CPAR1- Financial Accounting and Reporting Review Notes #1

COLLEGE OF BUSINESS

ACCOUNTANCY DEPARTMENT

Ritsyl O. Cainoy-Serona, CPA, MM

FAR Instructor

Topics/Outcomes:

1.0 Development of Financial Reporting Framework, Standard-Setting Bodies, Regulation

of the Accountancy Profession, Conceptual Framework of Financial Statements and Accounting
Process

The examinees must be able to:

1.1 Development of Financial Reporting Framework
1.1.1 Describe the development of Financial Reporting Framework
1.1.2 Discuss the components of the Framework
1.2 Standard-Setting Bodies
1.2.1 Identify the functions of the AASC, FRSC and PIC
1.3 Regulation of the Accountancy Profession
1.3.1 Describe and distinguish the Regulators of the Profession
1.3.2 Discuss the developments in the Accountancy Professions
1.3.3 Describe and apply the Compilation Services
1.3.4 Discuss the Accreditation of CPA Professionals
1.4 Accounting Process
1.4.1 Adjusting Entries
1.4.1.1 Apply accrual basis for adjusting entries (accrual or deferral)
1.4.2 Accounting Cycle
1.4.2.1 Illustrate the accounting cycle
1.5 Conceptual Framework
1.5.1 Describe the basic objective of financial statements
1.5.2 Interpret the qualitative characteristics of financial information.
1.5.3 Define and distinguish the elements of financial statements.
1.5.4 Distinguish financial capital from physical capital

MULTIPLE CHOICE QUESTIONS

1. An entity that presents its first PFRS financial statements is referred to under PFRS 1 as a
a. first-timer. b. first-time adopter. c. PFRS novice. d. first-time PFRSer.
2. PFRS 1 requires an entity to prepare and present an
a. opening PFRS financial statements.
b. opening PFRS statement of financial position.
c. opening PFRS statement of profit or loss and other comprehensive income.
d. opening notes to the financial statements.
3. The date to transition to PFRSs is
a. the beginning of the earliest period for which an entity presents full comparative information under PFRSs in its
first PFRS financial statements.
b. the end of the earliest period for which an entity presents full comparative information under PFRSs in its first
PFRS financial statements.
c. the beginning of the first PFRS reporting period.
d. the end of the first PFRS reporting period.
4. The statement of financial position of ABC Co. as of January 1, 20x4 included an allowance for bad debts computed
using the “aging of accounts receivable” method. The “over 120 days” category in the aging schedule included a
₱200,000 receivable which was actually written off on January 5, 20x4 (the 20x3 financial statements were authorized
for issue on March 1, 20x4). ABC Co. could not have foreseen this event on December 31, 20x3. Does ABC Co. need to
revise its previous estimate of bad debts as of January 1, 20x4 (date of transition) on December 31, 20x5 (end of first
PFRS reporting period)?
a. No. The receipt of the information on January 5, 20x4 is accounted for prospectively as a non-adjusting event
after the reporting period.
b. Yes. The receipt of the information on January 5, 20x4 is accounted for retrospectively as an adjusting event after
the reporting period.
CPAR1- Financial Accounting and Reporting Review Notes #1
c. No. The event should be ignored because it is within the scope of the previous GAAP and not the PFRSs.
d. Yes. Although, PFRS 1 does not require the adjustment, other PFRSs do.
5. Under PFRS 1, the early application of PFRSs that have not yet become effective as of the current reporting period
a. is required. c. is required, but not permitted.
b. is permitted, but not required. d. is prohibited.
6. PFRS 1 requires a first time adopter to do which of the following in the opening PFRS statement of financial position?
a. Recognize all assets and liabilities whose recognition is required by PFRSs.
b. Not recognize items as assets or liabilities if PFRSs do not permit such recognition.
c. Reclassify items that it recognized in accordance with previous GAAP as one type of asset, liability or component
of equity, but are a different type of asset, liability or component of equity in accordance with PFRSs.
d. Apply PFRSs in measuring all recognized assets and liabilities.
e. All of these
7. Retrospective application of accounting policies means
a. as if PFRSs have been used all along. c. as if PFRSs are used only in the current period.
b. as if PFRSs are used only in prior periods. d. restating the financial statements in order to correct all errors.
8. A soundly developed conceptual framework of concepts and objectives should
a. increase financial statement users' understanding of and confidence in financial reporting.
b. enhance comparability among companies' financial statements.
c. allow new and emerging practical problems to be more quickly soluble.
d. all of these.
9. A Standard sometimes contains requirements that depart from the Conceptual Framework. In such cases,
a. the requirements of the Conceptual Framework will prevail over those of the Standard.
b. the departure is explained in the ‘Basis for Conclusions’ on that Standard.
c. the entity’s management shall formulate its own accounting policy and disregards both the requirements of the Conceptual
Framework and the Standard.
d. A Standard should never depart from the Conceptual Framework.
10. The overall objective of financial reporting is to provide information
a. about an entity's assets, liabilities, and equity.
b. about an entity's financial performance during a period.
c. that is useful to primary users in making economic decisions about providing resources to the entity.
d. that allows owners to assess management's performance.
11. The two primary qualities that make accounting information useful for decision making are
a. comparability and consistency. c. relevance and reliability.
b. materiality and timeliness. d. faithful representation and relevance.

