4TH ISOMETRIANS CUP

ELIMINATION ROUND
LEVEL II

1. Accounting has been given various definitions, which of the following is not one of those definitions?
a. Accounting is a service activity. Its function is to provide quantitative information, primarily financial in
nature, about economic entities that is intended to be useful in making economic decisions.
b. Accounting is the art of recording, classifying, and summarizing in a significant manner and in terms of
money, transactions and events which are, in part of at least, of a financial character and interpreting the
results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence regarding assertions
about economic actions and events to ascertain the degree of correspondence between these assertions
and established criteria and communicating the results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic information to permit
informed judgment and decisions by users of information.

2. Which of the following statements is incorrect regarding the basic accounting concepts?
a. One of ABC Co.’s delivery trucks was involved in an accident. Although no lawsuits have yet been filed
against ABC, ABC recognized a liability for the probable loss on the event. This is an application of the
prudence or conservatism concept.
b. Under the consistency concept, the financial statements should be prepared on the basis of accounting
principles which are followed consistently.
c. Under the entity theory, the business is viewed as a separate entity. Therefore, the personal transactions
of the business owners are not recorded in the business’ accounting records.
d. The time period concept means that financial statements are prepared only at the end of the life of a
business.

3. Which of the following events is considered as an external event?

a. production c. gifts and charitable contributions
b. payment of taxes d. c and d

4. This concept defines the area of interest of the accountant. It determines which transactions are recognized
in the books of accounts and which are not.
a. Articulation c. Separate entity
b. Matching d. Full disclosure

5. Which of the following statements is correct?

I. Accounting provides qualitative information, financial information, and quantitative information.
II. Qualitative information is found in the notes to the financial statements only.
III. Accounting is considered an art because it is supported by an organized body of knowledge
IV. Accounting is considered a science because it involves the exercise of skill and judgment.
V. Measurement is the process of assigning numbers to objects such inventories or plant assets and to
events such as purchases or sales.
VI. All quantitative information is also financial in nature.
VII. The accounting process of assigning peso amounts or numbers to relevant objects and events is called
identification.
a. I and V c. I, II, III, IV and V
b. I, II, VI and V d. II, VI and V

6. The process of identifying, measuring, analyzing, and communicating financial information needed by
management to plan, evaluate, and control an organization’s operations is called
a. financial accounting. c. managerial accounting.
b. tax accounting. d. auditing.

7. It is the official accounting standard setting body in the Philippines. It is composed of a chairperson and 14
members.
a. Financial Reporting Standards Committee (FRSC)
b. Financial Reporting Standards Council (FRSC)
c. Accounting Standards Committee (ASC)
d. Accounting Standards Council (ASC)

8. You are the accountant of ABC Co. During the period, your company purchased staplers worth ₱1,500.
Although the staplers have an estimated useful life of 10 years, you have charged their cost as expense. Which
of the following is most likely to be true?
a. You are applying the concept of matching.
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 b. You are applying the concepts of materiality and cost-benefit consideration.
c. You are applying the concept of verifiability.
d. You are just lazy to compute for the periodic depreciation. 

9. What is the authoritative status of the Conceptual Framework?

a. It has the highest level of authority. In case of a conflict between the Conceptual Framework and a
Standard, the Conceptual Framework overrides that Standard.
b. If there is a Standard that specifically applies to a transaction, that Standard overrides the Conceptual
Framework. In the absence of such a Standard, the requirement of the Conceptual Framework should be
followed.
c. If there is a Standard that applies to a transaction, that Standard overrides the Conceptual Framework. In
the absence of such a Standard, the entity’s management should consider the applicability of the
Conceptual Framework in developing and applying an accounting policy that will result in useful
information.
d. The Conceptual Framework applies only to the IASB when developing or amending Standards. A
reporting entity should never use the Conceptual Framework.

