CFAS Reviewer AY.

2024-2025

PRE-FINALS
1. Which statement best describes significant influence?
A mutual sharing in the risks and benefits of a combined entity.
The power to participate in the financial and operating policy decisions of an entity.
The holding of a significant proportion of the share capital in another entity.
The contractually agreed sharing of control over an economic entity.

2. Which of the following is a qualifying asset?

Investment property measured at fair value
Building that is ready for its intended use upon purchase
Inventories that are routinely produced in large quantities on a continuous basis
An application software (intangible asset) that takes 3 years to develop

3. Which of the following is not one of the four basic financial statements?
balance sheet
statement of cash flows
statement of changes in financial position
income statement

4. According to PAS 23, borrowing costs are capitalized when

they relate directly to the acquisition, construction or production of a qualifying asset.
the entity chooses to capitalize them.
they are material and are expected to be incurred over more than one reporting period.
all of these

5. Which of the following statements is correct?

Some intangible assets have physical substance.
Intangible assets are always classified as noncur-rent assets even in cases where they
are part of a disposal group.
The process of recording the expiration of the economic benefits of an intangible asset is
called depletion.
Intangible assets can be obtained in one of two ways - external acquisition or internal
development.

6. Which of the following is considered an inventory rather than an agricultural produce at

the point of harvest?
Harvested cotton
Tea
Harvested cane
Picked leaves

7. It is an event that creates a legal or constructive obligation because the entity has no
other realistic alternative but to settle the obligation.
Event after reporting period
Non-adjusting event
Adjusting event
Obligating event

8. At the commencement of the lease, the lessee shall recognize a finance lease as asset
and liability at an amount equal to the
Fair value at the leased asset
Present value of the minimum lease payments
Fair value at the leased asset or present value of the minimum lease payments,
whichever is lower
Fair value at the leased asset or present value of the minimum lease payments,
whichever is higher
CFAS Reviewer AY. 2024-2025

9. Select the correct statement.

A leasing company should treat all its assets used in providing lease services as
investment property.
Investment properties that are to be disposed of without further development are treated
as investment property until they are derecognized.
All investment properties held for capital appreciation will be classified as held for sale in
the long run.
Investment properties being re-developed as investment properties on behalf of third
parties are investment properties.

10. The minimum lease payments include all of the following except
Rental payments over the lease term
Any amount guaranteed by the lessee or by a party related to the lessee
Payment required exercising an option on the part of the lessee to purchase the asset at
a price which is expected to be sufficiently lower than its fair value at the option exercise
date
Contingent rent

11. It is the date on which the lease is entitled to exercise its right to use the lease asset.
Inception of the lease
Date of lease agreement
Commencement of the lease
Date of commitment to the provision of the lease

12. Short-term employee benefits include all of the following, except

Wages, salaries and social security contributions.
Short-term compensated absences
Profit-sharing and bonuses payable in more than twelve months after the end of the
period in which the employees render the related service.
Nonmonetary benefits for current employees, such as medical care, housing, car and
free and subsidized goods.

13. The cost of a franchise is classified in the statement of financial position as a(n)
operational asset.
intangible asset.
deferred charge.
current asset.

14. Which of the following correct definition of a provision?

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

15. Which of the following is within the scope of PAS 20?

Government assistance provided in the form of tax benefits
Free technical or marketing advice
Forgivable loan for the government
Public improvements that benefit the entire community

16. Financial assets are initially measured

at fair value
at fair value plus direct transaction costs
at fair value plus direct transaction costs, except in the case of financial assets at fair
value through profit or loss where direct transaction costs are expensed immediately
at cost, in cases where the quoted prices of the financial assets are indeterminable
CFAS Reviewer AY. 2024-2025

17. Exploration and evaluation asset shall be classified as either tangible or intangible asset
and measured initially at cost. Which measurement model applies to exploration and
evaluation asset subsequent to initial recognition?
The cost model
Either the cost model or the revaluation model
The revaluation model
The revocable amount model

18. CPAs may practice public accountancy under the following forms of organization, except:
Sole proprietorship
Limited liability partnership
Particular partnership
Corporations

19. Exploration and evaluation assets are initially measured

at cost.
fair value
revalued amount.
a or b

20. When an investor uses the equity method to account for investment in ordinary shares,
cash dividend received by the investor from the investee are recorded as
Deduction from investment income.
Dividend income.
Deduction from shareholders equity.
None of the above.

21. Subsequent changes in fair values of a financial asset classified as fair value through
profit or loss are
recognized in profit or loss
recognized in other comprehensive income and
recognized in other comprehensive income accumulated in equity
ignored

22. What is the objective of financial statements according to the Conceptual Framework?
To provide information about the financial position, performance, and changes in
financial position of an entity that is useful to a wide range of users in making economic
decisions.
To prepare and present a balance sheet, an income statement, a cash flow statement,
and a statement of changes in equity.
To prepare and present comparable, relevant, reliable, and understandable information
to investors and creditors.
To prepare financial statement in accordance

23. The statement of profit or loss includes which of the following?

Revenue, cost of goods sold, distribution costs, general and administrative expense and
extraordinary items
Discontinued operations
Gains or losses arising from treasury share transactions
Other comprehensive income

24. Which statement is true concerning fair presentation of financial statements?

I. Fair presentation requires the faithful representation of the effects of transactions,
other events and condition.
II. In virtually all circumstances, an entity achieves a fair presentation by compliance
with applicable SEC and tax regulations.
l only Il only
Both I and II Neither I nor II
CFAS Reviewer AY. 2024-2025
25. Which of the following concepts of cash is not appropriate to use in preparing the
statement of cash flows?
cash
cash and cash equivalents
cash and money market funds
cash and treasury bonds

26. What is a consigned inventory?

Goods that are shipped and title transfer to the consignee.
Goods that are sold but payment is not required until the goods are sold
Goods that are shipped but title remains with the consignor
Goods that are sold but payment is not required until the goods are sold

27. The primary users of financial statements under the Conceptual Framework include
I. Existing and potential investors
II. Employees
III. Lenders and other creditors
IV. Suppliers and other trade creditors
V. Customers
VI. Governments and their agencies
VII. Public
VIII. Professional accountants, including auditors

