QUESTION 9-20 Multiple choice (PAS 1)

1.Which statement is incorrect concerning fair presentation of financial statements?

a. Fair presentation requires the faithful representation of the effects of transactions and other events.

b. Financial statements shall present fairly the financial position, financial performance and cash flows of an entity.

c. In virtually all circumstances, a fair presentation is achieved by compliance with applicable PFRS.

d. An entity whose financial statements comply with PFRS shall not make an explicit aud unreserved statement
of such compliance in notes,
2.Which of the following cannot be considered fair presentation of financial statements?

a. To present information in a manner that provides relevant and faithfully represented financial information.

b. To provide additional disclosures when compliance with specific PFRS is insufficient to understand the financial position
and financial performance.

c. To select and apply accounting policies in accordance with appliceble PFRS.

d. To rectify inappropriate accounting policies either by disclosure of the accounting policies used or by notes or
explanatory information.

3.Which statement indicates a going concern?

a. Management intends to liquidate the entity.

b. Management intends to cease the operations of the entity.

C. Management has no realistic alternative but to cease the operations of the entity.

d. None of these would indicate going concern

4.An entity is permitted to depart from a particular standard if all conditions are satisfied, except

a. In extremely rare circumstances.

b. When management concludes that compliance with the standard would be misleading.

C. When the departure from the standard is necessary to achieve fair presentation.o

d. When the Conceptual Framework for Financial Reporting prohibits such a depárture.

5. The effects of transactions and other events on economic resources and claims are depicted in the periods in which
those effects occur even if the resulting cash receipts and payments occur in a different period.

a.Accrual accounting

b. Cash accounting

c. Modified accrual accounting

d. Modified cash accounting

6.Financial statements must be prepared at leastoo

a.Annually
 b. Quarterly

c. Semiannually

d. Every two years

7. Technically, offsetting in financial statements is accomplished when

a. The allowance for doubtful accounts is deducted from accounts receivable.

b. The accumulated depreciation is deducted from property, plant and equipment.

c. The total liabilities are deducted from total assets.

d. Gain or loss from disposal of noncurrent asset is reported by deducting from the proceeds the carrying
amount of the asset and the related disposal cost.

8.The presentation and classification of items in the financial statements shall be retained from one accounting period to the next.
a. Consistency of presentation

b. Materiality

c. Aggregation

d. Comparability

9. A third statement of financial position as at beginning of the earliest comparative period presented is required
a. When an entity applies an accounting policy retrospectively.

b. When an entity makes a retrospective restatement of items in the financial statements.

c. When an entity reclassifies items in the financial statements.

d. Under all of these circumstances

10.Which statement in relation to financial statements in incorrect?

a. General purpose financial statements do not and cannot provide all of the information that primary

users need.

b. General purpose financial statements are designed to show the value of the reporting entity.

c, General purpose financial statements are intended to provide common information to users.

d. Financial statements are largely based on estimate and judgment rather than exact depiction.

QUESTION 9-21 Multiple choice (IFRS)

1.Items of dissimilar nature or function

a. Must alway8 be presented separately.

b. Must not be presented separately.

c. Must be presented separately if material.

 d. Must be presented separately even if immaterial.
2.Materiality depends on
a. The nature of the omission or misstatement.

b. The absolute size of the omission or misstatement.

c. The relative size and nature of the omission.

d. The judgment of management.

3. An entity must disclose comparative information for
a. The previous comparable period for all amounts.

b. The previous comparable period for all amounts and for all narrative and descriptive information.

C. The previous comparable period for all amounts and for all narrative and descriptive information
relevant to an understanding of the financial statements.

d. The previous two comparable periods for all amounts.

4.When the classification of items in the financial statements is changed, the entity
a. Must not reclassifiy the comparative amounts.

b. Can choose whether or not to reclassify.

C. Must reclassify the comparative amounts unless it is impracticable to do so.

d. Must reclassify the current year amounts only.

5. An entity shall present
a. The statement of cash flows more prominently.

b. The statement of financial position more prominently.

c. The income statement more prominently.

d. Each financial statement with equal prominence.

