; .‘. . • • ' • _ •
b. , • ‘•To report a measure of overall enterprise performance •, . • . - •T •
C. To report,- changes in .equity due to transacti o. . n s with Owners :. -, • • . , • • . •
.
d. To'c.orn.bine iticorne-frorn continuing; operatiOns•and'extraordinary items .- - •,
I. •' •
• • • • - • . •
- • -$3,2,Accounting..income is a•ck)ricept in •
•-• •a Income is .metisiird as the -amount of "real wealth that an entity . could • COn,stmie 'during a period and
. •• •' •,„ ,
• . be as well off at the en&o1-- that period as it was at the.begi.ti.tiiii.g. , • . - • .s• .•
- -

•• • • • - The transactions approach Used to record income and expense•-thrbUghout,the reporting period.. • -‘, • ,
values adjusted 'for the effects of i.tifkition_or def.latioil are used • • 2'
C. . , to 'Calculate real wealth. - •

firof•S outstanding, (,:oiT.)..ni(- ) 1,1 stock .fb'r the,petio(.1. • •-

• d.,•,I.nc,, O, rne equals .
• the change' in titarket,
ail accounting entity? • • , • . • ,„
,s 54.. -Which iS -.. .NOT - included in the category_ of' coinprefietisivelneame . ;•. ; • • • •; •
•• . • C. • ,Change revaluation surplus ') • • . „
.• 1 Net income • For. • • .. • •
• • "‘ b. "' Gain' on ,sale oftr' ast-tre stock . • . •d. Increase in value of investm e nt property..
• • „-s • _ • ,• ••• .
55. . Revenue
. is normally recognized ; .
• • • - - • _. • . •
;• . • •• . .a. When the title to the 'goodS . changes .
the customers order is received ,'• • • ; . •, •• - s. . • •. ,•
• _ b. • •Whe'n • . s • -., • • •
_ • . .• ,-• • •
c • When the customer's order is accompanied by ,a check
'•-• •.
, _rec.orainti; an account receivable -, • - • • J. O. ; A.• .
• , -
, • d:.•• s Wher.i-ithe ;transaction
. • • .results to--
, •• • -, - • , •-• . • .• , _
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Re SA,' The ReView. SchOol. of Accountancy

• PREWEE. K MATERIALS Fh. .THEORY . of ACCOUNTS (October 2016 Batch) -='Pa g e - 5 • . .,. ••• •
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•- .56: .1.1te matching principle is 'best demonstrated by: . , „ :‘ • •

•. a. • Allocating . adve-rtisiniexpense -to several reporting periods „ • • 1 - „ • ••' • • „, • ,. • •

• ,s b. : .R.ec9grOzing:
_ rent as revenue when the cash ‘ /. Vas collected '• ". • .. • •• .• • • • •
• . • • c. C.. • No)t, - ,
• .• recogrtizulg ,an •• „ • _ , • _ unless, some • ", , , is ,r‘cogilized ,• • . • • A '• • .
. • . • Assoiati.ng .effOrt (cost.) with accomplishment (reVeilue). : , • . • . • „..• •• „
57. ."ReS.A. Corporation; cl,ass,ifies .,, expenses by logistics -citia.i . ty control; maiirtfa.cturing, plant . engineering, • sales and • .• •
•, rarketing,research ::and 'develOpinent; finance and administration. the basis. of cl.asSili.catio.i.i is by . • , n„ • . • •••
•• • I a, 'Nature, of expense . C. perfOrtried • - ' •
, ,b, 'Objects: of expend.itiire •• .•• • •d. Area (,..)1.''''resp-c.)..tisibi_l.ity • .• . . : • ,
Whon, , an . entity opts. t&) present the. lincome . stateinent .classifying expenses by iftiiieti.oti., which of the following is "NcYr • ••
•-• •.. required to be discloSed.as'"add4ional .• • . • • •. - •
. „ . .
• •a Depreciation .expense.- • • . Director's remuneration • . . •,•
.• • b. 1up1oyce -benefits expense .' .•:. • ; d. , Amortization expense . _ , • -. .• .• • • . . • .•• - •
,disContinue0'. operation - is defined as the disposal' of a Separate or..tnajOr' line of .the business:: Any resulting gain or .•
. • . • loss on discontinued operations is reported as a(n) •• • - , • -n •-• "- , - • -• : • .
.• . • -a. Prior period adjtistinelit„ after taX.' *• — \ , •• • • •
. h. Separate itc-01.preceding .extraordinary items, pretax . • ,, • „.• ' S• ' .•,
• „c Separate item. from income under continuing . operations,
, after.tax.. . •: •• - .• • - •
: d,- :E.,),(tra(!rdinary gain or toss,' after tax:.

