REVIEWER FOR CFAS

CHAPTERS 1-7: o Private Accounting

1. Law regulating practice of accountancy of the

Philippines
o RA 9298
2. Body authorized by law to promulgate rules and
regulations affecting the practice of accountancy
profession in the Philippines
o Board of Accountancy
3. The qualifications of the members of BOA include all of
the following, except:
o Must have any pecuniary interest, directly or
indirectly, in any school conferring an academic
degree necessary for admission to the practice
of accountancy
4. What are the 3 main areas in the practice of the
accountancy profession?
o Public Accounting, Private Accounting, and
Government Accounting
7. Area of the accountancy profession that encompasses
the process of analyzing, classifying, summarizing, and
communicating all transactions involving receipt and
disposition of government funds and property and
interpreting the results thereof:
o Government Accounting
8. The Continuing Professional Development is required
for:
o Both renewal of CPA License and accreditation
to practice the accountancy profession
9. Which statement is incorrect in relation to practice of
public accounting
o The Securities and Exchange Commission can
register any corporation organized for the
practice of public accounting
10. All of the following are represented in FRSC, except
o Department of Budget and Management

5. What is the primary service of CPAs in public practice?

o Auditing 11. The IASB was formed
o To develop a single set of high-quality IFRS

6. Accountants employed in entities in various capacity as

accounting staff, chief accountant or controller are 12. The IASB employs a “due process” which
engaged in
 o Enables interested parties to express their views
on issues under consideration
13. What is a possible danger if politics plays too big of a
role in developing IFRS
o Accounting standards are not truly generally
accepted
14. Financial accounting emphasizes reporting to
o Creditors and investors
15. Which statement is true regarding managerial
accounting and financial accounting
o Managerial accounting need not follow generally
accepted accounting principles while financial
accounting must follow GAAP
16. Which statement best describes GAAP
o The accounting principles have been developed
on the basis of such factors as usage and
practical necessity
17. What is the only underlying assumption mentioned in the
conceptual framework for financial reporting
o Going concern
18. Which statement best describes the term “going
concern”
o The ability of the entity to continue in operation
for the foreseeable future
19. Which of the following is not an implication of the going
concern assumption
o Amortizing research and development costs
over several periods is justifiable and
appropriate
20. The relatively stable economic political and social
environment supports
o Going concern
21. The financial statements of the business entity are
separate and distinct from the financial statements of the
owners
o Economic entity assumption
22. The economic entity assumption
o Is applicable to all forms of business
organizations
23. Which underlying assumption serves as the basis for
preparing financial statements at regular arbitrary or
artificial points in time
o Accounting period
24. Which is not an important characteristic of the financial
statements that accountants currently prepare
o The information in financial statements is
expressed in units of money adjusted for
changing purchasing power

