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WorksheetsConceptual Framework and Accounting Standards
Total questions: 82
Worksheet time: 59mins
Who is responsible for making this assessment?
Accountant
Management
Auditor
Government regulatory body
These are the end product of the financial reporting process and the means by which information gathered and processed is periodically communicated to users.
Financial Reporting
Financial statements
Financial products
Accounting statements
Which of the following is not one of the general features of financial statements under PAS 1?
Fair presentation and compliance with PFRSS
Going Concern
Cash Basis
Materiality and aggregation
Who is responsible for the preparation and the fair presentation of an entity's financial statements in accordance with the PFRSs?
Any accountant
Auditor
Certified Public Accountant
Management
This type of presentation of a statement of financial position does not show distinctions between current and non-current items.
Classified presentation
Unclassified presentation
Non-discriminating presentation
Awesome presentation
In making an economic decision, an investor needs Information on the amounts of an entity's economic resources and claims to those resources. That investor would most likely refer to which of the following financial statements?
Statement of financial position
Statement of comprehensive income
Statement of cash flows
Statement of changes in equity
Which of the following financial statements would be dated as at a certain date?
Statement of financial position
Statement of profit or loss and other comprehensive income
Statement of cash flows
All of these
Imagine you are a business manager. You would be most awesome as a manager in which of the following independent scenarios?
Your company has an average total assets of P10M during the year. At the end of the year, your company reported a profit of 1M. The average return of other similar companies with the same level of assets is 30%.
Your adoption of accounting policy has led to the immediate recognition of expenses. Those costs could have otherwise been allocated over several periods. Accordingly, your company did not declare dividends during the period. This resulted to a decline in the market value of your company's stocks while the prices of all other stocks in the stock market have increased.
You changed your company's method of allocating costs from an accelerated method to a straight-line method. The change met the requirements of the PFRSS. This led to the smoothing of expenses, which increased your company's profit during the period by 12%, above the industry average.
You are great at closing deals, that's why you're a boss. Eager to increase your company's resources, you were able to obtain a P20M loan from a bank. Interest expense on the loan during the year was P3.4M while the return on investments of loan proceeds was 2%.
This comprises all 'non-owner changes in equity.' It excludes owner changes in equity, such as subscription, issuance, and reacquisition of share capital and declaration of dividends.
Other comprehensive income
Changes in equity
Total comprehensive income
Profit or loss
Materiality judgment is least likely to be applied in which of the following?
in determining whether an item warrants separate presentation in the financial statements or is to be aggregated with other
items in determining whether the information could influence the decisions of users, and therefore, must be presented in the financial statements
in determining whether the cost of processing and communicating information exceeds the benefits expected to be derived from
whether additional information needs to be provided, including the level of detail and conciseness of the information's presentation
It refers to the process of incorporating the effects of an accountable event In the statement of financial position or the statement of profit or loss and other comprehensive Income through a Journal entry.
realization
derecognition
recognition
posting
All of the following are events considered as exchange or reciprocal transfer, except
purchase of investment in equity securities
sale of equipment for non-interest bearing note
subscription of the entity's equity instrument (.e., contributions by owners)
exchange of a note payable for an account payable
borrowing of money from a bank
All of the following are events considered nonreciprocal transfers, except
declaration of cash dividends
declaration of stock dividends
payment of accounts payable
imposition of fines
theft
These are events involving an entity and another external party.
external events
internal events
transactions
life events
Is the accounting process of assigning numbers, commonly in monetary terms, to the economic transactions and events.
analyzing
classifying
measuring
interpreting
What's the basic purpose of accounting?
To provide quantitative financial information about economic activities.
To provide all information that users need in making economic decisions.
To provide qualitative financial information about economic activities intended to be useful in making economic decisions.
To provide quantitative financial information about economic activities intended to be useful in making economic decisions.