I and III
I, II, IlI, IV, V, VI, VII
all of these

28. If the entity's business model's objective is to hold assets in order to collect contractual
cash flows and cash flows are solely payments of principal and interest on the principal
amount outstanding, the financial asset is classified
according to management's intention of holding the securities
as financial asset measured at amortized cost
as financial asset measured at fair value
any of these

29. Which of the following best defines an accrual?

Adjusting entries where cash flows precedes revenue or expense recognition
Adjusting entries where revenue or expense recognition precedes cash flow
Adjusting entries where cash flow and revenue or expense recognition are simultaneous
Adjusting entries where revenue and expenses are recognized in the absence of cash
flow

30. A donated plant asset for which the fair value has been determined, and for which
incidental costs were incurred in acceptance of the asset, should be recorded at an amount
equal to its
incidental costs incurred.
fair value.
book value on books of donor. incurred.
book value on books of donor and incidental costs

31. The cost of inventory is the sum of:

Costs of purchase and costs of conversion
Direct costs, indirect costs, and other costs (allo-cated production overheads)
Cost of purchase, costs of conversion (allocated production overheads) and other costs
incurred in bringing the inventory to their present location and condition
Cost of Inventory
CFAS Reviewer AY. 2024-2025
32. It is a contract that transfers substantially all the risk and rewards incidental to
ownership of an asset, although title may or may not eventually be transferred.
Lease
Operating lease
Finance Lease
Lease purchase

33. Property, plant, and equipment may properly include

deposits on machinery not yet received.
idle equipment classified as held for sale asset under PFRS 5.
land held for speculation, rather than for use in the entity's normal business activities.
none of these.

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

Property owned by the entity and leased out under one or more operating leases.
Property held by the entity to be leased out under one or more operating leases
Real estate held for an undetermined future use.
Property owned by the entity and leased out to another entity under a finance lease.

35. A cost may be capitalized (capital expenditure) if

it clearly increases the useful life of an asset.
it increases the quantity of an asset.
it clearly increases the quality of an asset beyond its original state.
Any of these

36. A firm using the perpetual inventory method retuned defective merchandise costing
P5,000 to one of its suppliers. The entry to record this transaction will include a debit to
Accounts receivable
Purchase returns and allowances
Inventory
Accounts payable

37. A property is classified as investment property if

it is leased out under a finance lease.
the owner-occupied portion of the property is sig-nificant.
the entity provides relatively insignificant ancillary services (e.g., security, janitorial
services, and the like) to the occupants of the property.
it is rented between a parent entity and a subsidiary and consolidated financial
statements are prepared for the group.

38. The statement of cash flows reports

cash flows from operating activities
total changes in stockholder's equity
total assets
changes in retained earnings

39. It is that portion of the lease payments that is not fixed in amount but is based on the
future amount of a factor that changes other than the passage of time, for example,
percentage of future sales.
Contingent rent
Bargain purchase option
Executory cost
Accrued rent

40. Financial statements are structured representation of the financial position and financial
performance of an entity. To meet the objective of providing information about financial
CFAS Reviewer AY. 2024-2025
position, financial performance and cash flows of an entity, financial statements should
provide information about all of the following, except
Assets, liabilities and equity
Income and expenses, including gains and losses
Contributions by and distribution to owners in their capacity as owners.
Nature of the entity's business activities

41. Under PAS 19, employee benefits are all forms of consideration given by an entity in
exchange for service rendered by employees and include all of the following, except
Short-term employee benefits
Postemployment benefits, such as pension, defined contribution plans, defined benefit
plans, postemployment insurance and postemployment medical care
other long-term benefits, including long-service leave, sabbatical leave and long-term
disability benefits
Share-based payment

42. All of the following statements incorrectly refer to the Conceptual Framework except
The framework is concerned with all-purpose financial statements including consolidated
financial statements.
Financial statements are prepared and presented at least annually and are directed
toward the common and specific information needs of a wide range of users.
Prospectuses and computations prepared for taxation purposes are outside the scope of
the framework.
Financial statements include such items as reports by directors, statements by the
chairman, discussion and analysis by management, and similar items that may be
included in an annual report.
The framework applies to the financial statements of all commercial, industrial and
business reporting entities, but only for the private sector.

43. In the case of a nonmonetary grant, which of the following accounting treatments is
prescribed by PAS 20?
Record the asset at replacement cost and the grant at a nominal value.
Record the grant at a value estimated by management
Record both the grant and the asset at fair value of the nonmonetary asset.
Record only the asset at fair value; do not recognize the fair value of the grant

44. Which of the following statements is true?

The capitalizable costs of patents are legal fees and other registration costs.
An identifiable tangible asset developed internally is never recognized in the accounts as
an asset.
Intangible assets usually have a residual value that must be considered in the
amortization of cost.
An intangible asset is usually amortized by a credit to an income account.

45. PPE purchased on long-term credit contracts should be initially recognized at

the total amount of the future payments.
the present value of the future payments.
the future amount of the future payments.
none of these.

46. Intangible assets have all of the following characteristics, except:

their ownership confers rights, but no physical substance.
they have no physical substance.
they are relatively long-lived.
they provide benefits to current operations only.

47. These are incremental costs that are directly attributable to negotiating and arranging a
lease.
Initial direct costs
Costs of services
Transaction costs
CFAS Reviewer AY. 2024-2025
Executory costs

48. Which of these is not a major characteristic of a PPE?

Possesses physical substance
Yields services over a number of years
Acquired for use in operations
All of these are major characteristics of a PPE.

49. Which of the following statements is incorrect regarding the accounting for biological
assets?
Agricultural land used in growing agricultural produce can never qualify for recognition
as biological asset.
Biological asset is living animal or plant.
Agricultural produce is harvested product from a biological asset before any processing.
PAS 41 is used to account for both consumable and bearer plants

50. All of the following do not qualify as investment property, except

Machineries that are held for lease
Hotels or motels
Agricultural land purchased for appreciation purposes
Equipment purchased for an indeterminate purpose

51. The debit for a non-refundable sales tax properly levied and paid on the purchase of
machinery preferably would be a charge to
the machinery account.
a separate deferred charge account.
miscellaneous tax expense (which includes all taxes other than those on income).
accumulated depreciation--machinery.

