Professional Documents
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Online Exam 1 Answer Key
Online Exam 1 Answer Key
TF^ Presenting property, plant and equipment net of accumulated depreciation on the face of the
statement of financial position is an example of offsetting.
ANS : FALSE
IAS 1, paragraph 33 states that “measuring assets net of valuation allowances – for example, obsolescence
allowances on inventories and doubtful accounts on receivables – is not offsetting.
TF^ In case the requirement of an accounting standard is in conflict with the Conceptual
Framework, the Conceptual Framework overrides the requirements of the accounting standard.
ANS : FALSE
The requirements of IAS & IFRS always prevails due to its authoritative status.
TF^ General purpose financial statements are those intended to serve users who are in a position
to require financial reports tailored to their particular information needs.
ANS : FALSE
General purpose financial statements are intended to serve different users with their diverse information
needs. If it will only tailor to the information needs of specific users, it loses its neutrality.
ANS : TRUE
TF^ In identifying the financial statements, the presentation currency need not be disclosed in the
heading of the financial statements as the currency’s sign is already indicated.
ANS : FALSE
TF^ The level of rounding off used in the financial statements is indicated in the heading of the
financial statements to achieve a more understandable information.
ANS : TRUE
ANS : TRUE
TF^ PAS 1 requires that an entity prepares all of its financial statements using the cash basis of
accounting.
ANS : FALSE
TF^ Assets and liabilities, and income and expenses, may not be offset unless required or
permitted by a specific accounting policy developed by the reporting entity.
ANS : FALSE
Unless required or permitted by a specific IAS or IFRS. Take note that accounting policies are not
specifically developed by a reporting entity; rather, it is adopted by reporting entities based on existing
accounting standards issued or adopted by IASB.
TF^ As many parts of the financial statements are based on judgment, models and estimates
rather than exact positions, the IASB’s Conceptual Framework provides the concepts underlying
those judgments, estimates and models.
ANS : TRUE
TF^ General purpose financial reporting also provides information about how the management or
other equivalent governing body is able to discharge its responsibilities of managing the entity’s
resources, comply with laws, regulations and contractual provisions.
ANS : TRUE
TF^ The Conceptual Framework contains detailed requirements on how the financial statements
should be prepared in accordance with PFRS.
ANS : FALSE
The detailed requirements are set forth in IAS 1, Presentation of Financial Statements.
TF^ The presentation and classification of items in the financial statements shall be consistent
from one period to the next unless a change is justified either by a change in circumstances or a
requirement of a new PFRS.
ANS : TRUE
TF^ Consistent net losses and cash used on operating activities, as well as capital deficiency, are
some of the indicators that may cast significant doubt about the entity’s ability to continue as a
going concern.
ANS : TRUE
TF^ Financial statements are the shared responsibility of the company's management and the
external auditors, the latter being responsible for determining the accuracy of the management's
representations.
ANS : FALSE
An entity’s management is primarily responsible for the preparation and fair presentation of the financial
statements. External auditors are required to be independent of the reporting entity.
TF^ Financial statements also show the results of the management's stewardship of the owners'
resources entrusted to it.
ANS : TRUE
TF^ A non-publicly accountable entity that has total assets of P300 million and total liabilities of
P270 million as of December 31, 2019 is required to adopt the PFRS for SMEs.
ANS : FALSE
A large entity is an entity with total assets of more than P350 million or total liabilities of more than P250
million. Since it satisfied one of the requirements for the entity to be classified as a large entity, it is required
to adopt Full PFRS.
TF^ Publicly accountable entities shall use full PFRS only if they meet the asset or liability
threshold for a large entity.
ANS : FALSE
Publicly accountable entities shall use full PFRS, regardless of its size.
TF^ The recognition of receivables and payables in the statement of financial position is a result
of using the accrual basis of accounting.
ANS : TRUE
TF^ Inappropriate accounting policies are not rectified either by disclosure of the accounting
policies used or by notes or explanatory material.
ANS : TRUE
MC^ According to the new Conceptual Framework, who among the following are primary users of
financial reports?
I. Existing and/or potential investors
II. Creditors
III. Public
I only
*I and II only
II and III only
I, II, and III
A faithfully represented information is one that is complete, neutral (which includes substance over form) and
free from any error. Further, since estimates are permitted to be used to present a more relevant and timely
information, the degree of faithful representation of the financial information is being reduced. Thus, faithful
representation is affected by these so-called measurement uncertainties.
*True, False
False, True
True, True
False, False
MC^ The phrase “no practical ability to avoid” relates to what element of the financial statement?
Asset
*Liability
Income
Expense
MC^ SQUAREPANTS, Inc. intends to use a measurement basis for its investment in publicly-
traded equity securities that will consider the existing conditions as of the measurement date.
Which of the following will SQUAREPANTS most likely use?