Accounting provides which type of information?
quantitative
financial information
qualitative
all of these
General purpose financial statements are
those statements that cater to the common and specific needs of a wide range of external users.
those statements that cater to the common needs of a wide range of external users and internal users.
those statements that cater to the common needs of a limited range of external users.
those statements that cater to the common needs of a wide range of external users.
External users are those
who do have the authority to demand financial reports tailored to their specific needs.
who do not have the authority to demand financial reports tailored to their common needs.
who do not have the authority to demand financial reports tailored to their specific needs.
who belong to countries other than the domicile country of the reporting entity
The primary objective of financial reporting is to provide
information about economic resources, claims to these resources, and changes in them.
information useful for investment and credit decisions.
information useful in predicting future cash flows.
All of these
Which of the following statements is false?
Accountable events are those that have an effect in an entity's assets, liabilities, equity, income or expenses.
The term 'recognition' as used in accounting refers to the process of incorporating the effects of an accountable event in the statement of financial position or the statement of profit or loss and other comprehensive income through a memo entry.
External events are those that involve the reporting entity and an external party.
The Board of Accountancy consists of a chairperson and six members.
Which of the following statements is true?
In current practice, accounting provides only quantitative Information that is useful in making economic decisions.
External users are those who do not have the authority to demand financial reports tailored to their specific needs.
Under the stable monetary unit assumption, the owners of the business and the business are viewed as a single reporting entity. Therefore, the personal transactions of the owners are recorded in the books of account.
The practice of accountancy in the Philippines is regulated under RA 9892.
Which of the following statements correctly refers to the accounting process?
Measuring is the accounting process of analyzing business activities as to whether or not they will be recognized in the books.
Recognition refers to the process of including the effects of an event in the totals of the statement of financial position or the statement of profit or loss and other comprehensive income through memo entries.
Disclosure of events in the notes to the financial statement without including their effect in the totals of the statement of financial position or statement of profit or loss and other comprehensive income is not an application of the recognition principle.
An accountable event is an event that has an effect on the assets, liabilities or equity of an entity and its effect can be measured reliably.
Which of the following statements is true?
Loss for theft is classified as a nonreciprocal transfer.
Internal events are changes in economic resources by actions of other entities that do not involve transfers of resources and obligations.
Nonreciprocal transfers involve the transfer of resources in only one direction, either from one entity to another entity or from other entities to the entity.
Internal events are sudden, substantial, unanticipated reductions in resources not caused by other entities.
Fire, earthquake, and flood are examples of accountable events classified as internal events.
I, II, III, IV and V
I, II, IIl and IV
IV
III and IV
Which of the following statements is true?
Asset measurements in conventional financial statements are confined to historical cost.
Asset measurements in conventional financial statements are confined to historical cost and current costs.
Asset measurements in conventional financial statements reflect several financial attributes.
Asset measurements in conventional financial statements do not reflect output values.
During the lifetime of an entity, accountants produce financial statements at arbitrary points in time In accordance with which basic accounting concept?
Cost/benefit constraint
Periodicity assumption
Conservatism constraint
Matching principle
What accounting concept justifies the use of accruals and deferrals?
Going concern assumption
Materiality constraint
Consistency characteristic
Monetary unit assumption
The assumption that a business enterprise will not be sold or liquidated in the near future is known as the
economic entity assumption.
Monetary unit assumption
conservatism assumption.
going concern.
Valuing assets at their liquidation values rather than their cost is inconsistent with the
periodicity assumption
matching principle
materiality constraint
historical cost principle.
When products or other assets are exchanged for cash or claims for cash, they are said to be
allocated
realized
recognized
earned.
True or False
Only the events and transactions that affect an entity's assets, liabilities, equity, income, or expenses are recognized in the books of accounts.
Identifying is the process in accounting that involves assigning value to the economic transactions or events.
The focus of financial accounting is the preparation of general-purpose financial statements.
General purpose financial statements are those statements that cater to all the needs of all users.
All information presented in the financial statements is sourced from the entity's accounting records.
The fiscal year period that starts on May 1 should end on May 31 of the following year.
