ADVANCED FINANCIAL ACCOUNTING AND REPORTING

Theory of Accounts
I. Partnership Accounting

1. In the absence of partnership agreement to the contrary, what is the obligation of the partners as regards
to capital contribution?
a. They shall contribute equally.
b. They shall contribute based on their profit agreement.
c. They shall contribute based on their loss agreement.
d. They shall contribute based on their withdrawal agreement.

2. In the absence of partnership agreement to the contrary, the non-cash assets contributed by the partners
shall be measured initially at
a. Book value
b. Present value of future cash flows
c. Fair value
d. Historical cost

3. How shall the partnership profits or losses be distributed among the partners?
a. Based on original capital contribution ratio
b. Based on profit or loss agreement of partners
c. Based on ending capital contribution ratio
d. Equally

4. In the absence of partnership profit agreement to the contrary, how shall industrial partner share in
partnership’s profit?
a. Equal to the share of the least capitalist partner
b. Equal to the share of the highest capitalist partner
c. Just and equitable share
d. Equal to the average share capitalist partners

5. In the absence of partnership profit agreement to the contrary, how shall the remaining partnership’s
profit be distributed to the capitalist partners after distributing the share of industrial partner?
a. Based on capital contribution ratio
b. Based on loss agreement ratio
c. Equally
d. Equal to share of industrial partner

6. In the absence of partnership loss agreement to the contrary, how shall industrial partner share in
partnership’s loss?
a. Equal to the share of the least capitalist partner
b. Based on profit agreement ratio
c. Just and equitable share
d. None

7. In the absence of partnership loss agreement to the contrary, how shall capitalist partners share in
partnership’s loss?
a. Based on capital contribution ratio
b. Based on profit agreement ratio
c. Just and equitable share
d. Equally

8. Which of the following transactions will decrease the capital balance of a partner?
a. Additional investment by said partner
b. Share in partnership’s profit
c. Drawings by said partner
d. Receipt of bonus from other partners
9. Which of the following will not result to dissolution of a general partnership?
a. Death of a partner
b. Retirement of a partner
c. Insolvency of a partner
d. Assignment of a partner’s interest to a third person

10. What is the effect of admission of a new partner to an existing partnership through the purchase of
interest of an existing partner?
a. It will result to partnership gain or loss.
b. It will increase the partnership total assets by the cash paid to the existing partner.
c. It will not change the total capital of the partnership.
d. It will decrease the capital of the partnership by the capital to be transferred to the new partner.

11. If the total contributed capital of all the partners is equal to the total agreed capitalization of new
partnership in admission of new partner by investment, which is true?
a. Asset revaluation is recognized.
b. Impairment loss is recognized.
c. Bonus to or from new partner is recognized.
d. Any of the above.

12. In admission of new partner by investment, the total contributed capital of all the partners is more than
the total agreed capitalization of new partnership but the capital credit of new partner is less than his
capital contribution. Which of the following statements is correct?
a. There has been asset revaluation with bonus to new partner.
b. There has been asset impairment with bonus to old partners.
c. There has been bonus given to old partners without any revaluation or impairment.
d. There has been asset revaluation with bonus to old partners.

13. At the time of retirement of a partner, he receives more than his capital balance before retirement but the
capital balances of the remaining partners also increase. Which of the following is the most valid reason
under Philippine GAAP?
a. There has been asset revaluation before retirement.
b. Goodwill arising from partner’s retirement has been recognized.
c. There has been asset impairment before retirement.
d. Bonus has been given to retiring partner.

14. The existing partnership has been incorporated but the capital balances of the partners exceed the total
par value of the shares to be issued. The difference shall be credited to
a. Retained earnings
b. Gain as part Profit or loss
c. Income as part Other comprehensive income
d. Share premium

15. At the time of liquidation of general partnership, which of the following claims shall be settled first?
a. Those from capital contribution of partners
b. Those from share in profits of partners
c. Those from advances made by partners to the partners
d. Those from loans made by third persons
II. Corporate Liquidation

16. What is the term used for retained earnings with debit balance?
a. Deficit
b. Deficiency
c. Discount
d. Secret reserve

17. At the time of corporate liquidation, which of the following unsecured claims with priority shall be
settled first?
a. Liability for taxes
b. Liability for corporate crime
c. Liability for employee benefits
d. Liability for corporate torn

18. In every corporate liquidation, which type of credits shall always be fully settled?
a. Unsecured claims with priority
b. Fully secured claims
c. Unsecured claims without priority
d. Partially secured claims

19. In every corporate liquidation, which type of credits will not share from the free assets of the corporate?
a. Unsecured claims with priority
b. Fully secured claims
c. Unsecured claims without priority
d. Partially secured claims

20. In corporate liquidation of a closed bank, which of the following unsecured credits is classified as
without priority?
a. Claims of bank depositors
b. Claims of bank employees
c. Claims of local government for local taxes
d. Claims for violation of Anti-Money Laundering Law
III. PFRS 11: Joint Arrangements

21. Under IFRS 11, when the joint arrangement is not structured through a separate vehicle, it shall be
properly classified as
a. Always joint venture
b. Always joint operation
c. Joint venture or joint operation depending on the terms of the arrangement
d. Joint venture or joint operation depending on the substance of the arrangement

22. IFRS 11 defines it as a type of joint arrangement whereby the parties that have joint control of the
arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.
a. Joint venture
b. Joint operation
c. Jointly controlled entity
d. Jointly controlled asset

23. Under IFRS 11, the venturer in a joint venture shall account for its investment in joint venture using
a. Equity method
b. Fair value model
c. Cost method
d. Any of the above

24. Under IFRS for SMEs, an SME-venturer in a joint venture shall account for its investment in joint
venture using
a. Equity method
b. Fair value model
c. Cost method
d. Any of the above

25. Under IFRS 11, when the joint arrangement is structured through a separate vehicle, it shall be properly
classified as
a. Always joint venture
b. Always joint operation
c. Joint venture or joint operation depending on the accounting policy of the venture.
d. Joint venture or joint operation depending the structure and form of the arrangement, the terms
agreed by the parties in the contractual arrangement and other facts and circumstances.

