1.

These refer to the statements intended to meet the needs of users who are not in a position to require an entity to
prepare reports tailored to their particular information needs.
a. General purpose operational reports c. General purpose financial statements
b. Special purpose financial statements d. General purpose tax reports

2. PAS 1 provides that when an entity changes the end of its reporting period and presents financial statements for a
period longer or shorter than one year, an entity shall disclose the following, except
a. The 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 amounts presented in the financial statements are entirely comparable.

3. It is a term which means the process of reporting an asset, liability, income or expense on the face of the financial
statements of an entity.
a. Measurement c. Reporting
b. Recognition d. Presentation

4. The accounts in the statement of financial position use different measurement bases or financial attributes. Which of
the following statements pertaining such attribute is inaccurate?
a. Historical cost is the amount of cash or cash equivalent paid or the fair value of the consideration given to acquire
an asset at the time of acquisition and it is also known as “past sale exchange price”.
b. Current cost is the amount of cash and cash equivalent that would have to be paid if the same or an equivalent asset
was acquired currently and it is also known as “current purchase exchange price.”
c. Realizable value is the amount of cash or cash equivalent that could currently be obtained by selling the asset in an
orderly disposal and it is also known as “exit value”.
d. Present value is the discounted value of the future net cash inflows that the item is expected to generate in the
normal course of business and it is also known as “future exchange price.”

5. Users of financial statements need information in order to satisfy their different needs for information. Which of the
following statements concerning the financial statements users is accurate?
a. Employees are interested with the risk inherent in and return provided by their investments.
b. Customers have an interest in information about the continuance of an entity especially when they have a long-term
commitment with or are dependent on the entity.
c. Suppliers and other trade creditors are interested in information which enables them to determine whether their
loans and interest thereon will be paid when due.
d. Government and their agencies are interested to information about trends and recent developments in the prosperity
of the entity and the range of its activities.

6. Which of the following statements concerning the concept of going concern is inaccurate?
a. Going concern means that the accounting entity is viewed as continuing in operation indefinitely in the absence of
evidence to the contrary.
b. In making the assessment about the going concern assumption, management shall take into account all available
information about the future which is at least twelve months from the end of reporting period.
c. If the financial statements are not prepared on a going concern basis, such fact shall be disclosed together with the
measurement basis and the reason therefore.
d. As a general rule, assets are normally recorded at the market value estimated by management.

7. PAS 1 provides that the financial statements shall present fairly the financial position, financial performance and
cash flows of an entity. Which of the following statements is false?
a. Virtually, in all circumstances, fair presentation is achieved if the financial statements are prepared in accordance
with the PFRS.
b. An entity whose financial statements comply with PFRS shall make an explicit and unreserved statement of such
compliance in the notes.
c. Fair presentation is defined as the unfaithful representation of the effects of transactions and other events in
accordance with the definitions and recognition criteria for assets, liabilities, income and expenses paid down in the
framework.
d. An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting policies used or by
notes or explanatory information.
8. PAS 1 provides that in the extremely rare circumstances in which management concludes that compliance with a
requirement in a Standard or an Interpretation would be so misleading that it would conflict with the objective of
financial statements, the entity shall depart from that requirement provided the relevant regulatory framework
requires, or otherwise does not prohibit, such a departure. In such circumstances, it is incumbent upon the entity to
disclose the following, except
a. The management has concluded that the financial statements present fairly the entity’s financial position, financial
performance and cash flows.
b. That it has complied with applicable Standards and Interpretation, except that it has departed from a particular
requirement to achieve a fair presentation.
c. For each period presented, the financial impact of the departure on each item in the financial statements that would
have been reported in complying with the requirement.
d. The title of the Standard or Interpretation from which the entity has departed, the nature of departure, excluding the
treatment that the Standard or Interpretation that would require and the reason why that treatment would be so
misleading in the circumstances that it would conflict with the objective of financial statements, and the treatment
adopted.

9. Who has the primary responsibility for the preparation and presentation of financial statements?
a. External Auditor of the company c. Stockholders of the company
b. Securities and Exchange Commission d. Management of the company

10. Which of the following statements concerning materiality, aggregation and offsetting is correct?
a. An entity shall present aggregately each material class of similar items.
b. An entity shall present separately items of dissimilar nature or function unless they are immaterial.
c. Assets and liabilities, and income and expenses, when material shall be offset against each other.
d. The measurement of assets net of valuation allowance is not permitted because technically it is offsetting.