12. According to the Conceptual Framework, predictive value relates to

Relevance Faithful representation Relevance Faithful representation
a. Yes Yes c. Yes No
b. No Yes d. No No
13. Which of the following is considered a qualitative factor in making materiality judgments?
a. the context of an item in relation to the current economic state of the environment where the entity operates.
b. 10% of profit or loss, in absolute terms
c. 5% of total revenues
d. 1% of total assets
14. Which of the following statements about materiality is not correct?
a. An item must make a difference; otherwise, it need not be reported.
b. Materiality is affected by an item’s relative size and/or importance.
c. An item is material if its inclusion or omission would influence or change the judgment of a reasonable person.
d. All of these are correct statements about materiality.
15. The Filipino adage “Aanhin mo pa ang damo pag patay na ang kabayo” relates to which of the following qualitative
characteristics?
a. Relevance b. Timeliness c. Faithful representation d. Comparability
16. When information about two different entities has been prepared and presented in a similar manner, the information exhibits the
characteristic of
a. relevance. b. reliability. c. consistency. d. comparability.
17. According to the Conceptual Framework, physical count of inventory is an example of
a. direct verification. b. indirect verification. c. timeliness. d. relevance.
18. Information is considered relevant when it
a. can be depended on to represent the economic conditions and events that it is intended to represent.
b. is capable of making a difference in a decision.
c. is understandable by reasonably informed users of accounting information.
d. is verifiable and neutral.
19. 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
a. relevance. b. faithful representation. c. verifiability. d. neutrality.
20. Information is neutral if it
CPAR1- Financial Accounting and Reporting Review Notes #1
a. provides benefits which are at least equal to the costs of its preparation.
b. can be compared with similar information.
c. has no impact on a decision maker.
d. is free from bias toward a predetermined result.
21. 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
a. relevance. b. reliability. c. understandability. d. materiality.
22. Which of the following is considered a pervasive constraint by the Conceptual Framework?
a. Cost constraint b. Verifiability c. Conservatism d. Cost restraint
23. Which of the following is not an element that is directly related to the measurement of an entity’s financial position?
a. assets b. liabilities c. equity d. income
24. The revised Conceptual Framework defines an asset as
a. 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.
b. 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.
c. a physical object that can produce economic benefits for the entity.
d. All of these.
25. Which of the following is most likely to result in the recognition of a liability?
a. Customers become entitled to rebates for their past purchases.
b. Intention to acquire inventories in a future period.
c. Entering into a purchase contract for future delivery.
d. Agreeing on an irrevocable future commitment that is not burdensome at present.
26. Which of the following is not an indication of an economic resource’s potential to produce economic benefits for the entity?
a. The resource cannot be used in the entity’s operations but has a resale value.
b. The resource has no use to the entity but it can be exchanged for another resource with another party.
c. The entity does not intend to sell or use the resource but instead distribute it to the owners as dividends.
d. The economic benefits from the resource were already consumed by the entity.
27. Which of the following correctly reflects the Conceptual Framework definitions of income and expenses?
Income Expenses Income Expenses
a. Increase in assets Increase in liabilities c. Owner contributions Owner distribution
b. Decrease in assets Decrease in liabilities d. Decrease in equity Increase in equity
28. According to PAS 8, these are the specific principles, bases, conventions, rules and practices applied by an entity in
preparing and presenting financial statements.
a. Accounting policies c. Accounting standards
b. Accounting estimates d. Accounting assumptions
29. A change in the pattern of consumption of economic benefits from an asset is most likely a
a. change in accounting policy. c. error.
b. change in accounting estimate. d. any of these
30. PAS 8 permits a change in accounting policy only if the change
a. is required by a PFRS c. a or b