Historical cost
Current cost
*Fair value
Value in use
MC^ When two or more qualified individuals, working independently, can reasonably develop
similar conclusions from the complete set of financial statements prepared by the entity, which
enhancing qualitative characteristic was satisfied?
Comparability
*Verifiability
Understandability
Timeliness
Take note that items of income and expenses that go to profit or loss are considered nominal accounts are
closed at the end of each reporting period. Income or expense items that go to other comprehensive income
are considered real accounts and accumulate from one reporting period to another (presented as part of
equity).
MC^ Which is required for financial statements prepared in accordance with PFRS?
MC^ Based on the IASB’s Conceptual Framework, when is an element recognized in the financial
statements?
MC^ Evaluate the following statements pertaining to the information provided by general-purpose
financial statements:
True, False
False, True
True, True
*False, False
Market values are always relevant to be used as value for an enterprise’s assets.
Property, plant and equipment should always be updated to their current values.
Enterprises are expected to cease their operations in the succeeding years.
*Enterprises are expected to continue their operations indefinitely.
MC^ What concept justifies the recognition of accruals and deferrals?
Consistency
Materiality
*Going concern
Understandability
MC^ Under the accrual basis of accounting, the effects of the transactions and other events are
recorded in the accounting records
When they occur, but reported in the financial statements when cash is received or paid.
When cash is received or paid, but reported in the financial statements when they occur.
Only when the cash is received or paid.
*As they occur, the timing of the receipt and payment of cash being irrelevant.
MC^ Which one of the general features supports the classification of assets and liabilities as
current or non-current?
Accrual basis
Comparative information
Frequency of reporting
*Going concern
IAS 1, paragraph 33 states that “measuring assets net of valuation allowances – for example, obsolescence
allowances on inventories and doubtful accounts on receivables – is not offsetting.
The first three choices are all example of valuation, not offsetting.
MC^ In reference to the frequency of reporting, financial statements must be prepared at least
*Annually
Quarterly
Semi-annually
Whenever the entity wishes to prepare
MC^ Which financial statement presents the entity’s financial performance during a particular
reporting period?
MC^ The supporting schedules on the information presented on the face of the financial
statements and other explanatory information are provided by which financial statement
component?
MC^ Determine the applicable financial reporting framework to be applied by the following entities:
“Entities that are required to file financial statements under Part II of SRC Rule 68.”
MC^ Determine the applicable financial reporting framework to be applied by the following
entity: “Fruitas Holdings, Inc., a publicly-listed entity whose shares of stock are traded
with the Philippine Stock Exchange.”
MC^ Determine the applicable financial reporting framework to be applied by the following entities:
“Entities whose total assets are more than P100M to P350M or liabilities of more than
P100M to P250M.”
Full PFRS
*PFRS for Small and Medium-sized Entities
PFRS for Small Entities
Income Tax Reporting
MC^ Determine the applicable financial reporting framework to be applied by the following entities:
“Entities whose total assets or liabilities are between P3M to P100M.”
Full PFRS
PFRS for Small and Medium-sized Entities
*PFRS for Small Entities
Income Tax Reporting
MC^ Determine the applicable financial reporting framework to be applied by the following entity:
“Jilliane’s Mini Grocery, a business whose total assets and liabilities are less than P3
million.”
Full PFRS
PFRS for Small and Medium-sized Entities
PFRS for Small Entities
*Income Tax Reporting
MC^ Determine the applicable financial reporting framework to be applied by the following entity:
“Malayan Insurance, Inc., a life insurance company not publicly listed in the stock
exchange but is regulated by the Insurance Commission.”
*Full PFRS - these are publicly-accountable entities
PFRS for Small and Medium-sized Entities
PFRS for Small Entities
Income Tax Reporting
MC^ Determine the applicable financial reporting framework to be applied by the following entity:
“Tigers Trading, Inc., classified as a medium-sized entity, is a subsidiary of Thomas
International, a large entity. To aid Thomas in the preparation of the consolidated financial
statements, Tigers Trading decided to apply the reporting framework that Thomas
International uses.”
*Full PFRS
PFRS for Small and Medium-sized Entities
PFRS for Small Entities
Income Tax Reporting
MC^ Determine the applicable financial reporting framework to be applied by the following entity:
“BDO Unibank, Inc., a bank regulated by the Bangko Sentral ng Pilipinas.”
MC^ Determine the applicable financial reporting framework to be applied by the following entity:
“Palawan Pawnshop, a quasi-banking institution regulated by the Bangko Sentral ng
Pilipinas.”
MC^ Determine the applicable financial reporting framework to be applied by the following entity:
“A service company with total assets of P5 million.”
Full PFRS
PFRS for Small and Medium-sized Entities
*PFRS for Small Entities
Income Tax Reporting