QUESTION 9-22 Multiple choice(IAA)

1.Which would likely prepare the most accurate financial forecast for an entity based on empirical evidence?
a. Investors using statistical models

b. Corporate management

c. Financial analysts

d. Independent certified public accountants

2. What is the most useful information in predicting future cash flows?

a. Information about current cash flows

b. Current earnings based on accrual accounting

 c.Information regarding the accounting policies used

d. Information regarding financial position

3.The accrual basis of accounting is most useful for

a. Determining the amount of income tax liability.

b. Predicting short-term financial performance.

C. Predicting long-term financial performance.

d. Determining the amount of dividends to shareholders.

4. Accrual accounting is üsed because

a. Cash flows are considered less important.

b. It provides a better indication of ability to generate cash flows than cash basis.

c. It recognizes revenue when cash is received.

d. It is one of the implicit assumptions.

5.The financial statements prepared under GAAP

a. Do not articulate with one another.

b. Reflect a single measurement which is historical cost.

c. Are not highly precise because estimate and judgment must be made.

d. Contain a limited number of future projections.

QUESTION 10-15 Multiple choice(PAS 1)

1. When there is much variability, the operating cycle is measured at

a.The mean value

b. The median value

C. Twelve months

d. Three years

2. The operating cycle of an entity

a. Is the time between the acquisition of materials entering into a process and their realization in cash.

b. Is the period of time normally elapsed in converting trade receivables back into cash.

C. Is a period of one year.

d. Refers to the seasonal variation experienced by entities.

3. An entity shall classify an asset as current under all of the following conditions,except
a. The entity expects to realize the asset or intends to sell or consume it within the entity's normal operating cycle.
 b. The entity holds the asset for the purpose of trading.

c. The entity expects to realize the asset within twelve months after the reporting period.

d. The asset is cash or a cash equivalent that is restricted to settle a liability for more than twelve months after
the reporting period.
4. An entity shall classify a liability as current when under all of the following conditions, except

a. The entity expects to settle the liability within the entity's normal operating cycle.

b. The entity holds the liability primarily for the purpose of trading.

c. The liability is due to be settled within twelve months after the reporting period.

d. The entity has an unconditional right to defer settlement of the liability for at least twelve months after the
reporting period.

5.Which obligations are classified as current even if theee are due to be settled after more than twelve months from the end of
the reporting period?

a. Trade payables and accruals for employee and other operating cost

b.Current portion of interest-bearing liabilities

C. Bank overdrafts

d. Dividends payable
6. Current and noncurrent presentation of assets and liabilities provides useful information when the entity

a. Supplies goods or services within a clearly identifiable operating cycle

b. Is a financial institution

c. Is a public utility

d. Is a nonprofit organization
7. A presentation of assets and liabilities in increasing or. decreasing order of liquidity provides information that is reliable and
more relevant than a current and noncurrent presentation for
a. Financial institution

b. Public utility

C. Manufacturing entity

d. Service provider

8. In the Philippines, the common practice is to present in the statement of financial position
a. Current assets before noncurrent assets,current liabilities before noncurrent liabilities and equity after liabilities.

b. Noncurrent assets before current assets, noncurrent liabilities before current liabilities and equity after liabilities.

C. Current assets before noncurrent assets,noncurrent liabilities before current liabilities and equity after liabilities.

d. Noncurrent assets before current assets, current liabilities before noncurrent liabilities and equity after liabilities.
 9. A financial liability due within twelve months after the reporting period shall be classified as noncurrent

a. When it is refinanced on a long-term basis before the issue of financial statements.

b.When the entity has no discretion to refinance for at least twelve months.

c. When it is refinanced on a long-term basis after the end of reporting period.

d. When it is refinanced on a long-term basis on or before the end of reporting period.

10. When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the
effect that the liability becomes payable on demand, the liability is classified as

a.Current under all circumstances

b. Noncurrent under all circumstances

c. Current if the lender has agreed after the reporting period and before the issuance of the
statements not to demand payment as a consequence of the breach.

d. Noncurrent if the lender agreed after the reporting period to provide a grace period for at least twelve
months after the reporting period.

