DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
Theory of Accounts - Review

COVERAGE:
PAS 1: Presentation of Financial Statements
PAS 7: Statement of Cash Flows
PAS 8: Accounting Policies, Change in Accounting Estimates and Errors
PAS 10: Events After Reporting Period
PAS 24: Related Party Disclosures
PAS 34: Interim Reporting
PFRS 5: Noncurrent Asset held for Sale and Discontinued Operation
PFRS 8: Operating Segments
Accounting Process
Cash Basis, Accrual Basis and Error Correction

Direction: Read and select the best answer for the following questions.

1. These refer to the statements intended to meet the needs of users who are not in a position to require
an entity to prepare reports tailored to their particular information needs.
a. General purpose operational reports
b. Special purpose financial statements
c. General purpose financial statements
d. General purpose tax reports

2. PAS 1 provides that when an entity changes the end of its reporting period and presents financial
statements for a period longer or shorter than one year, an entity shall disclose the following, except
a. The period covered by the financial statements.
b. The reason for using a longer or shorter period.
c. The fact that amounts presented in the financial statements are not entirely comparable.
d. The fact that amounts presented in the financial statements are entirely comparable.

3. It is a term which means the process of reporting an asset, liability, income or expense on the face of
the financial statements of an entity.
a. Measurement
b. Recognition
c. Reporting
d. Presentation

4. The accounts in the statement of financial position use different measurement bases or financial
attributes. Which of the following statements pertaining such attribute is inaccurate?
a. Historical cost is the amount of cash or cash equivalent paid or the fair value of the
consideration given to acquire an asset at the time of acquisition and it is also known as “past
sale exchange price”.
b. Current cost is the amount of cash and cash equivalent that would have to be paid if the same
or an equivalent asset was acquired currently and it is also known as “current purchase
exchange price.”
c. Realizable value is the amount of cash or cash equivalent that could currently be obtained by
selling the asset in an orderly disposal and it is also known as “exit value”.
d. Present value is the discounted value of the future net cash inflows that the item is expected to
generate in the normal course of business and it is also known as “future exchange price.”

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5. Users of financial statements need information in order to satisfy their different needs for information.
Which of the following statements concerning the financial statements users is accurate?
a. Employees are interested with the risk inherent in and return provided by their investments.
b. Customers have an interest in information about the continuance of an entity especially when
they have a long-term commitment with or are dependent on the entity.
c. Suppliers and other trade creditors are interested in information which enables them to
determine whether their loans and interest thereon will be paid when due.
d. Government and their agencies are interested to information about trends and recent
developments in the prosperity of the entity and the range of its activities.

6. Which of the following statements concerning the concept of going concern is inaccurate?
a. Going concern means that the accounting entity is viewed as continuing in operation
indefinitely in the absence of evidence to the contrary.
b. In making the assessment about the going concern assumption, management shall take into
account all available information about the future which is at least twelve months from the end
of reporting period.
c. If the financial statements are not prepared on a going concern basis, such fact shall be
disclosed together with the measurement basis and the reason therefore.
d. As a general rule, assets are normally recorded at the market value estimated by management.

7. PAS 1 provides that the financial statements shall present fairly the financial position, financial
performance and cash flows of an entity. Which of the following statements is false?
a. Virtually, in all circumstances, fair presentation is achieved if the financial statements are
prepared in accordance with the PFRS.
b. An entity whose financial statements comply with PFRS shall make an explicit and unreserved
statement of such compliance in the notes.
c. Fair presentation is defined as the unfaithful representation of the effects of transactions and
other events in accordance with the definitions and recognition criteria for assets, liabilities,
income and expenses laid down in the framework.
d. An entity cannot rectify inappropriate accounting policies either by disclosure of the accounting
policies used or by notes or explanatory information.

8. PAS 1 provides that in the extremely rate circumstances in which management concludes that
compliance with a requirement in a Standard or an Interpretation would be so misleading that it
would conflict with the objective of financial statements, the entity shall depart from that requirement
provided the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.
In such circumstances, it is incumbent upon the entity to disclose the following, except
a. The management has concluded that the financial statements present fairly the entity’s
financial position, financial performance and cash flows.
b. That it has complied with applicable Standards and Interpretation, except that it has departed
from a particular requirement to achieve a fair presentation.
c. For each period presented, the financial impact of the departure on each item in the financial
statements that would have been reported in complying with the requirement.
d. The title of the Standard or Interpretation from which the entity has departed, the nature of
departure, excluding the treatment that the Standard or Interpretation that would require and
the reason why that treatment would be so misleading in the circumstances that it would
conflict with the objective of financial statements, and the treatment adopted.

9. Who has the primary responsibility for the preparation and presentation of financial statements?
a. External Auditor of the company
b. Securities and Exchange Commission
c. Stockholders of the company
d. Management of the company

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10. Which of the following statements concerning materiality, aggregation and offsetting is correct?
a. An entity shall present aggregately each material class of similar items.
b. An entity shall present separately items of dissimilar nature or function unless they are
immaterial.
c. Assets and liabilities, and income and expenses, when material shall be offset against each
other.
d. The measurement of assets net of valuation allowance is not permitted because technically it is
offsetting.

11. The following statements concerning comparable information and consistency of presentation are
incorrect, except
a. Except when permitted or required otherwise by PFRS, an entity shall disclose comparative
information in respect of the previous period for all amounts reported in the current period’s
financial statements.
b. The presentation and classification of financial statement items shall not be uniform from one
accounting period to the next.
c. A change in the presentation and classification is not allowed even it is required by another
PFRS and even when a significant change in the nature of the entity’s operations or a review of
the financial statements will demonstrate a more appropriate presentation and classification.
d. It is appropriate for an entity to leave its accounting policies unchanged when more relevant
and reliable alternatives exist.

12. PAS 1 requires that each component of the financial statements shall be clearly identified. In addition,
the following information shall be prominently displayed, excepy
a. The name of the reporting entity.
b. Whether the financial statements cover the individual entity or a group of entities.
c. The name of the major stockholder.
d. The level of rounding used in the amounts in the financial statements.

13. PAS 1 provides that a statement of financial position is a formal statement showing the three elements
comprising financial position, namely assets, liabilities and equity. This financial statement is
analyzed by users of financial statements to evaluate different factors. Which of the following
statements is incorrect?
a. Information about financial structure is useful in predicting future borrowing needs and how
profits and how profits and cash flows will be distributed between creditors and owners.
b. Information about liquidity and solvency is useful in predicting the ability of the entity to
comply with its future financial commitments.
c. Capacity for adaptation is the financial flexibility of the entity to use its available cash for
unexpected requirements and investment opportunities.
d. Solvency is the ability of the entity to meet currently maturing obligations.

