Quiz 1-Cfas
Quiz 1-Cfas
Instructions: Choose the letter of the correct/best answer for each of the following questions.
Overview of Accounting
1. It refers to the process of incorporating the effects of an accountable event in the statement of financial position or the
statement of profit or loss and other comprehensive income through a journal entry.
a. realization
b. derecognition
c. recognition
d. posting
2. All of the following are events considered as exchange or reciprocal transfer, except
a. purchase of investment in equity securities
b. sale of equipment for non-interest bearing note
c. subscription of the entity’s own equity instrument (i.e., contributions by owners)
d. exchange of a note payable for an account payable
e. borrowing of money from a bank
3. All of the following are events considered nonreciprocal transfers, except
a. declaration of cash dividends
b. declaration of stock dividends
c. payment of accounts payable
d. imposition of fines
e. theft
4. These are events involving an entity and another external party.
a. external events
b. internal events
c. transactions
d. life events
5. It is the accounting process of assigning numbers, commonly in monetary terms, to the economic transactions and
events.
a. analyzing c. classifying
b. measuring d. interpreting
6. What is the basic purpose of accounting?
a. To provide quantitative financial information about economic activities.
b. To provide all information that users need in making economic decisions.
c. To provide qualitative financial information about economic activities intended to be useful in making economic
decisions.
d. To provide quantitative financial information about economic activities intended to be useful in making economic
decisions.
7. Accounting provides which type of information?
a. quantitative
b. financial information
c. qualitative
d. all of these
8. General purpose financial statements are
a. those statements that cater to the common and specific needs of a wide range of external users.
b. those statements that cater to the common needs of a wide range of external users and internal users.
c. those statements that cater to the common needs of a limited range of external users.
d. those statements that cater to the common needs of a wide range of external users.
9. External users are those
a. who do have the authority to demand financial reports tailored to their specific needs.
b. who do not have the authority to demand financial reports tailored to their common needs.
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c. who do not have the authority to demand financial reports tailored to their specific needs.
d. who belong to countries other than the domicile country of the reporting entity
10. The primary objective of financial reporting is to provide
a. information about economic resources, claims to these resources, and changes in them.
b. information useful for investment and credit decisions.
c. information useful in predicting future cash flows.
d. all of these
11. Which of the following statements is false?
a. Accountable events are those that have an effect in an entity's assets, liabilities, equity, income or expenses.
b. The term “recognition” as used in accounting refers to the process of incorporating the effects of an accountable
event in the statement of financial position or the statement of profit or loss and other comprehensive income
through a memo entry.
c. External events are those that involve the reporting entity and an external party.
d. The Board of Accountancy consists of a chairperson and six members.
12. Which of the following statements is true?
a. In current practice, accounting provides only quantitative information that is useful in making economic
decisions.
b. External users are those who do not have the authority to demand financial reports tailored to their specific
needs.
c. Under the stable monetary unit assumption, the owners of the business and the business are viewed as a single
reporting entity. Therefore, the personal transactions of the owners are recorded in the books of accounts.
d. The practice of accountancy in the Philippines is regulated under R.A. 9892.
13. Which of the following statements correctly refer to the accounting process?
I. Measuring is the accounting process of analyzing business activities as to whether or not they will be recognized
in the books.
II. Recognition refers to the process of including the effects of an event in the totals of the statement of financial
position or the statement of profit or loss and other comprehensive income through memo entries.
III. Disclosure of events in the notes to financial statement without including their effect in the totals of the statement
of financial position or statement of profit or loss and other comprehensive income is not an application of the
recognition principle.
IV. An accountable event is an event that has an effect on the assets, liabilities or equity of an entity and its effect can
be measured reliably.
V. Sociological and psychological matters are within the scope of accounting.
a. I, II, III, IV and V
b. I, II, III and IV
c. IV
d. III and IV
14. Which of the following statements is true?
I. Loss from theft is classified as a nonreciprocal transfer.
II. Internal events are changes in economic resources by actions of other entities that do not involve transfers of
resources and obligations.
III. Nonreciprocal transfers involve the transfer of resources in only one direction, either from an entity to other
entities or from other entities to the entity.