QUESTION 10-16 Multiple choice (IFRS)

1. In presenting a statement of financial position, an entity

a. Must make the current and noncurrent presentation.

b.Must present assets and liabilities in order of liquidity.

c.Must choose either the current and noncurrent or the liquidity presentation, meaning free choice of presentation.

d. Must make the current and noncurrent presentation, except when a presentation based on liquidity provides
information that is reliable and more relevant.

2. Assets to be sold, consumed or realized as part of the normal operating cycle are

a. Current assets

b. Noncurrent assets

c. Classified as current or noncurrent in accordance with other criteria

d. Noncurrent investments

3. Liabilities that an entity expects to settle within the normal operating cycle are classified as

a. Noncurrent liabilities

b. Current or noncurrent liabilities in accordance with other criteria

c. Current liabilities

d. Equity
4. In which section of the statement of financial position should cash that is restricted for the settlement of a liability due 18 months
after the reporting period be presented?
a. Current assets

b. Equity

3. Noncurrent liabilities

d. Noncurrent assets

5. In which section of the statement of financial position should employment taxes that are due for settlenient in 15 months'
time be presented?
a. Current liabilities

b. Current assets

c. Noncurrent liabilities

d.Noncurrent assets

6. An entity has a loan due for repayment in six months' time but the entity has the option to refinance for repayment two
years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be
presented?

a. Current liabilities

b. Current assets

c. Noncurrent liabilities

d. Noncurrent assets

7. Which of the following must be included on the face of the statement of financial position?

a. Investment property

b. Number of shares authorized

c. Contingent asset

d. Shares in an entity owned by that entity

8. Which of the following is not required to be presented as minimum information on the face of the statement of financial
position?

a. Investment property

b. Investment accounted under the equity method

c. Biological asset

d.Contingent liability
 9. Which of the following must be included as a line item in the statement of financial position?

b.Property, plant and equipment analyzed by class Contingent asset

&.

c.Share capital and reserves analyzed by class

d. Deferred tax asset

10.Which statement about the statement of financial position is not true?

a. Biological assets should be reported in the statement of financial position.

b. The number of shares authorized for issue should be reported in the statement of financial position or the
statement of changes in equity or in the notes.

C. Provisions should be recognized in the.statement of financial position.

d. A revaluation surplus on a noncurrent asset in the current year should be recognized in the income
statement.
 QUESTION 10-17 Multiple choice (AICPA Adapted)

1. In analyzing financial statements, which financial 'statement would a potential investor primarily use to assess liquidity
and financial flexibility?

a. Statement of financial position

b. Income statement

C. Statement of retained earnings

d. Statement of cash flows

2. Which is an essential characteristic of an asset?

a. The claims to the benefits are legally enforceable

b. An asset is tangible

C. An asset is obtained at a cost

d. An asset is a present economic resource

3. Conceptually, asset valuation accounts are

a. Assets

b. Neither assets nor liabilities

C. Part of shareholders' equity

d. Liabilities

4.Working capital is
a. Assets which enable the entity to operate profitably.

b. Capital which has been reinvested in the business.

C. Unappropriated retained earnings.

d. Current assets less current liabilities.

5. The basis for classifying assets as current or noncurrent is the period of time normally elapsed from the time the entity
expends cash to the time it converts.
a. Inventory back into cash or 12 months, whichever is

shorter. b. Receivables back into cash or 12 months, whichever

is longer. c. Tangible fixed assets back into cash or 12 months, whichever is longer.

d. Inventory back into cash or 12 months, whichever is longer.

6. The operating cycle concept

a. Causes the distinction between current and noncurrent to depend on cash realization within one year.

b. Permits some assets to be classified as current even though more than one year removed from becoming
cash.

C. Has become obsolete.

 d. Affects the income statement only.

7. When classifying assets as current and noncurrent

a. Current assets must reflect realizable cash value.

b.Prepayments are included in other assets.

C. Current assets are determined by the seasonal nature.

d. Assets are classified as current if reasonably expected to be realized in cash or consumed during the
normal operating. cycle.