25. The Concept of accounting entity is applicable
o Whenever accounting is involved
26. When a parent and subsidiary relationship exists
consolidated financial statements are prepared and
recognition of
o Economic entity
27. What is the accounting concept that justifies the usage
of accruals and deferrals
o Going concern
28. The conceptual framework is intended to establish
o Objectives and concepts for use in developing
standards of financial accounting and reporting
29. Which is not a purpose of the conceptual framework
o To provide specific guidelines for resolving
situations not covered by existing accounting
standards
30. In the conceptual framework for financial reporting, what
provides the why of accounting
o Objective of financial reporting
31. The Primary focus of financial reporting has been on
meeting the needs of which of the following groups
o Existing and potential investors, lenders and
other creditors
32. Which is an objective of financial reporting
o To provide information that is useful to those
making investing and credit decisions
33. “Assessing cash flow prospects” as an objective of
financial reporting is interpreted to mean
o Over the long-run, trends in revenue and
expenses are generally more meaningful than
trends and cash receipts and disbursements
34. What are qualitative characteristics of financial
statements
o Qualitative characteristics are the attributes that
make the information provided in financial
statements useful to users
35. The fundamental qualitative characteristics are
o Relevance and faithful representation
36. Accounting information is considered relevant when it
o Is capable of making a difference in a decision
37. The ingredients of relevant financial information are
o Predictive value and confirmatory value
38. Which of the following is the best description of faithful
representation in relation to financial information in
financial statements
o Freedom from material error
39. The ingredients of faithful representation are
o Completeness, neutrality and free from error
40. The financial accounting information is directed toward
the common needs of users and its independent of
presumptions about particular needs and desires of
specific users
o Neutrality
41. The enhancing qualitative characteristics of financial
information are
o Comparability, understandability, verifiability,
and timeliness
42. Financial information exhibits consistency when
o Accounting entities gives similar events the
same accounting treatment each period
43. When information about two different entities engaged
in the same industry has been prepared and presented
in similar manner, the information exhibits the enhancing
qualitative characteristic of
o Comparability
44. The characteristic that is demonstrated when a high
degree of consensus can be secured among
independent measurers using the same measurement
method is
o Verifiability
45. An item would be considered material when
o The omission or misstatement of the amount
would make a difference to the users’ decisions
46. Conservatism is best described as selecting an
accounting alternative that
o Has the least favorable impact on equity
47. It is an increase in economic benefit during the
accounting period related to an increase in asset or
decrease in liability that results in increase and equity
other than contribution from owners
o Income
48. An asset is recognized when
o It is probable that future economic benefit will
flow to the entity and the cost or value of the
asset can be measured reliably
49. Which statement describes the revenue recognition
principle
o It is probable that future economic benefit will
flow to the entity and the amount can be
measured reliably
 50. which of the following is not an accepted basis for 56. Current and noncurrent presentation of assets and
recognition of revenue liabilities provides useful information when the entity
o Upon signing of contract o Supplies goods or services within a clearly
identifiable operating cycle

CHAPTERS 8-10:
57. In the Philippines, the common practice is to present in
the statement of financial position
51. The statement of financial position is useful for all of the o Current assets before non current assets,
following, except current liabilities before non-current liabilities
o To analyze cash inflows and outflows for the and equity after liabilities
period

58. When an entity breaches under a long term loan

52. Which criticism is not normally aimed at a statement of
financial position
o The extensive use of separate classification
53. Which is a limitation of the statement of financial position
o All of these are a limitation of the statement of
financial position
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
o 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

