1.

Accounting has been given various definitions, or reciprocal transfer, except

which of the following is not one of those a. Purchase of investment in equity securities
definitions b. Sale of equipment for non-interest bearing note
a. Accounting is a service activity. Its function is to provide c. Subscription of the entity’s own equity instrument (i.e.,
quantitative information, primarily financial in nature, about contributions by owners)
economic entities that is intended to be useful in making d. Exchange of a note payable for an account payable
economicdecisions. e. Borrowing of money from a bank
b. Accounting is the art of recording, classifying, and 6. All of the following are events considered nonreciprocal
summarizing in a significant manner andin terms of transfers, except
money, transactions and events which are, in part of at a. Declaration of cash dividends
least, of a financial character and interpreting the results b. Declaration of stock dividends
thereof. c. Payment of accounts payable
c. Accounting is a systematic process of objectively d. Imposition of fines
obtaining and evaluating evidencere garding e. Theft
assertions about economic actions and events to 7. These are events involving an entity and another
ascertain the degree of correspondence between these external party.
assertions and established criteria and communicating a. External events
theresults to interested users. b. Internal events
d. Accounting is the process of identifying, c. Transactions
measuring, and communicating economic information d. Life events
to permit informed judgment and decisions by users of 8. It is the accounting process of assigning numbers,
information. commonly in monetary terms, to the economic
2. Which of the following statements is true? transactions and events.
a. The basic purpose of accounting is to provide a. Analyzing
information about economic activities intended to be b. Measuring
useful in making economic decisions. c. Classifying
b. All events and transactions of an entity are recognized d. Interpreting
the books of accounts. 9. What is the basic purpose of accounting?
c. General purpose financial statements are those a. To provide quantitative financial information about
statements that cater to the common andspecific needs of economic activities.
a wide range of external users. b. To provide all information that users need in making
d. The accounting process of assigning numbers, economic decisions.
commonly in monetary terms, to the economic c. To provide qualitative financial information about
transactions and events is referred to as classifying. economic activities intended to be useful inmaking
3. The accounting standards used in the Philippines are economic decisions.
adapted from the standards issued by the d. To provide quantitative financial information about
a. Federal Accounting Standards Board (FASB). economic activities intended to be useful inmaking
b. International Accounting Standards Board (IASB). economic decisions.
c. Philippine Institute of Certified Public Accountants 10. Accounting provides which type of information?
(PICPA). a. Quantitative
d. Democratic People's Republic of Korea Accounting b. Financial information
Standards Committee (DPKRASC). c. Qualitative
4.. It refers to the process of incorporating the d. All of these
effects of an accountable event in the statement 11. General purpose financial statements are
offinancial position or the statement of profit or loss and a. Those statements that cater to the common and specific
other comprehensive income through a journal entry. needs of a wide range of external users.
a. Realization b. Those statements that cater to the common needs of a
b. Derecognition wide range of external users and internalusers.
c. Recognition c. Those statements that cater to the common needs of a
d. Posting limited range of external users.
5. All of the following are events considered as exchange d. Those statements that cater to the common needs of a
wide range of external users.
12. External users are those
a. Who do have the authority to demand financial reports
tailored to their specific needs.
b. Who do not have the authority to demand financial
reports tailored to their common needs.
c. Who do not have the authority to demand financial
reports tailored to their specific needs.
d. Who belong to countries other than the domicile country
of the reporting entity
13. The primary objective of financial reporting is to
provide
a. Information about economic resources, claims to these
resources, and changes in them.
b. Information useful for investment and credit decisions.
c. Information useful in predicting future cash flows.
d. All of these
14. Which of the following statements is false?
a. Accountable events are those that have an effect in an
entity's assets, liabilities, equity, income orexpenses.
b. The term “recognition” as used in accounting refers to
the process of incorporating the effects of anaccountable
event in the statement of financial position or the
statement of profit or loss and othercomprehensive
income through a memo entry.
c. External events are those that involve the reporting entity
and an external party.
d. The Board of Accountancy consists of a chairperson and
six members.
15. Which of the following statements is true?
a. In current practice, accounting provides only
quantitative information that is useful in
makingeconomic decisions.
b. External users are those who do not have the authority to
demand financial reports tailored to theirspecific needs.
c. Under the stable monetary unit assumption, the
owners of the business and the business areviewed
as a single reporting entity. Therefore, the personal
transactions of the owners are recordedin the books of
accounts.
d. The practice of accountancy in the Philippines is
regulated under R.A. 9892.
16.Which of the following is considered a direct user of
accounting information?
a. A regulatory agency Trade association
b. Taxing authority
c. Labor unions
d all of the above
17. Which of the following are represented in the Financial
Reporting Standards Council?
I. Securities and Exchange Commission
II. Department of Trade and Industry
III. Board of Accountancy
IV. Philippine Institute of Certified Public Accountants
V. Bureau of Internal Revenue
VI. Social Security System.
a. all of the above
b. I, II, III, V. VI
c. II, IV, V, VI
d. I, III, IV, V
18. This is the body created by the BOA in 2006 to assist
the Board in carrying out its power and function to
promulgate accounting standards in the Philippines.
a. Philippines Institute of Certified Public Accountants
b. Financial Reporting Standards Council
c. Auditing and Assurance Standards Council Financial
d. Reporting Standards Council
19.The body that authors the International Financial
Reporting Standards is the.
a. Accounting Standards Council
b. Financial Reporting Standards Council
c. International Accounting Standards Board
d. International Accounting Standards Committee
20.The objectives of financial reporting for business
enterprises are based on.
a. generally accepted accounting principles (GAAP).
b. reporting on management's stewardship.
c. the need for profit maximization.
d. the needs of the user of the information.
21. Accounting is a service activity and its function is to
provide quantitative information, primarily financial in
nature, about economic entities, that is intended to be
useful in making economic decisions. This accounting
definition is given by
a. Accounting Standards Council
b. AICPA Committee on Accounting Terminology
c. American Accounting Association
d. Board of Accountancy
22. One of the basic features of financial accounting is
a. Direct measurement of economic resources and
obligations and changes in them in terms of money and
sociological and psychological impact.
b. Direct measurement of economic resources and
obligations and changes in them in terms of money.
c. Direct measurement of economic resources and
obligations and changes in them in terms of money and
sociological impact.
d. Direct measurement of economic resources and
obligations and changes in them in terms of money and
psychological impact.