8. The term net assets represents

a. Retained earnings

b. Current assets less current liabilities

C. Total contributed capital

d. Total assets less total liabilities

9. Treasury shares should be reported as

a. Current asset

b. Investment

C. Other asset

d. Reduction of shareholders' equity

10.The term deficit refers to

a. An excess of current assets over current lisbilities

b. An excess of current liabilities over current assets

c. A debit balance in retained earnings

d. A prior period error

QUESTION 10-18 Multiple choice (AICPA Adapted)

1.Which should be classified as current asget?

a.Trade accounts receivable normally collectible in 18 months

b.Cash for the redemption of preference shares

C. Cash surrender value

d. A deposit on machinery ordered within six months

2. Which should not be considered as a current asset?

a. Installment accounts receivable due over 18 months in accordance with normal trade practice

b.Prepaid taxes
 C. Financial asset held for trading

d. Cash surrender value

3. Current assets should never include

a. A receivable not collectible·within one year

b. Current tax asset

c. Goodwill arising in a business combination

d. Premium paid on a bond investment

4. Equity investments held to finance construction of additional plant should be classified as

a. Current assets

b. Property, plant, and equipment

c. Intangible assets

d.Noncurrent investments

5. Which of the following is not a noncurrent investment?

a. Cash surrender value

b. Franchise

c. Land held for speculation

d. A sinking fund

QUESTION 10-19 Multiple choice (IAA)

1. The statement of financial position is useful for analyzing all of the following, except

a. Liquidity

b. Solvency

c. Profitability

d. Financial flexibility

2.The statement of financial position is useful for all of the following,except

a. To compute rate of return

b. To analyze cash inflows and outflows for the period

c. To evaluate capital structure

d. To assess future cash flows

3.What is one criticism not normally aimed at a statement of financial position?

a. Failure to reflect current value information

b. The extensive use of separate classifications

C. An extensive use of estimate

 d. Failure to include items of financial value that cannot be recorded objectively

4.The statement of financial position

a. Omits many items that are of financial value

b. Makes very limited use of judgment and estimate

c. Uses fair value for most assets and liabilities

d.All of the choices are correct

5. Which is a limitation of a statement of financial position?

a. Many items that are of financial value are omitted.

b. Judgment and estimate are used

c. Current fair value is not reported

d. All of these are a limitation of the statement of financial position

6.The amount of time that is expected to elapse until an asset is realized into cash is referred to as

a. Solvency

b. Financial flexibility

c. Liquidity

d.Exchangeability

7. Which is not an acceptable major asset classification?

a. Current assets

b. Investments

c. Property,plant,and equipment

d. Deferred charges

8. Which is not an element of working capital?

a. Accrued interest on notes receivable

b. Goodwill

c. Goods in process

d. Temporary investments

9. Accrued revenue would normally appear under

a. Noncurrent assets
 b. Gurrent liabilities

c. Noncurrent liabilities

d. Current assets
10. Which is classified as a noncurrent asset?

a. Plant expansion fund

b. Prepaid rent

c. Supplies

d. Goods in process

QUESTION 11-8 Multiple choice (PAS 1)

1. Which is a purpose of the notes to financial statements?

a. To present information about the basis of preparation of financial statements and accounting policies used.

b. To disclose the information required by PFRS but not presented elsewhere in the financial statements.

C. To provide additional information not presented but necessary for a fair presentation.

d. All of these can be considered a purpose of the notes to financial statements.

2. Which is the first item in presenting the notes to financial statements?
a. Statement of compliance with PFRS

b. Other disclosures, such as contingent liabilities, unrecognized contractual commitments and nonfinancial disclosures

c. Supporting information for items presented on the face of the financial statements

d. Summary of significant accounting policies

3. An entity is required to disclose all of the following nonfinancial information, except
a. A description of the nature of the entity's operations and the principal activities

b. The name of the parent entity and the ultimate parent

C. Domicile and legal form of the entity, the country of incorporation and address of the registered office.

d. Names and addresses of directors and officers.

