Father Saturnino Urios University

ACCOUNTANCY PROGRAM
Butuan City
SIMULATIVE EXAMINATION
Name: ___________________________________________ Date: _______________
Section: ________________________________________ Score: ______________

Instruction: Shade the letter of the correct answer in the answer sheet.
Strictly no erasures.

1. Which of the following is not a fundamental concept?

a. Entity Concept
b. Periodicity Concept
c. Going Concern
d. Materiality Concept
2. This encompasses the conventions, rules and procedures necessary to define
accepted accounting practice at a particular time.
a. Generally Accepted Accounting Principles
b. Philippine Financial Reporting Standards
c. International Financial Reporting Standards
d. Philippine Accounting Standards
3. This is one of the criteria for general acceptance of an accounting
principle in which the resulting information is not influenced by the
personal bias or judgment of those who furnish it.
a. Relevance
b. Faithful representation
c. Objectivity
d. Feasibility
4. Which of the following is false about the scope of practice of
accountancy?
a. Practice of public accountancy shall constitute in person, be it
his/ her individual capacity, or as a partner or as a staff member
in accounting or auditing firm, holding out himself/ herself as one
skilled in the knowledge, science and practice of accounting, and
as a qualified person to render professional services as a certified
public accountant (CPA); or offering or rendering, or both, to more
than one client of a fee basis or otherwise.
b. Practice in commerce and industry shall constitute in person
involved in decision making requiring professional knowledge in the
science of accounting, or when such employment or position requires
that the holder thereof may be a certified public accountant.
c. Practice in education/ academe shall constitute a person in an
educational institution which involve teaching of accounting,
auditing, management advisory services, finance, business law,
taxation, and other technically related subjects: Provided, that
members of the Integrated Bar of the Philippines may be allowed to
teach business law and taxation subjects.
d. Practice in Government shall constitute in a person who holds, or
is appointed to, a position in an accounting professional group in
government or in government-owned and/ or controlled corporation,
including those performing proprietary functions, where decision
making requires professional knowledge in the science of
accounting, or where a civil service eligibility as a certified
public accountant is required.
5. Created the Accounting Standards Council on November 18, 1981.
a. Junior Philippine Institute of Accountants
b. Philippine Institute of Certified Public Accountants
c. American Institute of Certified Public Accountants
d. Professional Regulations Commission
6. A present economic resource controlled by the entity as a result of past
events. An economic resource is a right that has the potential to produce
economic benefits.
a. Expenses
b. Income
c. Asset
d. Liability
 7. Which of the following is not a right that correspond to an obligation of
another party?
a. Rights to receive cash
b. Rights to use intellectual property
c. Rights to receive goods or services
d. Rights to benefit from an obligation of another party to transfer
economic resource if a specified uncertain future events occur.
8. The basic summary device of accounting.
a. T-account
b. Account
c. Journals
d. Ledgers
9. Jovit purchase a fixed asset worth P500,000, a down payment of P100,000
and issued a promissory note for the balance. What is the effect of the
purchase in the accounting equation?
a. Current assets increased.
b. Current liabilities decreased.
c. Noncurrent assets increased.
d. Noncurrent liability decreased.
10. Which of the following is false?
a. Source of Asset transaction refers to as an asset account increases
and the corresponding claims account increases.
b. Exchange of Claims refers to as a claim increases and another claims
increases.
c. Exchange of Assets refers to as one asset account increases and
another asset account decreases.
d. Use of Assets refers to as an asset account decreases and a
corresponding claims account decreases.
11. According to Philippine Accounting Standards (PAS) 1 an entity shall
classify an asset when, except
a. It expects to realize the asset, or intends to sell or consume it,
in its normal operating cycle.
b. It holds the asset primarily for the purpose of trading.
c. It expects to realize the asset within twelve years after the end
of the reporting period.
d. The assets is cash or cash equivalent unless the asset is restricted
from being exchanged or used to settle a liability for at least
twelve months after the reporting period.