23. Which of the following is not an implication of the
going concern assumption?
a. The historical cost principle is credible
b. Depreciation and amortization policies are justifiable
and appropriate.
c. The current and noncurrent classification of assets
and liabilities is justifiable and significant.
d. Amortizing research and development costs over
several periods is justifiable and appropriate.
24. The relatively stable economic, political and social
environment supports
a. Conservatism
b. Materiality
c. Timeliness
d. Going Concern
25. Which of the following is not an important
characteristic of the financial statements that
accountants currently prepare?
a. The information in financial statements is expressed
in units of money adjusted for changing purchasing
power.
b. Financial statements articulate with one another
because measuring financial position is related to
measuring changes in financial position.
c. The information in financial statements is summarized
and classified to help meet users’ needs.
d. Financial statements can be justified only if the benefits
they provide exceeds costs.
26. Which is not a basic purpose of the Conceptual
Framework?
a. To assist the Financial Reporting Standards Council in
developing accounting standards.
b. To assist preparers of financial statements in applying
accounting standards.
c. To assist the Financial Reporting Standards Council in
reviewing and adopting International Accounting Standards.
d. To assist the Board of Accountancy in promulgating
rules and regulations affecting the practice of accountancy
in the Philippines.
27. What is the authoritative status of the Conceptual
Framework?
a. The Conceptual Framework has the highest level of
authority.
b. In the absence of a standard or an interpretation that
specifically applies to a transaction, the Conceptual
Framework shall be followed.
c. In the absence of a standard or an interpretation
that specifically applies to a transaction, management
shall consider the applicability of the Conceptual
Framework in developing and applying an accounting
policy that results in information that is relevant and
reliable.
d. The Conceptual Framework applies only when the
Financial Reporting Standard Council develops new or
revised standards.
28. Which is not included in the scope of the Conceptual
Framework?
a. Qualitative characteristics of useful financial accounting
information
b. Definitions, recognition and measurement of the
elements of financial statements
c. Objective of financial reporting
d. Supplementary information
29. Which of the following is not true concerning the
Conceptual Framework?
I. The Conceptual Framework should be a basis for
standard setting.
II. The Conceptual Framework should allow practical
problems to be solved more quickly.
III. The Conceptual Framework should be based on
fundamental truths that are derived from the laws of nature.
a. II only
b. III only
c. II and III only
d. I and II only
30. What are the qualitative characteristics of financial
statements?
a. Qualitative characteristics are the attributes that make
the information provided in the financial statements useful
to users.
b. Qualitative characteristics are broad classes of
financial effects of transactions and other events.
c. Qualitative characteristics are nonqualitative aspects of
an entitys’s position and performance and changes in
financial position.
d. Qualitative characteristics measure the extent to which
an entity has complied with all relevant standards and
interpretations.
31. Accounting information is considered relevant when it
a. Can be depended upon to represent the economic
conditions and events that it is intended to represent.
b. Is capable of making a difference in decision.
c. Is understandable by reasonably informed users of
accounting information.
d. Is verifiable and neutral.
32. Which of the following is the best description of
faithful representation in relation to information in
financial statements?
a. Influence on the economic decision of users
b. Inclusion of a degree of caution
c. Freedom from material error
d. Comprehensibility to users
33. Which of the following is not an enhancing qualitative
characteristics?
a. Understandability
b. Profit-oriented
c. Timeliness
d. Comparability
34. Which of the following situations violates the concept
of faithful representation?
a. Financial statements were issued nine months late.
b. Data on segments having the same expected risks and
growth rates are reported to analysts estimating future
profits.
c. Financial statements included an item of property, plant
and equipment with carrying amount increased to
management estimate of market value.
d. Management reports to shareholders regularly refer
to new projects undertaken, but the financial statements
never report project results.
35. Which of the following statements is incorrect
concerning materiality?
a. Information is material if the omission or misstatement
could influence the economic decisions that users make
on the basis of the financial information about entities.
b. Materiality depends on the absolute size of the item
or error judged in the particular circumstances of the
omission or misstatement.
c. Materiality is not a fundamental qualitative
characteristic but rather a threshold or cut off point in
determining useful information.
d. Materiality is dependent on professional judgment
because no threshold limit is defined in the Conceptual
Framework.
36. A complete set of financial statements include all of
the following except the
a. Statement of Financial Position.
b. Statement of Cash Flows.
c. Income Statement.
d. Statement of retained earnings.
37. Which of the following statements is not an objective
of financial reporting?
a. Provide information that is useful in investment and
credit decisions.
b. Provide information about enterprise resources, claims
to those resources, and changes to them.
c. Provide information on the liquidation value of an
enterprise.
d. Provide information that is useful in assessing cash flow
prospects.
38. The overall objective of financial reporting is to
provide information
a. That is useful for decision making.
b. About an enterprise's assets, liabilities, and owners'
equity.
c. About an enterprise's financial performance during a
period.
d. That allows owners to assess management's
performance
39. The information provided by financial reporting
pertains to
a. Individual business enterprises, rather than to
industries or an economy as a whole or to members of
society as consumers.
b. Business industries, rather than to individual
enterprises or an economy as a whole or to members
of society as consumers.
c. Individual business enterprises, industries, and an
economy as a whole, rather than to members of
society as consumers.
d. An economy as a whole and to members of society as
consumers, rather than to individual enterprises or
industries.
40. Proper application of accounting principles is most
dependent upon the
a. Existence of specific guidelines.
b. External audit function.
c. Oversight of regulatory bodies.
d. Professional judgment of the accountant.
41. Conservatism is best described as selecting an
accounting alternative that
a. Understates assets and/or net income.
b. Has the least favorable impact on owners' equity.
c. Overstates, as opposed to understates, liabilities. D
d. Is least likely to mislead users of financial information.
42. The financial statements that are prepared for the
business are separate and distinct from the owners
according to the
a. Going concern principle.
b. Economic entity assumption
c. Matching principle.
d. Full disclosure principle.
43. Recording the purchase price of a chalkboard
eraser (with an estimated useful life of 10 years) as
an expense of the current period is justified by the
a. Going concern assumption.
b. Matching principle.
c. Materiality constraint.
d. Comparability principle.