4. Notes to financial statements

a. Are relatively unimportant facts

b. Document the source of financial statement facts

c. Are an integral part of financial statements

d. Are irrelevant and immaterial facts

QUESTION 11-9 Multiple choice (IFRS)

 1.The presentation of the notes to financial statemente in a systematic manner

a. Is voluntary

b. Is mandatory

C. Is mandatory, as far as practicable

d. Depends on the industry

2. The cross-reference between each line item in the financial statements and any related information disclosed in the
notes to financial statements
a. Is voluntary

b. Is mandatory

c. Depends on the industry

d. Is either voluntary or mandatory

3. Disclosure of information about key sources of estimation uncertainty

a. Is voluntary

b. Is mandatory

c. Is either voluntary or mandatory

d. Depends on the industry

4.Disclosure of information about judgments

a. Is voluntary

b. Is mandatory

c. Is either voluntary or mandatory

d. Depends on the industry

QUESTION 11-10 Multiple choice (AICPA Adapted)

1.What is the purpose of information presented in the notes to financial statements?
a. To provide disclosures required by generally accepted accounting principles

b. To correct improper presentation in the financial statements

C. To provide recognition of amounts not included in the financial statements

d. To present management response to auditor comments

2.The notes to financial statements should not be used to

a. Describe significant accounting policies.

b. Describe depreciation methods employed.

C. Destribe the principles and methods peculiar to the industry in which the entity operates.
 d. Correct an improper presentation in the financial statements.

3. An entity shall disclose in the summary of significant accounting policies

a. The measurement basis used in preparing the financial statements.

b. All the measurement bases irrespective of whether used by the entity.

c. The measurement basis used in preparing the financial statements and the accounting policies used.

d. All of the measurement bases and the accounting policy choices available to the entity irrespective of whether
used.

4. Which of the following information should be disclosed in the summary of significant accounting policies?
a. Refinancing of debt subsequent to the reporting period

b. Guarantee of indebtedness of others

c. Criteria for determining which investments are treated as cash equivalents

d. Adequacy of pension plan assets relative to vested benefits

5.The summary of nignificant accounting policies should disclose

a Proforma effect of retroactive application of an accounting change

b.Basis of profit recognition on long term construction contracts

C.Adequacy of pension plan assets in relation to vested benefits

d. Future lease payments

6. The summary of significant accounting policies should disclose

a. The composition of property, plant and equipment and the depreciation method used

b. The composition of property, plant and equipment only

C. The depreciation method used.only

d. Neither the composition of property, plant and equipment nor the depreciation method used

7. Which of the following should be included in the summary of significant accounting policies?
a.Property,plant and equipment recorded at cost with the depreciation computed principally by straight line
method

b. A business component was sold during the current year

c. Breakdown of sales attributable to business components

d. Future ordinary share dividends are expected to approximate sixty percent.of earnings

8. Which of the following is not a required disclosure of accounting policies?

a. The measurement basis used

b. Key management personnel involved in drafting the summary of significant accounting policies
 C. Disclosures required by Standards

d. The nature of operations and the policies that the users of the financial statements would expect to be disclosed

QUESTION 11-11 Multiple choice(IAA)

1.Notes to financial statements

a. Must be quantifiable.

b. Must qualify as an element.

c. Amplify items presented in the financial statements.

d. All of these are characteristics of notes to financial statements.

2.Which is incorrect regarding notes to financial statements?

a. IFRS requires specific note disclosures including disaggregation of inventories.

b. IFRS requires a maturity analysis for receivables.

c. IFRS requires that all notes should be clear, simple to understand and nontechnical in nature.

d. All of the choices are correct regarding notes to financial statements.

3. The disclosure of accounting policies is important to financial statement users in determining

a. Net income for the year.

b. Whether accounting policies are consistently applied from year to year.

c. The measurement of obsolete inventory.

d. Whether the working capital position is adequate.

4. The standard of adequate disclosure is best described by which of the following?

a. All information related to operating objectives must be disclosed in the financial statements.

b. Information about each account balance appearing in the financial statements is included in the notes.

c.Enough information should be disclosed in order that a prospective investor can make a wise decision.

d. Disclosure of any financial facts significant enough to influence the judgment of a primary user.