26. Under IFRS 11, how shall the cash or property dividend received by a joint venturer from its venture be
accounted for?
a. It shall be treated as dividend income presented in profit or loss.
b. It shall be treated as dividend income presented in other comprehensive income.
c. It shall be treated as addition to investment in joint venture account.
d. It shall be treated as deduction from investment in joint venture account.

27. Under IFRS for SMEs, in which model shall cash or property dividend received by an SME-joint
venturer from its venture be considered as dividend income?
a. Fair value model and cost method only
b. Fair value model only
c. Cost method only
d. Fair value model, cost method and equity method

28. IFRS 11 defines it as the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require the unanimous consent of the parties sharing control.
a. Control
b. Significant influence
c. Joint control
d. Joint influence
IV. PFRS 15: Revenue Recognition

29. If the collection of the note receivable is reasonably assured, the gross profit shall be recognized under
a. Accrual basis
b. Installment method
c. Cost recovery method
d. Percentage of completion method

30. If the collection of the note receivable is remote, the gross profit shall be recognized under
a. Accrual basis
b. Installment method
c. Cost recovery method
d. Percentage of completion method

31. If the collection of the note receivable is neither remote nor reasonably assured, the gross profit shall be
recognized under
a. Accrual basis
b. Installment method
c. Cost recovery method
d. Percentage of completion method

32. Under generally accepted accounting principles, deferred gross profit shall properly be presented in the
statement of financial position as
a. Deferred revenue
b. Current liability
c. Contra installment receivable account
d. Share premium

33. At the time of repossession of inventory by reason of defaulted installment receivable, the fair value of
repossessed inventory is less than the net of the defaulted installment receivable and its corresponding
deferred gross profit. The difference shall be recognize as
a. Deferred gain on repossession presented as current liability
b. Gain on repossession as part of other comprehensive income
c. Debit to retained earnings
d. Loss on repossession as part of profit or loss

34. When shall the consignor recognize revenue from consignment sales?
a. Upon delivery of the consigned goods to the consignee.
b. Upon signing of consignment contract.
c. Upon sale by the consignee to final customers.
d. Upon remittance by the consignee of collection to the consignor.

35. Under IFRS 15, when shall an entity recognize revenue from contracts with customers?
a. When it is probable that future economic benefits will flow to the entity and the revenue can be
measured reliably.
b. When or as the entity satisfies the performance obligation.
c. When the entity collected the cash from the customers.
d. When the entity and the customers sign the contracts.

36. Under IFRS 15, how does an entity satisfy the performance obligation on its contracts with customers?
a. Satisfaction of performance obligation over time.
b. Satisfaction of performance obligation at a point in time.
c. Either A or B.
d. Neither A nor B.
37. Under IFRS 15, in which of the following instances will the revenue from contracts with customers be
recognized at a point in time instead of over time?
a. When the customer simultaneously receives and consumes all of the benefits provided by the
entity as the entity performs.
b. When the entity’s performance creates or enhances an asset that the customer controls as the
asset is created.
c. When the entity’s performance does not create an asset with an alternative use to the entity and
the entity has an enforceable right to payment for performance completed to date.
d. When the entity has transferred physical possession and legal title to the asset to the customer.

38. Under IFRS 15, when shall the incremental cost of obtaining a contract with a customer be recognized
as an asset?
a. When it is probable that future economic benefits will flow to the entity and the cost can be
measured reliably.
b. When the entity expects to recover those costs.
c. When the costs will provide economic benefits for a period less than 12 months.
d. When the costs will decrease the revenue in the future periods.

39. Under IFRS 15, which of the following costs can be capitalized as an asset for being incremental cost of
obtaining a contract with customer?
a. Salaries of the legal counsel of the entity.
b. Advertising cost to create goodwill for the company.
c. Costs that the entity would not have incurred if the contract had not been successfully obtained
such as success fees’ paid to agents
d. Research and development costs to create a good name for the company

40. Under IFRS 15, when will the practical expedient of expensing the incremental cost of obtaining a
contract with a customer be available?
a. When it is probable that future economic benefits will flow to the entity and the cost can be
measured reliably.
b. When the entity expects to recover those costs.
c. When the costs will provide economic benefits for a period less than 12 months.
d. When the costs will increase the revenue in the future periods.

41. Under IFRS 15, when will the costs incurred to fulfill a contract with a customer be recognized as an
asset?
a. When the costs relate directly to a contract (or a specific anticipated contract).
b. When the costs generate or enhance resources of the entity that will be used in satisfying
performance obligations in the future.
c. When the costs are expected to be recovered.
d. When all of the above criteria are present.

42. Under IFRS 15, where a contract with a customer has multiple performance obligations, what will be the
accounting treatment to the transaction price?
a. The transaction price shall be recognized as revenue to the most important performance
obligation.
b. The transaction price shall be allocated equally to the different performance obligations.
c. The transaction price shall be allocated to the different performance obligations by reference to
their relative standalone selling prices.
d. The transaction price shall be recognized as revenue only at the end of completion of all
performance obligations.