14. Which of the following statements concerning the presentation and classification of assets and
liabilities in the statement of financial position is correct?
a. For financial institutions, the current and noncurrent classification provides information that
is reliable and relevant than a current and noncurrent presentation.
b. PAS 1, paragraph 60, provides that an entity shall not present current assets and noncurrent
assets separately in the statement of financial position.
c. The separate classification of current and noncurrent assets and liabilities is a useful
information when an entity supplies goods or services within a clearly identified operating
cycle.
d. PAS 1 requires all entity to use the current and noncurrent presentation and classification in
the statement of financial position.

15. The following are essential characteristics of an asset, except

a. The asset is controlled by the entity and a result of past transaction.
b. The asset is subject to depreciation.
c. The asset provides future economic benefits.
d. The cost of the asset can be measured reliably.

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16. PAS 1, paragraph 66. provides that an entity shall classify an asset as current when, except
a. The asset is cash or cash equivalent which is restricted from being exchanged or used to settle
a liability for at least twelve months after the reporting period.
b. The entity holds the asset primarily for the purpose of trading.
c. The entity expects to realize the asset within twelve months after reporting period.
d. The entity expects to realize the asset or intends to sell or consume it within the entity’s normal
operating cycle.

17. Which of the following statements concerning operating cycle is incorrect?

a. It is the time between the acquisition of assets for processing and their realization in cash or
cash equivalent.
b. It is significant as it is the basis of determining the proper classification of assets into either
current or noncurrent.
c. All assets that are expected to be realized, sold or consumed within the normal operating cycle
are current.
d. It is always longer than 12 months.

18. The following items are considered as noncurrent assets, except

a. Deferred tax asset
b. Noncurrent asset held for sale
c. Investment property
d. Biological asset

19. The following items are considered as current assets, except

a. Financial assets at fair value through profit or loss
b. Inventories
c. Cash set aside for the acquisition of Land within 12 months after reporting period
d. Trade and other receivables

20. The essential characteristics of liability are as follows, except

a. The liability is the present obligation of a particular entity.
b. The liability arises from past transaction.
c. The liability shall be settled using current asset.
d. The settlement of the liability requires an outflow of resources embodying economic benefits.

21. PAS 1, paragraph 69, provides that an entity shall classify a liability as current when, except
a. The entity expects to settle the liability within the entity’s normal operating cycle.
b. The entity has an unconditional right to defer settlement of the liability for at least 12 months
after the reporting period.
c. The entity holds the liability primarily for the purpose of trading.
d. The liability is due to be settled within twelve months after the reporting period.

22. PAS 1 provides that a liability which is due to be settled within the twelve months after the end of
reporting period is classified as current, even if:
I. The original term was for a period longer than twelve months.
II. An agreement to refinance or to reschedule payment on a long-term basis is
completed on or before the end of reporting period.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

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23. Which of the following liabilities shall be considered as noncurrent liabiltity?
a. If certain conditions relating to the borrower’s financial situation are breached and the lender
has agreed after the end of reporting period and before the statements are authorized for issue,
not to demand payment as a consequence of the breach.
b. A current liability on which the lender has agreed on or before the end of reporting period to
provide a grace period ending at least twelve months after the end of reporting period.
c. A current liability which is refinanced between the end of reporting period and the date the
financial statements are authorized for issue.
d. Trade payables and accruals for employees due to be settled within the entity’s normal
operating cycle.

24. The following are examples of current liabilities, except

a. Accounts payables
b. Estimated premium liability
c. Dividends payable
d. Deferred tax liability which will reverse within 12 months

25. What is working capital?

a. Total assets – total liabilities
b. Total assets – total equity
c. Total current assets – total current liabilities
d. Total current assets – total liabilities

26. Which of the following statements concerning the recognition of a provision, contingent liability and
contingent asset is correct?
a. Contingent asset shall be disclosed when it is reasonably possible to occur.
b. Contingent liability shall be disclosed when the possibility of occurrence is remote.
c. Provision shall be accrued when the range of outcome is probable.
d. Contingent liability shall not be disclosed when the outcome of event is reasonably possible.

27. It represents the cumulative balance of periodic net income or loss, dividend distributions, prior period
errors, changes in accounting policy and other capital adjustments.
a. Reserves
b. Retained earnings
c. Contributed capital
d. Total shareholder’s equity

28. PAS 1, paragraph 54, states that as a minimum, the face of the statement of financial position shall
include line item which present the following amounts, except
a. Noncontrolling interest
b. Biological asset
c. Provisions
d. Contingent liability

29. Which of the following items shall not be included in the Stockholder’s Equity Section of the Statement
of Financial Position?
a. Subscription receivable collectible beyond one year
b. Bonds Premium
c. Treasury Shares
d. Revaluation Surplus

30. The format of a statement of financial position is not specified in PAS 1. In practice, there are two
customary forms in presenting the statement of financial position. What form sets forth the three
major sections of financial position in a downward sequence of assets, liabilities and equity?
a. Simple form
b. Account form
c. Report form
d. Natural form

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31. PAS 1, paragraph 112, provides that the notes to financial statements shall do the following, except
a. Present information about the financial position, financial performance and cash flows of an
entity.
b. Present information about the basis of preparation of the financial statements and the specific
accounting policies used.
c. Disclose the information required by PFRS that is not presented in the financial statements.
d. Provided additional information which is not presented in the financial statements but is
relevant to an understanding of the financial statements.

32. PAS 1, paragraph 114, provides that an entity normally presents notes to financial statements in what
order?
I. Summary of significant accounting policies used
II. Other disclosures, such contingent liabilities, unrecognized contractual
commitments and nonfinancial disclosures.
III. Statement of compliance with PFRS
IV. Supporting computations
a. III – I – IV – II
b. III – IV – I – II
c. III – II – I – IV
d. III – IV – I – II

33. These are defined as the specific principles, methods, practices, rules, bases and conventions adopted
by an entity in preparing and presenting financial statements.
a. Accounting principles
b. Accounting estimates
c. Accounting methods
d. Accounting policies

34. The summary of significant accounting policies shall disclose the following:
I. The measurement basis used in preparing the financial statements.
II. The accounting policies used that are relevant to an understanding of the financial
statements.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

35. PAS 1, paragraphs 137 and 138 provide that an entity shall disclose the following, except
a. The amount of any cumulative preference dividends not recognized.
b. The amount of dividends declared after the financial statements are authorized for issue.
c. A description of the nature of the entity’s operations and its principal activities.
d. The name of the parent and the ultimate parent of the group.

