1. Entity A buys bananas and converts them into banana chips.

The conversion of bananas into

banana
chips is a (an)
a. Non-accountable event.
b. External event.
c. Non-reciprocal event.
d. Internal event.

2. Which of the following is considered valued by fact rather than by opinion?

a. Depreciation.
b. Cost of goods sold.
c. Discount on share capital.
d. Retained earnings.

3. Which of the following is not one of the several measurement based used in accounting?
a. Historical cost.
b. Fair value.
c. Present value.
d. All of these are used.

4. Entity A is owned by Mr. X and Ms. Y. Which of the following transactions does not violate
the separate entity concept and therefore is appropriately recorded in the accounting records of
Entity A?

a. Mr. X purchases groceries for his home consumption.

b. Mr. X gives Ms. Y chocolate and flowers on Valentine’s Day.
c. Ms. Y provides capital to Entity A.
d. Ms. Y provides capital to Entity B, another business entity.
5. Mr. A is assessing the ability of Entity A to generate future cash and cash equivalents. In
making the assessment, Mr. A uses not only the statement of cash flows but also the other
components of a complete set of financial statements. This is because of which of the following
concepts?

a. Going concern.
b. Time period.
c. Intercalation.
d. Articulation.

6. Entity A acquires a stapler. Instead of recognizing the cost of the stapler as an asset to be
subsequently depreciated, Entity A immediately charges it as expense. This is an application of
which of the following concepts?
a. Prudence.
b. Materiality.
c. Cost-benefit.
d. b and c.

7. What type of users’ needs is catered by general purpose financial statements?

a. Common needs.
b. Specific need.
c. a and b.
d. neither a nor b.
8. Which of the following is not among the four sectors in the practice of accountancy as
enumerated in R.A. 9298 also known as the “Philippine Accountancy Act of 2004”?

a. Practice in Commerce and Industry.

b. Practice in the Government.
c. Practice in Education/Academe.
d. Practice of Private Accountancy.

9. The Philippine Financial Reporting Standards (PFRSs) comprise:

I. Philippine Financial Reporting Standards
II. Philippine Accounting Standards
III. Interpretations.
IV. Accounting Practice Statements and Implementation Guidance
a. I, II and III
b. I, II, III and IV
c. I and II
d. I and III

10. Which of the following statements is incorrect regarding PFRSs?

a. The PFRSS are based on the IFRSs.
b. The financial reporting standards used in the Philippines are the same as those used globally.
c. The PFRSs have higher authority than the PASs and Interpretations.
d. The PFRSs are accompanied by guidance. The use of such guidance is sometimes mandatory