43. Under IFRS 15, where the standalone selling prices of the different performance obligations in a
contract with a customer are not available, what methods or approaches may be used to allocate the
transaction price?
a. Adjusted market assessment approach
b. Expected cost plus a margin approach
c. Residual approach but only permissible in limited circumstances
d. Any of the above
44. Under IFRS 15, what shall be presented by the entity in its statement of financial position in relation to
its contract with a customer where a customer has paid an amount of consideration prior to the entity
performing by transferring the related good or service to the customer?
a. Contract liability
b. Contract asset
c. Contract receivable
d. Contract equity

45. Under IFRS 15, what shall be presented by the entity in its statement of financial position in relation to
its contract with a customer where the entity has performed by transferring a good or service to the
customer and the customer has not yet paid the related consideration and the entity’s right to
consideration is conditional on something other than the passage of time , for example future
performance of the entity?
a. Contract liability
b. Contract asset
c. Contract receivable
d. Contract equity

46. Under IFRS 15, what shall be presented by the entity in its statement of financial position in relation to
its contract with a customer where the entity has performed by transferring a good or service to the
customer and the customer has not yet paid the related consideration and the entity’s right to
consideration is unconditional except for the passage of time?
a. Contract liability
b. Contract asset
c. Contract receivable
d. Contract equity

47. Under IAS 18, what is the measurement of revenue?

a. Fair value of the consideration received or receivable
b. Book value of the consideration received or receivable
c. Historical cost of the consideration received or receivable
d. Present value of cash flows of the consideration received or receivable

48. Under IAS 11, which of the following costs shall not form part of contract costs of long-term
construction contract?
a. Depreciation of idle plant and equipment that is not used on a particular contract
b. Costs of materials used in construction
c. Costs of moving plant, equipment and materials to and from the contract site
d. Site labour costs, including site supervision

49. Under IAS 11, which of the following costs shall form part of contract costs of long-term construction
contract?
a. general administration costs for which reimbursement is not specified in the contract
b. selling costs such as broker’s commission
c. research and development costs for which reimbursement is not specified in the contract
d. construction overheads including costs such as the preparation and processing of construction
personnel payroll

50. Under IAS 11, when the outcome of a construction contract can be estimated reliably, how shall the
long-term construction revenue and contract costs be recognized?
a. They shall be recognized as revenue and expenses respectively by reference to the stage of
completion of the contract activity at the end of the reporting period.
b. Construction revenue shall be recognized only to the extent of contract costs incurred that it is
probable will be recoverable and contract costs shall be recognized as an expense in the period in
which they are incurred.
c. They shall be recognized as revenue and expenses at the end of completion of project.
d. They shall be recognized as revenue and expenses at the period of collection.
51. Under IAS 11, when the outcome of a construction contract cannot be estimated reliably, how shall the
long-term construction revenue and contract costs be recognized?
a. They shall be recognized as revenue and expenses respectively by reference to the stage of
completion of the contract activity at the end of the reporting period.
b. Construction revenue shall be recognized only to the extent of contract costs incurred that it is
probable will be recoverable and contract costs shall be recognized as an expense in the period in
which they are incurred.
c. They shall be recognized as revenue and expenses at the end of completion of project.
d. They shall be recognized as revenue and expenses at the period of collection.

52. Under IAS 11, when it is probable that total contract costs will exceed total contract revenue in a long-
term construction contract, what is the treatment of expected loss?
a. The expected loss shall be recognized as an expense immediately regardless of the outcome of
construction contract.
b. The expected loss shall be recognized as expense by reference to the stage of completion of the
contract activity at the end of the reporting period.
c. The expected loss shall be recognized as an expense immediately only if the outcome of the
construction contract cannot be estimated reliably.
d. The expected loss shall be recognized as expense by reference to the stage of completion of the
contract activity at the end of the reporting period if the outcome of the construction contract can
be estimated reliably.

53. Under IAS 11, when the outcome of a construction contract can be estimated reliably, how shall the
change in percentage of completion be accounted for every year?
a. It shall be accounted for as a change in accounting estimate to be applied prospectively.
b. It shall be accounted for as a change in accounting policy to be applied retrospectively.
c. It shall be accounted for as a prior period error to be treated by retroactive restatement.
d. It shall be accounted for as a counterbalancing error to be applied prospectively.

54. Which of the following changes shall be considered as change in accounting policy to be treated
retroactively?
a. Change of the estimated cost to complete the project.
b. Change of the percentage of completion.
c. Change of the contract price.
d. Change from cost recovery method to percentage of completion

55. Under IAS 11, long-term construction revenue shall comprise of

a. The initial amount of revenue agreed in the contract.
b. Variations in the contract work, claims and incentive payments
c. Both A and B.
d. Neither A nor B.

