No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

THEORY OF ACCOUNTS PREWEEK LECTURE

By Rainiel C. Soriano, CPA, MBA

TOA and FAR Reviewer/iCARE Co-Founder

1. Which of the following is not considered as a cash equivalent?

a. A 3-year treasury note maturing on Jan. 31 of the next year purchased by the
entity on Dec. 1 of the current year.
b. A 3-year treasury note maturing on Jan. 31 of the next year purchased by the
entity on Oct. 1 of current year. 2021 oct 1 to jan 31---4 months CASH EQUIVALENT--kelan binili
-short term, 3 months, highly liquid
c. A 90-day T-bill. CE -bond investment, 3months
1. in must be debt investment
d. A 60-day money market placement. CE NOT included equity investment be no
maturity date
--this is 2 months bank reconciliation--- 2. must be acquired before 3 months maturity---regardless of

2. A proof of cash is --also called four column, beg bal, disbursement, receipt, end bal year of maturity ---" date of acquition"
Redemable preference share is considered liability
a. A proof of a company’s liquid position not equity of point of view of corporation

b. A proof of the existence of a cash deposit in bank

c. A reconciliation of the cash receipt and payment during the current year period,
together with the beginning and ending balances of cash
d. A reconciliation of the cash receipt and payment during the previous year period,
together with the beginning and ending balances of cash

3. Which of the following is included in cash and cash equivalents?

a. Cash in bond sinking fund --silent: non-current asset
b. Cash in plant expansion fund non-current asset
c. Investment in preference shares purchased 2 months before redemption date ---Redeemable

d. Investment in ordinary shares at FVPL Equity investment---- not CCE preference share

4. In order to be classified as a cash equivalent, an investment must have a maturity

period of:
a. Less than six months
b. Six to twelve months
c. Three to six months
d. Three months or less

5. All of the following can be classified as cash and cash equivalents, except:
a. Bank drafts --included
b. Loans notes held due for repayment in 90 days
c. Equity investments
d. Redeemable preference shares acquired due in 60 days

6. Which of the following is an advantage of using the net price method for recoding
cash discounts on credit sales? Net Price Method VS. Gross Price Method
a. Eases communication with customers about their balances.
b. It properly reflects current period sales revenue. if silent: GROSS unless
c. It implies recording of sales returns and allowances. no connection at discount PPE, PPE is always NET,
d. It requires less record-keeping efforts that the gross method bec in discount is wether
factored is actual selling take or not

7. When accounts receivable are factored without recourse, what amount does the
transferor credit? without recourse---without liability
mas accurante--NET METHOD
a. Accounts receivable assigned -collateral Cash Discount is immaterial,
b. Liability Dr
that why even not reflect it
c. Sales
Cr. A/R
okay pa rin
(Transferor ung owner nung notes]
d. Accounts receivable (factor means actual sales]

1|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

8. A non-interest bearing note receivable: Non-interest bearing=====FA pRINCIPAL---unspecified

= PRINCIPAL + INTEREST
(computed mo pa rin kasi)
a. Causes no interest revenue to be recorded Interest-----unspecified
Interest Bearing----------b. Includes a specific principal amount plus specific interest
c. Includes a specific principal amount but an unspecified interest amount
d. Includes an unspecified principal amount and an unspecified interest amount

9. Short-term non-interest bearing note receivable are usually recorded at their:

a. Present value
b. Net realizable value initially measurement of Short-term Non-interest bearing : Present Value

c. Discounted value Realistic rate---effective rate (yield rate)

d. Maturity value other term is Face Value ---use in interest computation
nominal rate bec unrealistic rate is not equal nr& ef

10. Assuming that the ideal measure of short-term receivable in the balance sheet is the
discounted value of the cash to be received in the future, failure to follow this
practice usually does not make the balance sheet misleading because
a. The amount of discount is not material discount is imaterial
b. Most receivables can be sold to a bank or factor
c. Most short-term receivables are not interest-bearing
d. The allowance for uncollectible accounts includes a discount element

11. Inventories are usually written down to net realizable value

a. Item by item
b. By classification PPE----per class category
c. By total
d. By segment