44. According to the conceptual framework, the process
of reporting an item in the financial statements of an
entity is
a. Realization.
c. Recognition.
b. Matching.
d. Allocation.
45. Which of the following elements of financial
statements is not a component of profit or loss?
a. Revenues.
b. Losses.
c. Expenses.
d. Distributions to owners.
46. An item would be considered material and therefore
would be disclosed in the financial statements if
a. The expected benefits of disclosure exceed the
additional costs.
b. The impact on earnings is greater than 3 percent.
c. The IASB definition of materiality is met.
d. The amount is deemed large enough to make a
difference to the users.
47. What accounting concept justifies the use of accruals
and deferrals?
a. Going concern assumption.
b. Timeliness assumption
c. Separate entity assumption
d. Relevance
48. Which of the following is not a purpose of the
conceptual framework of accounting?
a. To provide definitions of key terms and fundamental
concepts.
b. To provide specific guidelines for resolving situations
not covered by existing accounting standards.
c. To assist accountants and others in selecting among
alternative accounting and reporting methods.
d. To assist the FRSC in the standard-setting process.
49. Which of the following is not an implication of the
going-concern assumption?
a. The historical cost principle is credible.
b. Depreciation and amortization policies are justifiable and
appropriate.
c. The current/noncurrent classification of assets and
liabilities is justifiable and significant.
d. Amortizing research and development costs over
multiple periods is justifiable and appropriate
50. The overriding qualitative characteristic of accounting
information is
a. Relevance.
b. Faithful representation.
c. Understandability.
d. Decision usefulness.
51. When financial reports from two different
companies have been prepared and presented in a
similar manner, the information exhibits the characteristic
of
a. Relevance.
b. Comparability.
c. Faithful representation
d. Consistency.
52. Accounting for inventories by applying the lower-of-
cost-or-NRV is an example of the application of
a. Conservatism.
b. Consistency.
c. Comparability.
d. Materiality.
53. The Conceptual Framework
a. Sets out the concepts that underlie the preparation and
presentation of financial statements for internal users.
b. Is a Philippine Financial Reporting Standard that
defines standards for a particular measurement or
disclosure issue.
c. Is concerned with special purpose reports, for
example, prospectuses and computations prepared for
taxation purposes.
d. Applies to the financial statements of all
commercial, industrial and business reporting
enterprises, whether in the public or private sector.
54. Which statement is incorrect concerning the
recognition principles?
a. An asset is recognized when it is probable that future
economic benefits will flow to the enterprise and the asset
has a cost or value that can be measured reliably.
b. A liability is recognized when it is possible that an
outflow of resources embodying economic benefits will
result from the settlement of a present obligation that can
measured reliably.
c. Income is recognized when an increase in future
economic benefits related to an increase in asset or a
decrease in liability has arisen that can be measured
reliably.
d. Expenses are recognized when a decrease in future
economic benefits related to an decrease in asset or an
increase in liability has arisen that can be measured reliably.
55. Information about economic resources controlled
by the enterprise and its capacity to modify these
resources is useful in predicting the
a. Ability of the enterprise to meet its financial
commitments in the near term.
b. Ability of the enterprise to generate cash and cash
equivalents in the future.
c. Ability of the enterprise to meet its financial
commitments over a longer term.
d. Future borrowing needs and how future profits and
cash flows will be distributed among interested users.
56. In respect to information included in financial
statements, the accounting concept of ‘prudence’
ensures that:
a. The financial statements report what they purport to
report.
b. A degree of caution in the exercise of judgements about
estimates is made.
c. An appropriate balance is achieved between the
relevance and the reliability of information that has been
included.
d. Information is provided to users within the time
period in which it is most likely to bear on their
decisions.
57. Which statement is incorrect concerning financial
statements?
a. Financial statements do not show the results of
management’s stewardship of resources entrusted to it. B
b. Financial statements are prepared at least annually
and are directed toward the common information needs
of a wide range of users.
c. The objective of general-purpose financial
statements is to provide information about the
financial position, performance and cash flows of an
enterprise that is useful to a wide range of users in
making economic decisions.
d. The management of an enterprise has the primary
responsibility for the preparation and presentation of
financial statements
58. An item cannot be recognized in the statement of
financial position or the income statement unless it meets
the two criteria of:
a. Materiality; Relevance to the users
b. Completeness; Measurement reliability
c. Neutrality; Representational faithfulness
d. Probable economic benefits; Measurement reliability
59. The operating cycle
a. Measure the time elapsed between cash
disbursement for inventory and cash collections of the
sales price
b. Refers to the seasonal variations experienced by
business enterprise
c. Should be used to classify assets and liabilities as
current if it is less than one year
d. Cannot exceed one year
60. In classifying the elements of financial statements,
the primary distinction between revenues and gains is
a. The materiality of the amounts involved
b. The likelihood that the transactions involved will recur in
the future
c. The nature of the activities that gave rise to the
transactions involved
d. The costs versus the benefits of the alternative methods
of disclosing the transaction involved
61. Preparation of consolidated financial statements
when a parent-subsidiary relationship exist is an example
of the
a. Economic entity assumption
b. Relevance characteristic
c. Comparability characteristic
d. Neutrality characteristic
62. Which is correct regarding the overall
considerations in preparation and presentation of
financial statements?
a. Assets and liabilities, and income and expenses, when
material should be offset against each other.
b. Financial statements should be prepared on liquidity
concern basis.
c. Each material item should be presented separately in
the financial statements. Immaterial amounts of similar
nature and function should be grouped or condensed as
one line item in the financial statements.
d. The presentation and classification of financial
statement items should not be uniform from one
accounting period to the next.
63. Which statement is incorrect concerning the
Conceptual Framework?
a. Nothing in the framework overrides any specific
Statement of Financial Accounting Standards.
b. The framework deals with the objectives of the financial
statements, the qualitative characteristics that determine
the usefulness of the information in financial
statements, the definition, recognition and measurement
of the elements of the financial statements and concepts
of capital maintenance.
c. The framework sets out the concepts that underlie
the preparation and presentation of financial statements
for internal and external users.
d. The framework is concerned with general purpose
financial statements including consolidated financial
statements.