12. These are tangible assets that are held by an enterprise for use in the
production or supply of goods or services, or for rental to others, or
for administrative purposes and which are expected or be used during more
than one period.
a. Cash
b. Cash Equivalents
c. Long-term Investments
d. Property, Plant and Equipment
13. Per revised PAS 1, an entity shall classify a liability as current when,
except
a. It expects to settle the liability in its normal operating cycle.
b. It holds the liability primarily for the purpose of trading.
c. The liability is due to be settled within twelve months after the
reporting period
d. The entity have an unconditional right to defer settlement of the
liability for at least twelve months after the reporting period.
14. An entity performed services on account to its clients. What is the effect
if the entity did not record the transaction?
a. Cash is understated
b. Receivable is overstated
c. Revenue is understated
d. Expense is overstated
15. Luffy acquired supplies on account from Zoro, P14,000. What is the effect
of this transaction to its net assets?
a. Increase
b. Decrease
 c. No effect
d. Cannot be identified
16. Under double-entry system, what is the value of X if assets, current
liabilities, non-current liabilities and capital are X, P40,000, P60,000
and P350,000 respectively.
a. P250,000 b. P350,000 c. P370,000 d. P450,000
17. Which of the following is correct under double-entry system?
a. Asset amount must be equal to a liability amount.
b. The change in asset must be compensated by a change in liability.
c. The change in a debit-side entry must be compensated by a change in
credit-side entry.
d. An increase in asset must be compensated by a decrease in asset.
18. Which of the following is correct if the sole proprietor of an entity
borrows P90,000 in the name of the entity and deposits it into the entity’s
bank account?
a. The assets of the entity increase by P90,000.
b. The liabilities of the entity decrease by P90,000.
c. The capital of the entity increase by P90,000.
d. The drawings of the entity increase by P90,000.
19. Transaction analysis four basic steps.
Statement I – Identify the transaction from source documents.
Statement II – Ascertain whether each account increased or decreased by
the transaction.
Statement III – Indicate the accounts – either assets, liabilities,
equity, income or expense.
Statement IV – Using the rules of debit and credit, determine whether to
debit or credit the account to record its increase or decrease.
a. I, II, III and IV
b. I, III, II, and IV
c. II, I, III and IV
d. IV, II, III and I
20. These are original written evidences contain information about the nature
and the amounts of the transactions.
a. Accounts
b. Journals
c. Source Documents
d. Ledgers
21. A chronological record of the entity’s transactions.
a. Accounts
b. Journals
c. Source Documents
d. Ledgers
22. The reference book of the accounting system.
a. Accounts
b. Journals
c. Source Documents
d. Ledgers
23. A listing of all the accounts and their account numbers in the ledger.
a. General Journal
b. General Ledger
c. Chart of Accounts
d. Special Journals
24. Which of the following steps in accounting cycle are listed in a logical
order?
a. Prepare the income statement, prepare the statement of financial
position and then prepare a worksheet.
b. Post the journal entries to the ledger accounts, prepare a
worksheet, and then take a trial balance.
c. Journalize the closing entries, post the closing entries, and then
take a post-closing trial balance.
d. Post the closing entries, take a post-closing trial balance, then
journalize the closing entries.
25. Financial statements, except for the cash flows statement, are prepared
using?
 a. Cash basis
b. Installment basis
c. Lump-sum basis
d. Accrual basis
26. Expenses are paid but not yet incurred.
a. Accrued revenue
b. Accrued expenses
c. Deferred revenue
d. Prepaid expenses
27. Per 2018 Conceptual Framework, it is the process of capturing for
inclusion in the statement of financial position or statement of financial
performance an item that meets the definition of an asset, liability,
equity, income or expenses.
a. Derecognition
b. Recognition
c. Realization
d. Accumulation
28. The removal of all part of a recognized asset or liability from an entity’s
statement of financial position. This normally occurs when that item no
longer meets the definition of an asset or of liability.
