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Section:
QUIZ 2
CONCEPTUAL FRAMEWORK, PAS 1 & PAS 7

Multiple Choice. Choose the best answer. Write your answer before each corresponding number.
1. Statement 1 – The Conceptual Framework deals with the concepts used in the preparation and presentation of
financial statements.
Statement 2 – The Conceptual Framework is considered a Philippine Financial Reporting Standard (PFRS)
Statement 3 – In case of conflict, the Conceptual Framework prevails over the requirements of PFRS.
a. False, true, true
b. True, False, true
c. True, true, false
d. True, false, false
2. Under PAS 1, which of the following does not refer to a current liability?
a. It is held primarily for the purpose of being traded
b. It is expected to be settled within the entity’s normal operating cycle
c. It is due to be settled within twelve months after the balance sheet date
d. The entity has an unconditional right to defer settlement of the liability for at least twelve months after the
balance sheet date
3. Which is not included in the scope of the Conceptual Framework
a. Objectives of General-purpose financial reporting
b. Generally Accepted accounting principles
c. Concepts of Capital and capital maintenance
d. Definition, recognition, and measurement of the elements of financial statements
4. The objectives of financial reporting for entities are based on
a. The need for conservatism
b. Reporting on management’s stewardship
c. Generally accepted accounting principles
d. The need of the users of information
5. A general feature of FS presentation that requires an entity to present separately each material class of similar items
and present separately items of dissimilar nature or function unless they are immaterial.
a. Consistency of presentation
b. Materiality and aggregation
c. Comparative information
d. Fair presentation and compliance with PFRS
6. These are qualities or attributes that make financial accounting information useful to users.
a. Quantitative techniques
b. Underlying assumptions
c. Qualitative characteristics
d. Accounting principles
7. The overriding qualitative characteristic of accounting information is
a. Usefulness for decision making
b. Freedom from bias
c. Relevance
d. Comparability
8. Financial information exhibits the characteristics of consistency when
a. Gains and losses are not included in the income statement
b. Accounting procedures are adopted which give a consistent rate of income
c. Expenses are reported as charges against revenue in the period in which they are paid
d. Accounting entities give accountable events the same accounting treatment from period to period
9. The financial information must be comprehensible or intelligible if it is to be useful
a. Relevance
b. Reliability
c. Understandability
d. Comparability
10. If there is undue delay in reporting financial information, then it may lose its
a. Relevance
b. Faithful representation
c. Comparability
d. Understandability
11. The ability through consensus among measurers to ensure that financial information represents what is purports to
represent is an example of the concept of
a. Relevance
b. Verifiability
c. Comparability
d. Feedback value
12. Statement 1 – The relevance of accounting information is affected by its nature and materiality.
Statement 2 – Materiality is considered a primary qualitative characteristic rather than a threshold or cut off point
in determining useful information
Statement 3 – Information is material if its omission or misstatement could influence the economic decision of users
taken on the basis of the financial statements.
a. Only statement 1 is true
b. Only statement 2 is false
c. Only statement 3 is true
d. Neither statement is true
13. What are the elements that are directly related to the measurement of performance?
a. Assets, liabilities, and equity
b. Gains and losses
c. Income and expenses
d. Revenue and losses
14. Operating activities are
a. Acquisition and disposal of long-term assets and other investments not included in cash equivalents
b. Activities that result in changes in the size and composition of the contributed equity and borrowings of the
entity
c. Principal-revenue producing activities of the entity and other activities that are not investing or financing
activities
d. Primarily lending and borrowing activities
15. It is the change in equity during a period resulting from transactions and other events, other than those changes
resulting from transactions with owners in their capacity as owners
a. Profit or loss
b. Comprehensive income
c. Other comprehensive income
d. Share capital
16. An entity shall present
a. The statement of cash flows more prominently than the other statements
b. The statement of financial position more prominently than the other statements
c. The statement of comprehensive income more prominently than the other statements
d. Each financial statement with equal prominence
17. Determine the true statement
a. Income cover both revenues and gains
b. Revenues cover both income and gains
c. Gains cover both income and revenue
d. Income, revenues, and gains are one and the same
18. Which is not required to be presented as part of minimum requirements as a line item on the face of the statement
of financial position?
a. Biological assets
b. Contingent liability
c. Investment property
d. Investments accounted under the equity method
19. Which of the following is not an acceptable presentation of the statement of financial position?
a. Assets presented in the order of liquidity
b. Non-controlling interest presented within the equity
c. Provisions presented as part of the liability section
d. Deferred tax liability presented as part of current liabilities
20. These provide narrative description or disaggregation of items disclosed on the face of financial statement and
information about items that do not qualify for recognition.