11. The following statements concerning comparable information and consistency of presentation are incorrect, except
a. Except when permitted or required otherwise by PFRS, an entity shall disclose comparative information in respect
of the previous period for all amounts reported in the current period’s financial statements.
b. The presentation and classification of financial statement items shall not be uniform from one accounting period to
the next.
c. A change in the presentation and classification is not allowed even it is required by another PFRS and even when a
significant change in the nature of the entity’s operations or a review of the financial statements will demonstrate a
more appropriate presentation and classification.
d. It is appropriate for an entity to leave its accounting policies unchanged when more relevant and reliable
alternatives exist.

12. PAS 1 requires that each component of the financial statements shall be clearly identified. In addition, the
following information shall be prominently displayed, except
a. The name of the reporting entity.
b. Whether the financial statements cover the individual entity or a group of entities.
c. The name of the major stockholder.
d. The level of rounding used in the amounts in the financial statements.

13. PAS 1 provides that a statement of financial position is a formal statement showing the three elements comprising
financial position, namely assets, liabilities and equity. This financial statement is analyzed by users of financial
statements to evaluate different factors. Which of the following statements is incorrect?
a. Information about financial structure is useful in predicting future borrowing needs and how profits and how profits
and cash flows will be distributed between creditors and owners.
b. Information about liquidity and solvency is useful in predicting the ability of the entity to comply with its future
financial commitments.
c. Capacity for adaptation is the financial flexibility of the entity to use its available cash for unexpected requirements
and investment opportunities.
d. Solvency is the ability of the entity to meet currently maturing obligations.

14. Which of the following statements concerning the presentation and classification of assets and liabilities in the
statement of financial position is correct?
a. For financial institutions, the current and noncurrent classification provides information that is reliable and relevant
than a current and noncurrent presentation.
b. PAS 1, paragraph 60, provides that an entity shall not present current assets and noncurrent assets separately in the
statement of financial position.
c. The separate classification of current and noncurrent assets and liabilities is a useful information when an entity
supplies goods or services within a clearly identified operating cycle.
d. PAS 1 requires all entity to use the current and noncurrent presentation and classification in the statement of
financial position.

15. The following are essential characteristics of an asset, except

a. The asset is controlled by the entity and a result of past transaction.
b. The asset is subject to depreciation.
c. The asset provides future economic benefits.
d. The cost of the asset can be measured reliably.

16. PAS 1, paragraph 66. provides that an entity shall classify an asset as current when, except
a. The asset is cash or cash equivalent which is restricted from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
b. The entity holds the asset primarily for the purpose of trading.
c. The entity expects to realize the asset within twelve months after reporting period.
d. The entity expects to realize the asset or intends to sell or consume it within the entity’s normal operating cycle.

17. Which of the following statements concerning operating cycle is incorrect?

a. It is the time between the acquisition of assets for processing and their realization in cash or cash equivalent.
b. It is significant as it is the basis of determining the proper classification of assets into either current or noncurrent.
c. All assets that are expected to be realized, sold or consumed within the normal operating cycle are current.
d. It is always longer than 12 months.

18. The following items are considered as noncurrent assets, except

a. Deferred tax asset c. Investment property
b. Noncurrent asset held for sale d. Biological asset

19. The following items are considered as current assets, except

a. Financial assets at fair value through profit or loss
b. Inventories
c. Cash set aside for the acquisition of Land within 12 months after reporting period
d. Trade and other receivables

20. The essential characteristics of liability are as follows, except

a. The liability is the present obligation of a particular entity.
b. The liability arises from past transaction.
c. The liability shall be settled using current asset.
d. The settlement of the liability requires an outflow of resources embodying economic benefits.

21. PAS 1, paragraph 69, provides that an entity shall classify a liability as current when, except
a. The entity expects to settle the liability within the entity’s normal operating cycle.
b. The entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting
period.
c. The entity holds the liability primarily for the purpose of trading.
d. The liability is due to be settled within twelve months after the reporting period.