b. results in reliable and more relevant information d. PAS 8 does not permit a change in accounting policy
31. These arise from misapplication of accounting policies, mathematical mistakes, oversights or misinterpretations of
facts, or fraud.
a. Error c. Change in accounting policy
b. Change in accounting estimate d. Impracticable application
32. How should the following changes be treated, according to PAS 8?
I. A change is to be made in the method of calculating the provision for uncollectible receivables.
II. Investment properties are now measured at fair value, having previously been measured at cost.
Change (1) Change (2)
a. Change of accounting policy Change of accounting policy
b. Change of accounting policy Change of accounting estimate
c. Change of accounting estimate Change of accounting policy
d. Change of accounting estimate Change of accounting estimate
33. The accounting standards used in the Philippines are adapted from the standards issued by the
a. Federal Accounting Standards Board (FASB).
b. International Accounting Standards Board (IASB).
c. Philippine Institute of Certified Public Accountants (PICPA).
d. Democratic People's Republic of Korea Accounting Standards Committee (DPKRASC).
34. Which of the following statements is incorrect regarding the basic accounting concepts?
a. One of ABC Co.’s delivery trucks was involved in an accident. Although no lawsuits have yet been filed against ABC, ABC
recognized a liability for the probable loss on the event. This is an application of the prudence or conservatism concept.
b. Under the consistency concept, the financial statements should be prepared on the basis of accounting principles
which are followed consistently.
CPAR1- Financial Accounting and Reporting Review Notes #1
c. Under the entity theory, the business is viewed as a separate entity. Therefore, the personal transactions of the
business owners are not recorded in the business’ accounting records.
d. The time period concept means that financial statements are prepared only at the end of the life of a business.
35. Entity A appropriates ₱1M to fund employee benefits for the last quarter of the following year. Entity A deposits the
₱1M fund in a payroll account. This economic activity is most appropriately referred to as
a. production. b. savings. c. exchange. d. investment.
36. It is the branch of accounting that focuses on the preparation of general purpose financial statements.
a. Financial accounting b. General Accounting c. All-purpose Accounting d. All-around accounting
37. Entity A computes for its profit or loss periodically instead of waiting until the end of the life of the business before
doing so. This is an application of which of the following accounting concepts?
a. historical cost b. stable monetary unit c. accrual basis d. time period or reporting period
38. The bottom part of each of Entity A’s financial statements states the following “This statement should be read in
conjunction with the accompanying notes.” This is most likely an application of which of the following accounting concepts?
a. articulation b. consistency c. accrual basis d. time period
39. Which of the following events is considered as an internal event?
a. sale of inventory on account d. conversion of raw materials into finished goods
b. provision of capital by owners e. payment of liabilities
c. borrowing of money
40. Financial statements are said to be a mixture of fact and opinion. Which of the following items is factual?
a. cost of goods sold c. retained earnings
b. discount on capital stock d. patent amortization expense
41. This concept defines the area of interest of the accountant. It determines which transactions are recognized in the
books of accounts and which are not.
a. Articulation b. Matching c. Separate entity d. Full disclosure
42. A CPA employed as an accountant in a government agency is considered to be in
a. private practice. b. public practice. c. academe. d. service.
43. Which of the following statements is correct?
I. Accounting provides qualitative information, financial information, and quantitative information.
II. Qualitative information is found in the notes to the financial statements only.
III. Accounting is considered an art because it is supported by an organized body of knowledge
IV. Accounting is considered a science because it involves the exercise of skill and judgment.
V. Measurement is the process of assigning numbers to objects such inventories or plant assets and to events such as
purchases or sales.
VI. All quantitative information is also financial in nature.
VII. The accounting process of assigning peso amounts or numbers to relevant objects and events is called identification.