a. Derecognition
b. Recognition
c. Realization
d. Accumulation
29. This kind of adjustment deals with an amount already recorded in a balance
sheet account, the entry, in effect, decreases the balance sheet account
and increases an income statement account.
a. Accrued Expense
b. Accruals
c. Deferred Revenue
d. Deferrals
30. This kind of adjustment deals with an amount unrecorded in any account,
the entry, in effect, increases both a balance sheet and an income
statement account.
a. Accrued Expenses
b. Accruals
c. Deferred Revenue
d. Deferrals
31. Ralph, acquired an insurance for 3 years, P30,000 on January 1. Ralph
made an entry for this transaction debiting prepaid insurance. Ralph made
an appropriate adjusting entry. At the end of the year, which is correct?
a. The balance of insurance at the end of the year is the same at the
beginning of the year.
b. The balance of insurance at the end of the year is higher if expense
method is used.
c. The balance of insurance remain unchanged.
d. The balance of insurance at the end of the year is the same using
either expense or asset method.
32. On January 1, 2018, acquired a building, P1,500,000 with a useful life of
20 years with no residual value. At the end of third year of operations,
what will be the book value of the building?
a. The book value of the building is 225,000 higher than its book value
in the second year.
b. The book value of the building is equal to 85% of the cost.
c. The book value of the building is 150,000 lower than the cost.
d. The book value of the asset is the same as its historical cost.
33. Which of the following is deducted to arrive at the depreciable amount of
straight-line method of depreciation?
a. Acquisition Cost
b. Useful life
c. Market Value
d. Residual Value
34. The liability of an entity for an advance receipt of cash for services
not yet performed or goods not yet delivered.
 a. Accounts Payable
b. Accounts Receivable
c. Unearned Revenue
d. Notes Payable
35. On October 1, 2017, Jev Company, pays P50,000 to Beb Company for the goods
to be delivered on January 1, 2018. Jev Company appropriately recorded the
transaction it its books. Beb recorded the transaction on January as debit
to cash and credit to sales. What is the effect of non-recording of
transaction by Beb in 2017 statement of financial position?
a. Assets are overstated
b. Liabilities are understated
c. Income is overstated
d. Proper accounting was made
36. On November 30, 2016, end of the fiscal year 2015-2016, the entity
overlooked the 4 days salaries of 2 employees. The employees are paid a
monthly rate of P17,600 for 22 working days. Which is correct?
a. The salaries expense is understated by P35,200.
b. The net profit for fiscal year 2015-2018 is understated by P35,200.
c. The liabilities are understated P6,400.
d. The net profit for the fiscal year 2015-2016 is overstated by
P3,200.
37. At the beginning of second year, Throy Company has liabilities totaling
to P500,000. The liabilities are composed of Accounts Payable, Notes
Payable (5%), and Notes Payable (8%) with balances of P100,000; P200,000
and P200,000 respectively. The 5% note is payable in full, principal plus
interest, on third year – the note is dated January 1, of the second year.
The 8% note is dated July 1, of the first year, interest is payable every
July 1 and January 1. What will be the balance of Throy’s Liabilities in
the balance sheet at the end of the second year?
a. The balance of the liabilities will be 8,000 higher than the
beginning caused by the incurrence of interest.
b. The ending balance is the same with the beginning balance.
c. The ending balance of liabilities is 3.6% higher than the beginning
balance.
d. The ending balance of the liabilities is 2% higher than the
beginning balance as a result of interest expense.
38. Racecars Company made credit sales of P 1,000,000 in 2017, the fourth
year of operations. Company’s policy provided that 2% of the total credit
sales will be the estimated uncollectible accounts. If the entity made an
appropriate journal entry to reflect the adjustments, which is not correct?
a. Operating Expenses increased by 20,000.
b. Accounts Receivable net realizable value is 20,000 lower than its
last updated balance.
c. Allowance for uncollectible accounts equals to 20,000 if there’s no
beginning balance.
d. Allowance for doubtful accounts ending balance is the same, in all
circumstances, either percent of sales of percent of receivables is
used.