36. PAS 24, paragraph 9 provides that are parties are considered related if one party has, except
a. The ability to control the other party.
b. The ability to exercise the significant influence over the other party.
c. Joint control over the entity.
d. The contract to provide finance or service in the course of normal dealings.

37. Which of the following statements concerning PAS 24: Related Party is incorrect?
a. Related party transaction is a transfer of resources or obligation between related when a price
is charged.
b. Disclosure is required of related party relationships where control exists irrespective of whether
there have been transactions between the related parties.
c. The disclosure of related party transactions and outstanding balances in the separate financial
statements of a parent, subsidiary, associate or venturer is required.
d. Intragroup related party transactions and outstanding balances are eliminated in the
preparation of consolidated financial statements of the group.

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38. Under the amended version of PAS 24, a state-controlled entities that transact with other state-
controlled entities are required to disclose the following:
I. The name of the government and the nature of its relationship with the reporting
entity.
II. The information on the nature and amount of each individually significant
transaction with the government.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

39. PAS 10, paragraph 3 defines them as those events, whether favorable or unfavorable, that occur
between the end of reporting period and the date on which the financial statements are authorized for
issue.
a. Subsequent events
b. Events after reporting period
c. Events after the balance sheet date
d. Prior events

40. Which of the following statements concerning PAS 10 is incorrect?

I. Adjusting events after the reporting period are those that provide evidence of
conditions that exist at the end of reporting period.
II. Non-adjusting events after reporting period are those that are indicative of
conditions that arise after the end of reporting period.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

41. The following are examples of non-adjusting events, except

a. Destruction of a major production plant by fire after the reporting period.
b. Discovery of fraud or errors that show the financial statements were incorrect.
c. Commencing major litigation arising solely from events that occurred after the reporting period.
d. Plan to discontinue an operation.

42. The following are examples of adjusting events, except

a. Bankruptcy of a customer which occurs after the reporting period.
b. Settlement after reporting period of a court case because it confirms that the entity already
had a present obligation at the end of reporting period.
c. Sale of inventories after the reporting period may give evidence about the net realizable value at
reporting period.
d. Major purchase and disposal of asset or expropriation of major asset by government after the
reporting period.

43. When are the financial statements authorized for issue?

a. When the auditor already submitted and prepared the audit report.
b. When the management approves the financial statements for audit.
c. When the board of directors reviewed and authorized the financial statements for issue.
d. At the end of reporting period.

44. What is a development stage entity?

I. An organization that is devoting substantially all of its effort to establishing a new
business and that has not begun planned principal operations.
II. An organization that has begun planned principal operations but has not yet
generated significant revenue from those operations.
a. Either I or II
b. Neither I nor II
c. I only
d. II only
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45. It refers to a change in equity during a period resulting from transactions and other events, other than
changes resulting from transactions with owners in their capacity as owners.
a. Profit or Loss
b. Net Income
c. Other Comprehensive Income
d. Comprehensive Income

46. Which of the following are considered as components of other comprehensive income?
I. Realized gain or loss on investment in equity instruments measured at fair value
through other comprehensive income.
II. Gain or loss from translating the financial statements of foreign operation
III. Realization of revaluation surplus
IV. Unrealized gain or loss from derivative contracts designated as fair value hedge.
V. Actuarial gain or loss on defined benefit plan in accordance with full recognition
approach.
a. II – III – V
b. I – III – IV
c. I – II – V
d. II – V

47. These are amounts reclassified to profit or loss in the current period that were recognized in other
comprehensive income in the current or previous periods.
a. Prior period errors
b. Change in accounting policy
c. Reclassification adjustment
d. Change in accounting estimate

48. PAS 1, paragraph 81, provides that an entity may present comprehensive income as:
I. Two statements presenting an income statement which shows the components of
profit or loss and a statement of comprehensive income beginning with profit or
loss as shown in the income statements plus or minus the components of other
comprehensive income.
II. Single statement of comprehensive income showing the components of profit or
loss and components of other comprehensive income in a single statement.
a. I only
b. II only
c. Neither I nor II
d. Both I and II

49. Which of the following statements concerning the approach used by an entity in measuring its
financial performance is incorrect?
I. Capital maintenance approach is the conventional or traditional preparation of
income statement in conformity with PFRS.
II. Transaction approach means that net income occurs only after the capital used
from the beginning of the period is maintained.
a. Both I and II
b. Neither I nor II
c. I only
d. II only

50. Which of the following combination is correct regarding the capital maintenance approach?
a. Financial capital – current cost; Physical capital – historical cost
b. Financial capital – historical cost; Physical capital – current cost
c. Financial capital – historical cost; Physical capital – historical cost
d. Financial capital – current cost; Physical capital – current cost

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51. PAS 1, paragraph 87, specifically mandates that an entity shall present any item of infrequent and
unusual income or expenses as
a. Post- tax and after income from continuing operations
b. Pre-tax and after income from continuing operations
c. Post-tax and before income from continuing operations
d. Pre-tax and before income from continuing operations

52. Which of the following shall be disclosed on the face of the income statement and statement of
comprehensive income for the period?
I. Profit or loss attributable to noncontrolling interest and owners of the parent.
II. Total comprehensive income attributable to noncontrolling interest and owners of
the parent
a. I only
b. II only
c. Both I and II
d. Neither I nor II

53. PAS 1, paragraph 82, provides that as a minimum, the income statement and comprehensive income
shall include the line items which present the following amounts, except
a. Income tax expense
b. Extraordinary items
c. Finance cost
d. A single amount for discontinued operation

54. What presentation of the income statement on the basis of expenses is allowed by PAS 1, paragraph
99?
a. Only functional presentation
b. Only natural presentation
c. Neither A nor B
d. Either A or B

55. An entity classifying expenses by function shall disclose additional information on which of the
following?
a. Depreciation, amortization and employee benefit cost
b. Cost of Sales
c. Distribution cost
d. Administrative expense

56. PAS 24, paragraph 17, provides that if there have been transactions between related parties, an entity
shall disclose the following, except
a. The amount of the transaction.
b. The comparable amount of transactions with unrelated parties.
c. Provision for bad debts related to the outstanding balances.
d. The amount of outstanding balances, their terms and conditions, whether secured or
unsecured, and nature of consideration to be provided in settlement.