5. Application of the full disclosure principle

a. Is theoretically desirable but not practical because tha cost of complete disclosure exceeds the benefit.

b.is violated when important financial information in buried in the notes to financial statements.

c.Is demonstrated by the use of supplementary information presenting the effects of changing prices.

d.Requires that the financial statements should be consistent and comparable.

6. An inventory accounting policy that should be disclosed in a summary of significant accounting policies is

a. Composition of inventory into raw materials, work in process and finished goods

b. Major backlog of inventory orders

 c. Method used for pricing inventory

d. All of these should be disclosed in the summary of significant accounting policies

7. Significant accounting policies may not be

a. Selected on the basis of judgment

b. Selected from existing acceptable alternatives

c. Unusual or innovative in application

d. Omitted from financial statement disclosure

8. Which of the following is a method of disclosing relevant financial information?

a. Supporting schedule

b. Parenthetical explanation

C. Cross reference

d. All of these are methods of disclosure

QUESTION 14-11 Multiple choice(PAS 1)

1. The term comprehensive income

a. Must be reported on the face of the income statement.

b.Includes all changes in equity except those resuling from investments by and distributions to owners.

C.Is the net change in owners' equity for the period.

d. Is synonymous with the term net income.

2. It is the total of income less expenses, excluding the components of other comprehensive income.

a. Comprehensive income

b. Profit or loss

C. Accounting income

d. Economic income
3.This term comprises items of income and expense including reclassification adjustments, that are not recognized in profit or
loss as required or permitted by PFRS.

.a. Comprehensive income

b. Other comprehensive income

C. Profit or loss

d. Retained earnings
4. All of the following components of OCI should be reclassified to profit or loss, except

a. Gain or loss from translating the financial statements of a foreign operation

 b. Gain or loss on remeasuring debt investment at fair value through other comprehensive income

C. The effective portion of gain or loss on hedging instrument in a cash flow hedge

d. Gain or loss on remeasuring equity investment at fair value through other comprehensive income

5.Earnings

a. Include certain gains excluded from comprehensive income

b. Are the same as comprehensive income

C. Exclude certain gains and losses included in comprehensive income

d. Include certain gains and losses excluded from comprehensive income

6. Which of the following components of OCI should be reclassified to retained earnings?

a. Revaluation surplus

b. Remeasurements of defined benefit plan

C. Gain or loss attributable to credit risk of a financial liability designated at fair value through profit or los8

d. All of these components of OCI should be reclassified to retained earnings

7.The two-statement approach of presenting comprehensive income is preparing

a. A comparative statement of comprehensive income

b. A combined statement of comprehensive income and retained earnings

c. A combined income statement and a statement of changes in equity

d. A separate income statement and a separate statement of comprehensive income

8. Total comprehensive income for the period is presented

a. Showing separately the total amount attributable to owners of the parent and the noncontrolling interest.

b. Showing separately an analysis of expenses.by function.

C. Showing separately an analysis of expenses by nature.

d. Showing separately profit or loss and the total of other comprehensive income.

QUESTION 14-12 Multiple choice (IFRS)

1. An entity shall present an analysis of expenses using a classification based on
a. The nature of expenses.

b. The function of expenses.

C. Either the nature of expensès or the function of expenses, whichever provides information that is
reliable and more relevant.

d. Either the nature of expenses or the function of expenses, whichever the entity would prefer to present.
2. Separate line items in an analysis of expenses by nature include
 a.Purchases, transport costs, employee benefits, depreciation, extraordinary items.

b. Purchases, distribution costs, administrative costs, employee benefits, depreciation, taxes.

C.Depreciation, purchases, transport costs, employee benefits and advertising costs.

d. Cost of goods sold, administrative and distribution costs.

3. Separate line items in an analysis of expenses by function include
a. Purchases, transport costs, employee benefits, depreciation, extraordinary items

b. Purchases, distribution costs, administrative costs, employee benefits, depreciation, taxes

C. Depreciation, purchases, transport costs, employee benefits and advertising costs

d. Cost of goods sold, administrative and distribution costs

4. Under IFRS, the extraordinary item presentation

a. Has not changed from current rules.

b. Has been eliminated.