12. Inventory cost does not include PAS 2

a. Purchase price
b. Rebates ---normally this is trade discount
VAT----is not recorded, only taxes which is not recoverable
c. Import duties nonrefandable ang only included REMEMBER---dapat excluded or net
d. Freight ----FOB Shipping included only ---[buyer]
Where Seller---Inventory
13. When should goods in transit that were purchased f.o.b. destination be included in
the statement of financial position?
a. Accounts payable --BUYER---FOB SELLER
b. Inventory and accounts payable
c. Inventory
d. Not on the statement of financial position
hindi pa natin inventory kay seller pa yan@ point of destination an natin
cya pwedeng irecord

14. Which inventory costing most closely approximates current cost for ending
inventory?
a. FIFO
b. Average
c. LIFO
d. Specific identification

15. Agricultural produce growing on a bearer plant is

a. Classified as a biological asset growing bearer plant---PPE, property, PLANT, & equipment

b. Measured at the cost of production

c. Classified as inventory kung pinitas
d. All of the choices are correct regarding agricultural produce

16. On initial recognition, a nontrading equity investment may be irrevocably designated

a. At fair value through profit or loss
b. At amortized cot
c. At fair value through other comprehensive income
d. At cost Held for trading--- FVTPL

2|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

17. Which of the following is incorrect under the equity method?

a. The investment is initially recorded at cost.
b. The investment balance is increased by the investor’s share in the investee’s
profit.
c. The investor’s share in the investee’s profit is recognized as income of the
investor.
d. Dividend received from the investee is recognized as dividend income FALSE , deduction
Bec its return of capital kaya binabawas
18. What is the treatment of premium or discount on trading bond investment? we dont AMORTIZED
a. As part of the cost of the bond investment until the investment is sold.
b. As part of the cost of the bond investment and amortized over 5 years.
c. As expense or revenue in the period the bond is purchased.
d. As part of the cost of the bond investment and amortized over the remaining llife
of the bonds.

19. XYZ Company did not amortize the discount on its trading bond investment. What
effect would this have on the carrying value of the investment and on net income,
respectively?
a. No effect, no effect WE DONT AMORTIZED
b. Understate, overstate
c. Overstate, overstate
d. Understate, understate

20. An investor purchased a bond classified as long-term between the interest dates at a
premium. At purchase date, the carrying value of the bond is CA is less than
a. More than the cash paid to the seller
Dr.Cash
b. More than the face value of the bond bec have + premium Dr.
c. Less than the face value of the bond ---for discount CR. Bonds
d. Equal to the cash paid to the seller Premium

21. Gain or loss on disposal of debt securities classified as investment at FVOCI shall
be recognized in
Debt securities----ALWAYS-----p/l
a. Profit or loss Equity---gain or loss RE
OCI -items
CUAGU
b. A or C C
c. Other comprehensive income U
d. Balance sheet SHE A
G
O
22. Which of the following is true with regards to the accrued interest on bonds payable
that are sold between interest dates?
a. The accrued interest is computed using the effect rate.
b. The accrued interest will be paid to the seller when the bonds mature.
c. The accrued interest is extra income to the buyer and treated as bond issue cost
of the buyer.
d. The accrued interest is added to the issue price of the bond to determine the total
cash proceeds from bond issuance.

23. Gains or losses on sale of Investment at FVOCI are recognized

a. In profit or loss whether debt or equity securities.
b. In profit or loss when debt securities only.
c. In other comprehensive income whether debt or equity securities.
d. In profit or loss when equity securities only.

3|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

24. Assume an investor purchases bonds at a premium the bonds are to be held as a
long-term investment which of the following statement is true regarding the amount
basis:
CARRYING AMOUNTof bond interest revenue to be reported over life of the bonds?
a. The periodic amount of bond interest revenue will always be above the periodic
amount of cash received for interest ---this is for discount
b. The pattern of the periodic amount of bond interest revenue is an increasing
amount ---DISCOUNT
c. The periodic amount of bond interest revenue will always be equal to the periodic
amount of cash received ---INTEREST INCOME BECOME LOWER
d. The periodic amount of bond interest revenue will always be less than the
periodic amount of cash received

25. If a bond investment is purchased between interest payment dates, the buyer should
pay, in addition to the purchase price of the bonds, the amount of accrued interest
computed
a. From the date of acquisition to the nearest interest payment date.
b. From the last interest payment date to the date of acquisition.
c. From the last interest payment date to the next nearest payment date.
d. None of the above.