22. PAS 1 provides that a liability which is due to be settled within the twelve months after the end of reporting period
is classified as current, even if:
I. The original term was for a period longer than twelve months.
II. An agreement to refinance or to reschedule payment on a long-term basis is completed on or before the end of
reporting period.
a. I only c. Both I and II
b. II only d. Neither I nor II

23. Which of the following liabilities shall be considered as noncurrent liability?

a. If certain conditions relating to the borrower’s financial situation are breached and the lender has agreed after the
end of reporting period and before the statements are authorized for issue, not to demand payment as a consequence of
the breach.
b. A current liability on which the lender has agreed on or before the end of reporting period to provide a grace period
ending at least twelve months after the end of reporting period.
c. A current liability which is refinanced between the end of reporting period and the date the financial statements are
authorized for issue.
d. Trade payables and accruals for employees due to be settled within the entity’s normal operating cycle.

24. The following are examples of current liabilities, except

a. Accounts payables
b. Estimated premium liability
c. Dividends payable
d. Deferred tax liability which will reverse within 12 months

25. What is working capital?

a. Total assets – total liabilities
b. Total assets – total equity
c. Total current assets – total current liabilities
d. Total current assets – total liabilities

26. Which of the following statements concerning the recognition of a provision, contingent liability and contingent
asset is correct?
a. Contingent asset shall be disclosed when it is reasonably possible to occur.
b. Contingent liability shall be disclosed when the possibility of occurrence is remote.
c. Provision shall be accrued when the range of outcome is probable.
d. Contingent liability shall not be disclosed when the outcome of event is reasonably possible.

27. It represents the cumulative balance of periodic net income or loss, dividend distributions, prior period errors,
changes in accounting policy and other capital adjustments.
a. Reserves c. Contributed capital
b. Retained earnings d. Total shareholder’s equity

28. PAS 1, paragraph 54, states that as a minimum, the face of the statement of financial position shall include line
item which present the following amounts, except
a. Noncontrolling interest c. Provisions
b. Biological asset d. Contingent liability

29. Which of the following items shall not be included in the Stockholder’s Equity Section of the Statement of
Financial Position?
a. Subscription receivable collectible beyond one year
b. Bonds Premium
c. Treasury Shares
d. Revaluation Surplus

30. The format of a statement of financial position is not specified in PAS 1. In practice, there are two customary
forms in presenting the statement of financial position. What form sets forth the three major sections of financial
position in a downward sequence of assets, liabilities and equity?
a. Simple form c. Report form
b. Account form d. Natural form

31. PAS 1, paragraph 112, provides that the notes to financial statements shall do the following, except
a. Present information about the financial position, financial performance and cash flows of an entity.
b. Present information about the basis of preparation of the financial statements and the specific accounting policies
used.
c. Disclose the information required by PFRS that is not presented in the financial statements.
d. Provide additional information which is not presented in the financial statements but is relevant to an understanding
of the financial statements.

32. PAS 1, paragraph 114, provides that an entity normally presents notes to financial statements in what order?
I. Summary of significant accounting policies used
II. Other disclosures, such contingent liabilities, unrecognized contractual commitments and nonfinancial disclosures.
III. Statement of compliance with PFRS
IV. Supporting computations
a. III – I – IV – II c. III – II – I – IV
b. III – IV – I – II d. III – IV – I – II

33. These are defined as the specific principles, methods, practices, rules, bases and conventions adopted by an entity
in preparing and presenting financial statements.
a. Accounting principles c. Accounting methods
b. Accounting estimates d. Accounting policies

34. The summary of significant accounting policies shall disclose the following:
I. The measurement basis used in preparing the financial statements.
II. The accounting policies used that are relevant to an understanding of the financial statements.
a. I only c. Both I and II
b. II only d. Neither I nor II

35. PAS 1, paragraphs 137 and 138 provide that an entity shall disclose the following, except
a. The amount of any cumulative preference dividends not recognized.
b. The amount of dividends declared after the financial statements are authorized for issue.
c. A description of the nature of the entity’s operations and its principal activities.
d. The name of the parent and the ultimate parent of the group.

36. It is the change in equity during a period resulting from transactions and other events, other than changes resulting
from transactions with owners in their capacity as owners.
a. Profit or Loss c. Retained Earnings
b. Other Comprehensive Income d. Comprehensive Income

37. It is the total of income less expenses, excluding the components of other comprehensive income.
a. Profit or Loss c. Net Assets
b. Retained Earnings d. Comprehensive Income

38. The following are the components of “other comprehensive income”, except
a. Realized holding gain or loss on available for sale securities
b. Gain or loss from translating the financial statements of a foreign operation
c. Change in revaluation surplus
d. Unrealized gain or loss from derivative contracts designated as cash flow hedge
e. Actuarial gain or loss on defined benefit plan in accordance with the full recognition approach.