56. Under IAS 11, when may variations in the contract work, claims and incentive payments be allowed to
be recognized as additional long-term construction revenue?
a. When it is probable that they will result in revenue.
b. When they are capable of being reliably measured.
c. Either A or B.
d. Both A and B.
V. Accounting for Home Office, Branch and Agency Transactions

57. In the separate statement of financial position of the home office, the branch account shall be presented
as
a. Asset account
b. Liability account
c. Equity account
d. Income account

58. In the separate statement of financial position of the branch, the home office account shall be presented
as
a. Asset account
b. Liability account
c. Equity account
d. Income account

59. Which of the following transactions will increase the normal balance of the home office account in the
book of the branch?
a. Debit memo received from the home office
b. Payment of the home office’s liability by the branch
c. Net loss recognized by the branch
d. Collection of the branch’s receivable by the home office

60. Which of the following transactions will decrease the normal balance of the Pasay branch account in the
book of the home office?
a. Net income recognized by Pasay branch
b. Collection by Panay branch of Pasay branch’s receivable
c. Debit memo received by the home office from Panay branch
d. Credit memo received by the home office from Pasay branch

61. Which of the following is the best reason why the net income reported by the branch is less than the net
income computed by the home office concerning the branch’s operation?
a. Overstatement of goods in the beginning inventory of the branch for the goods coming from the
home office.
b. Understatement of goods in the beginning inventory of the branch for the goods coming from the
outside supplier.
c. Understatement of cost of goods sold reported by the branch for the goods coming from the
outside supplier.
d. Overstatement of cost of goods sold reported by the branch for the goods coming from the home
office.
VI. PFRS 3: Business Combinations

62. Under IFRS 3, how shall an entity account for each business combination?
a. Applying pooling of interest method
b. Applying equity method
c. Applying acquisition method
d. Applying cost method

63. Under IAS 27, which of the following statements concerning the determination of the acquirer in a
business combination is correct?
a. The acquirer in merger is the entity that absorbed the other entity.
b. The acquirers in consolidation are the entities being consolidated.
c. The acquirer in acquisition of stocks is the subsidiary corporation.
d. The acquirer is the entity that has significant influence in the other entity.

64. IFRS 3 defines it as the date on which the acquirer obtains control of another entity.
a. Control date
b. Business combination date
c. Acquisition date
d. Consolidation date

65. Under IFRS 3, what is the initial measurement of the identifiable assets and liabilities assumed in a
business combination?
a. Acquisition date fair value
b. Acquisition date book value
c. Acquisition date present value of cash flows
d. Acquisition date historical cost

66. Under IFRS 3, in a business combination through acquisition of less than 100% of common stocks of the
subsidiary, the noncontrolling interest in the net assets of the acquiree shall be measured initially at
a. fair value
b. the present ownership instruments' proportionate share in the recognised amounts of the
acquiree's identifiable net assets
c. Either A or B
d. Neither A nor B

67. Under IFRS 3, what is the proper treatment of contingent liability assumed in a business combination?
a. It shall be ignored because it is a possible obligation that arises from past events and whose
existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain
future events not wholly within the control of the entity.
b. It shall be disclosed only because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation.
c. It shall be accrued or recognized as of acquisition date if it is a a present obligation that arises
from past events and its fair value can be measured reliably even it is not probable that an
outflow of resources embodying economic benefits will be required to settle the obligation.
d. None of the above.

68. Under IFRS 3, what is the proper measurement of the consideration transferred in a business
combination?
a. Acquisition-date Fair value
b. Acquisition-date Book value
c. Acquisition-date Historical cost
d. Acquisition-date Present value of cash flows

69. Under IFRS 3, what is the treatment to the excess of the aggregate of (1) the consideration transferred
measured in accordance with this IFRS, which generally requires acquisition-date fair value; (2) the
amount of any non-controlling interest in the acquiree measured in accordance with IFRS 3; and (3) in a
business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held
equity interest in the acquiree over the fair value of the net of the acquisition-date amounts of the
identifiable assets acquired and the liabilities assumed?
a. Goodwill from business combination to be classified as non-current asset not subject to
amortization
 b. Gain on bargain purchase to be presented as part of profit or loss
c. Loss on bargain purchase to be presented as part of other comprehensive income
d. Credit to retained earnings

70. Under IFRS 3, what is the treatment to the excess of the fair value of the net of the acquisition-date
amounts of the identifiable assets acquired and the liabilities assumed over the of the aggregate of (1)
the consideration transferred measured in accordance with this IFRS, which generally requires
acquisition-date fair value; (2) the amount of any non-controlling interest in the acquiree measured in
accordance with IFRS 3; and (3) in a business combination achieved in stages, the acquisition-date fair
value of the acquirer’s previously held equity interest in the acquiree?
a. Goodwill from business combination to be classified as non-current asset not subject to
amortization but subject to annual impairment test
b. Gain on bargain purchase to be presented as part of profit or loss
c. Loss on bargain purchase to be presented as part of other comprehensive income
d. Credit to retained earnings

71. Under IFRS 3, what is the proper treatment to acquisition-related costs also known as direct cost of
business combination?
a. Expense as incurred presented as part of profit or loss
b. Expense as incurred presented as part of other comprehensive income
c. Part of consideration transferred in business combination
d. Debited or charged to direct cost of business combination

72. Under IFRS 3, in a business combination achieved in stages, the acquirer shall remeasure its previously
held equity interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or
loss, if any, in
a. Profit or loss
b. Other comprehensive income
c. Share premium
d. Retained earnings

73. Under IFRS 3, it refers to the period after the acquisition date during which the acquirer may adjust the
provisional amounts recognized for a business combination.
a. Retroactive period
b. Prospective period
c. Retrospective period
d. Measurement period

74. Under IFRS 3, what is the maximum period of the measurement period?
a. It shall not exceed one year from the acquisition date.
b. It shall not exceed 3 months from the acquisition date.
c. It shall not exceed 6 months from the acquisition date.
d. It shall not exceed 2 years from the acquisition date.