C. Has been eliminated from the net of tax presentation.

d. Has been eliminated from EPS reporting.

QUESTION 14-13 Multiple choice (AICPA Adapted)

1.What is the purpose of reporting comprehensive income?

a. To report transactions with owners

b. To report a measure of overall entity performance

To replace net income with a better measure

0 d. To combine income from continuing operations with income from discontinued operations

2.Which of the following changes during a period is not a component of other comprehensive income?

a. Remeasurement of defined benefit plan

b. Treasury share, at cost

c. Foreign currency translation adjustment

d. Unrealized gain on equity instrument measured at fair value through other comprehensive income

3.Other comprehensive income includes all of the following,except

a. Unrealized gain on forward contract designated as cash flow hedge

b. Loss from translating the financial statements of a foreign operation

c. Actuarial gain on defined benefit obligation

d. Dividend paid to shareholders

4. All of the following are a component of other comprehensive income, except

a. Foreign currency trańslation adjustment

b. Unrealized gain and loss on financial asset held for trading

c. Deferred loss on derivative financial instrument designated as cash flow hedge

d. Change in revaluation surplus

5. Which of the following is not an acceptable option of reporting other comprehensive income?

a. In a separate statement of comprehensive income

b. In a single statement of comprehensive income

c. In the notes

d. In a statement of changes in equity

6. When a complete set of financial statements is presented, comprehensive income and the components should

a. Appear as a part of discontinued operations.

b. Be reported net of related income tax effect, in total and individually.

C. Appear in a supplemental schedule in the notes.

d. Be displayed in a statement that has the same prominence as other financial statements.

7. Why is reclassification adjustment used when reporting other comprehensive income?

a. To reclassify an item of comprehensive income as another item of comprehensive income

b. To avoid double counting of items

c. To make net income equal comprehensive income

d. To adjust the income tax effect

8. Unusual and infrequent gain and loss should be reported

a. As an extraordinary item net of tax below income from continuing operations.

b. As an extraordinary item net of tax within income from continuing operations.

C. As a separate line item within income from continuing

operations. d. As a separate line item below income from continuing operations.

QUESTION 14-14 Multiple choice (IAA)

1. The limitations of the income statement include all of the following, except

a.Items that cannot be measured reliably are not reported.

b. Only actual amounts are reported in net income.

 C. Income measurement involves· judgment.

d. Income numbers are affected by the accounting method.

2. Which of the following would represent the least likely use of an income statement?

a. Use by customers to determine an entity's ability to provide needed goods and services

b.Use by labor unions to examine earnings closely as a basis for salary discussions

C. Use by government to formulate tax policy

d. Use by investors interested in financial position

3. The income statement would help in which of the following?

a.Evaluate liquidity

b. Evaluate solvency

c. Estimate amount, timing and uncertainty of future cash flows

d. Estimate future financial flexibility

4. Investors and creditors use income statement information for each of the following, except

a. To evaluate the future performance of an entity.

b.To provide a basis for predicting future performance.

c.To help assess the risk and uncertainty of achieving future cash flows.

d. Tọ evaluate the past performance of an entity.

5.The income statement would help in which of the following?

a. Assess capital structure

b. Determine financial position

C. Estimate future cash flows

d.Estimate need for additional financing

QUESTION 14-15 Multiple choice(IAA)

1.The income statement reveals

a. Resources and equity at a point in kime.

b. Resources and equity for a period of time.

C. Net earnings at a point in time.

d. Net earnings for a period of time.