60. It is a .sttbs.icliaiTy,' .a : major line of business or geographical .segment Whose operations and ,cash nsfloWs ca.ti be clearly .• • •
• - distinguished, operationally and :for financial reporting : purposes; Irorn the rest .ofthe ,entity. -••
• a. 'Co.tn.pcinetit of an entity,: • .;.-• . -S c., • 1-...)isconti.nued operation. -.-/ .••• • • . „ •• . .
b. :Disposal group • •,_- • • • d.. Extraordinary acivi1y: • • • -
• • 2 6.1, Under PAS .1„„ :Which of the 'following stibt.trd be'claSSified:as.extraordinary itetn in reporting results opesratic)ns? • ‘. • . •
. „a. „ Foreign exchange losses arising .froin appreciation of Japanese yen relative' to the . Philippine peso : ,•,
b Gain resulting'. from the national gi,:„werninent expropri.ation -pf a• corporate property
-•• c tinA)ss)es, :-resillting.:-..fr.)r.n. an unusual Major :fla$11floo-d in the Visay'as region :
None, all 'are Ordinary gains and losses •. . . . .•. , ' •-. • - •:'
, •- 62. An accounting pol icy - • • • : • .• - • •- - • •.,
- a. Comprises the principles 'applied in 'preparing the financial statements ' •: • . -• •. •• .
. 4 , • . • • . •
:• . • „ b. Is a. judgment
. _ .applied in deciding whether L() recognize a •:transaction• . • • . • -• - • •
. , • S - is the application of. judgment in deciding ot the measurement of an iteni ,• ••• • •
- d.. is the judgment used . . in deciding on Whether to disclose a, particular i.tem - • • ; . r • ..
.•_ „ 63....,,•,When a public; shareholding entity changes an accotinting . policy voluntarily, the entity should •-• .
. • .• • • •
• .• a. Account f.or for the change retrospectively : , , : ,• ..-• .• •.
• b. - linforni shareholders prior to taking the decision• ,•- ' •.• . • • •-•: ..
„ • • . •
• "treat the effect -of ; the change as an extraordinary item ••• . •. .
. . • • d. '''.Frea.t the change prospectively . . and adjust . of change in the current ,a.n(1 fu.ture, periods -• • . .
_ In 2016, .a 'Jinn eh„angef.Lfrotil : the ".11.1.,''() 'Method :of accounting for inventory to weig4ed::Ayerage,11:lie 2016 and ' •
.- .2015 eorn.parat: ive'tfirlaric-.ia-.1 statements will re11ect4hich rne .ttiod . . •• •
• •a.• 2015 .: Weighted ,Average, 2016i.: Weighted AVerage' • .- : •- •' . _.: •
• . •..- b. • 2015: FIFO, 2016: • •• .'• : • ,• •
' c••• n 2015: FI.Ft(), 2016: Weighted • , Average , . ' • ,• . , . . • . . • .
-
20•15 .: Weighted Average, 2016.„ . L -
• - • 65. Which type of accounting change should always be accounted for in current and future periods? . • • -• • • '• •
•. a. Change. in accounting eStiniatc, • c* Chafige in acc o unting' principle. • • • :.,'
• h. Correction of an error. • • .• • • d, • •ciTt apge in reporting •( • • •
.• , • -c • • :_, r
66 'Which .of.the;.-folloWitig is .a characteristic of a change in. a.ccountiiig . • .
• _• • 4 •
• • ••. .\ • _s• : -, • •
• It does not aftect--the , statementS.clf prior periods
•, , prior periods. • . .„ ; • . • •
requires the reporting . . of pro th.rina. amounts . . . :
. • '• • • ' C. never needs to -she clisclosed•.; , . - s •, • .. • ,, .
. • •, .• ,
t. • •
• (14 It should he reported through restatement of the financial: sta . t-enients. •
.67. In 20 16,'-a firm chartged. frpm stfa.ightt4ne tnethOd:of'deprecia.tion to 46 .
. t'able, declining balance (1.).1.)..13.)„ ,el'he ;firm's • ••,
•• , • . 2015 and s2()16 comparative : statements will reflect which - • metl. . .iod• methods?
•-• , • • .
• • -• • a. • 2015: .• •. . c. 2015:•DD13, .1)1)13. ••• •
- • -S F. 2(.115: St.,, 2 -()•16: :E)1.)."1.3 •- • d4. either S.F. - or • _
68. •Which Of the' following • changes would be accounted for prospectively? • " , •• -• ns . • .
-S S
•', Cort'elciti()nsi o1- 7 prior period errors5 , :
•- •-••
Change in the expectedlife (.)f,a 4eprecia „- hlie.a'sset.
• b.
First tune presentation of con.soliclated:I.ina„..ticia.1., statc1Tients.
e ,
A A,
. 7, • '‘
,

• d. ' Changing siforn..FIFO to weighted average for ler.haildise inventory S• ••

,The.'concept (-,':onsistexicy is's.actifie-ed in the •a(c00.1..f.ting, for Whid.): of thp f. iJitowing.ftem.S? :. . ..•. „. . •,
• r
• a.' Effect -Of c.harige in accounting principle: c•• ,Discontirmed.operat•ionsi •
J. O. A.
• b. I.',.xtraordinarv items... • •. .• • . I..ioss , on :.disposal 'Of -a :segment of a business •, •
_ . . . . _ • , • . .
F:). 0ge- 5 of 1Q - 0-agp8 . •. • ; ..• .
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-!.PREWEE- fc . MATERIA(S in THEORY of ACCOUNTS (October 2016 Batch) 7 Page 6 ,
79.: Which Of the .efollowip&are considered as .examples of expenses'? -
1.. A./1..dss on 1.11e. dispos4,of a nOti-current. asset
41:.:„ .'./. de/crease . in equity arising from distribution to equity participants
III. A decrease in economic benefits .dUring. :-the ;ai.,',COubting period
• ) 'IV. A reductidn in income for thc -aCcOuntig . period

a. I and „II C.. land III.