39. PAS 1 provides that an entity shall present comprehensive income in what format?
a. Two Statements which comprise of income statement showing the components of profit or loss and a statement of
comprehensive income beginning with profit or loss as shown in the income statement plus or minus the components
of other comprehensive income.
b. Single statement of comprehensive income which is a combined statement showing the components of profit or loss
and components of other comprehensive income in a single statement.
c. Either A or B
d. Neither A nor B

40. It is useful in predicting the capacity of the entity to generate cash flows from its existing resources.
a. Net income or loss computed under cash basis of accounting.
b. Net income or loss computed under accrual basis of accounting.
c. Net income or loss computed under tax basis of accounting.
d. Net income or loss computed under law basis of accounting.

41. The financial performance of an entity is determined using two approaches. Which of the following statements
concerning such approaches are incorrect?
a. Transaction approach is the conventional or traditional preparation of income statement in conformity with PFRS
and it requires the determination of how much income was earned during the year and how much expenses were
incurred in earning the revenue.
b. Capital maintenance approach means that net income occurs only after the capital used from the beginning of the
period is maintained.
c. Neither A nor B
d. Both A and B

42. Under this capital maintenance concept, net income occurs when the financial or nominal amount of the net assets
at the end of the year exceeds the financial or nominal amount of the net assets at the beginning of the period,
excluding distributions to and contributions by owners during the period.
a. Physical capital concept c. Nominal capital concept
b. Financial capital concept d. Social capital concept

43. Under this capital maintenance concept, net income occurs when the physical productive capital of the entity at the
end of the year exceeds the physical productive capital at the beginning of the period, also after excluding
distributions to and contributions from owners during the period.
a. Physical capital concept c. Nominal capital concept
b. Financial capital concept d. Social capital concept

44. Which of the following combinations is proper?

a. Financial capital – current cost; physical capital – current cost
b. Financial capital – historical cost; physical capital – historical cost
c. Financial capital – current cost; physical capital – historical cost
d. Financial capital – historical cost; physical capital – current cost

45. The following are the sources of income, except

a. Sale of merchandise to customers
b. Rendering of services
c. Signing of contract
d. Use of entity resources
e. Disposal of resources other than products

46. The following statements are true concerning income, except

a. Gains represent other items that meet the definition of income and do not arise in the course of ordinary or regular
activities of an entity.
b. Income is defined as increase in economic benefit during the accounting period in the form of inflow or increase in
asset or decrease in liability that results in increase in equity including contribution from equity participants.
c. Revenue arises in the course of the ordinary regular activities of an entity.
d. Income encompasses both revenue and gains.

47. The following statement are true concerning income, except

a. Expense is defined as decrease in economic benefit during the accounting period in the form of outflow or decrease
in asset and increase in liability that results in decrease in equity, other than distribution to equity participants.
b. Distribution costs or selling expenses constitute costs which are directly related to selling, advertising and delivery
of goods to customers.
c. Administrative expenses constitute cost of administering the business.
d. An entity shall present any items of income and expense as extraordinary items, in the income statement or
statement of comprehensive income or in the notes.

48. Unusual and infrequent items of income and expense are presented as
a. Extraordinary items after tax
b. Component of other comprehensive income after tax
c. Component of income from continuing operations before tax
d. Component of income from discontinued operations before tax

49. As a minimum, the income statement and statement of comprehensive income shall include the line items which
present the following amounts, except
a. Extraordinary items after tax c. Income tax expense
b. Finance cost d. Share of income or loss of associate

50. Which of the following items shall be disclosed on the face of the income statement and statement of
comprehensive income as allocation of profit or loss for the period?
a. Profit or loss attributable to non-controlling interest and owners of the parent.
b. Total comprehensive income attributable to non-controlling interest and owners of the parent.
c. Both A and B
d. Neither A nor B

51. What form of presenting income statement is required by PAS 1?

a. Functional presentation or cost of sales method which classifies expenses according to their function as part of cost
of sales, distribution costs, administrative activities and other activities.
b. Natural presentation which aggregates expenses according to their nature and not allocated among the various
functions within the entity.
c. Neither A nor B
d. Either A or B

52. If an entity uses the functional presentation in preparing financial statements, which of the following information
shall be disclosed?
a. Depreciation, amortization and employee benefit costs
b. Cost of sales
c. Administrative expenses
d. Selling expenses