52. A certificate of accreditation shall be issued to CPAs in public practice only upon
showing, in accordance with rules and regulations promulgated by the Board and approved
by the PRC, that such registration has acquired a minimum of years of meaningful
experience in any of the areas of public practice including taxation.
2
4
3
5

53. It is the net profit or loss for a period before deducting tax expense.
Accounting profit
Gross profit
Taxable profit
Net profit

54. According to PFRS 9, a financial instrument is recognized

when the instrument has probable economic benefits that can be measured reliably
only when the entity becomes party to the contractual provisions of the instrument
when the entity enters to a binding contract to deliver a variable number of its own
equity instrument
only when the instrument requires receipt of another financial instrument under
conditions which are potentially favorable

55. It is the profit for a period determined in accordance with the rules established by
taxation authorities upon which income taxes are payable.
Accounting profit
Net profit
Taxable profit
Accounting profit before tax
CFAS Reviewer AY. 2024-2025

56. Exploration and evaluation expenditures are incurred

When searching for an area that may warrant detailed exploration even though the
entity has not yet obtained the legal rights to explore a specific area
When the legal rights to explore a specific area have been obtained but the technical
feasibility and commercial viability of extracting a mineral resource are not yet
demonstrable
When a specific are is being developed and preparations for commercial extractions are
being made

57. Under the equity method of accounting for investments, an investor recognizes its share
of the earnings in the period in which the
Investee declares an asset dividend.
Investee reported a profit.
Investor sells the investment in associates

58. LCNRV of inventory:

Is always either the net realizable or cost
Must be equal to net realizable value
May sometimes be less than net realizable value complete
Must be equal to estimated selling price less cost to

59. The cost of inventories that are not ordinarily interchangeable and goods produced and
segregated for specific projects shall be measured using:
FIFO
LIFO
Average method
Specific identification

60. Assets that are classified as held for sale under PFRS 5 are
Required under PAS 36 to be tested for impairment
Depreciated annually
Not depreciated
Amortized over a period not exceeding 5 years

BATHEOAX - Conceptual Framework/PAS1,7 Quiz

1. Financial accounting standard-setting

A. Is a democratic process in that a majority of practicing accountants must agree with
a standard before it becomes enforceable.
B. Is a legislative process based on rules promulgated by government agencies.
C. Is based solely on research.
D. Is a social process which incorporates political actions of various interested user
groups as well as professional research and logic.

2. This comprises all “non-owner changes in equity.” It excludes owner changes in equity,
such as subscription, issuance, and reacquisition of share capital and declaration of
dividends.
A. Other comprehensive income
B. Changes in equity
C. Total comprehensive income
D. Profit or loss

3. The valuation of a promise to receive cash in the future at present value is valid because
of the accounting concept of
A. Entity
B. Time period
C. Going concern
D. Monetary unit
CFAS Reviewer AY. 2024-2025

4. During the lifetime of an entity, accountants produce financial statements at arbitrary

points in time in accordance with what basic accounting concept?
A. Accrual
B. Periodicity
C. Unit of measure
D. Continuity

5. The International Accounting Standards Board was formed to

A. Enforce IFRS in foreign countries.
B. Develop a single set of high quality IFRS.
C. Establish accounting standards for multinational entities.
D. Develop accounting standards for countries that do not have standard-setting body.

6. Financial accounting is concerned with

A. General-purpose reports on financial position and financial performance.
B. Specialized reports for inventory management and control.
C. Specialized reports for income tax computation and recognition.
D. General-purpose reports on changes in stock prices and future estimates o
market position.

7. These are the end product of the financial reporting process and the means by which
information gathered and processed is periodically communicated to users.
A. Financial reporting
B. Financial statements
C. Financial products
D. Accounting statements

8. The communicating process of accounting includes all of the following, except

A. Recording
B. Classifying
C. Summarizing
D. Interpreting

9. Accountants employed in entities in various capacity as accounting staff, chief

accountant or controller are said to be engaged in
A. Public accounting
B. Private accounting
C. Government accounting
D. Financial accounting

10. The concept of accounting entity is applicable

A. Only to the legal aspects of business organizations.
B. Only to the economic aspects of business organizations.
C. Only to business organizations.
D. Whenever accounting is involved.

11. The relatively stable economic, political and social environment supports
A. Conservatism
B. Materiality
C. Timeliness
D. Going Concern
CFAS Reviewer AY. 2024-2025
12. Imagine you are a business manager. You would be most awesome as a manager in
which of the following independent scenarios?
A. Your company has an average total assets of ₱10M during the year. At the end of the
year, your company reported profit of ₱1M. The average return of other similar
companies with the same level of assets is 30%.
B. Your adoption of accounting policy has led to the immediate recognition of expenses.
Those costs could have otherwise been allocated over several periods. Accordingly,
your company did not declare dividends during the period. This resulted to a decline
in the market value of your company’s stocks while the prices of all other stocks in
the stock market have increased.
C. You changed your company’s method of allocating costs from an accelerated method
to a straight-line method. The change met the requirements of the PFRSs. This led to
the smoothing of expenses, which increased your company’s profit during the period
by 12%, above the industry average.
D. You are great at closing deals, that’s why you’re a boss. Eager to increase your
company’s resources, you were able to obtain a ₱20M loan from a bank. Interest
expense on the loan during the year was ₱3.4M while the return on investments of
loan proceeds was 2%.

13. Accounting is a service activity and its function is to provide quantitative information,
primarily financial in nature, about economic entities, that is intended to be useful in
making economic decision. This accounting definition is given by
A. Accounting Standards Council
B. AICPA Committee on Accounting Terminology
C. American Accounting Association
D. Board of Accountancy

14. What is the accounting concept that justifies the usage of accruals and deferrals?
A. Going concern
B. Materiality
C. Consistency
D. Stable monetary unit

15. Generally accepted accounting principles

A. Are accounting adaptations based on the laws of economic science.
B. Derive their credibility and authority from legal rulings and court precedents.
C. Derive their credibility and authority from the national government through the
Securities and Exchange Commission.
D. Derive their credibility and authority from general recognition and acceptance by
the accountancy profession.