' b. U and II. 4. III and .IV_ • ,
,
..` ' TEM.ENT ( ).-t -fr ...r • (1.A.LIPOSITIQN, _ 0711.-1..,S -,'-‘ .(1/.1..HERJ)15C,.,,c,S),RES,..-
, PAS I Pr' e:s'eigOtioit 'dye Financial Stateme nts requires disclosure : in the'balance....sheet of the following items:':'
. .
a.: A Statement of.,', coinpliatice with Philippine 'Financial Reporting StandardS.(PFRS)
li.. InforMatiOn'about tlie,key . assumptions used in the , depreciation of assets
C. 1he .n.i.easurement basis used ,for the revaluation of aSsets -:
d, The carrying a:Mount - Of property.: plant and -e4uipment'
72, ' le- Wininaity. ()f accounting 'policies is norinally :preSented,:, •
,a. :Before all of the financial stateMents in 'a .financial - report
b. As the first nOte„ .aller all the -financial Statements -
c. - --- :As the last 'note. in :a set of' financial statements' .
. d. -. Vitbin the auditor's report ,
7.31 Which of tbe'f0.11oWing should he disclosed in the swill -nary of significant accounti ng policies? '
a. 'Refinkincingiof debt. subsiNuint. - 1.,0- the balance sheet date
b...r, Guarantees '.of indebtedness 61.' others.
. -. . .
c. Criteria . for 'determining which investments. are-4reated.as'cash„equivalent
.d.. .. Adequacy of pension .plan. assets relative t:o. vested benefits —
;74. As a significant c0. 1nribilent ol.7the notes to the .11 -fianciiil statements,the ac
. , :. policies sec
section
ion s onld.describe i
• , 4. - Only:tlie -measnoment bases used in preparing the financial StOternents . .
. b. Only the siieci. lic- .accburiOng policies followed by the enterprise
C. Roth the measurement bases used and accounting polieles . .collowed
, The nature. °Idle enterprise's operations and its principal. activities :
' 75, .W1hatis the valuation basis used in Conventional littancjal 'statements? • ,
a.. . - . :Replacement cost ',. ., -....': . - .. - . .- . . . ' ,- - i2c. ,.... .(1):riginal.cost
-:;).. 'Market value. .:. : ,l: . - ' .. - :. - - - I . - __. ' ':. -.. : --d.- • . -.'• A mixture of-costs' and Values
76. Which of the 170:towing infOrmation‘is :N01.17 .speeilically a required disclosure of PAS I?
a. , Name of the reporting entity -or other means of' identification .and any change in that information :irony
the previous year S
h. Names Of- major;trihareholders of -the entity .
S .
C,, .I..:evel...o.frotmclitig , used in presenting the linanciaLstatenients
d.': ,:Whetlier the ljnanCial statemeras cover the individual ;entity or .a, group of entities.:
T"L PAS 1 requires the following note - disclosures ' in relation - t.c.); dividends of.a.n entity:
..5a. Amount of anyetiniulative.pl'efi4Tence , -% - dividends
':: , • not
. -• recognized
- ,
)., ,Names attic; recipients of the:dividends • ,
--- • Addresses of all shareholders Who are entitled' to receive, the dividends' • •
)
..L . A Sehediile,Of etinitilatiVt; ,diVidends.paid . i.-priorperiods:
- 7-8, ::Whi.'h one'..of the following . falls ,within the definition Of '.relatedlarties' s define4. by PAS 24? .
.
- a, • iciovertunent department _ and agencies..
••b,.. A supplier- with whom the reporting entity' has a• one-year , , contract
. fir th e supply ofraW materials
C. PraviderS of finance in the course of their normal dealings with an enterprise by ,'virtu. only. of those -..i ..
‘. .: 1
. (ilins
g•
_ ' .,
„ The Wife of a key manaaement personnel ' who has the atit.hority to plan, diree., ad.. control the -- .
• , .. . .t7 . - . -
activities of the'reporttng, enterprise
79, Which Of. the tolIOwing . situations will irequire disclosure as a :related. party? .
a. In consolidated financial statements in respect to intra 7groti.p transactions.: .
.11; . In parent seimrate. FS. ,vviten they are made available or published with the .eonsOlidated.1-IS
C. In the ES of state-don-trolled .ejiteirrise 'of transactions with other state-controlled enterprises..
d; In related-party_relationshiris where control exist*, irrespeCtive of whether there have .been transactions -
between. - 'related parties :
80; /, •Part of the :notes': to 'financial statement: are events after t he r eporting period: Which pertain to tlic.)Seila rorable sane .1
..tin.favorable events that o c cur ---
a, After balance .sheet- date S .,_
s b. After issuance of the statements . .
C .. . Alter thebalance 'sheet dat..but prior to- issuance of financial statements:
. :13e0Veen the balance sheet date and the date when the financial statements are authorized for issue
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pREWEEK. - .. ,NIATERIALS in THEORY, of ACCOUNTS (October 2016 Batch) - : Page.:7 .• • •. .
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'81. Adjust-trients of ..fitiaticia.1. statements are required f()r those'levents:a.licr balance sheet .date which ; •
a.• • •. Arc unusual and material • •-• • • •• • , • • •
• ' •• • • •-• '•
• • .b (::,)cetirred prior to issuance of the .fillanciaf statements • • • •- • ' •• ‘-
.c liave a -.material effect or a users evaluation'of the iitli.) - rmation pre.-iented in the _financial. State.ments- •
,d. . Provide additional itif().rx.riat:ion tbr cletertnitting amounts relating (() conditions existing on the balance .• • • ••-• •
sheet date , • •• • • . • -•. . -• . . . • •
• • 82. - . Tyr)e I events that. provide evidence •(,)1Trandiiiorts existing' t..he balance 'sheet cl.ate are given the •Ii)l.lowing treat:ft:tent. •
• -a. Recognition in the financial st4te•tnents • ••• • • •-••• • • • • •• • •
. • • •• b. - Adjustment in • 11(,)w . . • . • -'• . •-
• • r, the notes t() theimnaricial statements,- . • .• • • •• • • • • '• •
•• .• '• ....• .• •• Ratific',at.i()rid • . . • by •shareholders
. . at, an
• artnti.a.I. . tneeting•• - • • - • .... • . • •- • ". . . • •' • ••• .
83; Type IT 'events that .are indicative .()f conclitions•that .arose a.fter the balance sheet date -are given the fi)l.lowitig treatrn.erit •
• ‘, -•a. Reco.gnitio-n in - the balance *Sheet . . . •• , • - •
• .• • • • • • • • ., • • . • .. .•• .
. • h.'. Rec.:)gniti.on it), the income stateinetit .• • .• - . . •
•