10. 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

a. I and III c. I, II, III, IV, V, VI

b. I, II, III, IV, V, VI, VII
d. all of these

11. The Conceptual Framework broadly classifies the qualitative characteristics into
a. primary and secondary qualitative characteristics.
b. major and minor qualitative characteristics.
c. fundamental and enhancing qualitative characteristics.
d. cold and hot qualitative characteristics.

12. Identify the qualitative characteristics that enhance the usefulness of financial information.
I. Relevance
II. Reliability
III. Faithful representation
IV. Comparability
V. Verifiability
VI. Timeliness
VII. Understandability

a. I and II c. II, III, IV, V and VII

b. I and III d. IV, V, VI and VII

13. Which of the following statements is incorrect concerning materiality?

a. Materiality can be assessed quantitatively or qualitatively
b. There are no specific materiality thresholds provided under the PFRSs
c. Materiality is a matter of judgment
d. Materiality is a quantitative matter. It should never be assessed qualitatively.

14. The elements of faithful representation do not include

a. comparability. c. completeness.
b. neutrality. d. free from error.

15. Which of the following is incorrect regarding the use of the term ‘reporting entity’ under the Conceptual
Framework?
a. A reporting entity one that is required, or chooses, to prepare financial statements.
b. A reporting entity must be a legal entity.
c. A reporting entity can be a parent and its subsidiaries viewed as a single entity.
d. All of these are correct.
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16. The cost of inventory is recognized as expense
a. immediately.
b. using the matching concept.
c. by systematic allocation.
d. any of these as a matter of accounting policy choice

17. Comprehensive income (or total comprehensive income) includes

a. Profit or loss
b. Other comprehensive income
c. Transactions with owners
d. a and b
e. All of these

18. The information provided by financial reporting pertains to

a. individual business entities and the economy as a whole, rather than to industries or to members of society
as consumers
b. individual business entities, industries and the economy as a whole, rather than to members of society as
consumers
c. individual reporting entities, rather than to industries, the economy as a whole or members of society as
consumers
d. individual business entities and industries, rather than to the economy as a whole or to members of society
as consumers

19. Which of the following statements is correct when an entity departs from a provision of a PFRS?
a. The entity’s financial statements would be grossly incorrect; therefore, PAS 1 does not allow such a
departure.
b. PAS 1 permits such a departure if the relevant regulatory framework requires, or otherwise does not
prohibit, such a departure.
c. PAS 1 requires certain disclosures when an entity departs from a provision of a PFRS.
d. b and c

20. Which of the following statements is correct regarding the classification of financial liabilities as current or
noncurrent in accordance with PAS 1?
a. Currently maturing obligations are presented as current liabilities even if their original term is longer than
one year and even if a refinancing agreement is completed after the end of the reporting period but before
the financial statements are authorized for issue.
b. Currently maturing obligations are presented as noncurrent liabilities only if their original term is longer
than one year.
c. Currently maturing obligations are presented as noncurrent liabilities only if a refinancing agreement is
completed after the end of the reporting period but before the financial statements are authorized for issue.
d. Currently maturing obligations are presented as noncurrent liabilities if a refinancing agreement is
completed after the financial statements are authorized for issue.

21. According to PAS 1, the judgments and estimates embodied in the financial statements, for example,
materiality judgments, assessments of uncertainty and risk, and the like, are the responsibility of the entity’s
a. management. c. auditor.
b. accountant. d. janitor.

22. Which of the following is not a disclosure requirement of PAS 1?

a. The financial effect of a departure when an entity departs from a PFRS requirement.
b. Any material uncertainties on the entity’s ability to continue as a going concern.
c. The recognition, measurement and disclosure of specific transactions and other events.
d. The reason for using a longer or shorter period when an entity changes the frequency of its reporting.

23. Comprehensive income excludes which of the following

a. Revaluation surplus
b. Gains and losses from investments measured at fair value through profit or loss
c. Income tax expense
d. Distributions to owners

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24. Entity A buys and sells artifacts. Each artifact is unique and not ordinarily interchangeable. According to PAS
2, the cost formula that Entity A should use is
a. Specific identification. c. FIFO.
b. Weighted Average. d. Any of these.