a. I and V b. I, II, VI and V c. I, II, III, IV and V d. II, VI and V
44. Which of the following statements about the Norwalk Agreement is correct?
a. The Norwalk Agreement requires all domestic companies in the U.S. to prepare financial statements in
accordance with the IFRSs.
b. The Norwalk Agreement is a short-term convergence between the FASB and the IASB which has long-time been abolished.
c. The Norwalk Agreement is a convergence between the FASB and the IASB to make their existing financial reporting
standards compatible and coordinate their future work programs to ensure that once achieved, compatibility is maintained.
d. The Norwalk Agreement does not affect the financial reporting standards in the Philippines.
45. The process of identifying, measuring, analyzing, and communicating financial information needed by management
to plan, evaluate, and control an organization’s operations is called
a. financial accounting. b. tax accounting. c. managerial accounting. d. auditing.
46. The PFRSs consist of all of the following except
a. PFRSs. b. PASs. c. Interpretations. d. Conceptual Framework.
47. It is the official accounting standard setting body in the Philippines. It is composed of a chairperson and 14 members.
a. Financial Reporting Standards Committee (FRSC) c. Accounting Standards Committee (ASC)
b. Financial Reporting Standards Council (FRSC) d. Accounting Standards Council (ASC)
48. Financial reporting standards continuously change primarily in response to
a. users’ needs. b. political influence. c. government regulations. d. changes in social environments.
49. Accounting is often called the "language of business" because
a. it is easy to understand.
b. it is fundamental to the communication of financial information.
c. all business owners have a good understanding of accounting principles.
d. accountants in many companies share financial information.
50. You are the accountant of ABC Co. During the period, your company purchased staplers worth ₱1,500. Although the
staplers have an estimated useful life of 10 years, you have charged their cost as expense. Which of the following is
most likely to be true?
a. You are applying the concept of matching.
b. You are applying the concepts of materiality and cost-benefit consideration.
CPAR1- Financial Accounting and Reporting Review Notes #1
c. You are applying the concept of verifiability.
d. You are just lazy to compute for the periodic depreciation.
51. All of the following statements incorrectly refer to the concepts in the Conceptual Framework except
a. The Conceptual Framework is concerned with all-purpose financial statements.
b. Financial statements are prepared and presented at least annually and are directed toward both the common and
specific information needs of a wide range of users.
c. The objective of general purpose financial statements is similar to the objective of general purpose financial reporting.
d. The financial statements prepared by a reporting entity comprising a parent and its subsidiaries are referred to as
‘combined financial statements’.
52. What is the authoritative status of the Conceptual Framework?
a. It has the highest level of authority. In case of a conflict between the Conceptual Framework and a Standard, the
Conceptual Framework overrides that Standard.
b. If there is a Standard that specifically applies to a transaction, that Standard overrides the Conceptual Framework. In
the absence of such a Standard, the requirement of the Conceptual Framework should be followed.
c. If there is a Standard that applies to a transaction, that Standard overrides the Conceptual Framework. In the absence
of such a Standard, the entity’s management should consider the applicability of the Conceptual Framework in
developing and applying an accounting policy that will result in useful information.
d. The Conceptual Framework applies only to the IASB when developing or amending Standards. A reporting entity
should never use the Conceptual Framework.
53. The foundation of the Conceptual Framework is formed from
a. the qualitative characteristics that makes information useful to users.
b. the objective of general purpose financial reporting.
c. the concept of reporting entity.
d. the principles and objectives of presentation and disclosure of financial information.
54. The primary users of financial statements under the Conceptual Framework include
I. Existing and potential investors
II. Employees
III. Lenders and other creditors
IV. Suppliers and other trade creditors
V. Customers
VI. Governments and their agencies
VII. Public
VIII. Professional accountants, including auditors

