CFAR 2022 QUESTIONS AND ANSWERS

Question 1: (Pp. 16)

1. Define accounting.
Accounting is the process of identifying, measuring and communicating economic
information that is financial in nature to permit informed judgement and decision by
users of the information that is useful for decision making.
2. Explain identifying as a component of accounting.
Identifying is a component of the accounting process in which it is where the
recognition or nonrecognition of business activities as “accountable” events happens.
3. When is a transaction accountable or quantifiable?
A business transaction is accountable if it is quantifiable in financial amount and
when it has an effect to the accounting equation which is the assets, liabilities, and equity.
4. Explain measuring as a component of accounting.
Measuring is the process of assigning a monetary amount to the accountable
economic transactions and events.
5. Explain communicating as component of accounting.
Communicating is the process of preparing and distributing accounting reports to
potential users of accounting information that is useful in decision making.
6. Explain recording, classifying, and summarizing in relation to the communicating
component of accounting?
Recording is the systematical process of maintaining a record for all economic
transaction of the business after they have been identified and measured.
Classifying is the sorting of similar and interrelated economic transactions into
their respective classes which can be accomplished by posting to the ledger which is the
group of accounts that are systematically categorized into asset, liability, equity, revenue,
and expense accounts.
Summarizing is the process of making financial statements which includes the
statement of financial position, income statement, statement of comprehensive income,
statement of changes in equity, and the statement of cash flows.
7. What is the overall objective of accounting?
The overall objective of accounting is to provide quantitative financial
information about a business that is useful to its users particularly the owners and
creditors in making economic decision.
8. Describe the accountancy profession.
The accounting profession is achieved through finishing a degree in Bachelor of
Science in Accountancy and by passing a very difficult examination given by the Board
of Accountancy (BOA).
9. What is R.A. No. 9298?
Republic Act No. 9298 commonly known as the “Philippine Accountancy Act of
2004”, is the law regulating the practice of accountancy in the Philippines.
10. What do you understand by the Board of Accountancy?
The Board of Accountancy (BOA) is the body authorized by the law to
promulgate rules and regulations affective the practice of the accountancy profession in
the Philippines that is also responsible for preparing and grading the Philippine CPA
examination that is offered twice a year in authorized testing centers around the country.
11. Explain the limitation of the practice of public accountancy.
The limitation is that the single practitioners and partnerships for the practice of
public accountancy shall be registered certified public accountants in the Philippines. A
certificate of accreditation shall be issued only upon that such registrant acquired a
minimum of three years of meaningful experience in any of the areas of public practice
including taxation.
12. Explain the accreditation to practice of accountancy.
Certified public accountants are required to register with the Board of
Accountancy and Professional Regulation Commission for the practice of public
accountancy in which the Board of Accountancy shall issue the Certificate of
Registration to practice public accountancy which shall be valid for 3 years and
renewable every 3 years upon payment of required fees.
13. What are the three main areas in the practice of accountancy profession?
The three main areas in the practice of accountancy profession are public
accounting, private accounting, and government accounting.
14. Explain public accounting.
Public accounting is a field of accountancy that usually offers auditing, taxation,
and management advisory services.
15. Explain auditing, taxation service and management advisory services.
Auditing is the examination of financial statements by an independent CPA for
the purpose of expressing an opinion as to the fairness with which the financial
statements are prepared.
 Taxation includes the preparation of annual income tax returns and determination
of tax consequences of certain proposed business endeavors.
Management advisory services offers advice on the quality of operations and
finance of clients for consideration and decision making. This includes about providing
advices on installation of computer systems, quality control, modification and installation
of accounting system, budgeting, and forward planning and forecasting.
16. Explain private accounting.
Private accounting is concerned about assisting the management in planning and
controlling the entity’s operation. This includes maintaining the records, producing the
financial reports, preparing budgets and controlling, and allocating the resources of the
entity.
17. Explain government accounting.
This encompasses the process of the accounting components on the transactions
involving the receipt and disposition of government funds and properly and interpreting
the results thereof.
18. What do you understand by the Continuing Professional Development of CPAs?
This mandates all regulated professions in acquisition of advanced knowledge,
skills, and proficiency that raises and enhances the technical skill and competence of all
regulated professions including Certified Public Accountants.
19. What is the meaning of CPD credit units?
This refers to the credit units required for the renewal of CPA license and
accreditation of a CPA to practice the accountancy profession every three years.
20. How many CPD credit units are required?
The required CPD credit units for all Certified Public Accountants regardless of
area or sector of practice shall be required to satisfy with 120 CPD credit units.
Only 15 CPD credit units are required for the renewal of CPA license. However,
120 CPD credit units are required for accreditation of CPA to practice the accountancy
profession.
21. What is the purpose of the required CPD credit units?
The required CPD credit units is mandatory for Certified Public Accountants in
order to renew their license and for accreditation to practice the accountancy profession.
22. What is the exemption from the CPD requirements?
 A CPA upon reaching 65 years of age shall be permanently exempted CPD
requirements only for the renewal of CPA and not for the purpose of accreditation to
practice the accountancy profession.
23. Distinguish accounting and auditing.
Accounting ceases when financial statements are already prepared and auditing
are performed after the financial statements are made to ascertain whether they are in
conformity with generally accepted accounting principles.
24. Distinguish accounting and bookkeeping.
Accounting is highly concerned about the justification for any actions adopted
while bookkeeping is largely concerned about the procedural development and
maintenance of accounting records. In simple sense, Bookkeeping is the “How” of
accounting while accounting is concerned with the “why” reason.
25. Distinguish accounting and accountancy.
Accounting is used in reference only to a particular field of accountancy while
accountancy is the profession of accounting practice.
26. Distinguish financial accounting and managerial accounting.
Financial accounting is focused on making general purpose reports known as
financial statements that are intended for both internal and external users. Managerial
accounting on the other hand is the accumulation and preparation of financial reports that
are intended only for its internal users.
27. Explain generally accepted accounting principles or GAAP.
This represents the rules, procedures, practice, and standards followed in the
preparation and presentation of financial statements that must be following in financial
reporting.
28. What constitute GAAP in the Philippines?
The accounting standards promulgated by the Financial Reporting Standards Council
(GAAP) constitute the highest hierarchy of GAAP in the Philippines
29. Explain the purpose of accounting standards.
The purpose of accounting standards is to identify proper accounting practices for
the preparation and presentation of financial statements to ensure comparability and
uniformity in financial statements based on the same financial information.
30. What do you understand about the Financial Reporting Standards Council?
The Financial Reporting Standards Council (FRSC) is the accounting standard
setting body that replaced the Accounting Standard Council (ASC). Its main function is
 to establish and improve accounting standards that will be generally accepted in the
Philippines.
31. What is the composition of FRSC?
The FRSC is composed of 15 members with a Chairman who had been or is
presently a senior accounting practitioner and 14 representatives from other government
bodies that are relevant to the FRSC including the BOA, SEC, BSP, BIR, COA, FINEX
(Financial Executive Institute of the Philippines), and other accredited national
professional organization of CPAs.
32. What do you understand about the International Accounting Standards Committee?
It is an independent private body with the objective of achieving uniformity in the
accounting principles which are used by business and other organizations for financial
reporting around the world.
33. What do you understand by the International Accounting Standards Board?
IASB now replaced the International Accounting Standards Committee. It
publishes standard in a series of pronouncements called International Financial Reporting
Standards or IFRS.
34. What do you understand by the International Financial Reporting Standards?
It is a series of standards in making uniform and globally accepted financial
reporting standards.
35. What are collectively included in Philippine Financial Reporting Standards?
These are the International Financial Reporting Standards as the PFRS are
numbered the same as the. The Philippine Accounting Standards are also numbered the
same as their counterpart in International Accounting Standards. Philippine
Interpretations also corresponds to Interpretations of the IFRIC and Interpretations by the
Philippine Interpretations Committee.