a. Financial reports
b. Value-added statements
c. Notes to financial statements
d. Summary of significant accounting policies
21. The normal order of presenting the notes to the financial statements is:
I. Statement of measurement basis and accounting policies applied
II. Supporting information or computation for line items presented and aggregated in the FS
III. Statement of Compliance with PFRS
IV. Commitments, contingencies, and other required financial and non-financial disclosures
a. I, III, II, IV
b. III, I, IV, II
c. III, I, II, IV
d. III, II, I, IV
22. A third statement of financial position at the beginning of the earlies comparative period is required
a. When an entity applies an accounting policy prospectively
b. When an entity makes a retrospective restatement of items in the financial statements
c. When an entity reorganizes items in the financial statements
d. In all of the above cases
23. When an entity changes the end of the reporting period longer or shorter than one year, an entity shall disclose all
of the following, except
a. Period covered by the financial statements
b. The reason for using a longer or shorter period
c. The fact that the amounts presented in the financial statements are not entirely comparable
d. The fact that similar entities in the geographical area in which the entity operates have done so.
24. In presenting a statement of financial position, an entity
a. Must make the current and noncurrent presentation
b. Must present assets and liabilities in order of liquidity
c. Must make the current and noncurrent presentation except when a presentation based on liquidity provides
information that is reliable and more relevant
d. Must choose either the current and noncurrent or the liquidity presentation
25. An entity must present additional line items in a statement of financial position when
a. Such presentation is relevant to an understanding of the entity’s financial position
b. Such presentation is a generally accepted practice in the sector in which the entity operates
c. Such presentation is required by tax authorities
d. Such presentation is relevant to an understanding of the entity’s financial performance
26. Current and noncurrent presentation provides useful information when the entity
a. Supplies goods or services within a clearly identifiable operating cycle
b. Is a financial institution
c. Is a public utility
d. Is a nonprofit organization
27. A presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is
reliable and more relevant than a current and noncurrent presentation for
a. Financial institution
b. Public utility
c. Government-owned entity
d. Service provider
28. An entity shall classify an asset as current under all of the following conditions, except
a. The entity expects to realize, or intends to sell or consume it within normal operating cycle
b. The entity holds the asset primarily for the purpose of trading
c. The entity expects to realize the asset within twelve months after the reporting period
d. The asset is cash or cash equivalent restricted to settle a liability for more than twelve months after the reporting
period
29. When there is much variability, the operating cycle is measured at
a. Six months
b. The median value
c. Twelve months
d. Less than twelve months
30. The basis for classifying assets as current or noncurrent is the period of time normally required to convert cash
invested in
a. Inventory back into cash, or 12 months, whichever is shorter
b. Receivables back into cash, or 12 months, whichever is longer
c. Tangible fixed assets back into cash, or 12 months, whichever is longer
d. Inventory back into cash, or 12 months, whichever is longer
31. The Two-statement approach of presenting comprehensive income is preparing
a. A comparative statement of comprehensive income
b. A combined statement of comprehensive income and retained earnings
c. A combined income statement and a statement of changes in equity
d. A separate income statement and a separate statement of comprehensive income beginning with profit or loss
plus or minus components of other comprehensive income
32. The presentation of notes to financial statements in a systematic manner
a. Is voluntary
b. Is mandatory
c. Is mandatory, as far as practicable
d. Depends on the industry
33. Cash flows from operating activities may be computed using
a. Direct method
b. Indirect method
c. Either direct or indirect method
d. Neither direct or indirect
34. Cash flows from investing and financing activities are be computed using
a. Direct method
b. Indirect method
c. Either direct or indirect method
d. Neither direct or indirect
35. In a cash flow statement using indirect method, depreciation is added back to reported net earnings because
depreciation
a. Is a direct source of cash
b. Reduces reported net earnings and involves an inflow of cash
c. Is an inflow of cash to a reserve account for replacement of assets
d. Reduces reported net earnings but does not involve an outflow of cash
36. In a cash flow statement using the indirect approach for operating activities, an increase in inventory is presented
as
a. Outflow of cash
b. Inflow and outflow of cash
c. Addition to net income
d. Deduction from net income
37. Making and collecting loans are
a. Operating activities
b. Investing activities
c. Financing activities
d. Liquidity activities
38. Under PAS 1, interest payments to lenders and other creditors should be classified as cash outflows for
a. Operating or Financing activities
b. Investing of Financing activities
c. Operating or Investing activities
d. Operating or Lending activities
39. Under IFRS 18, interest payments to lenders and other creditors should be classified as cash outflows for
a. Operating activities
b. Investing activities
c. Lending activities
d. Financing activities
40. Noncash investing and financing activities are
a. Reported in the statement of cash flows only if the direct method is used
b. Reported in the statement of cash flows only if the indirect method is used
c. Disclosed in a note or separate schedule accompanying the statement of cash flows
d. Not reported or disclosed because they have no impact on cash