16. What is the law regulating the practice of accountancy in the Philippines?
A. RA No. 9298
B. RA No. 9198
C. RA No. 9928
D. RA No. 9892

17. Managerial accounting is the area of accounting that emphasizes

A. Reporting financial information to external users.
B. Reporting to the Securities and Exchange Commission.
C. Combining accounting knowledge with an expertise in data processing.
D. Developing accounting information for use within an entity.

18. Proper application of accounting principles is most dependent upon

A. Existence of specific guidelines
B. Oversight of regulatory bodies
C. External audit function
D. Professional judgment of the accountant
CFAS Reviewer AY. 2024-2025
19. Materiality judgment is least likely to be applied in which of the following?

A. in determining whether an item warrants separate presentation in the financial

statements or is to be aggregated with other items
B. in determining whether information could influence the decisions of users, and
therefore, must be presented in the financial statements
C. in determining whether the cost of processing and communicating information
exceeds the benefits expected to be derived from it
D. whether additional information needs to be provided, including the level of detail and
conciseness of the information’s presentation

20. Which of the following financial statements would be dated as at a certain date?
A. Statement of financial position
B. Statement of profit or loss and other comprehensive income
C. Statement of cash flows
D. All of these

21. Financial accounting can be broadly defined in the area of accounting that prepares
A. General purpose financial statements to be used by parties internal to the entity only.
B. Financial statements to be used by investors only.
C. General purpose financial statements to be used by parties both internal and external
to the entity.
D. Financial statements to be used primarily by management.

22. Which of the following is not one of the general features of financial statements under
PAS 1?
A. Fair presentation and compliance with PFRSs
B. Going Concern
C. Cash Basis
D. Materiality and aggregation

23. Which of the following statement best describes the term “going concern”?
A. When current liabilities of an entity exceed current assets.
B. The ability of the entity to continue in operation for the foreseeable future.
C. The potential to contribute to the flow of cash and cash equivalents to the entity.
D. The expenses of an entity exceed its income.

24. Who is responsible for the preparation and the fair presentation of an entity’s financial
statements in accordance with the PFRSs?
A. Any accountant
B. Certified Public Accountant
C. Auditor
D. Management

25. The purpose of the International Financial Reporting Standards is to

A. Issue enforceable standards which regulate the financial accounting and reporting
of multinational entities.
B. Develop a uniform currency in which the financial transactions of entities throughout
the world would be measured.
C. Promote uniform accounting standards among countries of the world.
D. Arbitrate accounting disputes between auditors and international entities.

26. Which basic accounting assumption is threatened by the existence of severe inflation in
an economy?
A. Monetary unit assumption
B. Periodicity assumption
C. Going Concern assumption
D. Economic entity assumption
CFAS Reviewer AY. 2024-2025

27. The singularly unique function performed by Certified Public Accountants is

A. Tax preparation
B. Management advisory services
C. The attest function
D. The preparation of financial statements

28. As independent or external auditors, CPAs are primarily responsible for

A. Preparing financial statements in conformity with GAAP.
B. Certifying the accuracy of financial statements.
C. Expressing an opinion as to the fairness of financial statements.
D. Filing financial statements with the SEC.

29. Which underlying assumption serves as the basis for preparing financial statements at
regular artificial points in time?
A. Accounting entity
B. Going concern
C. Accounting period
D. Stable monetary unit

30. It is a “global phenomenon” intended to bring about transparency and a higher degree of
comparability in financial reporting in order to achieve the goal of one uniform and
globally accepted financial reporting standards.
A. IFRS
B. Borderless accounting
C. World trade
D. Information technology

31. In the development of accounting standards, the FRSC employs a “due process” system
which
A. Is efficient for collecting dues from members.
B. Enables interested parties to express their views on accounting issues under
consideration.
C. Identifies the accounting issues that are the most important.
D. Requires that all CPAs must receive a copy of PFRS.

32. It is the accounting standard setting body in the Philippines at the present time.
A. Accounting Standards Council
B. Auditing and Assurance Standards Council
C. Philippine Accounting Standards Board
D. Financial Reporting Standards Council

33. One of the basic features of financial accounting is

A. Direct measurement of economic resources and obligations and changes in them
in terms of money and sociological and psychological impact.
B. Direct measurement of economic resources and obligations and changes in them
in terms of money.
C. Direct measurement of economic resources and obligations and changes in them
in terms of money and sociological impact.
D. Direct measurement of economic resources and obligations and changes in them
in terms of money and psychological impact.

34. Which of the following is an internal user of financial information?

A. Board of Directors
B. Shareholder in the entity
C. Holder of the entity’s bonds
D. Creditor with long-term contract with the entity
CFAS Reviewer AY. 2024-2025

35. Which of the following statements best describes generally accepted accounting
principles?
A. They have been formulated in the public sector.
B. They have been developed on the basis of such factors as usage and practical
necessity.
C. They are the same as laws within our legal system.
D. They do not apply to small entities.

36. Which of the following is not an implication of the going concern assumption?
A. The historical cost principle is credible.
B. Depreciation and amortization policies are justifiable and appropriate.
C. The current and noncurrent classification of assets and liabilities is justifiable
and significant.
D. Amortizing research and development costs over several periods is justifiable
and appropriate.

37. These are the events that affect the entity and in which other entities participate.
A. Internal events
B. External events
C. Current events
D. Past events

38. Which of the following is not an important characteristic of the financial statements that
accountants currently prepare?
A. The information in financial statements is expressed in units of money adjusted
for changing purchasing power.
B. Financial statements articulate with one another because measuring financial
position is related to measuring changes in financial position.
C. The information in financial statements is summarized and classified to help meet
users’ needs.
D. Financial statements can be justified only if the benefits they provide exceed the
costs.