e., - Recognition in the rash flow statement ••• • •

•• disclosure in the financial statements . • .• •

:Noir -• •• .. • „ •-• ••• •• • ••• •
. 84. Under PAS 10„ . which ofihe f()1_1(.4ing is Classified as an tic/ft/sting' event rather than a 17(..)ri-adjusting. event? • . -•
.a. • '17he entity announced the discontinuance of its assembly c)perati(..)fi. •,. . • ..' . •.• .• • •.
•• - -b.•.rrhe entity into an agreemeni,to . purch.asethe f.'reebold., of its Currently .1e . a ,s ' ed. office building .. • ••
•• .
• ••• • e. - Destruction • lot a tnay)r.production plant by A.tre • . .. • • • j •
y

• • d, • A inistnke was discovered in the calculation of the allowance f.'or: ti.n.4 -;011ectibie trade :receivables -
• , resulting, to understatement•. • () . 1.' the ••• trade •• -receivables • • -• ..• _ • • • ' . •.' - , • •
•85. Nottmadjustitig, events' after balance.:stieet date -should he disclosed if .•,- • •: •• • •• ,
• a., Nini4d.isc1o•Stire w() - tild affect the ability of.users.of the .financialstate-ine.rits• to make prop'er•decisions. • :• •
• . b, 'Non-disclosure Would affect t:lie•-arilounts..presented in the financial 'st-ite.i.rietits .• • • . ••• ..• .
. • - Illeyrelate to conditions existing a.t. the. balance 'sheet date .• • ,•••• .. • • • • .
, _ • . -• •• _• • . •. . • . •.
• . . d. • lhey.are *u.ni.istial and nlateria..1 . .• , . .. •-• , • •• . • ...
•
• • • • • • .
-• •86.• 'Die key Characteristic f()r the chiss'ificatiOn 0,1' . . ati asset as 'held for sale' is that the . carrying amount of the asset must: , • .. •
. . a, • be lower tia initial cost of the asset • •• • -• . • •. T• ..- • • •
• • - b he higher thanit.S'net. realiiable. value .. • .,•. •. • •• •: • . • . • , •••
. .
•. . , . •. _•
• e principally he recovered through a-- sale transaction. - - • _ '• • ..„• • •
• . d. principally _ be recovered through continuing - • • • • . .._ .•.•
.
• • 87..- It is grotip of assets to be , disposed of by 'sale or otherwise., together as a . group in a•singleIrasactibn,.'„and.liabilities
. direc tly associated with - those- a.t.:isets that will be.tratisferred in the transaction. ,-• . • •.
•
.. - a. Disposal gro.u .O. • • . - • •
. .h. NotiettiTent asset .-: • • . • - . , - • . . . • -
C. Cas-Kgenetatinob -unit • . • • • , . •
••‘•
• . . • . •„.. • „ . • • • . . • , -
• 1•.).tsc().n.tintiect operations • • .• • • _ • •
A noncurrent asset is classitied.as held ..for .sale if such sale is highly probable. ''',..1. 1.1ighlypi-obable"- means that.•
. . _ • a.. • the sale is certain• • ••• -• -_•• •. • • • •• ••_ • • • .• . .• • ." . .
• -• - The
b.-- • future:
. • sale. is likely • • to occur _ . • • . • - . _ • . •. • • .. • • .
C. ':1"11.0Ilittire sale is more likely than not .0. ce•-_ur • .- . .• ••. .• . .
• „ •• • • , -• , • • • •
higher than 'more likelyt..11an . . . , • :, • .•
•• . • •••(i. _ • , •I•he -• probability :of future sale •is .
• ,, • 89.,- An entity shall measure a noncurrent asset or disposal group ' classified. as "held. for sale r n a• • ... . •
• . a, • carrying amount • . . •,
• •.h Fair value . less cost to sell • . • \
" • •• c. Carrying amount or '1.1.1ir value less cost to sell,' whichever is lo*er . • • • - ..••• , •• •• -
•• • • d. • earrying..amount• •_ or . "fair • value. less cost to sell,' •vvli..i.c•heVeris higher , • •". •
• • 90,Ifihe .' -fair value' less, cost t() lower than the carrying amount ()fa noncurrent asset .. classified as ..held - t- br 'sale, the • • •• '
• •• •i:••diflrcnce is treated. as .a. (t)! . • - • • ... , •
• - a,
- Note disclosure • . • • -• • • . .
• , • • • . • . , . •• • . •
• • Impairment • .. • • • .
• - - r„ •Depreciation expense • • • • • . • - • . • , ' • - _ • . • • • • .
Prior period adjustment •• ‘' • • - , - •
• . -.'•. ,
• asset is 'held ''f(yr...sal.e,' 1')1R.S 5 prohibits •• , _.. • • '•• •
• the •recognition •of any Maintenance costs ti)r•the asset in -tircifitor loss of the period . . • ; . • • - - . •
• - • b... 'the recognition 'of any cash flows from the asset as t'• operatiitTg . cash flows' • -
•
• • .• c, any,ftirtlier costs being capitalized as part oftlat,.: asset ; • • •• , •,
••• • • •• •• the -asset •frorn•beino h depreciated.
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PREWEEK MATERIALStri THEORY of ACCOUNTS (October 2016 Batch) - Page 8 '