26. Subsequent to initial recognition, the investment property shall be measured using
a. Fair value model or revaluation model
b. Cost model or fair value model
c. Fair value through profit or loss
d. Cost model of revaluation model ---FOR PPE

1.
27. Which of the following will most likely result to reclassification?
a. An entity decided to dispose of an investment property without development.
b. An entity begins to redevelop an existing investment property for continued future
use as investment property.
c. Commencement of development with a view to sale.
d. All of the above.

28. Which of the following would not be reported as investment property?

a. Real estate held for undetermined future use. Real estate
b. Property held by the entity and leaded out under one or more operating lease.
c. Property owned by the entity and leased out under one or more operating lease.
d. Property owned by the entity and leased out to another entity under a finance
lease.

29. A gain or loss arising from a change in the fair value of investment property shall
a. Be recognized in the profit or loss for the period in which it arises.
b. Be recognized directly to equity in the period in which it arises.
c. Be recognized as an adjustment to retained earnings at the beginning of the
year.
d. Not be recognized in the accounts.

30. Transfers from investment property to property, plant and equipment are appropriate
a. When there is change of use.
b. Based on the entity’s discretion.
c. Only when the entity adopt
d. The entity can never transfer property into another classification on the balance
sheet once it is classified as investment property.

31. Interest revenue earned on specific borrowing for qualifying asset

a. Reduces the cost of the qualifying asset
b. Reduces interest expense reported in the income statement
c. Increases equity
d. Must be credited to interest income

4|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

32. A government grant that becomes repayable shall be accounted for as

a. Change in accounting estimate ---treated current and prospectively----LOOKING FORWARD KA LANG
b. Change in accounting policy
c. Both change in accounting estimate and change in accounting policy
d. Neither change in accounting estimate and change in accounting policy

33. An entity recently moved to a new building. The old building is being actively
marketed for sale and the entity expects to complete the sale in four months. Which
of the following statements is incorrect regarding the old building?
a. It will be reclassified as an asset held for sale. IF NCA---reclassify held it sale

b. It will be classified as a current asset. then decide sale-IFRS 5 will be

used
c. It will be depreciated.
d. It will be measured at lower of carrying amount and fair value less cost of
disposal.

34. Which of the following is not relevant in determining the value in use?
a. Time value of money
b. Expected future cash flows we getting the present value
considered in the value use
c. Variation in the amount and timing of cash flow - TMV
d. The carrying amount of the asset - Expeected Future cash flows
- Valuation cash flow

35. An entity uses the activity method for computing depreciation on its only plant asset,
factory machinery. The credit to accumulated depreciation from period to period will
a. Be constant
b. Vary with sales revenue
c. Vary with unit sales
d. Vary with production

36. Which of the following characteristics do intangible assets posses? like PPE exempt being physical existence
a. Physical existence
b. Long-lived
c. Claim to a specific amount of cash in the future
d. Held for resale

37. Which of the following could not be sold by an entity to raise cash for a capital
project?
a. Patent
b. Copyright
Goodwill is unandentifiable asset
c. Goodwill
d. Trade name

38. An intangible asset shall be recognized if, and only if it is probable that the expected
future economic benefits that are attributable to the asset will flow to the entity and
the cost of the asset can be measured reliably. The probability recognition criterion
is always considered to be satisfied for intangible assets acquired
a. Separately
b. Either A or D
c. Neither A nor D
d. In business combination

39. Which statement is correct regarding initial recognition of research and development
costs?
a. Research costs may be capitalized.
b. All development costs should be capitalized.
c. If an entity cannot distinguish the research phase of an internal project to create
an intangible asset from the development phase, the entity treats the expenditure
for that project as if it were incurred in the development phase only. FALSE
d. A research and development project acquired in a business combination is
recognized as an asset.
acquired in business com----recognized an asset

5|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

40. Under PAS 38, intangible assets should be carried at we amortized---intangible asset
a. Cost less accumulated depreciation
b. Revalued amount less accumulated depreciation
c. Cost plus a notional increase in fair value since the intangible asset is acquired
d. Cost less accumulated amortization and/or accumulated impairment

41. Prior to the current financial year end, Four Season Co. has received a claim of
P100,000 from a supplier for providing poor quality goods which have damaged the
supplier’s plant and equipment. Four Season’s lawyer have stated that there is a
20% chance that Four Season will successfully defend the claim. Which of the
following is the correct accounting treatment for the claim in the financial statements
for the current year? this is provision [only 20%]we recognized liability measureable & ---------not contingent liability is 100%

a. Four Season should neither provide for nor disclose the claim.
b. Four Season should disclose a contingent liability of P100,000.
c. Four Season should provide for the expected cost of the claim of P100,000.
d. Four Season should provide for the expected cost of the claim of P20,000.