39. Statement I – Enter the account balances in the unadjusted trial balance
columns and total the amounts.
Statement II – Compute each account’s adjusted balances and enter the
adjusted amounts in the adjusted trial balance.
Statement III – Extend the balance sheet and income statement accounts’
balances and total the amounts.
Statement IV – Enter the adjusting entries in the adjustment columns and
total the amounts.
Statement V – Compute for profit or loss for income statement and column
totals for the balance sheet.
What is the correct order in the preparation of worksheet?
a. I,IV, V, II, III
b. I, IV, II, III, V
c. I, III, II, IV, V
d. I, II, IV, III, V
40. Akame and Kurome, partners in AK Guns and Swords Company, hired you as
their accountant. At the end of the year, you have created a comprehensive
worksheet, in the income statement columns you find that the debit balance
is lower than the credit balance. This indicates that
a. When closing temporary accounts, the Income Summary’s net balance
is debit.
b. Company’s total expenses is relatively higher than its income.
c. The company incurs losses for the period.
d. When closing temporary accounts, the Income Summary’s net balance
is credit.
41. This component of financial statement provides a narrative description or
disaggregation of items presented in the statements and information about
items that do not qualify recognition in the statements.
a. Statement of Financial Position
b. Statement of Financial Performance
c. Notes to Financial Statements
d. Statement of Changes in Equity
42. At the end of the first year of operations, as an accountant, you have
been tasked to compile and prepare a statement of financial position. What
will be the best format of presentation for the statement?
a. Report format, since it’s for reporting purposes.
b. Account format, since this will be used internally by the
management.
c. Neither report format nor account format, you can present the
financial statement in whatever style you want.
d. The standard does not prescribe the order or format in which an
entity present items in the statement of financial position.
43. Which of the following are the method of presenting the statement of cash
flows?
a. Direct or Indirect Method
b. Gross or Net Method
c. Allowance or Direct Write-off Method
d. Liquidity or Solvency Method
44. Which of the following is not a cash outflow from operating activities?
a. Payments to employees.
b. Payments for taxes.
c. Payments to acquire property, plant and equipment.
d. Payments for other operating expenses.
45. Which of the following will qualify as Financing Activity?
a. Cash receipts from sale of property, plant and equipment.
b. Cash payments to acquire debt or equity securities.
c. Cash receipts from issuance of notes payable.
d. Cash payments to make loans to others generally in the form of notes
receivable.
46. Which of the following statements is/ are true?
I – The income statement reports all income and expenses during the period.
The profit or loss is the final figure in this statement.
II – The statement of changes in equity considers the profit or loss figure
from the income statement as one of the determining factors that explains
the change in owner’s equity.
III – The statement of financial position reports the ending owner’s
equity, taken directly from the statement of changes in equity.
a. I only
b. II only
c. I and III only
d. I, II, and III
47. It is the exact opposite of a related adjusting entry made at the end of
the period.
a. Adjusting Entries
b. Closing Entries
c. Reversing Entries
d. Correcting Entries
48. A formal notice to the debtor detailing the accounts already due.
a. Official Receipt
 b. Statement of Account
c. Bill of lading
d. Receiving report
49. Which of the following is not a source document found in the purchase
transaction?
a. Purchase Requisition
b. Purchase Order
c. Sales Invoice
d. Receiving Report
50. In credit terms 5/10, n/30, the 30 represents
a. The discount period.
b. The discount rate.
c. The due date of account.
d. The last date to avail discount.
51. The cash discount on the buyer’s viewpoint.
a. Purchase Returns
b. Sales Returns
c. Purchase Discount
d. Sales Discount
52. Assume that an invoice for P300,000 with terms 2/10, n/30, is to be paid
within the discount period with money borrowed for the remaining 20 days
of the credit period. The borrowed money with 18% interest will be repaid
on the 20th day starting from the date of availment. Which is correct (use
360 days)?
a. The entity will borrow an amount of P300,000.
b. The entity will have a net savings of P3,060.
c. The entity will incur an interest expense of P54,000.
d. The entity will not benefit from the borrowing.