Bookkeeping and accounting are the same
Once promulgated, accounting standards are continually changed in response to changes in user needs.
The responsibility of selecting appropriate accounting policies mainly rests with the entity's accountant.
MULTIPLE CHOICE
It is the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information.
Accounting
Auditing
Taxation
Finance
The only indicator for an entity's ability to generate favorable cash flows is information based on previous cash receipts and payments.
True
False
Since financial statements are historical, they are of little use in making decisions about the future.
True
False
Investment and credit decisions are often based, at least in part, on evaluations of the past performance of an entity.
True
False
The primary focus of financial reporting is the information about an entity's economic resources.
True
False
Financial accounting is based on the presumption that all statement users need the same information.
True
False
Financial accounting is expressly designed to measure directly the value of a business enterprise.
True
False
Financial statements are the only source of information users need when making economic decisions.
True
False
All the components of a complete set of financial statements are interrelated. This concept most closely relates to
Concept of Articulation.
Entity concept.
Going concern.
Time period.
Which of the following statements is correct?
All quantitative information is also financial in nature.
The economic activity that involves using current inputs to increase the stock of resources available for output is called savings.
The accounting process of assigning peso amounts to economic transactions and events is measuring.
The economic activity of using the final output of the production process is called income distribution.
Which of the following statements is incorrect regarding accounting concept?
Under the Cost-benefit concept, the cost of processing and communicating information should exceed the benefits derived from it.
Under the Accrual Basis of accounting, income is recognized when earned and expenses are recognized when incurred, not when cash is received and disbursed.
Under the Going concern concept, the entity is assumed to carry on its operations for an indefinite period of time.
Under the Separate entity Concept, the business is treated separately from its owners.
Under the Periodicity concept, the life of the business is divided into series of reporting periods.
Which of the following statements is incorrect?
Financial reporting standards may at times be influenced by legal, political, business and social environments.
General purpose financial statements are prepared primarily for the use of external users.
The PFRSs are issued by the Financial Reporting Standards Council.
General-purpose financial statements must be prepared by a certified public accountant.
Mr. John Doe, CPA, is a professor in a university where he teaches mainly home economics, music and physical education. Those subjects require that the teacher must be awesome. Mr. Doe is also frequently invited as judge in beauty pageants and singing contests and as a referee in mixed martial arts competitions. Mr. Doe is considered to be practicing accountancy in which of the following sectors?
Academe
Public Accounting
Commerce and industry
None of these
The proper application of accounting principles is most dependent upon the
Accountant
Management
Auditor
Chief executive officer.
Entity A buys bananas and converts them into banana chips. The conversion of bananas into banana chips is an
nonaccountable event
external event
non-reciprocal transfer
Internal event
Which of the following is considered valued by fact rather than opinion?
Depreciation
Cost of goods sold
Discount on share capital
Retained earnings
Which of the following is not one of the several measurement bases used in accounting?
Historical cost
Fair value
Present value
All of these are used
Entity A is owned by Mr. X and Ms. Y. Which of the following transactions does not violate the separate entity concept and therefore is appropriately recorded in the accounting records of Entity A?
Mr. X purchases groceries for his home consumption.
Mr. X gives Ms. Y chocolate and flowers on Valentine's Day.
Ms. Y provides capital to Entity A.
Ms. Y provides capital to Entity B, another business entity.
Mr. A is assessing the ability of Entity A to generate future cash and cash equivalents. In making the assessment, Mr. A uses not only the statements of cash flows but also the other components of a complete set of financial statements. This is because of which of the following concepts?
Going concern
Time period
Intercalation
Articulation
Entity A acquires a stapler. Instead of recognizing the cost of the stapler asset to be subsequently depreciated, Entity A immediately charges it as an expense. This is an application of which of the following concepts?
Prudence
Materiality
Cost benefit
B and C
What type of user's needs is catered by general purpose financial statements?