IV. Internal events are sudden, substantial, unanticipated reductions in resources not caused by other entities.
V. Fire, earthquake and flood are examples of accountable events classified as internal events.
a. I, II, III and V
b. I, III and V
c. II, III, IV and V
d. I, III, IV and V
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a. the context of an item in relation to the current economic state of the environment where the entity operates.
b. 10% of profit or loss, in absolute terms
c. 5% of total revenues
d. 1% of total assets
26. Which of the following statements about materiality is not correct?
a. An item must make a difference; otherwise, it need not be reported.
b. Materiality is affected by an item’s relative size and/or importance.
c. An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.
d. All of these are correct statements about materiality.
27. Which of the following does not provide evidence of future economic benefits from a resource?
a. The resource cannot be used in the entity’s operations but has a resale value.
b. The resource has no use for the entity but it can be swapped for other resources.
c. The entity does not intend to sell or use the resource but instead distribute it to the owners as dividends.
d. The resource is expected to be used only in the current period and that’s it.
28. Which of the following would most likely result to the recognition of a liability?
a. Customers become entitled to rebates for their past purchases.
b. Intention to acquire inventories in a future period.
c. Entering into a purchase contract for future delivery.
d. Agreeing on an irrevocable future commitment that is not burdensome at present.
29. The adage “Aanhin mo pa and kabayo pag patay na ang damo” relates to which of the following qualitative
characteristics?
a. Relevance
b. Timeliness
c. Faithful representation
d. Comparability
30. The Conceptual Framework classifies gains and losses based on whether they are related to an entity's major ongoing or
central operations. These gains or losses may be classified as
Non-operating Operating
a. Yes No
b. Yes Yes
c. No Yes
d. No No
31. Which of the following is considered a pervasive constraint by the Conceptual Framework?
a. Cost-benefit relationship
b. Timeliness
c. Conservatism
d. Materiality
32. According to the Conceptual Framework, predictive value relates to
Relevance Faithful representation
a. Yes Yes
b. No Yes
c. Yes No
d. No No
33. Information is neutral if it
a. provides benefits which are at least equal to the costs of its preparation.
b. can be compared with similar information.
c. has no impact on a decision maker.
d. is free from bias toward a predetermined result.
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34. Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the
information they already possess or can obtain from other sources, and their ability to process information.
Consequently, for information to be useful there must be a linkage between these users and the decisions they make.
This link is
a. relevance.
b. reliability.
c. understandability.
d. materiality.
35. Accounting information is considered to be relevant when it
a. can be depended on to represent the economic conditions and events that it is intended to represent.
b. is capable of making a difference in a decision.
c. is understandable by reasonably informed users of accounting information.
d. is verifiable and neutral.
42. 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
43. 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%.
44. 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
45. 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
PAS 2 Inventories
46. Which of the following is added to the cost of inventories?
a. Storage costs of part-finished goods
b. Trade discounts
c. Refundable purchase taxes
d. Administrative costs
47. Which of the following costs are included in the cost of inventories?
a. Transport costs for raw materials
b. Abnormal material usage
c. Storage costs relating to finished goods
d. Administrative and general overhead
48. How should trade discounts be dealt with when valuing inventories at the lower of cost and net realisable value
(NRV) according to PAS 2?
a. Added to cost
b. Ignored
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How much cash and cash equivalents is reported in Entity A’s December 31, 20x1 statement of financial position?
a. 110,000 c. 310,000
b. 235,000 d. 460,000
52. Entity A acquires equipment by issuing shares of stocks. How should Entity A report the transaction in the statement
of cash flows?
a. Operating activities
b. Investing activities
c. Financing activities
d. Not reported
53. Entity A, a financial institution, received cash dividends from its investments in marketable securities during the year.
How will the dividends be presented in Entity A’s statement of cash flows?
a. as investing activity
b. as operating activity
c. as financing activity
d. a or b
54. Which of the following statements best describes a statement of cash flows?
a. The statement of cash flows is also called the statement of activities.
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b. The statement of cash flows shows information on an entity’s assets, liabilities and equity.
c. The statement of cash flows shows information on an entity’s income and expenses during the period.
d. The statement of cash flows shows historical changes of cash and cash equivalents during the period.
55. Which of the following is presented under the investing activities section of a statement of cash flows?
a. Collection of accounts receivable
b. Cash purchases of inventories
c. Purchase of equipment through cash
d. Issuance of share capital through cash
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