53. Statement I – There is no trade discount account and there is no special
accounting entry for this discount.
Statement II – All accounting entries are based on the invoice price which
is obtained by subtracting the trade discount from the list price..
Which is correct?
a. Statement I is false.
b. Statement II is false.
c. Both Statements are false.
d. Neither of the statements are false.
54. VIVA LGBTQ+ Company acquired machinery from ABCDE Company. Based on their
negotiation, VIVA LGBTQ+ will be granted with 10% and 20% trade discount
aside from the cash discount of 2/10, n/30. The entity paid within the
discount period amounting to P626,265.864. What is the amount of list
price of the machinery?
a. The list price is unnecessary for computing the invoice price,
therefore, list price should not be computed.
b. The list price is equal to 900,000 gross of deductions.
c. The list price is equal to the cash payment divided by 70.56%.
d. The list price is equal to invoice price plus cash discounts and
trade discounts.
55. On February 1, 2018, Justin Company, purchased merchandise inventory on
account from Selena Company, P100,000 with terms 2/10, n/30 – FOB shipping
point. The goods were shipped on March 1, 2018. The entry record the
payment of account within the discount period will typically include
a. Debit to Purchases, P100,000 if periodic inventory system is used.
b. Debit to Accounts Payable, P100,000 either periodic or perpetual
inventory system is used.
c. Credit to Accounts Payable P100,000.
d. Credit to Cash, P100,000.
56. Lyn-lyn Company acquired merchandise inventory worth P50,000 with terms
of 2/10, n/30 FOB shipping point, freight prepaid. Freight amounted to
P2,000. The freight is not recorded by the seller. Is the seller correct
in non-recording of freight?
a. No, since he is the seller, he should record the freight.
b. Yes, since the obligation to pay is on the seller but is not
appropriate to record because the amount is immaterial.
 c. No, the seller should record the freight since the term is FOB
shipping point.
d. Yes, the seller should not be the one paying the freight, still
will record an entry to recognize a receivable from the buyer.
57. Velasco Company is a manufacturing entity. During the year, the company
acquired a machinery worth P90,000 with a residual value of P10,000 and a
useful life of 8 years. Velasco Company made an appropriate adjusting
journal entry at the end of the year. What expense recognition principle
was observed by the company in recording the adjustments?
a. Going Concern
b. Immediate Recognition
c. Cause and effect association
d. Systematic and rational allocation
58. PJ Company, a leading merchandising entity, forecasted an increase of 30%
in unit sales for the next year of operation. Current net income shows an
amount equal to P75,000,000. Selling price is P250 and the cost is P150
per unit. The operating expenses is expected to increase to 15% from the
current year’s 10%. The next year’s operating expenses is expected to be
20% of sales, 25% higher than current year. Which is correct?
a. Net sales for the current year is P300,000,000.
b. The expected net income for the next year is 108 1/3% of the current
year’s net income.
c. The net income for the next year would be P97,500,000.
d. The Cost of goods sold for the current year equals to 243,750,000.
59. I – Gross margin is understated if sales is understated.
II – Gross margin is overstated if Cost of Goods sold in understated.
III – Net income is overstated if the ending inventory is overstated.
IV – Net income is understated if the operating expenses is understated.
a. I, II and IV are false
b. I, III, and IV are true
c. I, II, and III are true
d. I, III and IV are false
60. The optional step in accounting cycle.
a. Closing Entries
b. Post-closing trial balance
c. Reversing Entries
d. Adjusting Entries
61. Which is false?
a. Input tax increased the amount to be paid but has no effect on the
cost of purchases.
b. Output tax increase the amount collected but not necessarily, the
sales figure.
c. Value-added tax payable is the excess of output tax over input tax.
d. Input tax and output tax are contra-purchase and contra-sales
account respectively.