75. Under IFRS 3, what is the proper treatment of measurement period adjustment?
a. It shall be adjusted to profit or loss.
b. It shall be adjusted to other comprehensive income.
c. It shall be retroactively adjusted to goodwill or gain on bargain purchase.
d. It shall be retroactively adjusted to retained earnings.

76. Under IFRS 3, which of the following is a measurement period adjustment that may be retroactively
adjusted to goodwill or gain on bargain purchase?
a. Additional assets or liabilities if new information is obtained about facts and circumstances that
existed as of the acquisition date and, if known, would have resulted in the recognition of those
assets and liabilities as of that date.
b. Changes resulting from events after the acquisition date, such as meeting an earnings target,
reaching a specified share price or reaching a milestone on a research and development project,
are not measurement period adjustments.
c. Changes in the fair market value of the financial asset at fair value issued as part of the
consideration transferred.
d. Changes in the amortized cost of the financial asset at amortized cost issued as part of the
consideration transferred.
VII. PAS 27: Separate Financial Statements

77. IAS 27 defines them as financial statements presented by a parent corporation, an investor with a joint
control of, or significant influence over, an investee, in which the investments are accounted for at a cost
method or in accordance with IFRS 9.
a. Separate financial statements
b. Consolidated financial statements
c. Combined financial statements
d. Group financial statements

78. Under IAS 27, which entities are required to present and prepare separate financial statements?
a. Small and medium enterprises (SMEs)
b. Barangay Micro-business Enterprises (BMBEs)
c. Publicly listed entities
d. IAS 27 does not mandate which entities produce separate financial statements available for
public use.

79. Under IAS 27, what method may be used by a parent corporation that prepares separate financial
statements concerning its investment in subsidiary?
a. Cost method
b. Fair value model
c. Equity method
d. Any of the above

80. When the parent corporation accounts its investment in subsidiary using equity method in its separate
financial statements, which is correct?
a. The investment is subsequently measured at fair value.
b. Dividend income will be recognized.
c. Gain on bargain purchase may be recognized.
d. Goodwill arising from business combination will be presented separately.

81. When the parent corporation accounts its investment in subsidiary using cost method in its separate
financial statements, which is correct?
a. The investment is subsequently measured at fair value.
b. Dividend income will be recognized.
c. Gain on bargain purchase may be recognized.
d. Goodwill arising from business combination will be presented separately.

82. When the parent corporation accounts its investment in subsidiary using fair value model in its separate
financial statements, which income accounts may be recognized?
a. Dividend income and gain/loss on changes in fair value
b. Share in net income of subsidiary
c. Impairment loss
d. All of the above
VIII. IFRS 10: Consolidated Financial Statements

83. IFRS 10 defines them as the financial statements of a group in which the assets, liabilities, equity,
income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single
economic entity.
a. Separate financial statements
b. Consolidated financial statements
c. Combined financial statements
d. Group financial statements

84. They are the financial statements of the two or more subsidiaries of a parent corporation combined
excluding the operation of the parent corporation.
a. Separate financial statements
b. Consolidated financial statements
c. Combined financial statements
d. Group financial statements

85. IFRS 3 and IFRS 10 require which types of financial statements to be presented by a parent corporation?
a. Separate financial statements and consolidated financial statements
b. Separate financial statements and combined financial statements
c. Separate financial statements, combined financial statements and consolidated financial
statements
d. Consolidated financial statements

86. How does IFRS 10 define the concept of control?

a. An investor controls an investee when the investor is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its
power over the investee.
b. An investor controls an investee when it has the power govern the financial and operating
decisions of the investee.
c. An investor controls an investee when it owns more than 50% of the common stocks of the
investee.
d. An investor controls an investee when it has the power to participate in the financial and
operating decisions of the investee.

87. IFRS 10 enumerates the following essential requisites of control, except

a. power over the investee
b. exposure, or rights, to variable returns from its involvement with the investee
c. ability to use its power over the investee to affect the amount of the investor's returns
d. ownership of more than 50% of common stocks of the investee

88. Under IFRS 10, which entity is exempted to consolidate subsidiaries despite obtaining control over
another entity?
a. Banks
b. Holding company
c. Investment entity
d. Private entity

89. IFRS 10 provides that an parent entity need not present consolidated financial statements if it meets all
of the following conditions, except
a. It is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and its other
owners, including those not otherwise entitled to vote, have been informed about, and do not
object to, the parent not presenting consolidated financial statements.
b. Its debt or equity instruments are traded in a public market.
c. It did not file, nor is it in the process of filing, its financial statements with a securities
commission or other regulatory organization for the purpose of issuing any class of instruments
in a public market.
d. Its ultimate or any intermediate parent of the parent produces financial statements available for
public use that comply with IFRSs, in which subsidiaries are consolidated or are measured at fair
value through profit or loss in accordance with IFRS 10.
 90. Under IFRS 10, what is the proper presentation and classification of the noncontrolling interest in net
assets in the consolidation statement of financial position?
a. Part of non-current asset
b. Part of non-current liability
c. Part of current-asset
d. Within equity, separately from the equity of the owners of the parent.