59. Assets to be sold, consumed or realized as a part of the

54. The operating cycle of an entity normal Operating cycle are
o Is the time between the acquisition of materials o Current assets
entering into a process and their realization in
cash
60. In which section of the statement of financial position
should cash that is restricted for the settlement of a
55. An entity shall classify a liability as current when under liability due 18 months after the reporting period be
all of the following conditions except presented
o The entity has an unconditional right to defer o Noncurrent assets
settlement of the liability for at least 12 months
after the reporting period
61. An entity has a loan due for repayment in six months
time but the entity has the option to refinance for
repayment 2 years later. The entity plans to refinance
this loan. In which section of the statement of financial
position should this loan be presented
o Non-current liabilities
62. Which of the following is not required to be presented as
minimum information on the face of the statement of
financial position
o Contingent Liability
63. Which statement about the statement of financial
position is not true?
o A revaluation surplus on a noncurrent asset in
the current year should be recognized in the
income statement
64. Which is an essential characteristic of an asset
o An asset provides future benefits
65. Working capital is
o Current assets less current liabilities
66. The operating cycle concept
o Permits some assets to be classified as current
even though these are more than one year
removed from becoming cash
67. Which should be classified as current asset
o Trade installment accounts receivable normally
collectible in 18 months
68. Current assets should never include
o Goodwill arising in a business combination
69. Which of the following is not a non current investment
o Franchise
70. What is the most useful information in predicting future
cash flows
o Current earnings based on accrual accounting
71. The financial statements prepared under GAAP
o Are not highly precise because estimate and
judgment must be made
72. Which should be classified as a non-current asset
o Plant expansion fund
73. The essential characteristics of an asset include all of
the following except
o The asset is tangible
74. It is the total of income less expenses, including the
components of other comprehensive income
 o Profit or loss
75. Earnings
o Exclude certain gains and losses included in
comprehensive income
76. Which of the following components of OCI should be
reclassified to retained earnings
o All of these components of OCI should be
reclassified to retained earnings
77. Total comprehensive income for the period is presented
o Showing separately the total amount attributable
to owners of the parent and the non controlling
interest
78. Separate line items In an analysis of expenses by nature
include
o Depreciation, purchases, transport costs,
employee benefits and advertising costs.
79. Under IFRS, the extraordinary item presentation
o Has been eliminated
80. Which of the following changes during a period is not a
component of other comprehensive income?
o Treasury share, at cost
IA THEORIES CHAPTERS 1-3:
1. To be reported as cash, an item must be unrestricted in
use
o True
2. Four-year BSP treasury bill purchased four months
before the maturity date may be classified as cash
equivalents
o False
3. Preference shares without specified redemption date
can be classified as cash equivalents
o False
4. If the term is more than three months but within one
year, investment of excess cash in time deposit is
classified as short-term investment and presented
separately as current asset
o True
5. Cash in foreign currency should be translated to
Philippine currency using average exchange rate
o False
6. Tax fund set aside in current operations is classified
separately as cash and cash equivalents
o False
7. A cash fund set aside for the acquisition of delivery
equipment should be classified as noncurrent asset
 o True
8. A bank overdraft is classified as noncurrent liability and
should not be offset against other bank accounts with
debit balances
o False
9. If the deposit is legally restricted because of a formal
compensating balance agreement, the compensating
balance is classified separately as current asset if the
related loan is short-term
o True
10. Postdated checks received from the customer at the end
of the accounting period cannot be classified as cash
and cash equivalents
o True
11. Fluctuating fund system is a system of control of cash
which requires that all cash receipts should be deposited
intact and all cash disbursements be made by means of
check
o False
12. Under the fluctuating fund system, if payment of
expense is made out of the petty cash fund, no formal
journal entry is made
o False
13. A bank statement is a device which brings into
agreement the cash balance per book and cash balance
per bank
o False
14. Debit memos refer to items already debited by the bank
to the account of the depositor, but not yet recorded in
the cash ledger of the depositor
o True
15. Deposit in transit is a bank reconciling item
o True
16. Which of the following should not be considered cash
o IOUs
17. What is a compensating balance
o Minimum deposit required to be maintained in
connection with a borrowing arrangement
18. All of the following may be included in “cash” except
o Money market instruments
19. Which of the following is not considered a cash
equivalent
o A three-year treasury note maturing on Jan 31 of
the next year purchased by the entity on October
16 of current year
20. Petty cash fund is and to identify bank errors. Adjustments on the part of
o Money kept on hand for making minor the depositor should be recorded for
disbursements of coin and currency rather than o All items except bank errors, outstanding
by writing checks checks, and DIT

21. What is the major purpose of an imprest petty cash fund 27. Bank statements provide information about all of the
o To effectively control cash disbursements following, except
o Errors made by the depositor

22. Which statement in relation to an imprest petty cash is

incorrect 28. Essentially, a proof of cash
o The petty cash account is debited when the fund o Is a to-date bank reconciliation
is replenished

29. Which of the following would be deducted to the balance

23. Which of the following items must be added to the cash per bank statement to arrive at the cash balance per
balance per ledger in preparing a bank reconciliation ledger
which ends with adjusted cash balance o Note collected by bank on behalf of depositor
o Interest income credited by the bank

30. Which of the following would be deducted to the cash

24. Which of the following must be deducted from the bank balance per ledger to arrive at balance per bank
statement in preparing a bank recon which ends with statement
adjusted cash balance o DIT
o Outstanding checks
CHAPTERS 4-7:
31. Notes receivable are open accounts arising from sale of
25. If the balance shown in the bank statement is less than goods and services in the ordinary course of business
the correct cash balance and neither the entity nor the and not supported by promissory notes
bank has made any errors, there must be o False
o Deposits in transit