62. Saitama Company is a VAT registered Wholesaler of goods. During the
current year, he had a total purchases of P6,720,000 and a total sales of
P12,320,000. Can Saitama claim an input VAT?
a. No, since he is a wholesaler.
b. Yes, either retailer or wholesaler he can claim input VAT.
c. No, he cannot claim because his purchases is less than 10,000,000.
d. Yes, a VAT registered entity can claim input VAT.
63. The largest single expense in the income statement.
a. Operating Expenses
b. Finance Cost
c. Cost of sales
d. Administrative and Selling Expenses
64. Urnym,CPA, accountant of FirLas Company, encountered problems about the
records of the past accountant. Company used perpetual inventory system
in accounting its inventories. In 2018, before closing the books, Urnym
found out that the past accountant did not record cost of sales entry for
every sale transaction. The sales mark-up is 25% on cost. What will be the
appropriate step Urnym should perform?
 a. Cost of sales should be established, based on the cost of sales
ratio, to have a proper matching of expenses to revenues.
b. Urnym will just copy the last year’s cost of sales for simplicity.
c. Urnym will resign to avoid problems of the company.
d. Cost of sales is also an expense therefore it can be presented as
one line item together with operating expenses.
65. Which of the following items can lead to a difference between values of
profit and gross profit?
a. Sales returns
b. Transportation in
c. Purchase returns
d. Transportation out
66. Lyndon Company had an inventory balance of P300,000 on January 1. At the
end of the year the balance of inventory per physical count amounted to
P200,000. Lyndon uses periodic inventory system. If the entity used an
adjusting entry method to establish the ending inventory balance, an entry
will typically include?
a. Debit Merchandise Inventory, beginning P200,000.
b. Credit Income Summary, P300,000.
c. Credit Merchandise Inventory, ending P200,000.
d. Debit Income Summary, P300,000.
67. These are journals of original entry that are designed for recording
specific types of transactions of a similar nature.
a. General Journal
b. General Ledger
c. Special Journal
d. Subsidiary Journal
68. Which of the following uses of special journal is mismatched?
a. Sales journal is used in recording the sale of merchandise on
account.
b. Cash receipts journal is used in recording receipts of cash.
c. Purchases journal is used to record credit purchases of merchandise
and other items.
d. General journal is used to record entries of daily transactions.
69. Adjunct account of purchases.
a. Purchase returns
b. Purchase discounts
c. Freight-in
d. Freight-out
70. Inventories should be measured at
a. Cost
b. Net Realizable Value
c. Lower of cost or net realizable value
d. Fair market value
71. Revenue is recognized at the point of collection. The amount of revenue
is determined by multiplying the gross profit rate by the amount of
collections.
a. Installment Method
b. Cost recovery Method
c. Cash Method
d. Percentage of Collection method
72. Revenue is recognized at the point of production.
a. Sunk cost method
b. Cash Method
c. Production method
d. Percentage of completion
73. Revenue is recognized when received regardless of when earned.
a. Cost recovery method
b. Cash method
c. Accrual method
d. Percentage of completion
74. When the outcome of a construction contract can be estimated reliably,
contract revenue and contract costs associated with the construction
 contract shall be recognized as revenue and expenses, respectively, by
reference to the stage of completion of the contract activity.
a. Cost recovery method
b. Accrual Method
c. Cash Method
d. Percentage of completion
75. Which of the following does pertain to the conditions for the recognition
of revenue from sale of goods?
a. The amount of revenue can be measured reliably.
b. The entity retains neither continuing managerial involvement nor
effective control over the goods sold.
c. The cost incurred or to be incurred can be measured reliably.
d. All of the above
76. Which of the following does pertain to the conditions for the recognition
of revenue from rendering of services?
a. The amount of revenue can be measured reliably.
b. It is probable that the economic benefits associated with the
transaction will flow to the entity.
c. The stage of completion of the transaction at the end of the
reporting period can be measured reliably.
d. All of the above.