91. Which of the following items affect consolidated net income attributable to parent’s stockholders only
but not the non-controlling interest in net income?
a. Impairment loss of goodwill computed when NCI is measured initially at fair value
b. Amortization of difference between book value and fair value of identifiable assets and liabilities
of subsidiary
c. Stock issuance costs
d. Gain on bargain purchase

92. Which of the following items affect both consolidated net income attributable to parent’s stockholders
and the non-controlling interest in net income?
a. Impairment loss of goodwill computed when NCI is measured initially at proportionate share of
fair value of net assets of acquiree
b. Direct cost of business combination
c. Effects of upstream transactions
d. Dividend income from subsidiary

93. Which of the following items will not affect the consolidated net income?
a. Stock issuance costs
b. Acquisition related costs of business combination
c. Gain on bargain purchase
d. Indirect cost of business combination

IX. PAS 21: Foreign Currency Transactions

94. IAS 21 defines it as the currency of the primary economic environment in which the entity operates.
a. Foreign currency
b. Presentation currency
c. Functional currency
d. Legal tender

95. IAS 21 defines it as the currency other than the functional currency of the entity.
a. Foreign currency
b. Presentation currency
c. Functional currency
d. Legal tender

96. Under IAS 21, what is the initial measurement of foreign currency transaction?
a. Historical rate for monetary items and closing rate for nonmonetary items
b. Historical rate for nonmonetary items and closing rate for monetary items
c. Historical rate for both monetary items and nonmonetary items
d. Closing rate for both monetary items and nonmonetary items

97. Under IAS 21, what is the subsequent measurement of foreign currency denominated monetary items?
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate

98. Under IAS 21, what is the subsequent measurement of foreign currency denominated nonmonetary
items?
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate
 99. Under IAS 21, in which of the following items will foreign currency gain or loss be recognized?
a. Income tax payable
b. Prepaid asset
c. Depreciation expense
d. Inventory

100. Under IAS 21, in which of the following items will foreign currency gain or loss not be
recognized?
a. Accounts receivable
b. Interest payable
c. Sales
d. Dividends payable

101. Under IAS 21, foreign exchange differences arising from translating foreign currency
denominated transactions to functional currency shall be recognized in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss

X. Foreign Currency Hedging

102. Under IAS 39, unrealized holding gain or loss arising from changes in fair value of derivatives
designated as fair value hedge shall be recognized in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss

103. Under IAS 39, unrealized holding gain or loss arising from changes in fair value of derivatives
designated as cash flow hedge pertaining to effective portion shall be recognized in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss

104. Under IAS 39, unrealized holding gain or loss arising from changes in fair value of derivatives
designated as cash flow hedge pertaining to effective portion if realized shall be reclassified in
a. Other comprehensive income
b. Share premium
c. Retained earnings
d. Profit or loss

105. Under IAS 39, unrealized holding gain or loss arising from changes in fair value of derivatives
designated as cash flow hedge pertaining to ineffective portion shall be recognized in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss

106. Under IAS 39, unrealized holding gain or loss arising from changes in fair value of derivatives
designated as hedge of net investment in foreign operation pertaining to effective portion shall be
recognized in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss

107. Under IAS 39, unrealized holding gain or loss arising from changes in fair value of derivatives
designated as hedge of net investment in foreign operation pertaining to effective portion if realized shall
be reclassified in
a. Other comprehensive income
 b. Share premium
c. Retained earnings
d. Profit or loss

108. Under IAS 39, unrealized holding gain or loss arising from changes in fair value of derivatives
designated as hedge of net investment in foreign operation pertaining to ineffective portion shall be
recognized in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss

XI. Translation of Functional Currency Financial Statements to Presentation Currency

109. IAS 21 defines it as the currency in which the financial statements are presented.
a. Foreign currency
b. Presentation currency
c. Functional currency
d. Legal tender

110. Under IAS 21, items of assets and liabilities at functional currency shall be translated into
presentation currency at
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate

111. Under IAS 21, items of equity other than retained earnings at functional currency shall be
translated into presentation currency at
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate

112. Under IAS 21, than retained earnings at functional currency shall be translated into presentation
currency at
a. Historical rate
b. Closing rate
c. Average rate
d. It shall not be translated

113. Under IAS 21, items of income and expenses at functional currency shall be translated into
presentation currency at
a. Historical rate
b. Closing rate
c. Average rate
d. Opening rate

114. Under IAS 21, adjustments arising from translating functional currency into presentation
currency shall be presented in
a. Other comprehensive income with reclassification adjustment
b. Other comprehensive income without reclassification adjustment
c. Retained earnings
d. Profit or loss

115. Under IAS 21, translations adjustments arising from translating functional currency into
presentation currency if realized shall be reclassified in
a. Other comprehensive income
b. Share premium
c. Retained earnings
d. Profit or loss
XII. Accounting for Build, Operate & Transfer

116. IFRIC 12 is an arrangement whereby a government or other public sector body contracts with a
private operator to develop (or upgrade), operate and maintain the grantor's infrastructure assets such as
roads, bridges, tunnels, airports, energy distribution networks, prisons or hospitals.
a. Joint arrangement
b. Service concession arrangement
c. Consignment arrangement
d. Business arrangement

117. Under IFRIC 12, if the concession arrangement provides that the operator has an unconditional
contractual right to receive a specified or determinable amount of cash or another financial asset from
the government in return for constructing or upgrading a public sector asset, and then operating and
maintaining the asset for a specified period of time, the infrastructure asset shall be accounted for by the
operator as
a. Property, plant and equipment
b. Intangible asset
c. Financial asset
d. Prepaid asset

118. Under IFRIC 12, if the concession arrangement provides that the operator has a right to charge
for use of a public sector asset that it constructs or upgrades and then must operate and maintain for a
specified period of time but the right is not an unconditional right to receive cash because the amounts
are contingent on the extent to which the public uses the service, the infrastructure asset shall be
accounted for by the operator as
a. Property, plant and equipment
b. Intangible asset
c. Financial asset
d. Prepaid asset

119. The Philippine government granted a concession arrangement to MRT7 Inc. which will construct
the mass train transportation and will be authorized to operate it for a period of 50 years. The
arrangement provides that MRT7 Inc. receives a right or a license to charge users of the public service
but there is no an unconditional right to receive cash because the amounts will be contingent on the
extent that the public uses the service. How shall MRT7 Inc., the operator, account for its infrastructure
asset?
a. It shall be recognized as property, plant and equipment by the operator.
b. It shall be recognized as financial asset at fair value by the operator.
c. It shall be recognized as financial asset at amortized cost by the operator.
d. It shall be recognized as intangible asset of the operator.