42. In accordance with the requirements of PAS 37 Provisions, Contingent Liabilities

and Contingent Assets, where measurement uncertainty exists, which one of the
following methods is not an appropriate valuation for a provision based on
accounting standards?
a. The mid-point of a range of equally likely outcomes of expenditure.
b. No provision should be recognized where measurement uncertainly exists.
c. The minimum amount expected to represent a best estimate, where the other
option is omission.
d. The most likely amount expected to represent a best estimate, where there is a
single obligation.

43. Which of the following is the correct definition of a provision?

a. Possible obligation arising from past events
b. A liability which cannot be easily measured
c. A liability of uncertain timing or amount
d. An obligation to transfer funds to an entity

44. A provision shall be recognized as a liability under which of the following conditions?
a. The entity has a present obligation, legal or constructive, as a result of a past
event.
b. It is probable that an outflow of resources embodying economic benefits would
be required to settle the obligation
c. The amount of the obligation can be measured reliably.
d. All of these are required conditions.

45. Provisions are accrued because the likelihood of an unfavorable outcome is

a. Virtually certain
b. Greater than 50%
c. At least 75%
d. Possible

46. A bond convertible by the holder into a fixed number of ordinary shares of the entity
is
a. A compound financial instrument have both liability & equity component---in allocating its PRESENT VALUE OF LIABILITY
b. A derivative financial instrument EQUITY is residual value

c. A primary financial instrument

d. An equity

6|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

47. What is the principal of accounting for a compound financial instrument?

a. The issuer shall classify a compound instrument as either liability or equity.
b. The issuer shall classify the liability and equity components of a compound
instrument separately as liability or equity instrument. allocate: liab--PV; Equity--residual
c. The issuer shall classify a compound financial instrument as liability in its entirely
until converted into equity.
d. The issuer shall classify a compound instrument liability in its entirety.

48. How are the proceeds from issuing a compound instrument allocated between the
liability and equity components?
a. First, the liability component is measured at fair value, and then the remainder of
the proceeds is allocated to the equity component.
b. The proceeds are allocated to the liability and equity based on relative fair value.
c. The proceeds are allocated to the liability and equity based on carrying amount.
d. The proceeds are not allocated because the compound instrument is accounted
for either as liability or equity.

49. Proceeds from an issue of debt securities with share warrants should not be
allocated between debt and equity features when considered compound pa rin
a. The fair value of the warrants is not readily available.
b. Exercise of the warrants within the next few fiscal periods seems remote.
c. The warrants issued with the debt are nondetachable.
d. Proceeds should be allocated between debt and equity for all of these.

50. The proceeds for the sale of a bond with be equal to

a. The face amount of the bond.
b. The present value of the face amount of the bond plus the present value of the
interest payment to be made during the life of the bond.
c. The face amount of the bond plus the present value of the interest payments.
d. The sum of the face amount of the bond and the periodic interest payments.

51. A discount on note payable is charged to interest expense

a. Equally over the life of the note
b. Using the effective interest method
c. Only in the year the note issued
d. Only in the year the note matures inaamortized bec THE ONLY SOLE is effective interest method, if wala effective rate
dun ka lang gagamit ng straight line method

52. Note disclosures for long-term debt generally include all of the following, except
a. Assets pledged as security
b. Restrictions imposed by the creditors
c. Call provisions and conversion privileges
d. Names of specific creditors should not disclosed

53. The discount on note payable should be reported as

a. Addition to the face amount of the note
b. Deferred credit separate from the note
c. Deferred charge separate from the note
d. Direct deduction from the face amount of the note

54. An entity borrowed money from a bank to build a building. The long term note signed
by the entity is secured by a mortgage that pledges title to the building as security for
the loan. The entity is to pay the bank a certain amount each year for 10 years to
repay the loan. Which of the following relationship can be expected to apply to the
CANNOT REPORT situation?
a. The balance of mortgage payable at given date will be reported as noncurrent.
ALL---HAVE CURRENT
PORTION THEN
b. The balance of mortgage payable will remain a constant amount over the 10-year
NON CURRENT PORTION
period.
c. The amount of interest expense will decrease each period the loan outstanding,
while the portion of the annual payment applied to the loan principal will increase
each period.
d. The amount of interest expense will remain constant over the 10-year period.
PABAYAS UNG PRINCIPAL,