77. Strict matching principle
a. Cause and effect association
b. Systematic and rational allocation
c. Immediate recognition
d. Matching type
78. When the economic benefits are expected to arise over several accounting
periods and the association with income can be broadly or indirectly
determined, expenses are recognized on the basis of systematic and
allocation procedures.
a. Cause an effect association
b. Systematic and rational allocation
c. Immediate recognition
d. Cost constraint
79. The cost incurred is expensed outright because of uncertainty of future
economic benefits or difficulty of reliability associating certain costs
with future revenue.
a. Cause and effect association
b. Systematic and rational allocation
c. Immediate recognition
d. Cost principle
80. The amount of cash or cash equivalent paid or fair value of the
consideration given to acquire an asset at the time of acquisition.
a. Past purchase exchange price
b. Current purchase exchange price
c. Current sale exchange price
d. Future Exchange price
81. The discounted value of the future net cash inflows that the item is
expected to generate in the normal course of business.
a. Past purchase exchange price
b. Current purchase exchange price
c. Current sale exchange price
d. Future Exchange price
82. The amount of cash or cash equivalent that could currently be obtained by
selling the asset in an orderly disposal.
a. Past purchase exchange price
b. Current purchase exchange price
c. Current sale exchange price
d. Future Exchange price
83. The amount of cash or cash equivalent that would have to be paid if the
same or equivalent asset was acquired currently.
a. Past purchase exchange price
b. Current purchase exchange price
c. Current sale exchange price
 d. Future Exchange price
84. The process of determining the monetary amounts at which the elements of
the financial statements are to be recognized and carried in the statement
of financial position and Income statement.
a. Measurement
b. Recognition
c. Classification
d. Interpretation
85. Its main function is to establish and improve accounting standards that
will be generally accepted in the Philippines.
a. International Financial Reporting Standards Council
b. International Accounting Standards Board
c. Financial Reporting Standards Council
d. Accounting Standards Council
86. Its role is to prepare interpretations of PFRS for approval by the FRSC
and in the context of conceptual framework, to provide timely guidance on
financial reporting issues not specifically addressed in current PFRS.
a. International Financial Reporting Interpretations Committee
b. Standing Interpretations Committee
c. International Interpretation Committee
d. Philippine Interpretation Committee
87. Statement I – To formulate and publish in the public interest accounting
standards to be observed in the presentation of financial statements and
to promote their worldwide acceptance and observance.
Statement II – To work generally for the imprisonment and harmonization
of regulations, accounting standards and procedures relating to the
presentation of financial statements.
Statement III - To provide financial information about the reporting
entity that is useful to existing and potential investors, lenders and
other creditors in making decisions about providing resources to the
entity.
Statement IV - To provide quantitative financial information about a
business that is useful to statement users particularly owners and
creditors, in making economic decisions.
Which is true?
a. Statements I and III pertain to objectives of financial reporting
b. Statements II and IV pertain to objectives of IASC
c. Statements I and II pertain to objectives of IASC
d. Statements III and IV pertain to objectives of financial reporting
88. IASC: IASB: IFRS; ASC: FRSC:
a. GAAP
b. PSA
c. FRSC
d. PFRS
89. Statement I – In the past years, most of the Philippine standards issued
are based on American accounting standards.
Statement II – Presently, the Financial Reporting Standards Council has
adopted in their entirety all International Accounting Standards and
International Financial Reporting Standards.
Statement III – In formulating accounting standards that is generally
accepted in the Philippines, the Board of Accountancy together with the
Professional Regulation Commission created standards.
Which is true?
a. Statement I is false
b. Statement II is false
c. Statement III is false
d. Neither of the statements is false
90. The following are statements concerning the factors considered in totally
moving to International Accounting Standards, which is not?
a. Support of international accounting standards by Philippine
organizations, such as the Philippine SEC, Board of Accountancy and
PICPA.
b. Increasing recognition of international accounting standards by the
World Bank, Asian Development Bank and World Trade Organization.
 c. Increasing internalization of business which has heightened
interest in a common language for financial reporting.
d. Improvement of Philippine Accounting Standards or removal of free
choices of accounting.