Question 2: (Pp. 38)

1. What is the meaning of Conceptual Framework?
Conceptual Framework describes the concepts for general purpose financial reporting
that attempts to provide an overall theoretical foundation for accounting. It is the
underlying theory for the development of accounting standards and revision of previously
issued accounting standards.
2. What are the purposes of the Revised Conceptual Framework?
 It is to assist the IASB to develop IFRS Standards on consistent concepts; assist
preparers of financial statements to develop consistent accounting poly when no Standard
applies to a particular transaction or other event or where an issue is not yet addressed by
an IFRS; assist prepares of financial statements to develop accounting policy when a
Standards allows a choice of an accounting policy; and to assist all parties to understand
and interpret the IFRS Standards.
3. Explain the authoritative status of the Conceptual Framework?
If there is a standard or an interpretation that specifically applies to a certain
transaction, the standard shall override the Conceptual Framework but when there is an
absence of a standard of interpretation that specifically applies to a transaction, they shall
consider the applicability of the Conceptual Framework to apply or develop an
accounting policy that results in information that is relevant and reliable.
4. Explain the primary users and their information needs.
The Primary users include the existing and potential investors, lenders and other
creditors, while the other users include the employees, customers, government and their
agencies, and the public.
5. Explain the other users and their information needs.
These are the users of financial information other than the existing and potential
investors, lenders, and other creditors which may find the general purpose financial
reports useful but the reports are not directed to them primarily.
6. What is the scope of the Revised Conceptual Framework?
These are the objective of financial reporting; qualitative characteristics of useful
financial information; financial statements and reporting entity; elements of financial
statements; recognition and derecognition; measurement; presentation and disclosure; and
the concepts of capital and capital maintenance.

7. Explain financial reporting.

It is the provision of financial information about an entity to external users that is
useful to them in making economic decisions and for assessing the effectiveness of the
entity’s management.

8. What is the overall objective of financial reporting?

Is to provide financial information about the reporting entity that is useful to
existing and potential investors, lenders and other creditors in making decisions about
providing resources to the entity.

9. What are the specific objectives of financial reporting?

These are to provide information useful in making decisions about providing
resources to the entity; to provide information useful in assessing the cash flow prospects
 of the entity; and to provide information about entity resources, claims and changes in
resources and claims.

10. Explain financial position.

It is the information about the entity’s economic resources and the claims against
the reporting entity which has the elements of assets, liabilities, and the equity of the
entity.

11. Explain liquidity and solvency.

Liquidity is the ability of an entity to quickly raise cash to cover short term
obligations while Solvency is the ability of an entity to meet long term obligations for
them to continue their operations in the future.

12. Explain financial performance.

It is the level of income earned by the entity through the efficient and effective
use of its resources.

13. Explain accrual accounting.

Accrual accounting simply means that every transaction should be recognized on
time of its occurrence (or in other words, on the time it occurred) and not when a cash is
received or paid.

14. Explain management stewardship of the entity’s economic resources.

Information about the efficiency and effectivity of the management of an entity
helps users asses the management stewardship of those resource,

15. What are the limitations of financial reporting?

General purpose financial reports do not and cannot provide all information that
the existing and potential investors, lenders, and other creditors needed. It is not designed
to show the value of an entity but to provide information to help the primary users
estimate the value of an entity. It is intended to provide common information to users and
cannot accommodate every request for information. It is based on estimate and
judgement rather than exact depiction in terms of a larger extent.