\-- ':, Under PERS 5, an individual noi current asset c' lassified as leld tor sate"; must be disclosed
- ;,a; amongst "property, plant and equipthenr -assets on the bala n ce sheet
. . .
., ,ituorigst "non-current: inventories' on a, balance sheet
separately from,,the other .assets - iiitlx..: balance sheet i)j
'cL only in the notes to t,he financial statements
93. PERS 5 states that a noncurrentiasset that is to be abandoned.should'NQT be classified as held fbr sale becaus e
0.
- Its carrying atnOunt will be recovered principally through continuing use
':. It is :difficult to Value .
C.
It is unlikely that the
, noncurrent
., . asSet,will
. be sold within 12 months',
. it , is ;unlikely that - there Will be an active market for the non-current asset
94. ' An entity has a Win-current asset that was previously classified as :bel.elli9r,sale. however, the criteria for the said
asset U) remain as _ held for sale NO I QNGER A1P.1_,Y 'The entity- should
a, 'Retneasure the noncurrent asset at fair value
b.' Leave, the non-,current asset in the financial statements at its Carrying value
c gccognize. t he nbri-cuifent asset .i.t.i its carrying amount prior to its c' lassificatiot as ' held tbr sale as
adjusted. 'tbr subsequent depreciation.; al .nortization or revaluation , ,
. Measure , theinoneurrent asset at the loWer.of its carrying amount betbre the asset Was classified as held •
'for sale (as adjusted tbr subsequent depreciation amortization, or revaluation) and Its recoverable
, amount at the date of-the.decisiorrinpt to sell ,
95 .. Conceptually, interim financial. statements can be described as emphasizing
. a. Timelihess.Overteliability ,
b. Relevance
, over c omparability
c. Comparability over neutrality
d. Reliability over understandability
6., Whieh.of the: follOwinci; ,. is :FALSE. regarding
regarding. standards for interimrep , reporting? -
a, .Declines iiiinventors! value shall be deferred to ,future interiM periods _
b. Use of the gross' margin inetliod for computing cost' of_. goods Sold must be disclosed _
. . ,
- %. : Costs and expenses not directly ,associated with interim revenue must be 'allocated to interim periods
on areasonable basis; ' -
c Gains Od losses that arise in the interim period - shall be recognized _ - the interim peiiog. in Which .
they arise if they would not,normally
._ . ,.be deferred
. at year
. - end
In r feria" reporting,. which of the following should be accot:mited for on a tune proportion basis?
a. Depreciation S.
b. : Cost of Sales
-• Productivity bonus
.d-,' Decline in the net realable value of inventory- items
, 98. it is the approach , , _roach. of
, looking into an entity's ,organization
. . and _management structure and its mterii financial repo ing
system to identify the - busin/ess and ,geographical segment !iv external reporting purposes.
. a. :Entity approach
b. Scientific approach
C. Management approach, • '
d., 13Usiness or geographical approach
-99., An pritityoWns a number of farms - that harvestproduce seasoirally.. Approximately 80% ofihe entity's sales are in.' ..the
- period August to 'October. Because the entity's business is seasonal. PAS. 3 . 4 'suggests:
.a. -Additional disclosurein the accounting policy note , . .,
I). , Additional , disclosure
. in the notes about the, seasonal latute ol the business '
c., Disclosure of the seasonal. nature of the .business and diseloSure. of financial infirrnalion t
- hr the latest and
comparative 12-Month , , period in adclition to the interim report
d. No additional disclosure S S . ,-.
, 100.In deterthinitig whether a particular operating segment Is . of significant size 1. . 10%) -0 warrant Oise )sure,
a.'s Three tests are Usually applied and all tests : tin-1st be met
, b. Three tests are usually applied but only one must be met .
c. •.Five tests are usually applied and all tests must be met
(1. Five tests are Usually applied b -,Ot only one must be met