39. Financial accounting is the area of accounting that emphasizes reporting to

A. Management
B. Regulatory bodies
C. Internal auditors
D. Creditors and investors

40. PAS 1 requires an assessment of the entity’s ability to continue as a going concern each
time financial statements are prepared. Who is responsible in making this assessment?
A. Accountant
B. Auditor
C. Management
D. Government regulatory body

41. The financial statements that are prepared for the business are separate and distinct
from the financial statements of the owners.
A. Going concern assumption
B. Matching principle
C. Economic entity assumption
D. Accounting period assumption

42. It is the body authorized by law to promulgate rules and regulation affecting the practice
of the accountancy profession in the Philippines.
A. Board of Accountancy
B. Philippine Institute of Certified Public Accountants
C. Securities and Exchange Commission
D. Financial Reporting Standards Council
CFAS Reviewer AY. 2024-2025

43. This type of presentation of statement of financial position does not show distinctions
between current and noncurrent items.
A. Classified presentation
B. Unclassified presentation
C. Non-discriminating presentation
D. Awesome presentation

44. What is the only underlying assumption mentioned in the Conceptual Framework for
Financial Reporting?
A. Going concern
B. Accounting entity
C. Time period
D. Monetary unit

45. When a parent and subsidiary relationship exists, consolidated financial statements are
prepared in recognition of
A. Legal entity
B. Economic entity
C. Stable monetary unit
D. Time period

46. In making an economic decision, an investor needs information on the amounts of an

entity’s economic resources and claims to those resources. That investor would most
likely refer to which of the following financial statements?
A. Statement of financial position
B. Statement of comprehensive income
C. Statement of cash flows
D. Statement of changes in equity

47. Which basic assumption may not be followed when an entity in bankruptcy reports
financial results?
A. Economic entity assumption
B. Going concern assumption
C. Periodicity assumption
D. Monetary unit assumption

48. The basic objective of accounting is

A. To provide the information that the managers of an economic entity need to control
its operations.
B. To provide information that the creditors of an economic entity can use in
deciding whether to make additional loans to the entity.
C. To measure the periodic income of the economic entity.
D. To provide quantitative financial information about an entity that is useful in
making rational economic decision.

49. Once an accounting standard has been established

A. The standard is continually reviewed to see if modification is necessary.
B. The standard is not reviewed unless the Securities and Exchange Commission makes
a complaint.
C. The task of reviewing the standard to see if modification is necessary is given to
the PICPA.
D. The principle of consistency requires that no revisions ever be made to the standard.

50. The economic entity assumption

A. Is inapplicable to unincorporated businesses.
B. Recognizes the legal aspects of business organizations.
CFAS Reviewer AY. 2024-2025
C. Requires periodic income measurement.
D. Is applicable to all forms of business organizations.

BATHEOAX - Financial Instruments, Inventories, Biological Assets, Impairment of

Assets

1. What is the best evidence of the fair value of a financial instrument?

A. Its cost, including transaction costs directly attributable to the purchase origination of
issuance of the financial instrument.
B. Its estimated value determined using discounted cash flow technique, option pricing
model or other valuation technique.
C. Its quoted price, if an active market exists for the financial instrument
D. The present value of the contractual cash flow less impairment.

2. Financial assets include all of the following, except

A. Prepaid expenses
B. Trade accounts receivable
C. Cash in bank
D. Loans receivable

3. Equity instruments include all of the following, except

A. Common stock
B. Stock warrants
C. Preferred stock with mandatory redemption date or redeemable at the option of the
holder
D. Stock options

4. The gross profit method of estimating inventory would not be useful when
A. A periodic system is in use and inventories are required for interim statements
B. Inventories have been destroyed or lost by fire, theft, or other casualty, and the
specific data required for inventory valuation are not available
C. There is a significant change in the mix of the products being sold
D. There is significant unmonitored change in the relationship between gross profit and
the selling price of goods being sold

5. Changes in fair value of a biological asset or an agricultural produce are

A. Ignored
B. Included in the profit or loss of the current period
C. Included in the equity
D. Included in the retained earnings

6. When a portion of inventories has been pledged as security on a loan

A. The cost of pledged inventories should be transferred from current assets to
noncurrent assets
B. The fact should be disclosed but the amount of current assets should not be affected.
C. The value of the portion pledged should be subtracted from the debt
D. An equal amount of retained earnings should be appropriated

7. On the derecognition of an financial asset though other comprehensive income

A. The difference between the consideration received and the carrying amount shall be
recognized in profit or loss
B. The difference between the consideration received and the carrying amount shall be
recognized as an adjustment of retained earnings
C. The difference between the sum of the consideration received and any cumulative
gain or loss that has been recognized as component of other comprehensive income
and the carrying amount shall be recognized in profit or loss.
D. The difference between the sum of the consideration received and any cumulative
gain or loss that has been recognized, as component of other comprehensive income
and the carrying amount shall be included in retained earnings.
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8. The existence of significant influence by an investor is usually evidenced by any of the

following, except
A. Representation in the board of directors
B. Provision for essential technical information
C. Participation in the policy making process
D. Substantial loan to an officer

9. When the investor uses the equity method to account for investment in common stock,
cash dividends received by the investor from the investee should be recorded as
A. Dividend income
B. A deduction from the investor‘s share of the investee’s earnings
C. A deduction from Goodwill
D. A deduction from investment account

10. It is an entity, including an unincorporated entity such as a partnership over which the
investor has significant influence and that is neither a subsidiary nor an interest in a joint
venture.
A. Associate
B. Investee
C. Venture Capital Organization
D. Mutual Fund

11. The gross margin method of estimating ending inventory may be used for all of the
following
A. Internal as well as external interim reports
B. Internal as well as external year end reports
C. Estimate for inventory destroyed by fire or other casualty
D. Rough test of the validity of an inventory cost determined under either periodic or
perpetual system

12. Subsequent to initial recognition, the investment property should be measured at

A. Fair value
B. Cost less any accumulated depreciation and any accumulated impairment losses
C. Revalued amount
D. Either fair value or cost less any accumulated depreciation and any accumulated
losses.