a. I and III b. I, II, III, IV, V, VI, VII c. I, II, III, IV, V, VI d. all of these
55. The Conceptual Framework broadly classifies the qualitative characteristics into
a. primary and secondary qualitative characteristics. c. fundamental and enhancing qualitative characteristics.
b. major and minor qualitative characteristics. d. cold and hot qualitative characteristics.
56. Which of the following are considered aspects of the qualitative characteristic of relevance under the Conceptual
Framework?
I. Predictive value
II. Confirmatory value
III. Timeliness
IV. Materiality
a. I and II b. I, II and III c. I, II and IV d. I, II, III and IV
57. The elements of faithful representation do not include
a. comparability. b. neutrality. c. completeness. d. free from error.
58. The ability through consensus among measurers to ensure that information represents what it purports to represent
is an example of the concept of
a. relevance. b. comparability. c. verifiability. d. feedback value.
59. According to the Conceptual Framework, the pervasive constraint on the information that can be provided by financial
reporting is
a. materiality. b. historical. c. cost-benefit. d. going concern.
60. According to the revised Conceptual Framework, an item is recognized if
a. it meets the definition of an asset, liability, equity, income or expense.
b. recognizing it would provide useful information.
c. it is probable that the item will result to an inflow or outflow of economic benefits and its cost can be measured reliably.
d. a and b
61. Which of the following may result to an expense?
a. Increase in asset c. Increase in liability
b. Decrease in liability d. Distribution to holders of equity claims
62. Which of the following is incorrect regarding the use of the term ‘reporting entity’ under the Conceptual Framework?
a. A reporting entity one that is required, or chooses, to prepare financial statements.
CPAR1- Financial Accounting and Reporting Review Notes #1
b. A reporting entity must be a legal entity.
c. A reporting entity can be a parent and its subsidiaries viewed as a single entity.
d. All of these are correct.
63. The cost of inventory is recognized as expense
a. immediately. c. by systematic allocation.
b. using the matching concept. d. any of these as a matter of accounting policy choice
64. “I say red; you say green.” The information lacks which of the following qualitative characteristics?
a. Relevance b. Verifiability c. Timeliness d. Colorfulness
65. Which of the following is not one of the decisions that primary users make?
a. deciding on how to run the day-to-day operations of the entity
b. deciding on whether to hold or sell investment in stocks
c. deciding on whether to buy investment in stocks
d. deciding on whether to extend loan to the reporting entity
66. Entity A is making a materiality judgment. Entity A considers an item to be material, and therefore included in the
financial statements, if it pertains to a related party transaction. What type of materiality assessment is Entity A using?
a. Quantitative b. Qualitative c. Faithful representation d. Relevance
67. According to the Conceptual Framework, the needs of the primary users that are met by financial statements are
a. all of their needs. c. majority of their common needs only.
b. all of their common needs only. d. substantially a majority of their common and specific needs only.
68. The measurement bases described under the Conceptual Framework are least applicable to the measurement of
a. assets. b. liabilities. c. equity. d. income.
69. Information on the utilization of economic resources is most useful when assessing an entity’s
a. management stewardship. c. financial position and financial performance.
b. liquidity and solvency. d. financial strengths and weaknesses, including the entity’s needs for additional financing.
70. This refers to the comparability of financial statements of the same entity but in different periods.
a. Inter-comparability b. Extra-comparability c. Intra-comparability d. Intro-comparability
71. Which of the following financial statements would not be dated as covering a certain reporting period?
a. Statement of financial position c. Statement of cash flows
b. Statement of profit or loss and other comprehensive income d. Statement of changes in equity
72. Comprehensive income (or total comprehensive income) includes
a. Profit or loss d. a and b
b. Other comprehensive income e. All of these
c. Transactions with owners
73. What is the purpose of reporting comprehensive income?
a. To report changes in equity due to transactions with owners.