64. Financial information does not demonstrate
comparability and consistency when
I. Firms in the same industry use different accounting
methods to account for the same type of transaction
II. A company changes its estimate of the salvage value of
a fixed assets
III. A company fails to adjust its financial statements for
changes in value of the measuring unit.
a. I only
b. I and III only
c. I and II only
d. I, II and III
65. What is the primary difference in the treatment
between the two concepts of capital maintenance?
a. The treatment of the effects of changes in the prices of
assets and liabilities of the entity
b. The treatment of the effects of changes in the prices of
expense and revenue of the entity
c. The treatment of the effects of changes in foreign
exchange rates
d. The treatment of the effect of changes in foreign
subsidiary
66. Which is incorrect concerning the concept of
materiality and aggregation?
a. Materiality depends on the size and nature of the
item judged in the particular circumstances of its
omission or misstatement.
b. Materiality provides that the specific disclosure
requirements of a PFRS must be met even if the
resulting information is not material.
c. Items of a dissimilar nature or function shall be
presented separately unless they are immaterial.
d. Information is material if its nondisclosure could
influence the economic decisions of users taken on the
basis of the financial statements.
67. Which of the following statements concerning equity
is incorrect?
a. Although equity is defined as a residual, it may be sub-
classified in the statement of financial position.
b. The creation of reserves is sometimes required by
statute or other laws in order to give the entity and its
creditors an added measure of protection from the effects
of losses.
c. The existence and size of legal, statutory and tax
reserves are information that can be relevant to the
decision-making needs of users, transfer from reserves
are expense rather than appropriation of retained
earnings.
d. The amount at which equity is shown in the balance
sheet is dependent on the measurement of assets and
liabilities.
68. According to the conceptual framework, which of
the following statements conforms to the realization
concept?
a. Cash was collected on accounts receivable.
b. Product unit costs were assigned to cost of goods sold
when the units were sold.
c. An impaired asset was sold for cash.
d. Equipment depreciation was assigned to a production
department and then to product unit costs.
69. Per PAS 1, in the absence of a Standard or
Interpretation that specifically applies to a transaction or
event, management shall develop and apply accounting
policy that results in relevant and faithfully represented
information. Which of following is the least likely source
of such alternative?
a. The requirements and guidance on
Standards/Interpretations on similar and related issues
b. The definition, recognition criteria and measurement
concepts for assets, liabilities, income and expenses in
the Framework.
c. Most recent pronouncements of other standard setting
bodies that use a similar conceptual framework to develop
accounting standards and accepted practice.
d. Textbooks and other accounting literature to the extent
that these do not conflict with existing Standards and
Interpretations.
70. Which is not included in the category of
comprehensive income of an accounting entity?
a. Net income for the period
b. Revaluation surplus
c. Gain on sale of treasury shares
d. Increase in value of financial instruments classified
through fair value
71. Which of the following statements is/are true about
equity?
I. Equity is defined as the difference between assets and
liabilities
II. Increases and decreases in equity (other than from
transactions with owners of the enterprise) represent
income and expenses.
a. I only
b. II only
c. Both I and II
c. Neither I nor II
72. 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. Understandability
c. Faithful Representation
d. Materiality
73. Under a lease where the lessee acquires the benefits
of ownership of an asset, the lessee often recognizes the
present value of future rentals as an asset even though
legal title to the property is not acquired. This is an
example of
a. Form over substance
c. Verifiability
b. Substance over form
d. Conservatism
74. Information about the sources and uses of an
enterprise’s cash and cash equivalents is provided in the:
a. Income statement
b. Cash flow statement
c. Statement of changes in equity International Accounting Standards Board is the
d. Statement of financial position a. International Accounting Standards Committee
75. The measurement basis “net realizable value” is best b. IFRS Foundation
described as: c. International Financial Reporting Interpretations
a. Unamortized historical cost Committee
b. An asset’s selling price or a liability’s settlement amount d. Standards Advisory Council
c. Unadjusted initial cost 83.As part of the due process of developing an
d. Time adjusted cash flow accounting standard, the Financial Reporting Standards
76.The process of establishing financial reporting Council issues exposure draft for comment within a
standards is. period of 60 days, unless a shorter period is considered
a. a democratic process in that a majority of practicing appropriate. How long is this shorter period?
CPAs must vote in favor of a proposed standard. a. Not less than 50 days
b. a legislative process based on set of laws promulgated b. Not less than 45 days
by the House of Representatives c. Not less than 30 days
c. a social process, which incorporates political actions of d.It depends on the issue being resolved
various interested user groups as well as professional 84. Which of the following are parts of the due process
research and logic. applied by the Financial Reporting Standards Council in
d. based solely on economic analysis of the effects each developing a financial reporting standard?
standard will have if it is implemented. I. Formation of a task force to address the issue.
77. Which of the following users of accounting II. Publication of the exposure draft in the official gazette or
information are both an external user and a direct user? newspaper for general circulation.
a. Management III. Consideration of comments on the exposure draft.
b. Management IV. Approval vote by a majority members of the FRSC
c. Creditors members.
d. Regulatory bodies a. all of the above
78. Which of the following is an internal user of a b. I, III, IV
company's financial information? c. II, III, IV
a. Board of directors 85. What is the body authorized by law to promulgate
b. Long-term creditors of an enterprise Shareholders of the rules and regulations affecting the practice of
company Accountancy in the Philippines?
c. Regulatory agencies all of the above a. Accounting Standards Council
d. none of the above b. Philippine Institute of Certified Public Accountants
79. RA 9298 is otherwise knows as c. Board of Accountancy
a. Revised Accountancy Law d. Auditing Standards and Practices Council
b. Revised Accountancy Act 86. What is the branch of accounting that makes financial
c. all of the above information about an entity accessible to the external
d. none of the above users?
