Cash basis accounting is preferred over accrual basis accounting.

Information about the financial effects of cash receipts and cash payments is generally considered the best indicator of an entity’s present and continuing ability to generate favorable cash flows.

Over the long run, trends in revenue and expenses are generally more meaningful than trends in cash receipts and disbursements.

All of the choices are correct regarding “assessing cash flow prospects”.

Can be described as a social process which reflects political actions of various interested user groups as well as a product of research and logic.

Is based solely on research and empirical findings.

Is a legalistic process based on rules promulgated by governmental agencies.

Is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable.

A conceptual framework should increase financial statement users' understanding and confidence in financial reporting.

Practical problems should be more quickly solvable by reference to an existing conceptual framework.

A coherent set of accounting standards and rules should result.

Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply.

The amount at which current assets are carried and reported must reflect realizable cash value.

Prepayments for items such as insurance are included in “other assets” rather than as current assets as they will ultimately be expensed.

The time period by which current assets are distinguished from noncurrent assets is determined by the seasonal nature of the business.

Assets are classified as current if they are reasonably expected to be realized in cash or consumed during the normal operating cycle.

Indicate the receivables classified as current and noncurrent.

Disclose any receivables pledged as collateral.

Disclose all significant concentrations of credit risk arising from receivables.

All of the choices are required by PFRS when classifying receivables.

There is a direct reduction in the selling price of the product that results in a loss being recorded in the income statement prior to the sale.

A loss is recorded by debiting loss on inventory decline and crediting directly the inventory account

Only the portion of the loss attributable to inventory sold during the period is recorded.

The net realizable value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold.

Recovery of inventory writedown is prohibited under PFRS.

PFRS requires separate reporting of reversal of inventory writedown.

PFRS requires entities to record writedown in a separate loss account.

All of the choices are correct.

No income should reported annually until first harvest and sale in 30 years.

Income should be measured annually and reported using a fair value approach that recognizes and measures biological growth.

The eventual sale proceeds should be estimated over the 30-year period.

The plantation forest should be valued every five years and the increase in value should be reported as component of other comprehensive income.

Separate disclosure of the gain or loss relating to biological asset and agricultural produce.

The aggregate gain or loss arising on the initial recognition of biological assets and agricultural produce and from the change in fair value less estimated cost of disposal of

The total gain or loss from biological asset, agricultural produce, and from change in fair value less estimated costs of disposal of biological asset.

There is no requirement to disclose separately any gain or losses.

Investment property

Investments in financial instruments

Inventories that are manufactured or produced in large quantity on a repetitive basis and take a substantial period of time to get ready for use or sale

Biological assets

Interest cost in connection with the purchase of land to be used as a building site should be debited to the land account.

The amount of interest cost capitalized during the period should not exceed the actual interest cost incurred.

When excess borrowed funds not immediately needed for construction are temporarily invested, any interest earned should be recorded as interest revenue.

The minimum amount of interest to be capitalized is determined by multiplying a weighted average interest rate by the amount of average accumulated expenditures on qualifying assets during the period.

Depreciation is higher and net income lower if the grant is recorded as deferred revenue.

Depreciation is higher and net income lower if the grant is an adjustment to the asset.

Depreciation is higher if the grant is a deferred revenue and net income is not affected.

Depreciation is higher if the grant is adjustment of the asset.

Any adjustment needed when a government grant becomes repayable is accounted for as a change in accounting estimate.

In respect of loan from the government at zero interest rate, an imputed interest charge should be recognized in profit or loss.

Where conditions apply to a government grant, it should only be recognized when there is reasonable assurance that the conditions will be met.

A government grant that becomes receivable as compensation for losses already incurred should be recognized as income of the period in which it becomes receivable

Service life refers to the time an asset will be used and physical life refers to how long the asset will last.

Physical life is the life of an asset without consideration of residual value and service life requires the use of residual value.

Physical life is always longer than service life.

Service life refers to the length of time an asset is of use to the original owner, while physical life refers to how long the asset will be used by all owners.

Adjust the beginning inventory balance in the current year.

Restate the financial statements with corrected balances for all periods presented

Adjust the ending balance of retained earnings account in the current year-end.

Make no entry because the error will self-correct.

Disposal of a component that is similar in nature to other components but has operations and cash flows distinguishable from the rest of the entity.

Disposal of a component due to a major change in business strategy.

Disposal of a small component within the current business strategy.

Disposal of a component with distinguishable operations and cash flows from the rest of the entity

Recognize a loss for all recognized and unrecognized subsequent events in the current year

Recognize a gain or loss for any recognized subsequent event in the current year

Recognize a loss for a recognized subsequent event in the financial statements in the year when the subsequent event occurs.

Recognize a loss for a recognized subsequent event in the current year financial statements

An asset that is classified as FVPL is remeasured to fair value each reporting period and the profit or loss is recognized in income for the period.

An election can be made to use the fair value through profit or loss method when an entity security has no active market.

An election can be made to use the FVPL method for a held to maturity security requiring the security to be recorded at cost and subsequently measured at amortized cost

An asset that is classified as FVPL is remeasured to fair value each reporting period and the profit or loss is recognized in other comprehensive income.

Changes in fair value are reported in profit or loss in the current period

Changes in fair value are reported as an extraordinary gain

Changes in fair value are reported in other comprehensive income for the period

Changes in fair value are reported as deferred revenue for the period