13. Goods on consignment should be included in the inventory of

A. The consignee but not the consignor
B. Both the consignor and consignee
C. The consignor but not the consignee
D. Neither the consignor nor the consignee

14. Biological assets are

A. Living Animals Only
B. Living Plants Only
C. Both living animals and living plants
D. Living Plants and Animals including the bearer plants

15. Under the equity method of accounting for investments, an investor recognizes its share
of the earnings in the period in which the
A. Investor sells the investment
B. Investor declares a dividend
C. Investee pays dividend
D. Earnings are reported by the investee in the financial statements
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16. Financial assets at fair value through profit or loss
A. Maybe reclassified as available for sale investment
B. May be reclassified as held to maturity investment
C. May be reclassified as non marketable equity investment
D. Shall not be reclassified into any other investment category.

17. It is any contract that gives rise to both a financial asset of one entity and a financial
liability or equity instrument of another entity.
A. Financial instrument
B. Debt instrument
C. Equity instrument
D. Derivative instrument

18. Loans and receivables are

A. Nonderivative financial assets with fixed or determinable payments that are quoted
in an active market
B. Nonderivative financial assets without fixed or determinable payments that are not
quoted in an active market
C. Nonderivative financial assets that are not quoted in an active market
D. Nonderivative financial assets without fixed or determinable payments that are
quoted in an active market

19. The amount of any write-down of inventory to net realizable value and all losses of
inventory shall be
A. Recognized as operating expense in the period the write-down or loss occurs.
B. Recognized as other expense in the period the write-down or loss occurs.
C. Recognized as component of cost of sales in the period the write-down or loss occurs.
D. Deferred until the related inventory is sold.

20. Agricultural activity

A. Is the management by an entity of the biological transformation of biological assets
for sale, into agricultural produce, or into additional biological assets.
B. Comprises the processes of growth, degeneration, production and procreation that
cause qualitative or quantitative changes in a biological asset
C. Is the detachment of produce from a biological asset or the cessation of a biological
asset’s life processes
D. Is the aggregation of similar living animals or plants.

PAS 40, PFRS 5, PFRS 6, PAS 37, PFRS 16

1. A noncurrent asset that ceases to be classified as held for sale shall be measured at
A. Carrying amount
B. Recoverable amount at the date of the subsequent decision not to sell
C. Lower between the carrying amount before the asset was classified as held for sale
adjusted for depreciation that would have been recognized if the asset had not been
classified as held for sale and the recoverable amount at the date of the subsequent
decision not to sell
D. Higher between the carrying amount before the asset was classified as held for sale
adjusted for depreciation that would have been recognized if the asset had not been
classified as held for sale and the recoverable amount at the date of the subsequent
decision not to sell

2. Provisions shall be recognized for all of the following, except

A. cleaning-up costs of contaminated land when an oil company has a published policy
that it will undertake to clean up all contamination that it causes.
B. restructuring costs after a binding sale agreement has been signed.
C. rectification costs relating to effective products already sold.
D. future refurbishment costs due to introduction of a new computer system.
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3. Which statement is incorrect concerning presentation of noncurrent asset or disposal

group classified as held for sale?
A. An entity shall depreciate a noncurrent asset classified as held for sale or while it is
part of a disposal group classified as held for sale.
B. An entity shall present a noncurrent asset held for sale and the asset of a disposal
group classified as held for sale separately from other assets.
C. The liabilities of a disposal group classified as held for sale shall be presented
separately from other liabilities.
D. The assets and liabilities a disposal group classified as held for sale shall not be offset
as a single amount.

4. The lessee may apply the operating lease model under what condition?
A. Short Term Lease
B. Low value lease
C. Both Short term and low value lease
D. Either Short term and low value lease

5. Which is not included in lease payments

A. Any payment required by a purchase option that is reasonably certain to be exercised
B. Costs for services and taxes paid by lessee
C. Required payments over the lease term
D. Amount guaranteed by a party related to the lessee

6. An abandoned noncurrent asset

A. Shall be classified as held for sale
B. Shall not be classified as held for sale because its carrying amount will be recovered
principally through continuing use
C. Shall be accounted for as a discontinued operation
D. Shall be treated as a loss

7. If an entity wishes to change from a cost model to fair value model under IAS 40
A. When the board of directors approves a change
B. When the value of the assets will improve with a revised model
C. When a change will result in a more appropriate presentation
D. When the market for these properties is fluctuation

8. Which of the following expenditures would never qualify as an exploration and evaluation
asset?
A. Expenditure for acquisition of rights to explore
B. Expenditure for exploratory drilling
C. Expenditures related to the development of mineral resource
D. Expenditures for activities in relation to evaluating the technical feasibility and
commercial viability of extracting a mineral resource.

9. Under PFRS 16, the lessee is require to recognize

A. Right of use asset and lease liability
B. Right of use asset and not lease liability
C. Lease Receivable
D. Lease Liability and Receivable

10. A lessee had a 10 year finance lease requiring equal annual payments. The reduction of
the lease liability in the 2nd year should equal
A. The current liability shown for the lease at the end of first year
B. The current liability shown for the lease at the end of the 2nd year
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C. The reduction of the lease liability in the 1st year
D. 1/10 of the original lease liability

11. A competitor has sued our entity for the unauthorized use of its patented technology.
The amount that the entity may be required to pay to the competitor if the competitor
succeeds in the lawsuit is determinable with reliability, and according to the legal
counsel it is less than probable but more than remote that an outflow of the resources
would be needed to meet the obligation. The entity that was sued should, at year-end,
A. recognize a provision for this possible obligation.
B. make a disclosure of the possible obligation in the footnotes to the financial
statements.
C. make no provision or disclosure and wait until the lawsuit is finally decided and then
expense the amount on settlement, if any.
D. set aside, as an appropriation, a contingency reserve, an amount based on the best
estimate of the possible liability.