57. PAS 24, paragraph 16, provides that an entity shall disclose key management personnel compensation
in total and for each of the following categories, except
a. Termination benefits
b. Share based payment transactions
c. Short-term employee benefits
d. Out-of-the pocket expenses

58. PAS 24 enumerated unrelated parties which include the following, except
a. Venturer in a joint venture.
b. Two entities which have a director or key personnel in common.
c. Providers of finance, trade unions, public utilities and government agencies in the course of
their normal dealings with an entity.
d. A single customer, supplier, franchisor or general agent with whom an entity transacts a
significant volume of business.
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59. Which of the following transactions will not result to an income?
a. Rendering of services
b. Use of entity resources
c. Existence of probable contingent asset
d. Disposal of resources other than products

60. Which of the following statements concerning PAS 37, paragraph 10 is correct?
I. Contingent liability is a probable obligation that arises from past event and whose
existence will be confirmed only by the occurrence or nonoccurrence of one or
more uncertain future events not wholly within the control of the entity.
II. Contingent liability is a present obligation that arises from past event but is not
recognized because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation or the amount of the
obligation cannot be measured reliably.
III. Provision is an existing liability of uncertain timing and uncertain amount.
IV. Contingent asset is a possible asset that arises from past event and whose
existence will be confirmed only by the occurrence or nonoccurrence of one or
more uncertain future events not wholly within the control of the entity.
a. II and IV
b. I, II and IV
c. I and III
d. II, III, IV

61. PAS 1 provides that an entity shall present a statement of changes in equity showing the following,
except
a. Total comprehensive income for the period
b. Effects of changes in accounting policies and correction of errors
c. Dividends payable at the end of the year
d. Profit or loss for the period

62. PFRS 5, paragraph 6 provides that a noncurrent asset or disposal group is classified as held for sale if
a. The entity holds the asset for sale in the ordinary course of business.
b. The carrying amount of the asset will be recovered principally through a sale transaction rather
than continuing use.
c. The asset will be abandoned by the entity.
d. The asset is already fully depreciated.

63. A noncurrent asset or disposal group shall be classified as held for sale if:
I. The asset or disposal group is available for immediate sale in its present condition
subject only to terms that are usual and customary for sale of such assets or
disposal groups.
II. The sale must be highly probable.
a. I only
b. II only
c. Either I or II
d. Both I and II

64. For the sale to be highly probable, the following conditions must be met, except
a. An active program to locate a buyer and complete the plan must have been initiated.
b. Actions required to complete the plan indicate that it is unlikely that the plan will be
significantly changed or withdrawn.
c. The sale is expected to be a complete within one year from the end of reporting period.
d. The asset or disposal group must be actively marketed for sale at a sales price that is
reasonable in relation to its fair value.
65. PFRS 5, paragraph 15, provides that an entity shall measure a noncurrent asset or disposal group
classified as held for sale at
a. Lower of cost or net realizable value
b. Lower of cost or recoverable amount
c. Lower of cost or present value
d. Lower of cost of fair value less cost to sell
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66. If there is impairment loss of a disposal group, how is the loss apportioned across the assets?
a. Apportion the loss to all assets in the group based on their carrying value, regardless of
existence of goodwill in the group.
b. Apportion the loss to all assets in the group based on their fair value, regardless of existence of
goodwill in the group.
c. If there is a goodwill in the group, the goodwill is written off first and any remainder of
impairment loss is allocated prorate to the noncurrent assets based on their carrying value.
d. If there is a goodwill in the group, the goodwill is written off first and any remainder of
impairment loss is allocated prorate to the noncurrent assets based on their fair value.

67. PFRS 5, paragraph 21, provides for the treatment of subsequent increase in fair value of noncurrent
asset held for sale. Which of the following statements is incorrect?
a. The subsequent gain shall be recognized in the profit or loss and in the section of the income
from continuing operation before tax.
b. The subsequent gain shall be recognized without any limitation.
c. The subsequent gain shall not exceed any impairment loss previously recognized.
d. The subsequent gain shall not be presented as extraordinary item of expense.

68. The following statements concerning Noncurrent asset as held for sale are inaccurate, except
a. If an entity adopts the revaluation model for the measurement of assets, any asset classified as
held for sale should be revalued to fair value immediately prior to the classification as held for
sale.
b. Cost to sell is the incremental cost directly attributable to the disposal of an asset or disposal
group including finance cost and income tax expense.
c. Noncurrent assets held for sale shall still be subject to depreciation.
d. Noncurrent asset to be abandoned shall be classified as held for sale because its carrying
amount will be recovered principally through continuing use.

69. An entity decided not to sell the noncurrent asset held for sale. In such a case, PFRS 5, paragraph 27,
provides that the entity shall measure the noncurrent asset that ceases to be classified as held for sale
at
a. Lower of cost or fair value less cost to sell
b. Lower of carrying amount before the asset was classified as held for sale adjusted for any
depreciation or amortization that would have been recognized if the asset had not been
classified as held for sale or the fair value less cost to sell at the date of subsequent decision
not to sell.
c. Lower of carrying amount before the asset was classified as held for sale adjusted for any
depreciation or amortization that would have been recognized if the asset had not been
classified as held for sale or the value in use at the date of subsequent decision not to sell.
d. Lower of carrying amount before the asset was classified as held for sale adjusted for any
depreciation or amortization that would have been recognized if the asset had not been
classified as held for sale or the recoverable amount at the date of the subsequent decision not
to sell.

70. PFRS 5, paragraph 3, provides for the presentation of noncurrent assets or disposal group classified as
held for sale. Which of the following statements is proper?
a. Assets classified as noncurrent asset in accordance with PAS 1 shall be reclassified as current
assets even before it meets the criteria to be classified as held for sale.
b. The entity may offset the assets and liabilities in a disposal group in presenting them in the
statement of financial position.
c. The noncurrent assets classified as held for sale shall be presented separately as a single
amount under current assets.
d. The liabilities of a disposal group classified as held for sale shall be presented separately as a
single amount under noncurrent liabilities.

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71. Under Appendix A of PFRS 5, a discontinued operation is defined as a “component of an entity that
either has been disposed of or is classified as held for sale” and any of the following, except
a. Corporate headquarter of an entity.
b. Represents a separate major line of business or geographical area of operations.
c. Is part of a single-coordinated plan to dispose of a separate major line of business or
geographical area of operations.
d. Is a subsidiary acquired exclusively with a view to resale.

