1.
The components of financial statement include all of the following except
a. Statement of financial position
b. Income statement
c. Statement of cash flows
d. Statement of retained earnings
2. 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 the asset within the normal operating
cycle.
b. The entity holds the asset primarily for the purpose of trading.
c. The entity expects to realize the asset within 12 months after reporting period.
d. The asset is cash or cash equivalent restricted to settle a liability for more than 12months after
the reporting period.
3. An entity shall classify a liability as current under all of the following conditions except
a. The entity expects to settle the liability within the normal operating cycle.
b. The entity holds the liability primarily for the purpose of trading.
c. The liability is due to be settled within 12 months after reporting period.
d. The entity has an unconditional right to defer settlement of the liability for at least
12months after the reporting period.
4. When an entity changed the end of the reporting period longer or shorter than 1year, an entity shall
disclose all of the following, except
a. Period covered by the financial statements
b. The reason for using a shorter or longer period
c. The fact that 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.
5. When there is much variability, the operating cycle is measures at
a. 6 months
b. The median value
c. 12 months
d. Less than 12 months
6. In analyzing the entity’s financial statements, which financial statement would a potential investor
primarily use to assess liquidity and financial flexibility
a. Statement of financial position
b. Income statement
c. Statement of retained earnings
d. Statement of cash flows
7. Which of the following is an essential characteristic of an asset
a. The claims to an asset’s benefits are legally enforceable
b. An asset is tangible
c. An asset is obtained at a cost
d. An asset provides future benefits
8. Conceptually asset valuation accounts are
a. Assets
b. Neither assets nor liabilities
c. Part of shareholder’s equity
d. Liabilities
9. Working capital is
a. The group of assets needed by the entity to operate profitably
b. Capital which has been reinvested in the business
c. Unappropriated retained earnings
d. Current asset less current liabilities
10. An example of an item which is not an element of working capital is
a. Accrued interest on note receivable
b. Goodwill
c. Work in process
d. Temporary investment
11. As generally used, the term net assets represents
a. Retained earnings
b. Current assets less current liabilities
c. Total paid in capital
d. Total assets less total liabilities
12. When classifying assets as current and noncurrent for reporting purposes
a. The amounts at which current assets are carried and reported must reflect realizable cash
value.
b. Prepayments for items such as insurance or rent are included in ‘other assets’ rather than as
current assets as the prepayments will ultimately be expensed.
c. The time period by which current assets are distinguished from noncurrent assets is
determined by seasonal nature of the business.
d. Assets are classified as current if the assets are reasonably expected to be realized 5n cash
or consumed during the normal operating cycle.
13. 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. Receivable back into cash or 12 months, whichever is longer.
c. Property, plant and equipment back into cash or 12 months, whichever is longer.
d. Inventory back into cash or 12 months, whichever is longer.
14. The operating cycle concept
a. Causes the distinction between current and noncurrent items to depend whether these
would affect cash within 1 year.
b. Permits some assets to be classified as current even though these are more than one year
removed from becoming cash.
c. Has become obsolete.
d. Affects the income statement but not the statement of financial position.
15. Which of the following should be classified as current asset
a. Trade installment receivable normally collectible in 18 months.
b. Cash designated for the redemption of callable preference shares.
c. Cash surrender value of a life insurance policy.
d. A deposit on machinery, delivery of which will be made within six months.