120. The Philippine government granted a concession arrangement to Makati Med Inc. which will
construct a hospital and will be authorized to operate it for a period of 10 years. The arrangement
provides that Makati Med Inc. will provide medical services to underprivileged members of the
community for free. In exchange, Makati Med Inc. has an unconditional contractual right to receive cash
or another financial asset from or at the direction of the Philippine government for the construction
services and medical services. How shall MRT7 Inc., the operator, account for its infrastructure asset?
a. It shall be recognized as property, plant and equipment by the operator.
b. It shall be recognized as intangible asset of the operator.
c. It shall be recognized as Investment in stocks at cost method of the operator.
d. It shall be recognized as financial asset either at (1) FAFVP/L or (2) FAFVOCI or (3)
FA@Amortized Cost depending on the business model of the operator.
XIII. Accounting for Non-Profit Organization

121. Which of the following funds shall be classified as temporarily restricted net asset in statement
of financial position of nonprofit organization?
a. Board designated plant fund
b. Term endowment fund
c. Regular endowment fund
d. Current operation fund

122. Which of the following funds shall be classified as unrestricted net asset in statement of financial
position of nonprofit organization?
a. Internally restricted fund
b. Plant endowment fund
c. Annuity fund
d. Life income fund

123. In the statement of activities, expenses of nonprofit organization shall be recorded only as
reduction from
a. Temporarily restricted net assets
b. Unrestricted net assets
c. Permanently restricted net assets
d. Current liability

124. Last year, a nonprofit organization received a contribution with a donor restriction for
educational scholarship of its members. In the current year, the nonprofit organization fully spent the
said contribution for the intended purpose. What is the effect of this expenditure to current year’s change
in net assets?
a. It will increase the temporarily restricted net assets.
b. It will not affect the unrestricted net assets.
c. It will not affect the total net assets.
d. It will decrease the permanently restricted net assets.

125. In the statement of cash flows of nonprofit organization, how shall the following cash flows be
presented?
I. Cash receipts from other income and gain
II. Cash payments for the acquisition of equipment
III. Cash receipts from donor who imposed term restriction
a. Operating, Investing, Financing
b. Investing, Financing, Operating
c. Financing, Operating, Investing
d. Operating, Financing, Investing
XIV. Government Accounting Manual

126. It encompasses the process of analyzing, classifying, summarizing and communicating all
transactions that are involved in the receipt and disbursement of all government funds and properties,
and interpreting the results thereof.
a. Responsibility accounting
b. Government accounting
c. Financial accounting
d. Management accounting

127. It refers to the newest system adopted by the Commission on Audit for the analyzing, classifying,
summarizing and communicating all transactions that are involved in the receipt and disbursement of all
government funds and properties, and interpreting the results thereof.
a. New government accounting system
b. Government accounting manual
c. Fund accounting
d. Public fund accounting

128. Which of the following cash in bank accounts is used by national government agencies for
disbursement?
a. Cash Treasury/Agency Deposit Regular
b. Cash – Modified Disbursement System – Regular
c. Cash in Bank Land Bank of the Philippines
d. Cash in Bank Bangko Sentral ng Pilipinas

129. Which of the following cash in bank accounts is used by national government agencies for cash
remittances to Bureau of Treasury?
a. Cash Treasury/Agency Deposit Regular
b. Cash – Modified Disbursement System – Regular
c. Cash in Bank Land Bank of the Philippines
d. Cash in Bank Bangko Sentral ng Pilipinas

130. The receipt of notice of cash allocation by a national government agency shall be credited by the
said agency to
a. Cash – Modified Disbursement System – Regular
b. Cash Treasury/Agency Deposit Regular
c. Subsidy income from national government
d. Advances from national government
XV. Cost Accounting

131. It is a costing system that values manufactured products with the actual material costs, actual
direct labor costs and manufacturing overhead based on a predetermined manufacturing overhead rate.
a. Actual costing system
b. Normal costing system
c. Standard costing system
d. Budgeted costing system

132. If the under or over applied factory overhead is significant, it shall be closed to
a. Cost of goods sold only
b. Finished goods and cost of goods sold proportionately
c. Work in process, finished goods and cost of goods proportionately
d. Raw materials, work in process, finished goods, and cost of goods sold proportionately

133. Which of the following will increase the cost of goods manufactured for the period?
a. Decrease in finished goods inventory for the period
b. Decrease in work in process for the period
c. Increase in direct materials for the period
d. Decrease in salaries payable for the period

134. In job order costing, normal spoilage which is a characteristic of a given production cycle shall
be
a. Expensed as incurred
b. Charged or capitalized to a specific job.
c. Closed to factory overhead account.
d. Debited to work in process account.

135. In job order costing, normal rework cost which is attributable to a specific job shall be
a. Expensed as incurred
b. Charged or capitalized to that particular job.
c. Closed to factory overhead account.
d. Debited to work in process account.