80.As used in the definition of accounting, an economic a. Auditing
entity may be. b. Financial accounting
a. a business enterprise c. Government accounting
b. an individual d. Management accounting
c. a division within a business enterprise 87. The PFRS consists of
d. all of the above I. Specific PFRSS, which are adopted from the IFRSS
81. What is the branch of accounting that serves the II. PAS, which are adopted from the IASS
information needs of internal users? III. Philippines Interpretations, which are adopted from the
a. Cost accounting IFRIC and the SIC
b. Financial accounting IV. Interpretations of the PIC.
c. Government accounting a. all of the above
d. Management accounting b. I, II, III
82. An independent, not-for-profit private sector c. I
organization that governs the activities of the d. I, II
88.Which among the following is an indirect user of a. external events
accounting information? b. nonreciprocal
a. Management of the enterprise c. internal events
b. Taxing authority d. special event
c. Regulatory agency 95. Entity A computes for its profit or loss periodically
d. Lenders of the enterprise instead of waiting until the end of the life ofthe business
89.Financial Accounting is concerned with. before doing so. This is an application of which
a. recording financial transactions. of the following accounting concepts?
b. summarizing and presenting financial information on a. historical cost
financial reports b. stable monetary unit
c. analyzing the financial reports c. accrual basis
d. all of the above d. time period
90. Based on the RA 9298, the Financial Reporting 96. This refers to the use of caution in the
Standards Council is composed of exercise of judgments needed in making estimates
a. 13 members required under conditions of uncertainty , such that assets
b. 14 members or income are not overstated andliabilities or expenses
c. 15 members are not understated.
d. 16 members a. faithful representation
91. Which of the following statements is incorrect b. prudence
regarding the basic accounting concepts? c. consistency
a. One of ABC Co.’s delivery trucks was involved in an d. relevance
accident. Although no lawsuits haveyet been filed against 97. The bottom part of each of Entity A’s financial
ABC, ABC recognized a liability for the probable loss on the statements states the following “This statement should
event. This is an application of the prudence or be read in conjunction with the accompanying notes.”
conservatism concept. This is most likely an application ofwhich of the following
b. Under the consistency concept, the financial statements accounting concepts?
should be prepared on the basis ofaccounting principles a. articulation
which are followed consistently. b. consistency
c. Under the entity theory, the business is viewed as a c. accrual basis
separate entity. Therefore, the personaltransactions of the d. time period
business owners are not recorded in the business’ 98. Entity A’s asset has a carrying amount of ₱1M. At year
accounting records. end, Entity A asset has a recoverable amount of only
d. The time period concept means that financial ₱800K. Entity A recognizes a loss of ₱200K for
statements are prepared only at the end of thelife of a thedifference. Although this accounting treatment is
business. required, it violates which of the following concepts?
92. Entity A appropriates ₱1M to fund employee benefits a. historical cost
for the last quarter of the following year.Entity A b. stable monetary unit
deposits the ₱1M fund in a payroll account. This c. accrual basis
economic activity is mostappropriately referred to as d. time period
a. production. 99. Which of the following events is considered as an
b. savings. internal event?
c. exchange. a. sale of inventory on account
d. investment. b. provision of capital by owners
93. It is the branch of accounting that focuses on the c. borrowing of money
general purpose reports of financial positionand operating d. conversion of raw materials into finished goods
results known as financial statements. e. payment of liabilities
a. Financial accounting 100. Which of the following events is considered as an
b. Auditing external event?
c. Managerial accounting a. production
d. Taxation b. payment of taxes
94. These are events that do not involve an external party. c. gifts and charitable contributions
d. provision of capital by ownerse. b. The Norwalk Agreement is a short-term convergence
b, c and d between the FASB and the IASB whichhas long-time been
101. Financial statements are said to be a mixture of fact abolished.
and opinion. Which of the following items is factual? c. The Norwalk Agreement is a convergence between the
a. cost of goods sold FASB and the IASB to make theirexisting financial reporting
b. discount on capital stock standards compatible and coordinate their future work
c. retained earnings programsto ensure that once achieved, compatibility is
d. patent amortization expense maintained.
102. The most common form of business organization is d. The Norwalk Agreement does not affect the financial
a. corporation reporting standards in the Philippines.
b. sole proprietorship 107. The process of identifying, measuring, analyzing,
c. partnership and communicating financial information needed by
d. cell phone stand management to plan, evaluate, and control an
103. This concept defines the area of interest of the organization’s operations is called
accountant. It determines which transactions a. financial accounting.
arerecognized in the books of accounts and which are not. b. tax accounting.
a. Articulation c. managerial accounting.
b. Matching d. auditing.
c. Separate entity 108. The PFRSs consist of all of the following except
d. Full disclosure a. PFRSs.
104. A CPA employed as an accountant in a government b. PASs.
agency is considered to be in c. Interpretations.
a. private practice. d. Conceptual Framework.
b. public practice. 109. It is the official accounting standard setting
c. academe. body in the Philippines. It is composed of
d. service. achairperson and 14 members.
105. Which of the following statements is correct? a. Financial Reporting Standards Committee (FRSC)
I. Accounting provides qualitative information, b. Financial Reporting Standards Council (FRSC)
financial information, and quantitativeinformation. c. Accounting Standards Committee (ASC)
II. Qualitative information is found in the notes to the d. Accounting Standards Council (ASC)
financial statements only. 110. Financial reporting standards continuously change
III. Accounting is considered an art because it is supported primarily in response to
by an organized body of knowledg a. users’ needs.
IV. Accounting is considered a science because it involves b. political influence.
the exercise of skill and judgment. c. government regulations.
V. Measurement is the process of assigning numbers to d. changes in social environments
objects such inventories or plant assetsand to events such 111. Accounting is often called the "language of business"
as purchases or sales. because
VI. All quantitative information is also financial in nature. a. it is easy to understand.
VII. The accounting process of assigning peso amounts or b. it is fundamental to the communication of financial
numbers to relevant objects and eventsis known as information.
identification. c. all business owners have a good understanding of
a. I and V accounting principles.
b. I, II, VI and V d. accountants in many companies share financial
c. I, II, III, IV and V information.
d. II, VI and V 112. You are the accountant of ABC Co. During the period,
106. Which of the following statements about the Norwalk your company purchased staplers worth ₱1,500. Although
Agreement is correct? the staplers have an estimated useful life of 10 years, you
a. The Norwalk Agreement requires all domestic have charged thei rcost as expense. Which of the
companies in the U.S. to prepare financialstatements in following is most likely to be true?
accordance with the IFRSs. a. You are applying the concept of matching
.b. You are applying the concepts of materiality and cost- 116. What is the objective of financial statements
benefit consideration according to the Conceptual Framework?
