Conceptual Framework

The overall objective of financial reporting is to provide information

• about an entity's assets, liabilities, and equity.

• about an entity's financial performance during a period.

• that is useful to primary users in making economic decisions about providing resources to the entity.

• that allows owners to assess management's performance.

The two primary qualities that make accounting information useful for decision making are

• comparability and consistency.

• materiality and timeliness.

• relevance and reliability.

• faithful representation and relevance.

Information is considered relevant when it

• can be depended on to represent the economic conditions and events that it is intended to represent.

• is capable of making a difference in a decision.

• is understandable by reasonably informed users of accounting information.

• is verifiable and neutral.

Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the information they already possess or can obtain from other sources, and their ability to process information. Consequently, for information to be useful there must be a linkage between these users and the decisions they make. This link is

• relevance.

• reliability.

• understandability.

• materiality.

The revised Conceptual Framework defines an asset as

• a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

• 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 physical object that can produce economic benefits for the entity.

• All of these

Which of the following is not an indication of an economic resource’s potential to produce economic benefits for the entity?

• The resource cannot be used in the entity’s operations but has a resale value.

• The resource has no use to the entity but it can be exchanged for another resource with another party.

• The entity does not intend to sell or use the resource but instead distribute it to the owners as dividends.

• The economic benefits from the resource were already consumed by the entity.

The law that regulates the practice of accounting in the Philippines is the Philippine Accountancy Act of 2004 also known as

• R.A. No. 9298

• R.A. No. 9892

• R.A. No. 8299

• R.A. Blg. 69

The Commission upon the recommendation of the Board shall within ninety (90) days from the effectivity of the IRR, create an accounting standard setting body to be known as the

• Financial Reporting Standards Council

• Financial Reporting Standards Committee

• Accounting Standards Committee

• Financial Reporting Standards Board

FRSC shall be composed of

• Fifteen members and a Chairman

• Fourteen members with a Chairman

• Fourteen members and a Chairman

• Eight members and a Chairman

Under this concept, a profit is earned only if the financial (or money) amount of the net assets at the end of the period exceeds the financial ( or money) amount of net assets at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period. It can be measured in either nominal monetary units or units of constant purchasing power.

• Concept of capital

• Concept of capital maintenance

• Financial capital maintenance concept

• Physical capital maintenance concept