136. What is the only reason for the difference between the equivalent unit of production computed
under average process costing and FIFO process costing?
a. Completed portion in beginning work in process inventory
b. Incomplete portion in beginning work in process inventory
c. Completed portion in ending work in process inventory
d. Incomplete portion in ending work in process inventory

137. When will the average process costing method produce the same cost of goods manufactured as
the first in first out process costing method?
a. When materials are added 100% at the end of the process.
b. When materials are added 100% at the beginning of the process.
c. When the beginning work in process inventory and ending work in process inventory are equal.
d. When there is no beginning work in process inventory.

138. Under which process costing method will the cost of the work in process inventory beginning be
ignored in the computation of cost per unit?
a. FIFO process costing
b. Average process costing
c. Both A and B
d. Neither A nor B

139. In a manufacturing company, which of the following product costs shall be considered as prime
cost and conversion cost at the same time?
a. Salary of the factory security guard
b. Freight in of the direct materials
c. Depreciation expense of sewing machine
d. Employee benefits of factory worker
140. In a manufacturing company, which of the following product costs shall be considered as prime
cost but not conversion cost?
a. Insurance while in transit of the direct materials
b. Utility cost of the factory
c. Salary of the factory workers
d. Creditable value added tax

141. In a manufacturing company, which of the following product costs shall be considered as
conversion cost but not prime cost?
a. Irrecoverable import duties of direct materials
b. Employee benefits of factory worker
c. Foreign exchange difference on inventory loan
d. Amortization cost of the patent covering a machinery used for production

142. In a manufacturing company, which of the following shall be considered as period cost?
a. Employee benefits of factory security guard
b. Freight out, warranty cost and sales commission
c. Costs of normal waste
d. Storage costs of work in process inventory

143. It is an inventory strategy a company employs to increase efficiency and decrease waste by
receiving and producing goods as they are needed in the production process, thereby reducing inventory
costs.
a. Just In Time Inventory System
b. Min-max inventory system
c. Pareto/80-20 inventory rule
d. ABC inventory system

144. It is a product costing system generally used in just-in-time inventory environment. This costing
system delays the costing process until the production of goods is completed by eliminating the detailed
tracking of cost throughout the production system and preparing journal entries only at trigger points.
a. Backflush costing
b. Standard costing
c. Normal costing
d. Traditional costing

145. Which costing system is ideal for backflush costing and just in time inventory system?
a. Actual costing system
b. Normal costing system
c. Standard costing system
d. Budgeted costing system

146. This method of service department costs allocation is also called sequential method that allocates
the costs of some service departments to other service departments, but once a service department’s
costs have been allocated, no subsequent costs are allocated back to it.
a. Direct method
b. Reciprocal method
c. Step-down method
d. Bottom-top method

147. If the net realizable value of the by-product of a joint production process is significant, how shall
it be accounted for?
a. The net realizable value of the by-product shall be recorded as deduction from the total joint
manufacturing cost thereby reducing the cost of the main products also known as replacement
cost method.
b. The net realizable value of the by-product shall be recorded as deduction from the net sales of
the main product.
c. The net realizable value of the by-product shall be recorded as deduction from the cost of sales
of the main product.
d. The net realizable value of the by-product shall be recorded as other income.
148. Under Standard Costing System, direct material price variance shall be appropriately computed
using
a. Actual direct materials used
b. Actual direct materials purchased
c. Actual direct materials wasted
d. Actual direct materials converted to work in process

149. Under Standard Costing System, if the journal entry to record usage of direct materials include a
credit to direct material usage variance, it means that
a. Actual price of direct material is higher than the standard price
b. Actual price of direct material is lower than the standard price
c. Actual direct materials used is higher than the standard quantity of direct materials
d. Actual direct materials used is lower than the standard quantity of direct materials

150. Under Standard Costing System, if the actual direct labor hours is more than the standard direct
labor hours, the journal entry to record the incurring of direct labor cost will result to
a. Debit to labor efficiency variance
b. Credit to labor rate variance
c. Credit to labor efficiency variance
d. Debit to labor rate variance

151. Under Standard Costing System, when cost of direct material or cost of direct labor will be
journalized, the work in process account will be debited at
a. Actual cost
b. Standard cost
c. Future cost
d. Historical cost

152. Which of the following factory overhead variances is pure variable?

a. Spending variance
b. Controllable variance
c. Efficiency variance
d. Volume variance

153. Which of the following factory overhead variances is pure fixed?

a. Spending variance
b. Controllable variance
c. Efficiency variance
d. Volume variance

154. Under IAS 18, what is the proper measurement of revenue at the date of its recognition?
a. Fair value of the consideration received or receivable.
b. Book value of the consideration received or receivable.
c. Historical cost of the consideration received or receivable.
d. Amortized or depreciated cost of the consideration received or receivable.

155. Which of the following will increase the cost of goods sold of a manufacturing concern during
the year?
a. Adjusting entry for insignificant over-application of factory overhead.
b. Decrease in the salary of the factory workers during the year.
c. Increase in the work in process inventory during the year.
d. Decrease in the finished goods inventory during the year.

156. The journal entry to record the usage and purchase of direct materials during the year includes a
debit to direct material efficiency variance. Which of the following statements is correct?
a. The actual direct material used in production is higher than the standard direct material that
should have been used.
b. The actual direct material used in production is lower than the standard direct materials that
should have been used.
c. The actual purchase price of direct material is higher than the standard price of direct material.
d. The actual purchase price of direct material is lower than the standard price of direct material.