72. The following statements concerning the timing of reporting of a component of an entity classified as
discontinued operation are correct, except
a. If the discontinued criteria are met after the end of reporting period, an entity shall not classify
the discontinued operation as held for sale in the current financial statements.
b. PFRS 5, paragraph 12, allows the retroactive classification as a discontinued operation when
the discontinued criteria are met after the end of reporting period.
c. A component of an entity is classified as discontinued operation at the date the entity has
actually disposed of the operation or when the operation meets the criteria as classified as held
for sale.
d. A component of an entity is classified as held for sale at the time its carrying amount will be
recovered principally through a sale transaction rather than through continuing use.

73. PFRS 5, paragraph 33, provides that an entity shall present the result of discontinued operation in the
Statement of Comprehensive Income
a. Above Income from continuing operations after tax
b. Above Income from continuing operations before tax
c. Below Income from continuing operations before tax
d. Below income from continuing operations after tax

74. PFRS 5 provides that the results of a discontinued operation shall be presented as a single amount in
the Statement of Comprehensive Income. The following details shall be disclosed in the notes to
financial statements, except
a. Termination cost of employees and other costs which are directly incurred as a result of the
discontinuance.
b. Any gain or loss from actual disposal of the assets and settlement of liabilities of a
discontinued operation.
c. Depreciation expense of the assets of discontinued operation.
d. Any impairment loss recognized as of the end of reporting period.

75. Which of the following statements concerning the presentation of Discontinued Operation in the
financial statements is incorrect?
a. If a disposal group is classified as held for sale in the current year, the results of the disposal
group for prior period shall be re-represented as relating to discontinued operation in the
comparative figures for the current year’s income statement.
b. The net cash flows attributable to the operating, investing and financing activities of a
discontinued operation shall not be presented separately in the statement of cash flows.
c. An entity shall not reclassify or represent the assts and liabilities of a discontinued operation
for the prior period to reflect the held for sale classification in the statement of financial
position as of the end of the current reporting period.
d. Assets and liabilities of a discontinued operation shall be presented separately as a single
amount under current assets and current liabilities, respectively.

76. The following activities are not considered as discontinued operation, except
a. Phasing out of a product line within a product group.
b. Shifting of product or marketing activities for a particular line of business from one location to
another.
c. Closing of a facility, factory, branch to achieve productivity improvement or other cost saving.
d. Selling by a communication entity of all its radio stations.

12
77. Which of the following assets may be reported in discontinued operations?
I. Abandoned Noncurrent assets.
II. Abandoned Noncurrent assets which are a major line of business or geographical
are of operations.
a. Both I and II
b. Neither I nor II
c. II only
d. I only

78. PAS 8 defines it as an adjustment of the carrying amount of an asset or a liability or the amount of the
periodic consumption of an asset that results from the assessment of the present status of and
expected future benefit and obligation associated with the asset and liability.
a. Change in accounting estimate
b. Change in accounting policy
c. Change in accounting principle
d. Change in accounting method

79. Change in accounting policies shall be made only when:

I. Required by an accounting standard or an interpretation of the standard.
II. The change will result in less relevant and reliable information about the financial
position, financial performance and cash flows of the entity.

a. I only
b. II only
c. Both I and II
d. Neither I nor II

80. The following are examples of change in accounting estimate, except

a. Change of method of estimating bad debts.
b. Change in the depreciation method of PPE
c. Change in the fair value of financial assets and financial liabilities
d. Change in the method of inventory pricing from FIFO to average method

81. The following are not changes in accounting policy, except

a. The application of an accounting policy for events or transactions that differ in substance from
previously occurring events or transactions.
b. Change from cost model to fair value model in measuring investment property and PPE.
c. The application of a new accounting policy for events or transactions which did not occur
previously or that were immaterial.
d. Change in the periodic consumption of an asset.

82. The effect of a change in accounting estimate shall be recognized

a. Only in the period of change.
b. Retroactively by restating the prior year’s balances.
c. Both in the period of change and future change if the change affects both.
d. Prospectively by restating the prior year’s balances.

83. If there is doubt or difficulty in determining whether a change refers to accounting policy or
accounting estimate, PAS 8 requires the entity to treat the change as
a. Change in accounting policy without appropriate disclosures
b. Change in accounting estimate with appropriate disclosures
c. Change in accounting policy with appropriate disclosures
d. Change in accounting estimate without appropriate disclosures

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84. Which of the following statements concerning PAS 8 is incorrect?
a. Retrospective application is applying a new accounting policy to transactions , other events and
conditions as if that policy had always been applied.
b. Prospective application means that the new accounting policy is applied to events and
transactions occurring before the date of change.
c. Retrospective restatement refers to the process of correcting the beginning balance of the
assets, liabilities and equity.
d. When it is impracticable for an entity to apply a new accounting policy retrospectively because
it cannot determine the cumulative effect of applying the policy to all periods, the entity shall
apply the new policy prospectively from the earliest period practicable.

85. What is the proper treatment of change in accounting policy?

a. Retrospectively regardless of transitory provision.
b. Prospectively regardless of transitory provision.
c. If the change is required by a standard with a transitional provision, the change shall be
applied retrospectively and if the change is voluntary or without transitory provision, the
change shall be applied in accordance with the transitional provisions.
d. If the change is required by a standard with a transitional provision, the change shall be
applied in accordance with the transitional provision and if the change is voluntary or without
transitory provision, the change shall be applied retroactively.

86. PAS 8 specifies the hierarchy of guidance which the management may use in case of absence of an
accounting standard that specifically applies to a transaction or event. What is the proper order of
priority?
I. Definition, recognition, criteria and measurement concepts of assets, liabilities,
income and expenses provided in the Framework.
II. Most recent pronouncements of other standard-setting bodies that use a similar
framework.
III. Requirements of current standards dealing with similar matters.
a. III – I – II
b. I – II – III
c. III – II – I
d. II – III – I

87. Prior period errors are omissions from and misstatement in the financial statements for one or more
periods arising from a failure to use or misuse of reliable information that:
I. Were available when financial statements for those periods were authorized for
issue.
II. Could reasonable be taken to have been obtained and taken into accounting in the
preparation and presentation of those financial statements.
a. Both I and II
b. Either I or II
c. I only
d. II only

88. What is the proper treatment for prior period errors?

a. Retrospective restatement with disclosures
b. Prospective restatement disclosures
c. Retrospective restatement without disclosures
d. Prospectively restatement disclosures

89. PAS 8 provides that an entity shall disclose for prior period errors the following, except
a. Nature of the prior period error
b. The amount of correction at the beginning of the earliest prior period presented.
c. If retrospective restatement is impracticable for a particular prior period, the circumstances
that led to the existence of that condition and a description of how and from when the error
has been corrected.
d. Comparative amount to financial statement line item without error or correction

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90. PAS 34 provides that it is the preparation and presentation of financial information for a period of less
than one year.
a. Segment reporting
b. Interim reporting
c. Annual reporting
d. Financial reporting

91. Which of the following statements concerning the mandate of PAS 34 is correct?
a. PAS 34 mandates the entities which are required to publish interim financial reports, how
frequently or how soon after end of reporting period.
b. PAS 34 requires public companies to file quarterly financial reports within 45 days after each
quarter-end.
c. PAS 34 encourages publicly traded companies to provide interim financial reports at least
semiannually and such reports are to be made available not later than 60 days after the end of
interim period.
d. PAS 34 encourages publicly traded companies to provide interim financial reports at least
quarterly and such reports are to be made available not later than 45 days after the end of
interim period.