7|P a g e mortgage payable is still liability RSORIANO/JMAGLINAO

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
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Telephone : (043) 723 8412
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55. A troubled debt restructuring will generally result in a

a. Loss by both the debtor and the creditor trouble debt restructuring debtor experience difficulty

b. Loss by the debtor and a gain by the creditor

in payment

c. Gain by both the debtor and the creditor

d. Gain by the debtor and a loss by the creditor

56. Which of the following is a characteristic of a corporation?

a. Salaries given to owners is a mean of distributing income dividend is way of distribution

b. Separate legal entity

c. Unlimited liability limited liability
d. Limited life unlimited life---hindi na nagdedeclare at the year50th

57. Total Shareholders’ equity represents

a. A claim to specific assets contributed by the owners. A = L+ E
b. The maximum amount that can be borrowed by the entity.
c. A claim against a portion of the total assets of an entity.
d. Only the amount of earnings that have been retained in the business.

58. Equity is generally classified into two major categories, namely

a. Contributed capital and appropriated capital
b. Retained Earnings and unearned capital
c. Appropriated capital and retained earnings Contributed -sc, sp, sub -subcrip rec.,
d. Earned capital and contributed capital vs.
legal
Retained capital----Earned
59. The term residual interest means that ordinary shareholders all is correct but best is "c"
a. are entitled to a dividend every year in which the entity earns a profit
b. have the right to specific assets of the entity
c. bear the ultimate risks and uncertainties and receive the benefits of ownership
d. can negotiate individual contracts on behalf of the entity

60. Which of the following will not require journal entry under the memo entry method?
a. Authorization of shares to be issued
b. Shares issued
c. Subscription received
d. Re-acquisition of previously issued shares

61. Share options as an equity-settled share-based compensation are ---given to employess---add'l compensation
a. Rights or privileges granted to existing shareholders only no
b. Considered as additional compensation to the officers and employees
c. Privileges granted to company employees to acquire stock of other entities
d. Usually offered at an option price higher than the market value of the option
shares wala mageexercise kasi mahal

62. Share options are what type of share-based payment transaction?

a. Asset-settled share based payment transaction equity settled---

b. Cash-settled share-based payment transactions or cash settled

c. Equity-settled share-based payment transaction

d. Liability-settled share-based payment transactions

63. Compensation expense resulting from a share option plan is generally have vesting period
a. Recognized in the period of exercise.
b. Recognized in the period of the grant.
c. Allocated to the periods benefited by the employee’s required service. this is mean vested period
d. Allocated over the periods of the employee’s service life to retirement. false

8|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
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Telephone : (043) 723 8412
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64. The date of which total compensation expense is computed in a share option plan is
the compute on the date of grant-------we fair value on grant date----options vest

a. Date of grant
b. Date when the market price coincides with the option price
c. Date of exercise
d. Date when the market price exceeds the option price

65. Which statement in relation to share options granted to employees is true?

a. The services received shall be measured at the fair value of the employee’s
services. pwede
b. Fair value shall be measured at the date the options vest. pwede best answer
c. Fair value shall be measured at the date of exercise. bec is date of grant
d. None of these.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

66. Current tax expense plus deferred tax expense is

a. A meaningless sum Current tax expense = taxable income x tax rate
b. Tax deductible expense
c. Income tax expense
d. All of these

67. These are items of revenue and expenses that are included in either accounting
income or taxable income but will never be included in the other.
a. Permanent differences
taxable
b. Timing differences pareho
c. Temporary differences different is either permanent vs. temporary
d. Exchange differences

68. Under PAS 12, it is the amount attributable to the asset or liability (recognized) for
tax purposes.
a. Tax savings
b. Tax shield
c. Tax base
d. Tax benefits

69. In computing the change in deferred tax accounts, which tax rates are used?
a. Current tax rates ---current enacted tax rate
b. Enacted future tax rates
c. Past years’ tax rates
d. Estimated future tax rates

70. What is a temporary difference that would result in a deferred tax liability? temporary
a. Operating loss carryforward ---deductible(future) temporary difference deductible vs temporary
b. Subscription received in advance ---deductible(future) temporary difference >>Deductible
>>Tempory
c. Accrual of warranty expense
d. Excess of tax depreciation over accounting depreciation