b. To report a measure of the overall financial performance of an entity.
c. To replace profit with a better measure.
d. To combine income from continuing operations with income from discontinued operations and extraordinary items.
74. Which of the following statements is correct when an entity departs from a provision of a PFRS?
a. The entity’s financial statements would be grossly incorrect; therefore, PAS 1 does not allow such a departure.
b. PAS 1 permits such a departure if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.
c. PAS 1 requires certain disclosures when an entity departs from a provision of a PFRS.
d. b and c
75. Which of the following statements is correct regarding the classification of financial liabilities as current or
noncurrent in accordance with PAS 1?
a. Currently maturing obligations are presented as current liabilities even if their original term is longer than one
year and even if a refinancing agreement is completed after the end of the reporting period but before the
financial statements are authorized for issue.
b. Currently maturing obligations are presented as noncurrent liabilities only if their original term is longer than one year.
c. Currently maturing obligations are presented as noncurrent liabilities only if a refinancing agreement is
completed after the end of the reporting period but before the financial statements are authorized for issue.
d. Currently maturing obligations are presented as noncurrent liabilities if a refinancing agreement is completed
after the financial statements are authorized for issue.
76. According to PAS 1, the judgments and estimates embodied in the financial statements, for example, materiality
judgments, assessments of uncertainty and risk, and the like, are the responsibility of the entity’s
a. management. b. accountant. c. auditor. d. janitor.
77. Which of the following is not a disclosure requirement of PAS 1?
a. The financial effect of a departure when an entity departs from a PFRS requirement.
b. Any material uncertainties on the entity’s ability to continue as a going concern.
c. The recognition, measurement and disclosure of specific transactions and other events.
d. The reason for using a longer or shorter period when an entity changes the frequency of its reporting.
78. Comprehensive income excludes which of the following
CPAR1- Financial Accounting and Reporting Review Notes #1
a. Revaluation surplus
b. Gains and losses from investments measured at fair value through profit or loss
c. Income tax expense
d. Distributions to owners
79. Entity A needs guidance in accounting for its inventories. Entity A should refer to which of the following?
a. PAS 1 b. PAS 2 c. PAS 7 d. PAS 8
80. Entity A needs guidance in preparing its statement of changes in equity. Entity A should refer to which of the following?
a. PAS 1 b. PAS 2 c. PAS 7 d. PAS 8
81. Entity A buys and sells artifacts. Each artifact is unique and not ordinarily interchangeable. According to PAS 2, the
cost formula that Entity A should use is
a. Specific identification. b. Weighted Average. c. FIFO. d. Any of these.
82. An entity makes a change in accounting estimate. How does the entity recognize the effects of the change in profit or loss?
a. Prospectively in the current period c. Retrospectively starting from the earliest period presented
b. Prospectively in the current and future periods d. a or b
83. Materiality does not make any difference with regard to
a. the separate presentation of items in the financial statements.
b. the disclosure of additional information in the notes.
c. intentional errors.
d. the level of rounding-off of amounts in the financial statements.
84. According to PAS 10, dividends declared after the reporting period, but before the financial statements are
authorized for issue, are
a. recognized as liability at the end of reporting period. c. disclosed only as an adjusting event.
b. not recognized as liability at the end of reporting period. d. any of these.
85. You are a business manager. During the period, you have authorized the acquisition of a machine that will be used in
your company’s manufacturing activities in the next 5 years. In your selection of an appropriate accounting policy for
the recognition and measurement of the machine, which of the following reporting standards is most relevant?
a. PAS 1 b. PAS 2 c. PAS 16 d. PAS 32
86. Entity A receives land from the government conditioned that the land will only be used in Entity A’s primary
business activities and should never be sold. If in case, Entity A decides not to use the land in its primary business