25. Entity A acquires inventories and incurs the following costs:

Purchase price, gross of trade discount 100,000
Trade discount 20,000
Non-refundable purchase tax, not included
in the purchase price above 5,000
Freight-in (Transportation costs) 15,000
Commission to broker 2,000
Advertisement costs 10,000

How much is the cost of the inventories purchased?

a. 102,000 c. 97,000
b. 122,000 d. 100,000

26. Which of the following is presented in the activities section of the statement of cash flows?
a. Purchase of a treasury bill three months before its maturity date.
b. Dividends paid this year although declared in a prior year.
c. Acquisition of equipment through issuance of note payable.
d. Bank overdrafts that can be offset.

27. In the statement of cash flows of a non-financial institution, interest income received is presented under
a. operating activities. c. investing activities.
b. financing activities. d. a or c

28. If the price of crackers goes up when the price of cheese goes down, crackers and cheese are
a. inferior goods. c. both substitutes and complements.
b. substitutes. d. Complements

29. Select the group that best represents the basic factors of production.
a. land, labor, capital, entrepreneurship
b. land, labor, money, management skills
c. land, natural resources, labor, capital
d. land, labor, capital, technology

30. Law of Demand states that

a. With the increase in price Quantity increases
b. With the increase in price quantity decreases other things remaining the same.
c. Quantity does not change with any increase in price.
d. All of the above.

31. Managerial economics can best be described as:

a. How managers streamline the production process to achieve cost minimization.
b. How firm managers use economic analysis to make business decisions to best use the firm's
resources.
c. How and when firm managers determine the appropriate plant to build and where to locate it.
d. The study of how firm managers make their decisions and the experience they utilize to maximize
the net worth of the firm.

32. Mallory decides to spend 3 hours working overtime rather than watching a video with her friends. She earns
P8 an hour. Her opportunity cost of working is
a. the P24 she earns working.
b. the P24 minus the enjoyment she would have received from watching the video.
c. the enjoyment she would have received had she watched the video.
d. nothing, since she would have received less than P24 of enjoyment from the video.

33. A company using the periodic inventory system has the following account balances: Merchandise Inventory at
the beginning of the year, P4,000; Transportation-In, P450; Purchases, P12,000; Purchases Returns and
Allowances, P2,300; Purchases Discounts, P220. The cost of merchandise purchased is equal to
a. P13,930 c. P9,489
b. P9,930 d. P14520
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34. The primary difference between a periodic and perpetual inventory system is that a
a. periodic system determines the inventory on hand only at the end of the accounting period
b. periodic system keeps a record showing the inventory on hand at all times
c. periodic system provides an easy means to determine inventory shrinkage
d. periodic system records the cost of the sale on the date the sale is made

35. A sales invoice included the following information: merchandise price, P4,000; transportation, P300; terms
1/10, n/eom, FOB shipping point. Assuming that a credit for merchandise returned of P600 is granted prior to
payment, that the transportation is prepaid by the seller, and that the invoice is paid within the discount period,
what is the amount of cash received by the seller?
a. P3,366 c. P3,666
b. P3,400 d. P3,950

36. The JPB partnership reported net income of P160,000 for the year ended December 31, 20x4. According to
the partnership agreement, partnership profits and losses are to be distributed as follows:
J P B

Salaries P 50,000 P60,000 P30,000

Bonus on net income 10% 5% 10%

Remainder (if positive) 60% 30% 10%

Remainder (if negative) 30% 40% 30%

How should partnership net income for 20x4 be allocated to J, P, and B?