32. Trade receivables which are expected to be realized and

26. Bank recons are normally prepared on a monthly basis cash within the normal operating cycle or one year,
to identify adjustments needed in the depositor’s records whichever is longer, are classified as current assets
 o True 39. Trade discount is a contra sales account
o False

33. Non trade receivables which are expected to be realized

in cash within one year or normal operating cycle, are 40. Under gross sales method, sales discount forfeited can
classified as current be used if the customer paid beyond the discount period
o False o False

34. Unless collectable currently, subscription receivable 41. Generally accepted accounting principles require the
should be shown as a deduction from subscribed share use of the direct write-off method in accounting for bad
capital debts because it conforms with the matching principle
o True o False

35. Creditors’ accounts with debit balances are classified as 42. Under the allowance method of accounting for bad
current assets debts, accounts written of decrease the accounts
o True receivable and allowance for doubtful accounts balance
o True

36. Accounts receivable shall be recognized initially at

discounted value 43. The allowance for doubtful accounts normally has a
o False credit balance
o True
44. Discounted notes receivable should be removed from
37. The term FOB destination means that the ownership of the notes receivable account and transferred to
the goods purchased is vested in the buyer upon accounts receivable
shipment thereof o False
o False

45. Initially, long-term interest bearing notes are measured

38. The term freight prepaid means that the freight charge at face amount
on the goods shipped is already paid by the seller o True
o True
46. Which method of recording bad that loss is consistent
with accrual accounting
o Allowance method
47. A method of estimating bad debts that focuses on the
income statement rather than the statement of financial
position is the allowance method based on
o Credit sales
48. A method of estimating uncollectible accounts that
emphasizes asset valuation rather than income
measurement is the allowance method based on
o Aging of accounts receivable
49. The advantage of relating the bad debt expense to
accounts receivable is that this approach
o Gives a reasonably accurate measurement of
receivables in the statement of financial position
50. When a specific customer account receivable is written
off as uncollectible, what will be the effect on net income
under the allowance and direct write off method
o No effect under allowance method and decrease
under direct write off method
51. When the allowance method of recognizing uncollectible
accounts is used, the entry to record the write off of a
specific account would
o Decrease both accounts receivable and the
allowance for uncollectible accounts
52. When an entity uses the allowance method for
recognizing uncollectible accounts, the entry to record
the write off of a specific uncollectible account
o Affects neither net income nor working capital
53. When the allowance method of recognizing bad debt
expense is used, the entries at the time of collection of
an account previously written off would
o Have no effect on net income
54. An entity uses the allowance method to recognize
doubtful accounts expense. What is the effect of
collection of an account previously written off
o Increase in allowance for doubtful accounts and
decrease in doubtful accounts expense
55. When an accounts receivable aging schedule is
prepared, a series of computations is made to determine
the estimated schedule uncollectible accounts. The
resulting amount from this aging
o Is the amount of desired credit balance of the
allowance for doubtful accounts to be reported at
year end
56. What is imputed interest
o Interest based on the implicit interest rate
 57. Accounting for the interest in a non interest bearing note
receivable is an example of what aspect of accounting
theory
o Substance over form
58. On July 1 of the current year, an entity received a one-
year note receivable bearing interest at the market rate.
The face amount of the note receivable and the entire
amount of the interest are due in one year. The interest
receivable account would show a balance on
o December 31 but not July 1
59. On July 1 of the current year, an entity received a one-
year note receivable bearing interest at the market rate.
The face amount of the note receivable and the entire
amount of the interest are due in one year. When the
note receivable was recorded on July 1, which of the
following was debited
o Neither interest receivable nor unearned
discount on notes receivable
60. On August 15, an entity sold goods for which it received
a note bearing the market rate of interest on that date.
The four-month note was dated July 15. Note principal,
together with all interest, is due November 15. When the
note was recorded on August 15, which of the following
accounts increased
o Interest Receivable
CHAPTERS 8-9:
61. The amount of receivables that are pledged against
borrowings should be
o Included in total receivables with disclosure
62. The amount of account receivable is included in total
receivables with appropriate disclosures when
o Pledge (Yes); Assigned (Yes); Factored (No)
63. The assignor’s equity in assigned accounts that is
required to be disclosed in the notes to the FS is equal
to the
