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# TA-256: STATEMENT OF COMPREHENSIVE INCOME & ACCOUNTING CHANGES Sources: PAS 1/PAS 8/Conceptual Framework/RPCPA/Applicable AICPA/Various test banks 1, It refers to an increase in economic benefits in the form of an increase in assets or 3 decrease in abilities resulting in an increase in equity other than contributions from owners. a. Asset < Gain pF Income 4. Profit 2." An entity's revenue may result from 2, Adecrease in an asset from primary operations 17S. A decrease in a habiity from primary operations ©. An increase in an asset from incidental transactions d. An increase in a liability from incidental transactions 3. They refer to increases in equity from peripheral or incidental transactions of an entity. a. Revenues , Comprehensive income b. Dividends wo Gains 4. It refers to a decrease in economic benefits in the form of a decrease in asset or an increase in liability resulting in a decrease in equity other than distributions to owners. a. Asset Income b. Liability H Expense 5. Expense is recognized s a. When it has been paid for b. When it 1s probable that economic benefit can be measured reliably ¢, When it is probable that the outflow of economic benefit has occurred 7 When it is probable that an outflow of economic benefit has occurred and it can be measured reliably In accounting, the term ‘probable’ means that the probability that an event will occur Is A. More than the probability that the event wilt not occur 'b. Less than the probability that the event will not occur © Same as the probability that the event will not occur 4g. Highly uncertain 7. It ts the process that involves the simultaneous recognition of revenue and expenses that result directly from the same transactions or events. Immediate recognition AO Matching of cost with revenue “b. Matching of revenue with cost 4. Systematic and rational allocation ° If an asset provides benefits for several periods, its cost 1s allocated to the periods benefited in the 8. absence of a more direct basis for relating the cost to revenue. ‘a, Associating cause and effect ¢. Immediate recognition 8. Systematic and rational allocation d. Installment method 9. Which of the following is an example of the expense recognition principle of associating cause and effect? Depreciation of property ©. Allocation of insurance cost 4 Sales commissions 4. Officers’ salaries 10. The write-off of a worthless patent is an example of whichget the following expense recognition principles? tS ‘a. Systematic and rational allocation Immediate’ accymtion b. Cause and effect association ‘d. Profit maximization 11, Under the transactions approach, net income (profit) 1s computed as the excess of Income over expenses © Ending capital over beginning capital b. Total assets over total liabilities 4. Beginning capital over ending capital 12. Under a strict transaction approach to income measurement, which of the following would not be considered a transaction? a. Payment of taxes b. Sale of merchandise inventory at 25% markup . Write-down of inventories from cost to net realizable value %G. xchange of property valued at market price Yor anather property ei es ay CmRewtiede onion of Cenneitaneg TA-£09 STATEMENT OF COMPREHENSIVE INCOME & ACCOUNTING CHANGES 13. Under the capital mmvntenance approach, nak income: (pron) is Camputed ae the excess of a. Beginning over ending capital, including the effect pf miveetiniants and withdrawals by owners, =. Begining aver ending capital, exctuing Ihe eller Lot nvestmnenin aiid wititeawals by owners, © Ending over beginning capital, including the eter of investinents and withelvawals by owners, AL Ending over beginning capital, excluding the effect af mivastinonts and withurawals by owners 14, The income statement presentation wh Of cost of sales, selling actowitios, aclininigirative activities ariel ott AL Cost of Sales method Cfurchimal) C. Aceqwu forth vein expenses are classified! according to thelr function, a8 part oeratinig activities, 7b. Nature of expense method Report fou 15. Which of the following is not considered! in the cost of goods wold # Oifice Supplies ¢ Kaw Materials b. Work-In-Process a Fished Good 16, Which of the following 15 not considered! as a distribution cost? a. Salesmen’s commission © Freight out b. Depreciation of delivery equipment ya” Provaht in 17, Which item ts no longer allowed to be shown on the face of the incoine statement? a. Finance cost, iy Extraordinary ite b. Tax expense ‘J, Share of income OF loss of associates 18. A transaction that 1s material in amount, Unusual Mm fialure and inrequent IN occurrence should be Presented in the income statement separately ay a a, Pnor period error Component of income from continuing operations Component of income fron discontinued operations, alter tax 4. Component of income fron discontinued aperations, before tax 19. The results of discontinued operations should be presented a single amount in the ‘a. statement of changes in equity b. Statement of financial position and in the notes thereto, {AF iacome statement, alter tax, separately from Income fram continuing aperations d, income statement, before lax, separately trom income: from continua aperations 20. An entity shall disclose on the face of {he income statement the allocation of protit or loss between a, Parent and subsidiary companies b. Ordinary and extraordinary activities Continuing and discontinued operations, _2® Non-controting (minority) interest and owners of the parant 21. Comprehensive income refers to the changes