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,FRE\AiEFEK MATERIALS in THEORY 9\f ACCOUNTS (October 2016
,- Batch) -,Page 9••••• • ••- •• •.•- • • • •-•

• _ • . • . • . • . • ,
• • - • , .• • _•.• . • Stl(i(u.-1..',SI1Y,1) ANSWERS • -• • • , •
• .• • . •- 1", • • -1.3 26. 13 .•51. - 13 76 1 • • . • •
- 2. - '13 . •-. • • 27. 11)_ _ - 52, -11. . 17. A,. • . _ • , • •
• • •, .3, - 1) • 28•. • . C • • 53, r• B - . 78. '11).'
„• • ,. •, 4, .1) . . ' " 29,• - C• , .54. .13 - 79. t) • •• •.
.‘ 5. ' C • -• 30. - A - •55. As - - 80. • • • • •
• - -6. 13 • • • 31. , :1) 56. 1..) • •81.", .1-) • • . . -• •• •
•. . •• -., . • 32. • • • 57. C• • 82„, • -A • -• .
• -• 8. .1.3 . • . • -.337.. •1) . •58.• •C • • .81. .
• • • . 9. - C 34 I3• • 59. C • 84. • D -
: • •- - 10. . 13. • ;. • 35. •C - 60. A . • -• 85... A' • • . • •
•• . .IL C • • 36. " 1) • • 61, • . .86. • .0 „. • • • -• • ••
. '• 1.2. I) „„.•37, A • 62; A, ; • •• _ 87. A' . •• • • •
- • 13. • A- . , • '38, C • • „-'63;-• A • • .88. • • •• }, ••
. •14 C. • • r 39.• -• -.1) • •' 64. A •-• 89. - • .C. • . ••• ‘•• •
• • 15. A- - • , .40. . • 65. A ••• . -90.: ...B . _•
• - 16. A • • 41. B. • - • , 66. . . •• • . , 1),
• •17. C . • 42.. C • . • • .67. 13. 92. •C; „ - '• ,• • -•
"- • • • '43. r • - •13 -68 B• 93, .A
•19. .1) . . 44..• . • 69. -• A 94, D • -• •• ••. -• •
•-- . 20. • ,„ ••• - • • .'45.• • .13 •- 70. • C • 95. A • . , •
• • r
46. I) •• 71 -.• . 1) • s 96. , A . • • • "•
1 . . .1.) • ,
. - • . C •! 72. . B cj- ' • 97. - .. A - •
. • • r; • • 21 11 48 C 73. , •C . 98. C . ;. • .• • '•. •. . •
, • . 24. B . • ••• 49. • B 74; C • 99, _ . • ••• • •
17/ • - '50; C• •••• • • 75.• -.1) .; l(,K) • - • •
• . •- , - • . ".,):5. . .
„ •"-
.•• (201.0),. users -ol.fill.alleial.inibrir.iatiori.are classified into: .... •
3,- 'tinder the Conceptual...I'punevvork. . r
• PRIMARY users: existing and potential investorS;.lenci.ers.aftd other creditc.)r.s
• S •'. • ''• • • •
011•11F,R (secondary) users: eipployees, customers, gov.errnitents and their ai?,encieS, and the public • • • .. ..
•
13. Under the :Conceptual ../raniework (2()10), c()Irt.parablitty is NOT tiratorrni:t.y (ic.. ac(,;(yun.ting changes are a.1.1(:) - wed.).,- .. • •
•• • • • • consistency principle ,however requires that, should there he any change, necessary disclosures 'must be inade. • -•
„. . • -.1$. While only •'S6.ing ,,eoncertf is • tnet.rtic.)-: ti(d, as an underlying :.• assumption in the new....I'rar.nevvo.rk, 'accrual basis' .‘ is
• Ineitti()I....teci under the section on objectives .. offirlanclattepat'titig, in the new Framework, • .. ... •
24 ...1:NTITY,,l',.heory (Assets I iabilitics Equity). -'1x1plitasis . is on .Proper income deterrtfinatiorilincotne statement;
.P.R..()PRIETARY theory (Assets Liabilities .= f.F.,quity) 4 emphasis is oil . . proper asset •valuati()tiitya.la.rice sheet,: . •
• • , RESII)UAL-1.-...?,Qt.:111r.VY 'theory (Assets Preferred Equity (2ottir.tion Equity) - • • „.