71. Service cost excludes

a. Current service cost
b. Gain or loss on settlement
c. Past service cost
d. Actuarial gains and losses ----remeasurement part

9|P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
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Telephone : (043) 723 8412
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72. Current service cost is

a. The increase in the present value of the defined benefit obligation resulting from
employee service in the current period.
b. The change in the present value of the defined benefit obligation for employee
service in prior periods. ---past service cost
c. The difference between the present value of the defined benefit obligation being
settled, as determined on the date of settlement and the settlement price,
including any plan assets transferred and any payments made directly by the
entity in connection with the settlement. gain or loss

d. The change during the period in the net defined benefit liability or asset that
arises from the passage of time. actaurial

73. Past service cost arises from

a. A plan amendment (the introduction or withdrawal of, or changes to, a defined
benefit plan) actuarial
b. A curtailment (a significant reduction by the entity in the number of employees
covered by a plan) actuarial
c. Either A or B
d. Neither A nor B

74. Actuarial gains or losses are changes in the present value of the defined benefit
obligations resulting from:
a. Experience adjustment (the effect of differences between the previous actuarial
assumptions and what has actually occurred).
b. The effects of changes in actuarial assumptions
c. Both A and B
d. Neither A nor B

75. In accordance with the revised PAS 19, which of the following is reported in profit or
loss?
a. Actual loss on defined benefit obligation WHAT IS revised PAS 19????

b. Interest on the effect of asset ceiling

c. Actual gain on plan assets
d. Gain or loss on routine settlements

76. Which of the following items will affect the profit or loss for the period?
a. Dividends paid on redeemable preference share -----Redeemable preference share- [ PAID ] -is a liability will incure
b. Remeasurement loss on defined benefit obligation --OCI interest expense
c. Cash dividend received on investment in associate
d. Cumulative effect on change in accounting policy N/A

77. 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. true
b. Use by labor unions to examine earnings closely as a basis for salary
discussions.
c. Use by government agencies to formulate tax and economic policy. ---not specifically
d. Use by investors interested in the financial position of the entity. -most likely

78. The occurrence that most likely would have no effect on net income is the
a. Sale in the current year of an office building contributed by a shareholder in prior
year. have gain & loss upon sale
b. Collection in the current year of a dividend from an investment. have dividend income
c. Correction of an error in the financial statements of prior period discovered be adjusted to RE
subsequent to their issuance.
d. Shares purchased deemed worthless in the current year.

10 | P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
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79. Revenue may result from must be from ordinary course of business ---primary operation
a. A decrease in an asset form primary operation
b. An increase in a liability from incidental transaction Income either revenue or gain
c. An increase in an asset from incidental transaction gain--- incidental transaction
d. A decrease in a liability from primary operation

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

a. Describe significant accounting policies. need
b. Describe depreciation methods employed. need Under Indirect method our starting point is

c. Describe the principles and methods peculiar to the industry. NET INCOME the we add back depreciation
(bec of tax purposes)
d. Correct an improper presentation in the financial statements.

basis on cash flow81. On the statement of cash flows in which the operating activities section is prepared
under the indirect method, depreciation is treated as an adjustment to reported net
-is the NET INCOME
you need to add / or
deduct earnings because depreciation
a. Is a direct inflow of cash from investing activities. Depreciation is Non-cash
all NON-CASH transaction
@ Net Income
b. Reduces reported net earnings and involves an inflow of cash. Depreciation is Non-cash
1. Depreciation- less
2. Loss on sale - add c. Reduces reported net earnings but does not involve an outflow of cash.
d. Is an Inflow of cash to a reserve account for replacement of assets.

82. The amortization of bond premium on long-term debt should be presented in a

statement of cash
amortization of premium--- flows (using indirect approach for operating activities) as a(n)
pertain to interest kaya a. Addition to net income under indirect method
b. Investing activity
included at Operating actv.
Net income
long term debt c. Deduction from net income less: Interest expense ---bec over stated ang net income need bawasan
-financing activity d. Financing activity from bond premium which is Interest paid > interest expense

83. A loss on the sale of machinery in the ordinary course of business should be
presented in a statement of cash flows (using indirect approach for operating
activities) as a(n) loss on sale is non-cash ---- pinababa yan ung net income kaya need to add back
a. Outflow of cash
b. Deduction from net income
c. Addition to net income
d. Inflow and outflow of cash