.c. You are applying the concept of verifiability. a. To provide information about the financial position,
d. You are just lazy to compute for the periodic performance, and changes in financialposition of an entity
depreciation. that is useful to a wide range of users in making economic
113. All of the following statements incorrectly refer to decisions.
the Conceptual Framework except b. To prepare and present a balance sheet, an income
a. The framework is concerned with all-purpose financial statement, a cash flow statement, and astatement of
statements including consolidatedfinancial statements changes in equity.
.b. Financial statements are prepared and presented at c. To prepare and present comparable, relevant, reliable,
least annually and are directed towardthe common and and understandable information toinvestors and creditors.
specific information needs of a wide range of users. d. To prepare financial statements in accordance
c. Prospectuses and computations prepared for taxation with all applicable Standards andInterpretations.
purposes are outside the scope of theframework. 117. The primary users of financial statements under the
d. Financial statements include such items as reports by Conceptual Framework include
directors, statements by the chairman,discussion and I. Existing and potential investors
analysis by management and similar items that may be II. Employees
included in an annualreport. III. Lenders and other creditors
e. The framework applies to the financial statements of all IV. Suppliers and other trade creditors
commercial, industrial and businessreporting entities, but V. Customers
only for the private sector. VI. Governments and their agencies
114. What is the authoritative status of the Conceptual VII. Public
Framework? VIII. Professional accountants, including auditors
a. It has the highest level of authority. In case of a conflict a. I and III
between the Conceptual Frameworkand a Standard or b. I, II, III, IV, V, VI, VII
Interpretation, the Conceptual Framework overrides the c. I, II, III, IV, V, VI
Standard orInterpretation. d. all of these
b. If there is a Standard or Interpretation that specifically 118. Under the Conceptual Framework, qualitative
applies to a transaction, it overridesthe Conceptual characteristics are sub-classified into
Framework. In the absence of a Standard or an a. primary and secondary qualitative characteristics
Interpretation that specificallyapplies, the Conceptual b. major and minor qualitative characteristics
Framework should be followed. c. fundamental and enhancing qualitative characteristics
c. If there is a Standard or Interpretation that specifically d. not sub-classified
applies to a transaction, it overridesthe Conceptual 119. Identify the fundamental qualitative characteristics
Framework. In the absence of a Standard or an under the Conceptual Framework.
Interpretation that specificallyapplies to a transaction, I. Relevance
management should consider the applicability of the II. Reliability
Conceptual Framework in developing and applying an III. Faithful representation
accounting policy that will result in informationthat is IV. Comparability
relevant and reliable. V. Verifiability
d. The Conceptual Framework applies only when IASB VI. Timeliness
develops new or revised Standards. An entity is never VII. Understandability
required to consider the Conceptual Framework. a. I and II
115. The foundation of the Conceptual Framework is b. I and III
formed from c. I, II, III, IV, V and VI
a. the qualitative characteristics that makes information d. IV, V, VI and VII
useful to users. 120. Identify the qualitative characteristics that enhance
b. the objective of general purpose financial reporting. the usefulness of financial information.
c. the concept of reporting entity. I. Relevance
d. the various measurement requirements which results to II. Reliability
fair presented financial information. III. Faithful representation
IV. Comparability management.
V. Verifiability d. b and c
VI. Timeliness 125. Which of the following statements is incorrect
VII. Understandability concerning materiality?
a. I and II a. Materiality can be assessed quantitatively or qualitatively
b. I and III b. There are no specific materiality thresholds provided
c. II, III, IV, V and VII under the PFRSs
d. IV, V, VI and VII c. Materiality is a matter of judgment
121. Which of the following are related to the d. Materiality is a quantitative matter. It should never be
qualitative characteristic of relevance under assessed qualitatively.
theConceptual Framework? 126. The elements of faithful representation do not
I. Predictive value include
II. Confirmatory value a. Comparability
III. Timeliness b. Neutrality
IV. Materiality c. Completeness
a. I and II d. Free from error
b. I, II and III 127. The ability through consensus among measurers to
c. I, II and IV ensure that information represents what itpurports to
d. I, II, III and IV represent is an example of the concept of
122. Under this qualitative characteristic, users are a. Relevance
assumed to have a reasonable knowledge b. Comparability
ofbusiness and economic activities and accounting and a c. Verifiability
willingness to study the information withreasonable d. Feedback value
diligence. However, information about complex matters 128. According to the Conceptual Framework, it is a
that should be included inthe financial statements pervasive constraint on the information that can be
because of its relevance to the economic decision-making provided by financial reporting
needs of usersshould not be excluded merely on the a. materiality
grounds that it may be too difficult for certain users to b. historical
understand. c. cost
a. Relevance d. going concern
b. Reliability 129. The elements directly related to the measurement of
c. Understandability performance
d. Comparability a. income
123. The Conceptual Framework sets out general b. expenses
recognition principles of financial statement c. a and b
elementswhich include all of the following except d. neither a nor b
a. asset recognition 130. Assets and liabilities are recognized if
b. equity recognition a. they meet the definition of an element.
c. liability recognition b. have probable future economic benefits and have cost or
d. expense recognition value that are measured reliably.
124. Which of the following is most likely expensed under c. a and b
the ‘immediate recognition’ principle? d. neither a nor b
a. cost of inventories 131. The cost of purchases of inventory is recognized as
b. impairment loss expense
c. cost of equipmentd. rentals paid a. immediately.