o Assigned accounts receivable minus the bank
loan balance
64. Factoring of receivables is usually done on a
o Without recourse, notification basis
65. Which is a correct presumption regarding receivable
factoring and note discounting in the absence of a
contrary statement
o Receivable factoring (without recourse); Note
discounting (with recourse)
66. Note receivable discounted with recourse should be
o Excluded from total receivables with disclosure
of the contingent liability
67. Why would an entity factor account receivable
o To accelerate access to amount collected
68. Which of the following is a method to generate cash
from accounts receivable
o Assignment and factoring
69. The practice of realizing cash from accounts receivable
prior to maturity date is widespread. Which term is not
associated with this practice?
 o Defalcation
70. When the accounts receivable are sold outright, the
accounts receivable have been
o Factored
71. Which of the following is used to account for probable
sales discounts, sales returns and sales allowances in
a factoring arrangement?
o Factor holdback
72. When an entity factored accounts receivable without
recourse with a bank, the transaction is best described
as
o Sale of the AR to the bank, with the risk of
uncollectible accounts transferred to the bank
CHAPTER 10-14
73. Which statement is true when accounts receivable are
factored without recourse
o The factor assumes the risk of collectability and
absorbs any credit losses in collecting the
accounts receivable
74. All but one of the following are required before a
transfer of accounts receivable can be recorded as sale
o The transferor maintains continuing involvement
75. If financial assets are exchanged for cash but the
transfer does not meet the criteria for a sale, the
transaction should be accounted for as
o Both secured borrowing and pledge of collateral
76. If a notes receivable is discounted with recourse
o Notes receivable discounted is credited
77. The NR discounted account is reported as
o Contra asset account for the face amount of the
note
78. If a notes receivable is discounted without recourse
o Notes Receivable is credited
79. NR discounted with recourse should be
o Excluded from total receivables with disclosure
80. After being held for 40 days, a 120-day 12% interest
bearing note receivable was discounted at a bank at
15%. The net proceeds from discounting are equal to
o Maturity value less the discount at 15%
81. Which of the following should not be taken into account
when determining the cost of inventory
o Recoverable purchase taxes
82. The cost of inventory does not include
o Abnormal amount of wasted materials
83. Which of the following costs of conversion cannot be
included in the cost of inventory
o Salaries of sales staff
84. Which of the following should be taken into account
when determining the cost of inventory
o Storage cost of part-finished goods
85. Costs incurred in bringing the inventory to the present
location and condition include
o Cost of designing product for specific purposes
86. Inventories encompass all of the following, except
o Land and other property not held for sale
87. A property developer must classify properties that it
holds for sale in the ordinary course of business as
o Inventory
88. Factory supplies to be consumed in the production
process are reported as
o Inventory
89. Which of the following should not be reported as
inventory
o Machinery acquired by a manufacturing entity
90. When determining the cost of an inventory, which of
the following should not be included
o Interest on loan obtained to purchase the
inventory
91. Why is inventory included in the computation of net
income
o To determine the cost of goods sold
92. Which is a characteristic of a perpetual inventory
method
o Cost of goods sold is recorded with each sale
93. Which is incorrect about the perpetual inventory
method
o Purchase returns are recorded by debiting
accounts payable and crediting purchase
returns and allowances
94. An entry debiting inventory and crediting COGS would
be made when
o Merchandise is returned under perpetual
inventory
95. In a periodic system, the beginning inventory is
o Goods available for sale minus net purchases
96. Theoretically, cash discounts permitted should be
o Deducted from inventory, whether taken or not
97. Which of the following generally would not be
separately accounted for in the computation of COGS?
o Trade discounts applicable to purchases
98. The use of purchase discount account implies that
the recorded cost of a purchased inventory is
o Invoice price
99. The use of discount lost account implies that cost of
a purchased inventory is
o Invoice price less the purchase discount
allowable whether or not taken
100. The valuation of inventory on a prime cost basis
o Would exclude all overhead from inventory cost
101. IFRS prohibits which cost flow assumption
o LIFO
102. What is the inventory pricing procedure in which 109. IFRS requires the specific identification method
the oldest costs rarely have an effect on the ending in certain circumstances. Which of the following is likely
inventory to be a circumstance where the specific identification
o FIFO method can be used
o Inventory turnover is low
103. In a period of falling prices which inventory
method generally provides the lowest amount of 110. Which cost flow assumption is used for
ending inventory inventory when an entity builds townhouses
o FIFO o Specific identification