92. What view is adopted by PAS 34 concerning interim financial reporting?

a. Integral view
b. Mix of integral and independent views
c. Independent view
d. Disclosure view

93. PAS 34, paragraph 8, provides for the minimum components of interim financial report. Which of the
following is not a minimum component?
a. Selected explanatory notes
b. Condensed statement of financial position
c. Condensed statement of retained earnings
d. Condensed income statement

94. Which of the following statements concerning presentation and disclosure of Interim Reports is
incorrect?
a. PAS 34 allows an entity to publish a complete set of financial statements in its interim financial
reports.
b. PAS 34 provides that if an entity’s interim financial report is in compliance with PFRS, such
fact need not be disclosed.
c. PAS 34 provides that an entity shall not be described as complying with PFRS unless it
complies with all of the requirements of each PFRS.
d. PAS 34 does not prohibit or discourage the publishing of a condensed financial statements and
selected explanatory notes.

95. PAS 34 allows the presentation of selected explanatory notes. What is the assumption used by PAS 34
which justifies the allowing of selected explanatory notes?
a. Users have an access to the most recent annual environmental report.
b. Going concern assumption
c. Accrual basis assumption
d. Users have an access to the most recent annual financial report.

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96. Which of the following comparative interim financial reports is improper for the quarterly financial
report ending on June 30,2010?
a. Statement of financial position for the 3 months ended June 30, 2010 and Statement of
financial position for the 3 months ended June 30,2009.
b. Statement of comprehensive income for the 3 months ended June 30 2010 and Statement of
comprehensive income for the 3 months ended June 30,2009; Statement of comprehensive
income for the 6 months ended June 30,2010 and Statement of comprehensive income for the
6 months ended June 30,2009.
c. Statement of cash flows for the 6 months ended June 30,2010 and Statement of cash flows for
the 6 months ended June 30,2009.
d. Statement of changes in equity for the 6 months ended June 30,2010 and Statement of
changes in equity for the 6 months ended June 30,2009

97. Which of the following statements concerning the treatment of different items of income and expenses
in the interim financial reports is correct?
a. Revenues from products sold or services rendered are recorded when the cash are collected
regardless of when they are earned.
b. Expenses not associated directly with revenue are matched against revenue in those interim
periods in which related revenue is recognized.
c. Inventories are measured at lower of cost or market value.
d. Seasonal, cyclical or occasional revenue shall not be anticipated or deferred as of interim
period.

98. What is the proper presentation of gain or losses from the disposal of assets in the interim financial
reports?
a. Allocate the gain or loss for the entire year
b. Allocate the gain or loss to the remainder of the year
c. Report the gain or loss in the interim period in which they are earned or incurred.
d. Do not report the gain or loss in the interim period and wait for the annual financial report.

99. Which of the following statements concerning PAS 34 recognition of income and expense is incorrect?
a. Paid vacation and holiday leave shall not be accrued for interim purposes even if they are legal
commitments.
b. Interim period income tax expense shall reflect the same general principles of income tax
accounting applicable to annual reporting.
c. Irregular and discretionary costs although they are planned shall not be anticipated as of
interim date.
d. Depreciation and amortization for an interim period shall be based only on assets owned
during that interim period.

100. What is the core principle of PFRS 8: Operating Segments?

a. An entity shall disclose information to enable users of its financial statements to evaluate the
nature and financial effects of the business activities in which it engages and the economic
environments in which it operates.
b. An entity shall disclose information based on risk and return of a segment.
c. An entity shall disclose information based on product aspect and geographical aspect.
d. An entity shall disclose information to enable users of its financial statements to evaluate the
nature and effects of the products it produces its geographical area.
101. PFRS 8: Operating Segments applies to
a. Separate or individual financial statements of an entity
b. Consolidated financial statements of a group
c. Both separate financial statements of an entity and consolidated financial statements of a
group.
d. Neither separate financial statements of an entity nor consolidated financial statements of a
group.

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102. PFRS 8 provides that if a financial report contains both the consolidated financial statements
of a parent and the parent’s separate financial statements, segment information is required
a. In separate or individual financial statements of an entity.
b. In consolidated financial statements of a group
c. Both separate financial statements of an entity and consolidated financial statements of a
group.
d. Neither separate financial statements of an entity nor consolidated financial statements of a
group.

103. PFRS 8 enumerates the requisites of an operating segment. Which of the following is not a
requisite of operating segment?
a. It engages in business activities from which it may earn revenues and incur expenses,
including revenue and expenses relating to transactions with other components of the same
entity.
b. Its operating results are regularly reviewed by the entity’s chief operating decision maker to
make decisions about resources to be allocated to the segment and assess its performance.
c. Discrete information is not available
d. Discrete information is available.

104. Which of the following segment of an entity shall not be classified as operating segment?
I. Corporate headquarters
II. Postemployment benefit plan
III. Start-up operation segment
a. I and II
b. I only
c. I, II and III
d. II and III

105. According to PFRS 8, this term refers to a function to allocate resources to the segments and
assess their performance.
a. Chief executive officer
b. Chief operating officer
c. Chief finance officer
d. Chief operating decision maker

106. An entity shall report information about an operating segment that meets any of the following
quantitative thresholds, except
a. The segment revenue, excluding intersegment sales, is 10% or more of the combined external
revenue of all operating segments.
b. The absolute amount of profit or loss is 10% or more of the greater in absolute amount of
combined profit or all operating segments that reported a profit or the combined loss of all
operating segments that reported a loss.
c. The assets of the segment are 10% or more of the combined assets of all operating segments.
d. The segment revenue, including external and intersegment sales, is 10% or more of the
combined external revenue and intersegment sales of all operating segments.