J P B
a. P96,000 P48,000 P16,000
b. P58,000 P64,000 P38,000
c. P60,000 P60,000 P40,000
d. P66,000 P68,000 P46,000

37. DO is admitted into the partnership of RE and MI by investing cash equivalent to ¼ of their capital. Which of
the following is true after the admission of DO?
a. Assets of the partnership will increase
b. Total partners' equity remain the same
c. RE and MI capital decreased by ¼
d. Assets of the partnership will remain the same

38. Partner Ae first contributed P50,000 of capital into existing partnership on March 1, 2016. On June 1, 2016,
said partner contributed another P20,000. On September 1, 2016, he withdrew P15,000 from the partnership.
Withdrawal in excess of P10,000 are charged to partner's capital accounts. What is the annual weighted
average capital balance of Partner Ae?
a. 32,500 c. 60,000
b. 51,667 d. Answer not given

39. If a partner's capital balance is credited for an amount greater than or less than the fair value of his net
contribution, the excess or deficiency is called a
a. Bonus c. Discount
b. Goodwill d. Premium

40. A partnership has the following accounting amounts:

Sales P 700,000
Cost of goods sold 400,000
Operating expenses 100,000
Salary allocations to partners 130,000
Interest paid to banks 20,000
Partners' drawings 80,000

What is the partnership net income (loss)?

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 a. 200,000 c. 50,000
b. 180,000 d. Answer not given

41. Which of the following is true?

a. A stipulation that excludes one or more partners from any share in the profits or losses is valid
b. The income summary account is credited in the entry to record the distribution of profits
c. In the absence of any agreement, salary allowances to partners shall be provided when the
operations yield losses
d. Salary and interest allowances are reported in the statement of comprehensive income as salaries
and interest expense

42. He refers to a partner who contributed not only money and property but also industry to the newly formed
partnership.
a. Industrial partner c. Capitalist-industrial partner
b. Nominal partner d. Capitalist partner

43. It refers to a juridical necessity to give, to do or not to do.

a. Obligation c. Law
b. Contract d. Delict

44. It is a source of a civil obligation that refers to a juridical relation which arises from certain lawful, voluntary and
unilateral act, to the end that no one may be unjustly enriched or benefited at the expense of another.
a. Quasi-delict c. Contract
b. Quasi-contract d. Delict

45. In an obligation to deliver a determinate thing, what degree of diligence shall be exercised by the obligor or
debtor in the preservation of the determinate thing in the absence of applicable legal provision and valid
agreement of the paries?
a. Extraordinary diligence c. Absolute diligence
b. Diligence of a good father of a family d. Utmost diligence and care

46. It is an obligation where the debtor is alternatively bound by different prestations and it is extinguished by the
performance of any of them.
a. Alternative obligation c. Conjunctive obligation
b. Facultative obligation d. Indivisible obligation

47. Who has the right of choice in a facultative obligation?

a. Generally creditor, unless it has expressly granted to the debtor
b. Generally debtor, unless it has expressly granted to the creditor
c. Always debtor
d. Always creditor

48. At the end of 2019, Tayum Company made four adjusting entries for the following items:
1. Depreciation expense, P25,000.
2. Expired insurance, P2,200 (originally recorded as prepaid insurance).
3. Interest payable, P6,000.
4. Rental revenue receivable, P10,000.

In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is
(are)
a. Entry No. 3. c. Entries No. 3 and No. 4.
b. Entry No. 4. d. Entries No. 2, No. 3, and No. 4.

49. PFRSs are adopted from the standards issued by the

a. IASC. c. IASB.
b. IASCF. d. FASB.

50. Entity A's inventories on December 31, 20x1 have a cost of ?100,000 and a net realizable value of ?80,000.
Accordingly, Entity A recognized a write-down of inventories of ?20,000. Shortly after December 31, 20x1, but
before the financial statements were authorized for issue, the inventories were sold for a net sale proceeds of
?70,000. The correct amount of inventory write-down to be reported in Entity A's December 31, 20x1 financial
statements is
a. 20,000 c. 30,000
b. 0 d. any of these

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