104. Which inventory cost flow assumption would 111. Net realizable value is
consistently result in the highest income in a period of o Estimated selling price less estimated cost to
rising prices or inflation complete and cost of disposal
o FIFO
112. Inventories are usually written down to NRV
105. The costing of inventory must be deferred until o Item by item
the end of reporting period under which of the following
method of inventory valuation 113. LCNRV is best described as
o Weighted average o Reporting of a loss when there is a decrease in
the future utility below the original cost
106. Cost of goods sold is the same under periodic
system and perpetual system using 114. LCNRV of inventory
o FIFO o Is always either the NRV or cost

107. The cost of inventories that are not ordinarily 115. Which statement is true regarding inventory
interchangeable and goods produced and segregated writedown and reversal of writedown
for specific projects shall be measured using o Separate reporting of reversal of inventory
o Specific identification writedown is required

108. Which is the reason why specific identification 116. How should trade discounts be dealt with when
method may be considered ideal for assigning cost to valuing inventories at the LCNRV
inventory and cost of goods sold o Deducted in arriving at cost
o The cost flow matches the physical flow
117. How should prompt payment discount be dealt
with when valuing inventories at LCNRV
o Ignored
118. How should sales staff commission be dealt
with when valuing inventories at LCNRV
o Deducted in arriving at NRV
119. How should import duties be dealt with when
valuing inventories at LCNRV
o Added to cost
120. NRV is defined as
o Estimated selling price less estimated cost to
complete and estimated cost of disposal
121. The gross profit method assumes that
o The relationship between selling price and
COGS is similar in prior years
122. The gross profit method is not valid when
o The gross margin percentage changes
significantly
123. Which statement is not valid about the gross
profit method
o It may be used for annual statements
124. Which is not a basic assumption of the gross
profit method
o The amount of purchases and the amount of
sales remain relatively unchanged from the
previous method
125. How is the gross profit method used in relation
to inventory
o To verify the accuracy of the perpetual
inventory record
126. An advantage of the retail inventory method is
that it
o Provides a method for inventory control and
facilitates determination of the periodic
inventory
127. To produce an inventory valuation which
approximates the lower of cost and NRV using the
retail method, the computation of the ratio of cost to
retail should
o Include markup but not markdown
128. When the conventional retail inventory method
is used, markdowns are commonly ignored in the
computation of cost to retail ratio because
o This tends to give a better approximation of the
Lower of average cost and NRV
129. The retail inventory method would include which
of the following in the calculation of goods available for
sale at both cost and retail
o Purchase return
130. With regard to the retail inventory method,
which is the most accurate statement
o The retail method results in a lower ending
inventory if net markups are included but net
markdowns are excluded in computing the cost
ratio
131. The conventional retail method produces an
ending inventory that approximates
o Lower of average cost and net realizable value

132. If the conservative retail inventory method is

used, which of the following calculations would include
or exclude net markdowns
o Exclude Cost Ratio, Include Ending Inventory at
Retail

133. Which of the following is not a reason why the

retail inventory method is used widely
o To defer income tax liability

134. An inventory method designed to approximate

inventory valuation at the LCNRV
o Conservative retail method

135. The retail method is based on the assumption

that
o Final inventory and the total goods available for
sale contain the same proportion of high cost
and low cost ratio of goods