38. A secondary objective of financial statements b. using the matching concept.
a. is to show information regarding assets and liabilities of c. by systematic allocation.
an entity d. any of these as a matter of accounting policy choice
b. is to show information regarding an entity’s financial 132. “I say red, you say green.” The information
position, performance, and changes infinancial position lacks which of the following
c. is to show the results of the stewardship of qualitativecharacteristics?
a. Relevance owners.
b. Verifiability b. To report a measure of overall performance of an entity.
c. Timeliness c. To replace profit with a better measure.
d. Colorfulness d. To combine income from continuing operations with
133. Which of the following is not one of the decisions income from discontinued operationsand extraordinary
that primary users make? items.
a. deciding on how to run the day-to-day operations of the 140. The information provided by financial reporting
entity pertains to
b. deciding on whether to hold or sell investment in stocks a. individual business entities and the economy as a whole,
c. deciding on whether to buy investment in stocks rather than to industries or tomembers of society as
d. deciding on whether to extend loan to the reporting consumers
entity b. individual business entities, industries and the economy
134. Entity A is making a materiality judgment. Entity A as a whole, rather than to membersof society as
considers an item to be material, andtherefore needs consumers
to be disclosed in the notes to the financial statements, if c. individual entities, rather than to industries of the
the item pertains to arelated party transaction. What type economy as a whole or to members of society as
of materiality assessment is Entity A using? consumers
a. quantitative d. individual business entities and industries rather than to
b. qualitative the economy as a whole or tomembers of society as
c. faithful representation consumers
d. relevance 141. Which of the following statements is correct when an
135. According to the Conceptual Framework, the needs entity departs from a provision of a PFRS?
of primary users that are met by financialstatements area. a. The entity’s financial statements would be grossly
all of their needs incorrect; therefore, PAS 1 does not allowsuch a departure.
b. all of their common needs only b. PAS 1 permits such a departure if the relevant regulatory
c. majority of their common needs only framework requires, or otherwisedoes not prohibit, such a
d. substantially a majority of their common and specific departure.
needs only c. PAS 1 requires certain disclosures when an entity
136. This refers to the comparability of financial departs from a provision of a PFRS.
statements of the same entity but in different period d. b and c
a. Inter-comparability 142. Which of the following statements is correct
b. Extra-comparabilit regarding the classification of financial liabilities
c. Intra-comparability ascurrent or noncurrent in accordance with PAS 1
d. Intro-comparability a. Currently maturing obligations are presented as current
137. Which of the following financial statements would liabilities even if their original term is longer than one year
not be dated as covering a certain reportingperiod? and even if a refinancing agreement is completed after the
a. Statement of financial position end of thereporting period but before the financial
b. Statement of profit or loss and other comprehensive statements are authorized for issue.
income b. Currently maturing obligations are presented as
c. Statement of cash flows noncurrent liabilities only if their originalterm is longer than
d. Statement of changes in equity one year.
138. Comprehensive income (or total comprehensive c. Currently maturing obligations are presented as
income) includes noncurrent liabilities only if a refinancingagreement is
a. Profit or loss completed after the end of the reporting period
b. Other comprehensive income but before the financialstatements are authorized for
c. Transactions with owners issue.
d. a and b d. Currently maturing obligations are presented as
e. All of these noncurrent liabilities if a refinancingagreement is
139. What is the purpose of reporting comprehensive completed after the financial statements are authorized for
income? issue.
a. To report changes in equity due to transactions with 143. According to PAS 1, the judgments and estimates
embodied in the financial statements, forexample, amount in excess of its recoverable amount.
materiality judgments, assessments of uncertainty b. Historical cost concept
and risk, and the like, are theresponsibility of the c. Prudence or conservatism concept
entity’s d. Offsetting concept
a. management. 150. Entity A buys and sells artifacts. Each artifact is
b. accountant. unique and not ordinarily interchangeable. According to
c. auditor. PAS 2, the cost formula that Entity A should use is
d. janitor. a. Specific identification
144. Which of the following is not a required disclosure b. Weighted Averagec. FIFO
under PAS 1? d. Any of these
a. The financial effect of a departure from a PFRS 151. Entity A acquires inventories and incurs the following
when an entity departs from a PFRSrequirement. costs:
b. Any material uncertainties on the entity’s ability to Purchase price, gross of trade discount 100,000
continue as a going concern. Trade discount 20,000
c. The recognition, measurement and disclosure of specific Non-refundable purchase tax, not included in the
transactions and other events. purchase price above 5,000
d. The reason for using a longer or shorter period when an Freight-in (Transportation costs) 15,000
entity changes the frequency of itsreporting. Commission to broker 2,000 Advertisement costs
145. An entity’s financial position or condition refers to 10,000
which of the following? How much is the cost of the inventories purchased?
a. The status of the entity’s assets, liabilities and equity. a. 102,000
b. The amount of return that the entity has generated from b. 122,000
its economic resources during theperiod. c. 97,000
c. The level of change in the entity’s economic resources d. 100,000
and claims to those resources, alsoreferred to as the 152. Which of the following is presented in the activities
economic phenomena. section of the statement of cash flows?
d. All of these. a. Purchase of a treasury bill three months before its
146. Comprehensive income excludes which of the maturity date.
following b. Exchange differences from translating foreign currency
a. Revaluation surplus denominated cash flows.
b. Gains and losses from investments measured at fair c. Acquisition of equipment through issuance of note
value through profit or loss payable.
c. Income tax expense d. Bank overdrafts that can be offset.
d. Distributions to owners 153. In the statement of cash flows of a non-financial
147. Entity A needs guidance in accounting for its institution, interest income received is presentedunder
inventories. Entity A should refer to which of thefollowing? a. operating activities
a. PAS 1 .b. financing activities.
b. PAS 2 c. investing activities.
c. PAS 7 d. a or c
d. PAS 86 154. An entity makes a change in accounting estimate.
148. Entity A needs guidance in preparing its statement of How does the entity recognize the effects ofthe change in
changes in equity. Entity A should refer to which of the profit or loss?
following? a. Prospectively in the current period
a. PAS 1 b. Prospectively in the current and future periods
b. PAS 2 c. Retrospectively starting from the earliest period
c. PAS 7 presented
d. PAS 8 d. a or b
149. Which of the following concepts is violated when 155. Materiality does not make any difference with regard
measuring inventories at the lower of cost andnet to
realizable value? a. the separate presentation of items in the financial
a. The concept that assets shall not be carried at an statements.