91. A series of pronouncements of standards issued by the Financial Reporting
Standards Council.
a. Philippine Standards on Auditing
b. Government Accounting Manual
c. Philippine Financial Reporting Standards
d. International Financial Reporting Standards
92. Which is not included in the Philippine Financial Reporting Standards?
a. Philippine Interpretations which correspond to Interpretations of
the IFRIC and the Standing Interpretations Committee, and
Interpretations developed by the Philippine Interpretations
Committee.
b. Philippine Accounting Standards which correspond to International
Accounting Standards.
c. Philippine Financial Reporting Standards which correspond to
International Financial Reporting Standards.
d. International Financial Reporting Standards and Interpretations
formulated by the Board of Accountancy and in the provision of RA
9298.
93. The basic notions or fundamental premises on which the accounting process
is based.
a. Accounting Policies
b. Accounting entity assumption
c. Accounting Assumptions
d. Accounting Estimates
94. Assumption or assumptions mentioned in the Conceptual Framework.
a. Going concern, accounting entity, time period, and monetary unit
b. Going concern and Time period
c. Going Concern only
d. Going concern, monetary unit and time period
95. Mr. Gatchalian is engaged into trading business. On January 1, 2018, he
purchased equipment costing P600,000. The equipment has a useful life of
5 years and residual value of P100,000. In the same date, he recorded the
transaction in his journal debiting Equipment account and crediting cash
at cost. What accounting assumption did Mr. Gatchalian observed in
recording the transaction?
a. Going Concern assumption
b. Time period assumption
c. Monetary unit assumption
d. Accounting entity assumption
96. Ms. Yutiamco is a proprietor of a merchandising business. It was
established on January 1, 2008 with a capital investment of P3,000,000.00
and used calendar year for its reporting. On December 30, 2012, Ms.
Yutiamco purchase from Mr. Moscatiles merchandise costing P350,000, FOB
shipping point. The merchandise arrived on January 5, 2013 and recorded
the purchase. What accounting assumption is violated in the situation?
a. Going Concern assumption
b. Time period assumption
c. Monetary unit assumption
d. Accounting entity assumption
97. Ms. Korina Rodriguez is a proprietor of a manufacturing business. Raw
materials were purchased from Mr. Jib. Later on the current year, Ms.
Rodriguez received a birthday gift from Mr. Vincent, a check worth P25,000.
The transaction was recorded by the entity by debiting cash and crediting
income. What accounting assumption was violated in the situation?
a. Going Concern assumption
b. Time period assumption
c. Monetary unit assumption
d. Accounting entity assumption
98. Ms. Crismundo, branch accountant of Syria’s Bullets and Guns Company – an
international company, encountered an importation transaction from its
 parent company. The transaction involves equipment worth $300,000 when the
exchange rate was P40 to $1. As an accountant she debited Equipment and
credited cash amounting to P12, 000,000. After three years, the current
market price of Equipment is P45 to $1. However, since the entity has a
policy about using a revaluation method in subsequently measuring its
property, plant and equipment. Therefore, as an accountant, Ms. Crismundo
adjusted the Equipment account balance. What accounting assumption was
observed by Ms. Crismundo?
a. Going concern assumption
b. Time period assumption
c. Monetary unit assumption
d. Accounting entity assumption
99. Depicts the effects of transactions and other events and circumstances on
an entity’s economic resources and claims in the periods in which those
effects occur even if the resulting cash receipts and payments occur in a
different period.
a. Cash method accounting
b. Output method accounting
c. Accrual accounting
d. Crop basis accounting
100. Which of the following is not a limitation of financial reporting?
a. General purpose financial reports can provide all of the information
that existing and potential investors, lenders and other creditors
need.
b. General purpose financial reports are not designated to show the
value of an entity but the reports provide information to help the
primary users estimate the value of the entity.
c. General purpose financial reports are intended to provide common
information to users and cannot accommodate every request for
information.
d. To a large extent, general purpose financial reports are based on
estimate and judgement rather than exact depiction.