12. Which is incorrect concerning the balance sheet presentation of the discontinued
operation?
A. Assets of the component held for sale are presented separately from all other assets
of the entity
B. Assets of the component held for sale are measured at the higher of fair value less
cost to sell and their carrying amount.
C. Liabilities of the component held for sale are presented separately from all other
liabilities of the entity
D. Depreciable assets of the component held for sale shall not be depreciated

13. Exploration and evaluation assets are initially measured at

A. cost.
B. revalued amount.
C. fair value.
D. a or b

14. If an entity wishes to change from a cost model to fair value model under IAS 40
A. When the board of directors approves a change
B. When the value of the assets will improve with a revised model
C. When a change will result in a more appropriate presentation
D. When the market for these properties is fluctuation

15. Exploration and evaluation assets are exploration and evaluation expenditures
recognized as
A. assets in accordance with the entity’s accounting policy.
B. expenses in accordance with applicable PFRSs.
C. assets in accordance with (a) above, subject to the limitations provided under PAS 8
Accounting Policies, Changes in Accounting Estimates and Errors.
D. any of these

16. An investment property shall be measured initially at

A. Cost
B. Cost less accumulated impairment loss
C. Depreciable cost less accumulated impairment losses
D. Fair Value less accumulated impairment loss

17. Does PFRS 6 require an entity to recognize exploration and evaluation expenditure as an
asset?
A. No, but only to the extent such expenditure is recoverable in future periods.
B. Yes, but only to the extent the technical feasibility and commercial viability of
extracting the associated mineral resource have been demonstrated.
C. Yes, but only to the extent required by the entity’s accounting policy for recognizing
exploration and evaluation asset.
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D. No, such expenditure is always expensed in profit or loss as incurred

18. Exploration and evaluation expenditures are incurred

A. When searching for an area that may warrant detailed exploration, even though the
entity has not yet obtained the legal rights to explore a specific area.
B. When the legal rights to explore a specific area have been obtained, but the technical
feasibility and commercial viability to extracting a mineral resource are not yet
demonstrable.
C. When a specific area is being developed and preparations for commercial extraction
are being made.
D. In extracting mineral resource and processing the resource to make it marketable or
transportable.

19. An entity has an asset that was classified as held for sale. However, the criteria for it to
remain as held for sale no longer apply. The entity shall
A. Leave the noncurrent asset in the financial statements at its current carrying value.
B. Premeasured the noncurrent asset at fair value
C. Measure the noncurrent asset at the lower of its carrying amount before the asset
was classified as held for sale, adjusted for subsequent depreciation, amortization or
revaluation and its recoverable amount at the date of the decision not to sell.
D. Recognize the noncurrent asset at its carrying amount prior to its classification as
held for sale adjusted for subsequent depreciation, amortization or revaluation.

20. A provision is recognized in the statement of financial position under which of the
following requirements?
I. An enterprise has a present obligation, legal or constructive, as a result of a past
event.
II. It is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation.
III. A reliable estimate can be made of the amount of the obligation.
A. I, II and III
B. II and III
C. I only
D. II only

21. Which statement is incorrect concerning a contingent asset?

A. A contingent asset is not recognized in the financial statements because this may
result to recognition of income that may never be realized.
B. A contingent asset is only disclosed when the occurrence of the future event is
possible or remote
C. When the realization of income is virtually certain, the related asset is no longer
contingent asset and its recognition is appropriate
D. The related gain arising from the contingent asset is recognized usually when it is
realized

22. Which of the following should be disclosed in the financial statements as a contingent
liability?
A. The entity has accepted a liability prior to the year-end for unfair dismissal of an
employee and is to pay damages.
B. The entity has received a letter from a supplier complaining about a past unpaid
invoice.
C. The entity is involved in a legal case, which it may possibly lose, although this is not
probable.
D. The entity has not yet paid certain claims under sales warranties.

23. The results of discontinued operation shall be presented

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A. On the face of the income statement as a single amount below the income from
continuing operations.
B. On the face of the income statement with details of revenue and expenses side by
side with continuing operations
C. As a single amount in the statement of retained earnings
D. In the accompanying notes to the financial statements

24. An entity classify a noncurrent asset or disposal group as held for sale when
A. The carrying amount of the asset or disposal group will be recovered through
continuing use
B. The carrying amount of the asset or disposal group will be recovered through a sales
transaction
C. The noncurrent asset or disposal group is to be abandoned
D. The noncurrent asset or disposal group is idle or retired from active use

25. The carrying amount of the right of use asset would be periodically reduced by
A. Total Lease Payments
B. Portions of the lease payments allocable to interest
C. Portion of the lease payments allocable to reduction of the lease liability
D. Depreciation of the right of use asset

26. If a property is partly an investment property, and partly owner-occupied, the

company should account for the property
A. As owner-occupied
B. Each portion should be accounted for separately
C. As investment property
D. As inventory

27. Which of the following does not meet the definition of a liability?
A. The signing of a three-year employment contract at a fixed annual salary.
B. An obligation to provide goods or services in the future.
C. A note payable with no specified maturity date.
D. An obligation that is estimated amount.

28. A provision shall be recognized as liability if it satisfies all of the following criteria, except
A. The amount of the obligation can be measured reliably.
B. It is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation.
C. It is possible that an outflow of resources embodying economic benefits will be
required to settle the obligation.
D. The entity has a present obligation as a result of a past event.

29. All of the following properties falls under PAS 40 except,

A. Land held for Long-term capital appreciation
B. Property occupied by an employee paying market rent
C. Land held for currently undetermined use
D. A building owned by the entity and leased out under operating Lease

30. An entity shall measure a noncurrent asset or disposal group classified as held for sale
A. carrying amount
B. Fair value less cost to sell
C. Lower of carrying amount and fair value less cost to sell
D. Higher of carrying amount and fair value less cost to sell

PAS 12,19,8,10,24,33,34 PFRS 8,13

1. During the current year, an entity discovered that ending inventory reported in the
financial statements for the prior year was understated. How should the entity account
for this understatement?
A. Adjust the beginning inventory of the prior year
B. Restate the financial statements with corrected balances for all periods presented
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C. Adjust the ending balance in retained earnings at current year end
D. Make no entry because the error will self-correct

2. An entity has co-signed the mortgage note on the home of its president guaranteeing
the indebtedness in the event that the president should default. The entity considers the
likelihood of default to be remote. How should the guarantee be treated in the financial
statements
A. Disclosed only
B. Accrued only
C. Accrued and Disclosed
D. Neither accrued nor disclosed