b. the disclosure of additional information in the notes. a. PAS 2
c. intentional errors. b. PAS 16
d. level of rounding-off of amounts in the financial c. PAS 20
statements. d. All of these are
156. According to PAS 10, dividends declared after the
reporting period, but before the financialstatements are 162. Pampanga Company’s December 31, 2014
authorized for issue, are statement of financial position reported the following
a. recognized as liability at the end of reporting period. current assets:
b. not recognized as liability at the end of reporting period. Cash 3,000,000
c. disclosed only as an adjusting event. Accounts receivable 5,200,000
d. any of these. Inventory 2,000,000
157. At the end of the period, Entity A has deductible Prepaid expenses 700,000
temporary difference of ₱100,000. Entity A’sincome tax Equipment used and held for resale 100,000
rate is 30%. Entity A’s statement of financial position 11,000,000
would report which of the following? An analysis of the accounts receivable disclosed that
a. 30,000 deferred tax asset accounts receivable comprised the following:
b. 30,000 deferred tax liability Trade accounts receivable 4,000,000
c. 30,000 deferred tax expense. Allowance for doubtful accounts ( 300,000)
d. 30,000 income tax expense Selling price of Pampanga Company’s unsold goods sent
158. You are a business manager. During the period, to XYZ Company on consignment at 125% of cost and
you have authorized the acquisition of a machine excluded from Pampanga’s ending inventory 1,500,000
that will be used in your company’s manufacturing 5,200,000
activities in the next 5 years. In your selection of an At December 31, 2014, the total current assets should be
appropriate accounting policy for the recognition and a. P10,600,000
measurement of themachine, which of the following b P 9,800,000
reporting standards is most relevant? c. P10,700,000
a. PAS 1 d. P 9,900,000
b. PAS 2 163. The trial balance of Arayat Company reflected the
c. PAS 16 following liability account balances on December 31, 2014:
d. PAS 32 Accounts payable 4,000,000
159. Which of the following is not one of the principal Bonds payable, due 2015 8,000,000
issues in the accounting for PPE? Discount on bonds payable 1,000,000
a. Recognition. Deferred tax liability 1,500,000
b. Initial measurement as asset. Dividends payable 3,000,000
c. Allocation of carrying amount over the period of use. Income tax payable 500,000
d. Recognition of carrying amount as expense when the Note payable, due 1/15/2016 2,500,000
related revenue is recognized
160. The transfer of resources from the government In its December 31, 2014 statement of financial position,
to an entity in exchange for past or future compliance Arayat should report current liabilities at
with certain conditions relating to the operating activities a. P16,000,000
of the entity is called b. P14,500,000
a. Government grants.b. Government assistance. c. P17,000,000
c. Government financial assistance. d. P16,500,000
d. Government asset transfers.
161. Entity A receives land from the government 164. Candaba Company was incorporated on January 1,
conditioned that the land will only be used in Entity A’s 2014, with proceeds from the issuance of P15,000,000 in
primary business activities and should never be sold. If in common stock and borrowed funds of P5,000,000.
case, Entity A decides not to use the land in its primary During the first year of operations, revenue from sales
business activities, it shall return the land to the and consulting amounted to P20,000,000, and operating
government. Which ofthe following standards is least costs and expenses totalled P12,000,000.
likely to be relevant in accounting for the land? On December 15, Candaba declared a P2,000,000 cash
dividend payable to stockholders on January 15, 2015 d. P63,000,000
No additional activities affected owners’ equity in 2014. 168. Clark Co.’s advertising expense account had a balance
Candaba’s liabilities increased to P7,000,000 by of P146,000 at December 31, 2014, before anynecessary
December 31, 2014. On December 31, 2014 statement of year-end adjustment relating to the following: Included in
financial position, total assets should be reported at: the P146,000 is the P15,000 cost of printing catalogs for a
a. P30,000,000 sales promotional campaign in January 2015.Ratio
b. P21,000,000 advertisements broadcast during December 2014 were
c. P22,000,000 billed to Clark on January 2, 2015. Clarkpaid the P9,000
d. P28,000,000 invoice on January 11, 2015. What amount should Clark
165. The following items were among those that were report as advertising expense in its income statement
reported on Bulacan Company’s income statement for for the year endedDecember 31, 2014?
theyear ended December 31, 2014: a. P122,000
Legal and audit fees 2,000,000 b. P131,000
Rent for office space 6,000,000 c. P140,000
Interest on acceptances payable 1,000,000 d. P155,000
Loss on abandoned data processing equipment 500,000 169. An analysis of Thrift Corp.’s unadjusted prepaid
Insurance 200,000 expense account at December 31, 2014, revealed
The office space is used equally by the sales and thefollowing: An opening balance of P1,500 for Thrift’s
accounting departments. comprehensive insurance policy. Thrift had paid an
What amount should beclassified as general and annualpremium of P3,000 on July 1, 2013. A P3,200 annual
administrative expenses? insurance premium payment made July 1, 2014. A P2,000
a. P8,200,000 advance rental payment for a warehouse thrift leased for
b. P5,200,000 one year beginning January 1, 2015. In its December 31,
c. P6,200,000 2014 statement of financial position, what amount should
d. P5,000,000 Thrift report as prepaidexpenses?
166. The following information pertains to Malolos a. P5,200
Company’s 2014 cost of goods sold: c. P2,000
Inventory, January 1 10,000,000 b. P3,600
Purchases 40,000,000 d. P1,600
Writeoff of obsolete inventory 5,000,000 170. On October 1, 2014, Acme Fuel Co. sold 100,000
Inventory, December 31 3,000,000 gallons of heating oil to Karn Co. at P3 per gallon.
What amount should Malolos report as cost of goods sold? Fiftythousand gallons were delivered on December 15,
a. P42,000,000 2014, and the remaining 50,000 gallons were deliveredon
b. P45,000,000 January 15, 2015. Payment terms were: 50% due on
c. P47,000,000 October 1, 2014, 25% due on first delivery, and
d. P50,000,000 theremaining 25% due on second delivery. What amount of
167. The following information was taken from Hagonoy revenue should Acme recognize from this saleduring 2014?
Company’s accounting records for the year ended a. P 75,000
December 31, 2014: c. P225,000
Decrease in raw materials inventory 1,000,000 b. P150,000
Increase in goods in process inventory 3,000,000 d.P300,000
Increase in finished goods inventor 2,000,000 171. The beginning of the year total equity for a firm was
Raw materials purchased 40,000,000 P40,000. During the year, the firm issued ordinaryshares for
Direct labor payroll 10,000,000 a total proceeds of P20,000, earned P20,000 net income,
Factory overhead 6,000,000 and paid P5,000 in cash dividends. If ending total liabilities
Freight out 4,000,000 are P100,000, what is the ending total assets?
Freight in 5,000,000 a. P165,000
The cost of goods sold is c. P45,000
a. P59,000,000 b. P175,000
b. P57,000,000 d. P25,000
c. P61,000,000