In equity other than changes resulting from distribution te and contributions from owners. Which of these isnot a vanpanent of comprehensive income? a. Losses G Expenses b, Revenue of Dividends 2. It is the total of income less expenses, excluding the components of other comprehensive income. PE Profit oF loss Accumulated protit oF lows b. Retained earnings d. Total comprehensive income 23. These are items of income and expenses that are nol permitted by PFRS. ‘a, Retained earnings Total comprehensive income b. Accumulated profit or loss a Other comprehensive income recognized in profit or loss as required oF 24. Which item is not a component of ather comprehensive income? ‘a. Changes in revaluation surplus +b, Foreign currency translation gain or loss +f Unrealized gains and losses. ot Hrading securities 4, Unrealized gain oF loss trom derivative contracts designated as cash flow hedae 25. The statement of comprehensive income shall! include information about 1). Profit or toss MD Chan wa M1) Other comprehensive income ace Say wf Land it © Mand ut b. Fad It 1 Manel 1 SOSENENT OF COMPREHENSIVE INCOME & ACCOUNTING CHANGES 26. A change in accounting estimate 16 considered as a(n) 2.8 Irregular book adjustment Change m accounting policy Normal recurring adjustment Correction of prior period error requiring restatement of financial statements 27 Prospective application of the effect of change in estimate means that the change is applied to transactions from the bate of change €. Beginning of the year of change B Balance sheet date 4. Date of issuance of financial statement 28. The effects of change in accounting estimate should be ‘2 Shown as adjustment to retained earnings b. Treated as an extraordinary item, net of related tax €__Accounted for in profit or loss in the current and prior periods YE Accounted for in profit or loss in the period of change and, if affected, future periods 29. Its the specific principle, basis, convention, rule and practice adgpigd by an entity in preparing and presenting the financial statements ‘a, Prior period error . Accounting estimate of Accounting policy d. Generally accepted accounting principles 30. A change in accounting policy shall be effected when 1) Reauired by an accounting standard or its interpretation 11) It heips an entity save on corporate taxes by way of understating periodic income Il) The change results in financial statements providing more relevant or reliable financial information about the reporting entity \& Land I 2& land b. Mand Itt d. 1, W andJt 31. A change in accounting policy as required by an accounting standard shall be ‘a. Ignored D. Applied retrospectively ‘c. Applied currently and prospectively (AT Applied in accordance with the transitional provisions of the related standard 32. A change in accounting policy made by an entity voluntarily shall be ‘a Ignored “Bt Apphed retrospectively ‘c. Applied currently and prospectively d. Treated as a change in accounting estimate 33. Which of the following terms best describes applying a new accounting policy to transactions as if that policy had always been applied? ‘a. Prospective application c. Prospective restatement [Ph Retrospective application d._ Retrospective restatement 34. Retrospective application means that any effect of a change in accounting policy should be reported as ‘a. An extraordinary item b. Acurrent adjustment to profit or loss ¢. A component of discontinued operation a Aeatch-up adjustment to the opening balance of retained earnings 35. Prospective application of a change in accounting policy is required when ’2._ Retrospective application will tend to overstate the equity position b. Retrospective application will tend to understate the equity position €_ The amount of aahustment tothe opening balance of retained earnings can be reasonably determine A The amount of adjustment to the opening balance of retained earnings cannot be reasonably determined 36. Which is considered as a change in accounting policy rather than a change in accouriting estimate? '2. Revision of an intangible asset's useful life Change in the residual value of a building used as plant site Change in inventory valuation from FIFO to weighted average method Sd. Change in depreciation method from straight line to double declining balance method KODA | The Review School of Gccountamcy, TA-256 STATEMENT OF COMPREHENSIVE INCOME & ACCOUNTING CHANGES: 37. A change in reporting entity and measurement basis is treated as a change in accounting Policy +c. Estimate 'b. Concept d. Assumption 38. If it is dificult to distinguish between @ change in accounting estimate and a change in accounting policy, then the change is treated as a 2." Pror period error c., Change in accounting policy b. Current period error 4” Change in accounting estimate 39. Prior period errors include ail of the following, except a. Effects of mathematical mistakes b. Mistakes in applying accounting policies C. Oversights or misinterpretation of facts and fraud Do Effects of a change in the estimated useful life of an asset 40. Prior period errors discovered in the current period are reported as a. Extraordinary items b. Component of current income from ordinary activities ‘Adyustments to the opening balance of retained earnings Component of current income from continuing operations CoMpREGENGIVE |NCOME AC 77 (i) - Bo teury, By rae Oe ~Confubeins Soe'> sone nt chemin. provi, ang ‘ Ones cr * PP. emst emepett Cs) ~ OF ( 5 cyt) THs ft toca Nat 1% Shaft of Bil) Proibory ond ae pth oh C tn bla) 7Ph6 24 ( Ralehe forty Diechorures)