107. PFRS 8 provides for the overall size test to ensure that all entities present a sufficient level of
information regarding their business activities in order that users of financial statements can make
informed economic decisions. What is that entity revenue threshold?
a. The total revenue of reportable operating segments is 75% of the total revenue of all operating
segments.
b. The total external revenue of reportable operating segments is 75% of the total external revenue
of all operating segments.
c. The total external revenue of reportable operating segments is 75% of the total revenue of all
operating segments.
d. The total revenue of reportable operating segments is 75% of the total external revenue of all
operating segments.

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108. What is the requirement of PFRS 8 concerning the limit to the number of reportable segments?
a. PFRS 8 limits the reportable segments to 10.
b. PFRS 8 limits the reportable segments to 5.
c. PFRS 8 suggest that if the number of reportable segments exceeds ten, it is likely that the
information may become too detailed and consequently loss its usefulness.
d. Although no precise limit has been determined, as the number of reportable segment increase
above ten, the entity shall not consider whether a practical limit has been reached.

109. Under the amended version of PFRS 8, which of the following shall be disclosed under all
circumstances?
a. Profit or loss
b. Other comprehensive income
c. Total assets
d. Total liabilities

110. PFRS 8 defines “entity-wide disclosures” as additional information that is required to be

disclosed by all entities if such information is not provided as part of the reportable segment
information. As such, an entity shall disclose information about the following, except
a. Information about products and services
b. Information about geographical areas
c. Information about major customers
d. Information about competitors

111. PFRS 8 defines a major customer as a single external customer providing revenue which
amounts to
a. 10% or more of total entity’s revenue
b. 10% or more of total entity’s internal revenue
c. 10% or more of total entity’s external revenue
d. 10% or more of total entity’s profit or loss

112. Under this basis of accounting, income is recognized when received regardless of when earned,
and expense is recognized when paid regardless of when incurred.
a. Accrual basis
b. Cash basis
c. Modified cash basis
d. Going concern basis

113. Under this system, the records maintained are represented by the so-called “bare essentials”
and normally these include a record of cash, accounts receivable, accounts payable, PPE and taxes
paid. The records of the company are incomplete.
a. Double entry system
b. Triple entry system
c. Single entry system
d. Compound entry system

114. Which of the following statements concerning prior period error is incorrect?
a. They include the effects of mathematical mistakes, mistakes in applying accounting policies,
oversights or misinterpretation of facts and fraud.
b. Prior period error shall be corrected by retrospective restatement.
c. The correction of a prior period error shall be included in the profit or loss of the period in
which it is discovered.
d. The correction of a prior period error is an adjustment of beginning balance of retained
earnings of the earliest period presented.

115. These errors only affect real or permanent accounts.

a. Income statement errors
b. Mixed errors
c. Prior period error
d. Statement of financial position error

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116. These errors are those which, if not detected, are automatically counterbalanced or corrected
in the next account period.
a. Transplacement error
b. Transposition error
c. Non-counterbalancing error
d. Counterbalancing error

117. The following errors will be offset or corrected over two period or these errors correct
themselves over two periods, except
a. Overstatement of Ending Inventory
b. Understatement of Depreciation Expense
c. Overstatement of Unearned Revenue
d. Understatement of Accrued Expense

118. PAS 7, paragraph 7, that an investment normally qualifies as a cash equivalent only when
a. It is acquired 12 months before its maturity.
b. It is acquired 12 months before the end of reporting period.
c. It is acquired 3 months before its maturity.
d. Its remaining term is 3 months.

119. As a general rule, the following cash flows shall be presented in the operating activities, except
a. Interest paid
b. Interest received
c. Dividends paid
d. Dividends received

120. The following are examples of cash flows from investing activities, except
a. Cash payments for future contract, forward contract, option contract and swap contract
b. Cash received from the exercise of share options by the company officials.
c. Cash receipts from sale of debt instruments of another entity.
d. Nontrade advances and loans to other parties.

121. The following are examples cash flows from financing activities, except
a. Cash payments for bonds payable
b. Cash receipts from issuance of treasury shares
c. Cash payments by a lessee for the reduction of the outstanding liability relating to a finance
lease.
d. Cash payments for trading securities

122. Investing and financing transactions that do not require use of cash or cash equivalents shall
be presented
a. In the statement of cash flows
b. In the statement of financial position
c. In the statement of comprehensive income
d. In the notes to financial statements

123. PAS 7, paragraph 35, provides that cash flows arising from this shall be separately disclosed
as cash flows from operating activities?
a. Interest paid
b. Income taxes paid
c. Interest received
d. Dividends received

124. Which of the following activities in the statement of cash flows allow the use of indirect
method?
a. Operating activities
b. Financing and investing activities
c. Operating and financing activities
d. Operating and investing activities

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125. Which of the following items shall be added in the accrual basis net income in determining the
net cash flows from operating activities under the indirect method?
a. Gain on sale of PPE.
b. Investment income from Investment in Associate.
c. Amortization of discount on bonds payable
d. Amortization of discount on bonds receivable.

126. Which of the following items shall be deducted in the accrual basis net income in determining
the net cash flows from operating activities under the indirect method?
a. Depreciation expense
b. Impairment loss on goodwill
c. Amortization of premium on bonds payable
d. Amortization of premium on bonds receivable

127. The purchase of a cash equivalent shall be presented in what portion of statement of cash
flows?
a. Operating activities
b. Investing activities
c. Financing activities
d. Not presented

128. External events include all of the following, except

a. Sale of merchandise
b. Borrowing money from the bank
c. Donation received from shareholder
d. Casualty loss caused by flood, earthquake or other natural disaster.

129. What is the proper order of the following steps in the accounting cycle?
I. Preparing the reversing entries
II. Preparing adjusting entries
III. Posting
IV. Analyzing business transactions
V. Preparing closing entries
VI. Preparing unadjusted trial balance
VII. Preparing financial statements
VIII. Preparing post-closing trial balance
IX. Journalizing
a. IV-IX-III-VI-II-VII-V-VIII-I
b. IV-IX-III-VI-II-V-VIII-VII-I
c. IV-IX-III-VI-II-VII-V-I-VIII
d. IV-IX-III-VI-II-VII-I-V-VIII

130. It is an optional step in the accounting cycle and may be made to facilitate the preparation of
the financial statements.
a. Preparing trial balance
b. Worksheet
c. Financial statement analysis
d. Preparing reversing entries

131. These pertain to the original source materials evidencing a transaction.

a. Journal
b. Ledger
c. Source documents
d. Audit trail

132. The following are examples of business or source documents, except

a. Sales invoice
b. Debit and credit memorandum
c. Purchase requisition form
d. Check stubs and minutes book
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133. This pertains to the book of original entry.
a. Journal
b. Ledger
c. Source documents
d. Audit trail

134. This pertains to the book of final entry.

a. Journal
b. Ledger
c. Source documents
d. Audit trail

135. This type of journal entry consists of one debit and one credit.
a. Simple journal entry
b. Complex journal entry
c. Basic journal entry
d. Compound journal entry

136. What is a compound journal entry?

a. A journal entry with at least one debit and one credit.
b. A journal entry with at least one nominal and one real account.
c. A journal entry with at least two real accounts.
d. A journal entry consisting of two or more debits or two or more credits.

