Post-test - Fundamental Accounting Concepts and Principles

Entity NTZ is already undergoing liquidation. As such, the entity's financial statements

• should be prepared using the going concern assumption.

• should not be prepared using the going concern assumption.

• may be prepared using the going concern assumption, depending on management's judgment.

The fundamental characteristic of information where it should be able to influence user's decision refers to __________.

Under the revenue recognition principle, revenue is said to be earned

• when cash is received, irrespective of the timing of delivery of goods or rendering of services.

• upon delivery of goods or rendering of services, irrespective of when cash is received.

• upon delivery of goods or rendering of services and when cash is received.

• upon receipt of order from the customer.

Faithful presentation requires 100% accuracy of the financial information in the financial statements

• True

• False

Mr. Z, the owner of Z Company, took P500 pesos from the company funds to pay for a personal purchase. Under the economic entity concept, this will be

• ignored in the accounting books, since it is a personal transaction of the owner.

• recorded in the accounting books as a business expenses.

• recorded in the accounting books as a transaction with the owner.

• recorded in the accounting books as a business revenue.

The following are application of prudence, except for

• Ensuring assets are not reported at an amount that is higher than what could be recovered.

• Ensuring liabilities are not reported at an amount lower that is expected to be paid.

• Being caution in applying accounting policies on matters involving estimates, judgment and uncertainties.

• Recording non-existent expenses in order to report lower profits.

Under periodicity, when a business adopts a fiscal year, it may start its accounting period on May 1 and end in ___________.

An accounting period that start on January 1 and ends in December 31 is called _________ _________.

When errors and fraud materially affects the financial statements, the financial information contained therein will lose which of the following characteristics?

• Comparability

• Faithful presentation

• Relevance

• Timeliness

Under periodicity, all financial statements are always prepared with a 12-month period coverage.

• True

• False