3. Operating segments that do not meet any of the quantitative thresholds

A. Cannot be considered reportable
B. May be considered reportable and separately disclosed if management believes that
information about the segment would be useful to the users of the financial
statements
C. May be considered reportable and separately disclosed if the information is for
internal use
D. May be considered reportable and separately disclosed if this is the practice within
the economic environment in which the entity operates

4. Which of the following transactions most likely would be a related party transactions
requiring disclosure?
A. The entity borrowed P1,000,000 from Southwest Bank issuing a non-interest bearing
note
B. The entity borrowed P2,000,000 from Northwest Bank at a rate significantly above
the prevailing market interest rate
C. The entity borrowed P500,000 from Eastwest bank with no schedule terms for how or
when the funds will be repaid
D. The entity borrowed P3,000,000 from West Bank at a rate which is a little below the
prevailing market rate

5. Earnings per share shall be reported for all of the following except
A. Continuing operations
B. Discontinued operations
C. Net income
D. Net cash provided by operating activities

6. Which event after the end of the reporting period would generally require disclosure
A. Retirement of key management personnel
B. Settlement of litigation when the event that gave rise to the litigation occurred in a
prior period
C. Strike of employees
D. Issue of a large amount of ordinary shares

7. Which statement about interim reporting is true

A. All entities that issue an annual report must issue interim financial report
B. The integral view is the appropriate appriach is preparing interim financial report
C. A complete set of financial statements must be presented for an interim period
D. The same accounting principles used for the annual report should be employed for
interim report

8. Interm financial reporting should be viewed

A. As a tye of reporting that need not follow IFRS
B. As useful only if activity is evenly spread throughout the year so that estimates are
unncessary
C. As reporting for an integral part of an annual period
D. As reporting for a separate accounting period
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9. A cash settled share based payment transaction increases

A. Current Asset
B. Non-Current Asset
C. Equity
D. Liability

10. The calculation of diluted EPS assumes that share options were exercised and that the
proceeds were used to
A. Buy ordinary shares as an investment
B. Retire Preference Shares
C. Buy Treasury Shares
D. Increase net income

11. Share options should be reported as expense

A. using the intrinsic value method
B. using the fair value method
C. using the fair value or intrinsic value method
D. using the cost method

12. In calculating diluted earnings per share, which of the following should not be considered
A. The weighted average number of ordinary shares outstanding
B. The amount of dividends declared on cumulative preference shares
C. The amount of cash dividends declared on ordinary shares
D. The number of ordinary shares resulting from the assumed conversion of bonds
payable outstanding

13. Tax expense should be allocated to all except

A. Discontinued operation
B. Prior period error
C. Gross Income
D. Other comprehensive income

14. All of the following are related parties except

A. Joint venture in which the entity is a venturer
B. A postemployment benefit plan for the employees
C. An executive director of the entity
D. The partner of a key manager is a major supplier

15. An entity decide to build and operate an amusement park next year. The entity applied
for a letter of guarantee which was issued before the issuance of the financial
statements of the current year. What is the adjustment required at the current year end?
A. Book a long term payable for the amount of guarantee
B. Disclose the guarantee as a contingent liability
C. Increase the contingency reserve
D. Do nothing

16. In financial reporting for operating segments, an entity shall disclose all of the following
except
A. Type of product and service from which reportable segment deprives revenue
B. the title of the chief operating decision maker
C. Factors used to identify the reportable segments
D. The basis of measurement of segment profit or loss and segment assets

17. At the current year-end, an entity had a deferred tax liability that exceeded to reverse in
the next year. Which of the following should be reported in the current year-end
statement of financial position?
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A. The excess of the deferred tax liability over the deferred tax asset as a non-current
liability
B. The excess of the deferred tax liability over the deferred tax asset as a current
liability
C. The deferred tax liability as a non-current liability
D. The deferred tax liability as a current liability

18. An entity made a public announcement of a commitment to a voluntary redundancy

plan. The entity has an obligation to pay employees that choose voluntary redundancy a
lump sum equal to twice their gross annual salary. What is the obligation to pay
employees that choose voluntary redundancy
A. Short term employee benefit
B. Postemployment benefit
C. Other long-term employee benefit
D. A termination benefit

19. Which statement is true in relation to events after the reporting period?
A. Notes to the financial statements should give details of material adjusting events
included in those financial statements
B. Notes to the financial statements should give details of material nonadjusting events
which could influence the economic decisions of primary users
C. A decline in the fair value of trading investments would normally be classified as an
adjusting event
D. The settlement of a long running court case would normally be classified as a non-
adjusting event

20. A formula in a defined contribution plan

A. Defines the benefits that the employee will receive at the time of retirement
B. Ensures that the defined benefit cost and funding are the same
C. Requires an employer to contribute a certain sum each period based on the formula
D. Ensures that enough fund would be available

21. An entity that changed from cash basis to accrual basis of accounting during the current
year should report
A. Prior period adjustment resulting from the correction of an error
B. Prior period adjustment resulting from the change in accounting policy
C. Component of income from continuing operations
D. Component of income from discontinued operations

22. On April 1, 2023, the entity discovered that depreciation expense for 2022 was
overstated. The 2022 financial statements were authorized for issue on March 15, 2023.
What must the entity do?
A. Reissue the 2022 financial statements with the correct depreciation expense
B. Reduce the depreciation expense for 2023
C. Restate the depreciation expense reported for 2022 in the comparative figures of the
2023 financial statements
D. Do nothing

23. When issuing share options which of the the following factors is more relevant in
determining the accounting treatment?
A. The par value of the shares issued
B. The market value of the shares issued
C. The authorized number of shares
D. Whether the share options are issued in lieu of salary

24. In a defined benefit plan, the process of funding refers to

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A. Determining the defined benefit obligation
B. Determining the accumulated benefit obligation
C. Making the periodic contributions to a funding agency to ensure that funds are
available to meet claims
D. Determining the amount reported for pension expense

25. Which is incorrect concerning tax asset and liabilities

A. Deferred tax asset and liability shall be discounted
B. Tax asset and liability shall be presented separately from other assets and other
liabilities
C. Deferred tax asset and liability shall be distinguished from current tax asset and
liabilities
D. Deferred tax asset and liability are noncurrent