Common needs
Specific needs
a and c
neither a nor b
Which of the following is not among the four sectors the process of accounting enumerated in RA 9298 also known as the 'Philippine Accountancy Act of 2004'?
Practice in Commerce and Industry
Practice in the Government
Practice in Education/Academe
Practice of Private Accountancy
The Philippine Financial Reporting Standards (PFRSs) comprise:
Philippine Financial Reporting Standards
Philippines Accounting Standards
Interpretations
Accounting Practice Statements and Implementation Guidance
Which of the following statements is incorrect regarding the PFRSs?
The PFRSs are based on the IFRSs.
The financial reporting standards used in the Philippines are the same as those used globally.
The PFRSs have higher authority than the PASs and Interpretations.
The PFRSs are accompanied by guidance. The use of such guidance is sometimes mandatory and sometimes optional.
A soundly developed conceptual framework of concepts and objectives should
increase financial statement users' understanding of and confidence in financial reporting.
enhance comparability among companies financial statements.
allow new and emerging practical problems to be more quickly soluble.
All of these.
A Standard sometimes contains requirements that depart from the Conceptual Framework. In such cases,
The requirements of the Conceptual Framework will prevail over those of the Standard.
The departure is explained in the 'Basis for Conclusions' on that Standard.
the entity's management shall formulate its own accounting policy and disregards both the requirements of the Conceptual Framework and the Standard.
A Standard should never depart from the 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.
According to the Conceptual framework, predictive value relates to
Which of the following is considered a qualitative factor in making materiality judgments?
the context of an item in relation to the current economic state of the environment where the entity operates.
10% or loss in absolute terms
5% of total revenues
1% of total assets/
Which of the following statements about materiality is not correct?
An intern must make a difference; otherwise, it need not be reported.
Materiality is affected by an item's relative size and/or importance.
An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.
All of these are correct statements about materiality.
The Filipino adage 'Aanhin mo pa ang damo pag patay na ang kabayo' relates to which of the following qualitative characteristics?
Relevance
Timeliness
Faithful representation
Comparability
When information about two different entities has been prepared and presented in a similar manner, the information exhibits the characteristics of
relevance.
reliability.
Consistency.
Comparability.
According to the Conceptual Framework, the physical count of inventory is an example of
direct verification.
indirect verification.
timeliness.
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.
The quality of information that gives assurance that it is reasonably free of error and bias and provides a true, correct, and complete depiction of what it purports to represent is
relevance.
faithful representation.
Verifiability.
Neutrality.
Information is neutral if it
provides benefits that are at least equal to the costs of its preparation.
can be compared with similar information.
has no impact on a decision-maker.
is free from bias toward a predetermined result.
What is the law regulating the practice of accountancy in the Philippines?
RA. No. 9298
R.A. No. 9198
RA. No. 9928
R.A. No. 9892
It is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.
Board of Accountancy
Philippine Institute of Certified Public Accountants
Securities and Exchange Commission
Financial Reporting Standards Council
The qualifications of the members of the Board of Accountancy include all of the following, except
must be a natural-born citizen and a resident of the Philippines,
Must be duly registered CPA with at least ten years of work experience in any scope of practice of accountancy.
Must be of good moral character and must not have been convicted of a crime involving moral turpitude.
Must have any pecuniary interest, directly or indirectly, in any school conferring an academic degree necessary for admission to the practice of accountancy.
What are the three main areas in the practice of the accountancy profession?
Public accounting, private accounting, and managerial accounting
Auditing, taxation, and managerial accounting
Financial accounting, managerial accounting and corporate accounting
Public accounting, private accounting, and government accounting
What is the primary service of CPAs in public practice?
Auditing
Taxation
Managerial accounting
Controllership
Accountants employed in entities in various capacity as accounting staff, chief accountants or controllers are said to be Engaged in
Public Accounting
Private Accounting
Government Accounting
Financial Accounting
It is the area of the accountancy profession that encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof.
Internal auditing
External auditing
Private Accounting
Government accounting