- 26. IAS. and :IIRS are -prine.iples-t)a-ed as opposed to the US F.ASB'standards'wllich.are considered .rtt.les-based r.
Usual mistake is choice A. Instead f obtaini,ng. majority support -fioni.praeticing•aceountants, standards are prepared .
. _ . • by an.
. independent, body •(FRSC) that facilitates . the approval of 'accounting standards . (PFT..S-'). PVh..e• '.1:x.)dy conApcised
of - pro.fesSi.onal members, representing various interested user groups:L . ' . . -• ' .
, .
, . 35. The Bureau -.Revenue (.131.R)'is riot directly inVolVed jfl the •standard-setting :process ot tmnancial reporting
,.• • • •••. • v .standards in the country; inStead, .J311.{ is represented • in the 15 -- theMber Financial •Reporting Standards Council, which' .
- is the standard-setting body of the country. 'Philippine Financial Reporting Standards (I)F,R.S) are ',approved subject to •,
. - the concurrence. of - the',.Prolessional 'Regulations (;:()tntilissioU1 (-P -1..(2.) through the Board' of Accountancy .030.4/. • ' .
• 4o, External events are those that all.eet the 'entity and in which other ,entities participate. On the Other ,hand,. internal
• • events do not involve - other. entities - . participation. Production and casualty arc the usual exat.npk,S•ol internal events.
50,,• Prepaid 'expense recorded under the aSSei iliOthOd is not stibjc,'et to reversing entries; however,' prepaid exti[ense; .
the (..!xpertse '1:ie./lick/may he teverSed.. • - - •
recorded lilidpr
Retrospective application assumes that the new accounting - policy had always been applied from tkebeginning
- . •
.• 6•7.
, . Prospective
. application
. means that the change is. effected from the date of change onwards. , • • y•.•
.
.77 Choice A is 11).O.re .,,omr.,non:ly• known as "dividend in tarre.ars," Which is ,required to he disclosed in the notes to the FS\.. , . ••
79, 'While 'PAS 24 reciuires . the disclOsure, of .parent and subsidiary 'relationship irrespective..-off . a.ny intercompany or intraL.
•• group triinsactions;,, it does not require disclosure of transactionswitiih .are porn:11111y in the Preparation of
_ _ - . - • • • , . . , •
consolidated .FS.. • - ••' • • . • • , •. • • . • , • .
.
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• - • . • ,
. - S-usg.,c,,st. !Astn.s2w,•er.:".i) -• • .; • , '• „ , • . , •,
. 1. ; Accounting ; concepts are - N OT derived .tiorn which ol'tlie folleiving?,- • • • ..- • • ,;• - • • .. , ,• •
. .
. .0 a Experience e. 1...-aws of nature • • . .
• . • • • 1). . 'Pragmatism (practicality)
,• -• Inductive reasoningi . • • • .• • . • • ‘•
" • .S 2. Which of these. qualitative ,cliaraeteristics.,or . concepts are related? .- • ,..- " • •• • - •• • •• ,
• ••
• • A- .• a.'„ • . ; Relevance and materiality - . c. Relevance .and,liticlerstaticlabilijy' • ••• '•
J. O. A.-
. . . b,,, 'Understandability and comparability •d Reliability and. comparability • , • •.. • .
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. .PREWEEK !MATERIALS in THEORY of ACCOUNTS (Octol?er 2016 Batch) Page 10 -• . • • •-