137. The following statements pertaining to special journals are correct, except
a. Only sales of merchandise on account are recorded in the sales journal.
b. Receipts of cash from any source are recorded in the cash receipts journal.
c. All payments of cash for any purpose are recorded in cash disbursements journal.
d. Only purchases of merchandise on account are recorded in the purchases journal.

138. Adjusting entries, closing entries and reversing entries are recorded in the
a. Sales journal
b. Cash receipts journal
c. General journal
d. Purchases journal

139. It is an accounting device used in summarizing the effects of transactions on each asset,
liability, equity, revenue and expense.
a. Journal
b. Account
c. Ledger
d. Trial balance

140. It refers to a listing of all the entity’s general ledger accounts in a systematic form. The
accounts are usually numbered to permit easy identification and cross-referencing with the journals.
a. Trial balance
b. Chart of accounts
c. General ledger
d. General journal

141. It is a device used in storing the details or breakdown of certain general ledger accounts.
a. Subsidiary ledger
b. Special journals
c. General ledger
d. General journal

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142. What is the controlling account of customer’s subsidiary ledger?
a. Accounts payable
b. Accounts receivable
c. Common stock
d. Cash account

143. What is a real account?

a. It represents assets, liabilities and equity account and it is also known as permanent or
statement of financial position account. It is normally carried from one accounting period to
another and remains in the post-closing trial balance.
b. It is offset account and it is deducted from the related account.
c. It is added to the related account.
d. It represents revenue and expense account and it is also known as temporary or income
statement accounts. It is closed at the end of every accounting period and has zero balance in
the post-closing trial balance.

144. Which of the following is an example of real-adjunct account?

a. Allowance for bad debts
b. Freight In
c. Sales discount
d. Premium on Bonds Payable

145. This is a system of internal control over all cash disbursements wherein a voucher must be
prepared for every cash disbursement that is to be made.
a. Imprest system
b. Voucher system
c. Check register system
d. Cash register system

146. What is a voucher?

a. It is the business document or written authorization for every cash disbursement.
b. It is the journal where all vouchers are recorded in numerical sequence.
c. It is the journal where all checks issued for payments are recorded.
d. It is the subsidiary where all unpaid vouchers are filed after the vouchers are entered in the
voucher register.

147. It is a list of general ledger accounts with their respective debit or credit balance.
a. Worksheet
b. Chart of accounts
c. Trial balance
d. Financial statements

148. Which of the following statements pertaining to a trial balance is incorrect?

a. It is a control device that helps to minimize accounting errors.
b. It is normally prepared at the end of every accounting period after all transactions for the
period have been recorded and posted to the general ledger.
c. It provides evidence that the total debits equal the total credits.
d. If it is in balance it signifies the absence of errors in the journalizing and posting of
transactions.

149. What is transposition error?

a. It is an error in placing the decimal point and also known as slide error.
b. It is an error of nonrecording a transaction.
c. It is an error which if not detected is automatically counterbalanced or corrected in the
following accounting period.
d. It is an error wherein the figures are interchanged.

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150. What is the purpose of adjusting entries?
a. To simplify the accounting process and make a fresh accounting start.
b. To apply the realization concept to transactions which affect at least two accounting periods.
c. To close the nominal accounts for preparation of post-closing trial balance.
d. To initially record transactions or events.

151. Which of the following is a proper combination for an adjusting entry?

a. Debit asset and credit liability
b. Debit liability and credit revenue
c. Debit liability and credit equity
d. Credit equity and debit asset

152. In preparing a worksheet, which of the following statements is true?

a. If the total credits in the Income Statement Column exceed the total debits in the Income
Statement Column, there is a net loss.
b. If the total debits in the Balance Sheet Column exceed the total credits in the Balance Sheet
Column, there is a net income.
c. If the total credits in the Income Statement Column exceed the total debits in the Balance
Sheet Column, there is a net income.
d. If the total debits in the Balance Sheet Column exceed the total credits in the Income
Statement Column, there is a net loss.

153. After the closing entries have been prepared, which of the following will have zero balance?
a. Purchase discount
b. Allowance for bad debts
c. Share premium
d. Discount on bonds payable

154. In closing the income summary account of a corporation that is profitable, which of the
following statements is true?
a. Share premium account is debited.
b. Retained earnings account is debited
c. Retained earnings account is credited
d. Income summary account is credited

155. It is a listing of general ledger accounts and their balances and it consists only of real or
permanent accounts.
a. Unadjusted trial balance
b. Adjusted trial balance
c. Income statement
d. Post-closing trial balance

156. These entries are made at the beginning of the new accounting period in order to simplify
recording of certain kinds of recurring transactions.
a. Closing entries
b. Reversing entries
c. Journal entries
d. Realization entries

157. The following adjusting entries will require reversing entries, except
a. Accrued expenses
b. Accrued income
c. Prepaid expense using expense method
d. Unearned income using liability method

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158. Which of the following statements concerning debit and credit sides of an account are true?
a. Debit represents the increase of an account.
b. Credit represents the increase of an account.
c. Credit is the normal balance of asset and expense accounts while debit is the normal balance
of liability, equity and income accounts.
d. Normal balance of an account represents the increase side of an account.

159. In preparing the worksheet, which of the following statements concerning merchandise
inventory account is proper?
a. Merchandise inventory, end is extended to debit column in the income statement column.
b. Merchandise inventory, end is extended to debit column in the balance sheet column.
c. Merchandise inventory, beg. is extended to credit column in the income statement column.
d. Merchandise inventory, beg. is extended to credit column in the balance sheet column.

160. The following are the purposes of worksheet, except

a. It provides a place where adjusting entries can be made informally before they are journalized
and posted.
b. It ensures the elimination of errors in the journalizing and posting of transactions.
c. It provides an orderly means whereby each account can be classified according to the financial
statement in which it will appear.
d. It provides a balancing mechanism that helps to uncover accounting errors.

24