2. Conceptually, net income is a measure of

a. Wealth

b.Change of wealth

C. Capital maintenance
 d. Cash flow

3. Which term cannot be used to describe a line item in the statement of comprehensive income?

a. Revenue

b. Gross income.

c. Income before tax

d. Extraordinary

4. Comprehensive income includes all,except

a. Revenue and gain

b. Expense and loss

C. Preference share dividend

d. Unrealized gain and loss on derivative contract

5.Comprehensive income includes all, except

a. Dividend revenue

b. Loss on disposal of asset

c. Investment by owners

d. Unrealized gain on trading investment

QUESTION 14-16 Multiple choice(IAA)

1.Income determination is arrived at by

a. Measuring the change in owners' equity

b. Identifying the change in the purchasing power

c. Using a transaction approach

d. Applying the value added concept

2.Net income equals

a. Assets minus liabilities

b. Revenue minus cost of goods sold

c.. Revenue minus expenses

d. Cash receipts minus cash payments

3.Comprehensive income always

 a. Is the same as net income.

b. Is greater than net income

c. Is less than net income.

d. Could be greater than or less than net income.

4.Gains are

a. Inflows from selling a product to a customer

b. Increases in equity resulting from transfers of assets to the entity from owners

c. Increases in equity from peripheral transactions

d. All of these can be considered gains

5.Change in equity from nonowner sources is

a. Comprehensive income

b. Revenue

c. Expense

d. Gáin or loss

QUESTION 14-17 Multiple choice (IFRS)

1. In the statement of changes in equity, the effect of a change in accounting policy is presented

a. Separately for each component of equity.

b. In aggregate for total equity.

C. In total for the amount attributable to owners of the parent and the noncontrolling interest.

d. Separately for the total aount attributable to owners of parent and the noncontrolling interest

2. In the statement of changes in equity, the effect of the correction of a prior period error is presented

a. Separately for each component of equity.

b. In aggregate for total equity.

c. In total for the amount attributable to owners of the parent and the noncontrolling interest.

d. Separately for the total amount attributable to owners of the parent and the noncontrolling interest.
3. Which does not appear in the statement of retained earnings?
a. Net loss

b. Prior period error

c. Preference share dividend

d. Other comprehensive income

4. Which appears first in a statement of retained earnings?
a. Net income

b. Prior period error

 c. Cash dividend

d. Share dividend
5. Corrections of errors in prior period are included in
a. Retained earnings

b. Other comprehensive income

c. Net income

d.Share premium
 QUESTION 9-18 Multiple choice (PAS 1)
1. A complete set of financial statements includes all, except.
a. Statement of financial position

b. Statement of changes in equity

C. Notes to financial statements

d. Environmental reports

2. What is the objective of financial statements?

a. To provide information about the financial position, financial performance and changes in
financial position useful to a wide range of users

b. To prepare a statement of financial position and statement of comprehensive income

c. To present relevant, reliable, comparable and understandable information

d. To prepare financial statements in accordance with all applicable standards

3. The primary responsibility for the preparation of the financial statements is reposed in
a. Management of the entity

b. Internal auditor

C. External auditor

d. Controller

4. The major financial statements include all,except

a. Statement of financial position

b. Income statement

C. Statement of cash flows

d. Statement of retained earnings

5. The major financial statements include all,except

a. Statement of financial position

b. Statement of changes in financial position

C. Statement of comprehensive income

d. Statement of changes in equity

QUESTION 9-19 Multiple choice (IFRS)

1. When an entity changed the reporting period longer or shorter than one year, an entity shall disclose all, except

a. Period covered by the financial statements.

b. The reason for using a longer or shorter period.

C. The fact that amounts presented in the financial statements are not entirely comparable.

d. The fact that similar entities in the geographical area in which the entity operates have done so.
2. Which is not a component of financial statements?

a. Statement of financial position

b. Statement of changes in equity

C. Report of board of directors

d. Notes to financial statements

3. Which is included in a complete set of financial statements?.

a. A statement of compliance with local legislation

b. A statement of changes in equity

c. Statements of financial position for the last five years

d. Value added statement

4. Which is included within the financial statements?

a. A statement of retained earnings

b. Accounting policies

c. An auditor's report

d. Board of directors' report

5.An entity shall clearly identify each financial statement and display all of the following, except

a. Name of the reporting entity.

b. Names of major shareholders of the entity.

c. The presentation currency.

d. Whether the financial statements cover the individual entity or a group of entities.