activities, it shall return the land to the government. Which of the following standards is least likely to be relevant in
accounting for the land?
a. PAS 2 b. PAS 16 c. PAS 20 d. All of these are relevant
87. The issuance of financial reporting standards in the Philippines is the responsibility of the
a. PICPA. b. FRSC. c. AASC. d. CPE Council.
88. According to the Conceptual Framework, the correct classifications of Relevance and Reliability, respectively, are
a. Fundamental, Enhancing c. Enhancing, Fundamental
b. Fundamental, Fundamental d. Fundamental, None
89. Which of the following transactions or other events results to the recognition of an asset?
a. An entity forecasts a purchase of inventory in the coming month. The purchase is highly probable.
b. An entity enters into firm commitment to purchase inventory in the coming month. The entity cannot cancel the
commitment without paying a penalty. The contract is not onerous
c. During the period, one of the buildings of an entity was destroyed by a calamity.
d. An entity receives a non-monetary grant from the government.
90. Information about an entity’s financial position and changes in financial position is referred to under the Conceptual Framework
as the
a. economic phenomena. c. phantom of the opera.
b. foundation of the Conceptual Framework. d. economic sabotage.
91. According to the Conceptual Framework, contributions from, and distributions to, holders of equity claims (i.e., the entity’s
owners) are
a. income and expenses, respectively.
b. income and expenses, respectively, that are recognized in other comprehensive income.
c. not income and expenses, but rather direct adjustments to equity.
d. not recognized in the financial statements.
92. Which of the following could result to the recognition of income?
a. increase in liability c. decrease in asset
b. decrease in equity d. decrease in liability
93. According to the Conceptual Framework, it is the right or the group of rights, the obligation or the group of obligations, or the
group of rights and obligations, to which recognition criteria and measurement concepts are applied.
a. Unit of account b. Aggregation c. Classifying d. Executory contract
94. Entity A combines similar items and separates dissimilar items when presenting information. Entity A is applying which of the
following presentation and disclosure principles?
a. Use of entity-specific information, rather than ‘boiler-plate’ descriptions
b. Classifying
c. Aggregates
CPAR1- Financial Accounting and Reporting Review Notes #1
d. Offsetting
95. According to the Conceptual Framework, this principle refers to presenting information in a concise manner by summarizing
voluminous data, but not too concise that important detail is either omitted or obscured.
a. Use of entity-specific information, rather than ‘boiler-plate’ descriptions
b. Classifying
c. Aggregation
d. Offsetting
96. Which of the following is considered a primary user of general purpose financial reports under the Conceptual Framework?
a. government regulatory body c. potential investor
b. the entity’s management d. all of these are primary users
97. Which of the following is not one of the aspects in the revised definition of a liability?
a. Probable outflows of economic benefits and reliable measurement of those outflows
b. Obligation
c. Transfer of an economic resource
d. Present obligation as a result of past events

98. According to the Conceptual Framework, the historical cost of an asset or a liability is updated for all of the following (if
applicable), except
a. impairment of an asset.
b. accrual of interest, when the time value of money is considered.
c. changes in value as at the measurement date.
d. increase in an obligation relating to a contract becoming onerous.
99. The revised Conceptual Framework defines a liability as
a. a present obligation of the entity arising from past events, the settlement of which is expected to result in an
outflow from the entity of resources embodying economic benefits.
b. a present obligation of the entity to transfer an economic resource as a result of past events.
c. 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.
d. All of these.
100.A company is issuing its comparative financial statements for the years 20x2 and 20x3. If the company is required to issue an
additional statement of financial position, such statement should be dated
a. as of Jan. 1, 20x1. c. as of Dec. 31, 20x2.
b. as of Jan. 1, 20x2. d. as of Dec. 31, 20x1.

“Go ahead and be lazy; sleep on, but you will go hungry.” (Proverbs 19:15)

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