84. In a statement of cash flows in which the operating activities section is prepared
under the indirect method, a gain on the sale of an investment in available-for-sale
securities should be presented as a(n) gain on sale -is non cash need to deduct
a. Inflow and outflow of cash
b. Addition to net income
c. Outflow of cash
d. Deduction from net income

85. In a statement of cash flows, interest payments to lenders and other creditors should
be classified as cash outflows for general is operating is interest
a. Financing activities --this is only for alternative
b. Borrowing activities
c. Lending activities
d. Operating activities

86. According to the Conceptual Framework, the fundamental qualitative characteristic

of relevance includes
a. Predictive value and feedback value > enhance

b. Verifiability, neutrality, and representational faithfulness

>

c. Predictive value and confirmatory value

d. Comparability and timeliness

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87. Non-current asset should be measured at cost less depreciation rather than
enforced sales value. the concept applied in this statement is:
a. Going concern have historical assumption---under ppe it must recorded @ COST
b. Relevance
c. Comparability
d. Understandability

88. Accounting has been given various definition, which of the following is not one of
those definitions?
a. Accounting is a service activity. Its function is to provide quantitative information,
primarily financial in nature, about economic entities that is intended to be useful
in making economic decisions. true
b. Accounting is an art of recording, classifying, and summarizing in a significant
manner and in terms of money, transactions and events which are, in part of at
least, of a financial character and interpreting the result thereof true
c. Accounting is a systematic process of objectively obtaining and evaluating events
to ascertain the degree of correspondence between these assertions and
established criteria and communicating the results to interested users. false-audit
d. Accounting is the process of identifying, measuring, and communicating
economic information to permit informed judgment and decisions by users of
information. true

89. What is the logical order of the following steps in the accounting cycle?
a. Post the journal entries to the ledger accounts, prepare a worksheet, and then
make a trial balance. pwede

b. Journalize the closing entries entries, post the closing entries, and then make
a postclosing trial balance. pwede

c. Prepare the income statement, prepare the statement of financial position and
then prepare worksheet. worksheet mo na

d. Post the closing entries, take a postclosing trial balance, then journalize the
closing entries.

90. The accounting equation must remain in balance

a. Throughout each step in the accounting cycle
b. Only at the time the trial balance is prepared
c. Only when journal entries are recorded
d. Only when formal financial statements are prepared

91. Which obligations are classified as current even if these are due to be settled after
more than twelve months from the end of the reporting period?
a. Trade payables and accruals for employees and other operating cost ---always current
b. Current portion of interest-bearing liabilities non-current
c. Bank overdrafts ---if settled nagiging non-current asset
d. Dividend payable ---if settled nagiging non-current asset

92. Which of the following accounts would be included in a post-closing trial balance?
a. Gain on reversal of write down of inventories.
on the spot

b. Gain on retirement of treasury shares. --this is credit @ share premium closing trial balance
- we eliminate nominal account
c. Loss on factoring of receivables. on th spot
means appear in RE

d. Dividend paid on preference share with mandatory redemption

93. Which of the following should be classified as current asset?

a. Investment property NON-CURRENT ASSET
b. Financial asset held for trading CURRENT
c. Property, plant and equipment NON-CURRENT ASSTE
d. Cash surrender value ????
Cash surrender value
- long term investment 3 yrs in arrow na

12 | P a g e RSORIANO/JMAGLINAO
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : icarecpareview@gmail.com

94. Which of the following would be classified as a non-current asset?

a. Goods which are in process of production for sale in the ordinary course of
business. INVENTORY

b. Debt and equity securities acquired principally for the purpose of generating a
profit from short-term fluctuations in price or dealer’s margin. CURRENT ASSET BEC TRADING
c. Cash funds that are set aside for payment of equipment to be delivered a month
after the reporting period. NON-CURRENT---SET ASIDE FUND
d. Amounts due from customers within a period of 12 to 18 months, extended within
the usual credit term of the enterprise. CURRENT---TRADE

95. SM Appliance store sold some of its televisions to customers on account during the
current period. When special journals are used, the entity enters the transaction in
the
a. Sales journal -----SALES -----on account
b. Cash receipts journal -------SALES--------on cash
c. General journal
d. Cash payment journal

Cash on Accrual:
---

Cash surrender value

- long term investment 3 yrs in arrow na

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