• • • ••• • . . • . " - - . • .
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•• N(...)1a. requisite oF 'reliability of "financial statein sents? • •. •-.• "• • .
• . • I) • -al The statements arc prepared in accordance with Ci•AA.1 3.-.- .• • • • '• -•
• • ,b Ilie ,statemetits.are examined by .independent auditors, Who prepare acitegtiate staternetit.s • ''• • .
c. - An effec.tive'System of internal control is maintained - • ‘. .• • •- .
, • . •. d. - • • Income. tax return's are . .T5roperly• tiled ‘. • • • s .. . . . • ..

4. • - What' 'coikerite is 'critical in distinguishing an 'enterprise's return on investment .froin return outs investment? •.
C • -• comprehensive income concept • ...c.._ Capital •maintenance conce\pt . -• • .: •
• - ' . •• b,' . C-urretit: per.forniance.concept . e. • .• d„ Investments . return - concept . • • 1 • •- • '‘ • • •
• • e 5. Which ofthe 'followittg,, accounting concepts states that befbre .a transaction is recorded, sufficient evidence muSt. exist .
•- to 'allow two or inore knowledgeable individuals to reach essentially the same conclusion about the transaction?-
. . / • •
. a. C(In.tinti.ity assuniption. . • • C. '• Cost principle •--• • . •
.b. Separate entity assuinption. , • ." Reliability quality . e- _ •
• • . -6.. -Preparation' Of -consolidated financial statements is primarily based on the • •. ' e' .- •
I.). " a linie period asf,:.itimption . e- • . c,. •Costibeite.fit constraint .- . . -; • •
• • • . '•
•• - • , h. Full diseloStire principle. . • Separate entity.-assilinpti)n •• -• •
. • . •• . . • - • •
'e • The 'recognition Of periodic depreciation expense on cornpany 7owned automobiles ,requires 'estimating both -salvtlge,or • e•
• • -• residual 'value, and the ..useful' life' of the vehicles. The. use of estimates in this case is an example • of ,• •
. 'a". conservatism. ,. . - • •
• • •.• -. • -
, • •• • . - h. Mlamtainingeonsistcncv • • .• . . • • ••• • ' • • • -•
c. - Invoking the materiality constraint rather than the. cost.-ben'etit Constraint ,,
- • - • . . • . • •• • - • , . -• ;. .
• , • • d. .Providing relevant' data at the expense of reliability . • - .• • e' - • 1 , . •-• •• • ..
"*.85 'ihe' accrual basis Of accounting is MOST useful Ibr , • _
the 'airiourit of income tax an entity sh4tild pay .- -• • •. • • •
. -b, -Predictinv-, the -•short.-terin - financial' performance oT•f_...sin• entity •. .•• ' . •. • . •
• • -• „ . . • _ - • •
• Predicting the f long,term financial perl.)rinance. of an entity _ . . •.• .• • ••• •
d.• Deterniiiii.ng) the -•amOunt of dividends an •entity should pay • .•. •_ • •• ,• -
9.- . Which ofthe'. following -accounting concepts bcsi.,..ji,istifi.es' the use of ac.c:ruals and deferrals? -. . • . - .••
•- • C . a. • Costlbenelit Constraint - *.• c, , Continuity' assumption '• ' • -'‘
.• b. •• assittripti(;)ti • d, Materiality constraint • • •- • •• • •
Ther'c'(:).ntibui -of.. assumption -is the basis :for the rule that: . • . • _ . .
The lflCOlflC. statement ..-ShOuld_ . include Material gains and 1sses that are • both unusual_ and •?' •
. -• . '• • infrequent • -, ' ., -.• • ._•. . • s• - •. .
. b.' -freasury. stock Should not he rpbrted in the balance- sheet as an /• • -• -
•- c. •-- . The cost kl..)f installing a machine should. not be included in the recorded -cost_ of the machine, hut. rather• • . ,
•
• , . .- expense • immedi
- a. • ,
ately i - • _ . ,,.. • • . . •
. . , • . . ,
" •-• • - -d. The cost o.1 operating ass.ets ShoUld he allocated to xpen.se systematically over their uscful lives. •••-•
,. . •
Accrual basis accounting r. • •• • • - ; -• . •' •
B', . a. omits adjusting at end of thc.'' period.: . .• . •-• • • .•
• . • b. 1..5-eads to the reporting of more complete iliforination.. than does (.... .•ash-basis aceounting.' • . •
• • c; is not acceptable iinder °AAP - - , • • -
. •-• ci; • Resnits in higher in c ome than cash basis account:in°. . S , • .
. 11., A e(ltripany, which has total assetsof P 'I 0(),000,400. andperi.odie net income of V-9,000,000, 'purchases staplers with s'
. ., an .estimated life ()I-.`10.years 17(..)r :P 200. In connection with the purchase, the company debits, miscellaneous expense.
This scenario- is -MOST•closely associated with which of the .161lowifig concepts or principles? . e . . • .e • • . -- •
•'1.) • • a. • - Materiality and goitig- i toticern c. Reliability and•Comparabi.litylconsistency - - •
' . b. Relevance. and neutrality• \ • . •• .d„ -Tvlateriality and 'cost-benefit tradeoff • •.
•• - Adjusting entries are primarily based on the accounting principles of .,- , • • • . . • „ •
13. • • a..: „, Revenue realization and Materi'alitv„ . ci • . Matching and cost••• e , •• . •
' .• b, • Revenue •realization and triatchi.ng - •d Matching and monetary unit, = -•
. 14. A development. Stage. enterprise • • •, •• • ,• • . ,
a* •, Issues an income statement that shows only cumulative earnotint. s 'from the enterprise's inception• -• ••
• b. Issues an income 'statement that is the- - - Sartie . .a an established operating enterprise....but
b• 'does • poi. show • - • .
. . .
•- .et.innilative amounts from , the enterprise's inception as additional iiifo.riplitiori .
.• .* c, Issues' an income statement. - that is the saine as an established e Operating •enterprise. and _:-shows .
-S • cuthulative amounts frdin the'enterprise's inception as additional in •, -• • -.•
. • .. d Does not issue an income •st.a:terrient,' - •-• •• • •- • • . ••• .
15, • 1External events include alt . 'oftlie following, EXC1I1-• . • ••• •. . .. • ...
.
a. Sale, of Merchandise. • •- " • ,•••c Do.riat-loi.i. received .1-s-tom' sharchb.lder . . .• . • -•
,• . • •, .
b • Borrowing • • _ (,)t• tri(-
Borrowing • .)nc-y-i-
• •f• ron-• i. the bank, • . .d. Casualty caused byfir, e ,--flood, earthquake or others .
'The body that serves as the study or support group of the Financial .Reporting Standards .Council and is responsible far •
-.• reviewing accounting, issues with divergent and unacceptable treatments in the at)sence. ofan authbritative guidance is,
• . 1.3 ' a. .-,, Accounting Principles (.,:ommittee Accounting Standards: Interpretations _C,4: -.r.i•-irriittee -., • -
_ h. Philippine 1.nterpre -t ationsCorp11flttee ..d: 11'.xlticatiori ITechriical committee
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