1. What is the authoritative status of the Conceptual Framework?

a. The Conceptual Framework has the highest level of authority

b. The Conceptual Framework applies only when the IASB develops new or
revised standards

c. In the absence of a standard that specifically applies to a transaction, the

Conceptual Framework shall be followed

d. In the absence of a standard 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.

2.The Conceptual Framework is intended to assist

a. CPAs in public practice c. Financial Reporting Standards Council

b. Users of financial statements d. All of the choices

3.Under PAS 1, which of the following should be classified as extraordinary item in

reporting results of operation?

a. Foreign exchange losses arising from appreciation of Japanses yen relative to

the Philippine peso

b. Gains resulting from the national government expropriation of a corporate

property

c. Losses resulting from an unusual major flashflood in the Visayas region

d. None, all are ordinary gains and losses

4. Which of the following is a characteristics of a change in accounting estimate?

a. It should be reported through restatement of the financial statements.

b. It requires the reporting of pro forma amounts for prior periods.

c. It does not affect the financial statements of prior periods.

d. It never needs to be disclosed

5. Which of the following changes would be accounted for prospectively?

a. Correction of prior period errors

 b. Changes in the expected life of a depreciable asset

c. First time presentation of consolidated financial statements

d. Changing from FIFO to a weighted average for merchandise inventory

6. A required format for the presentation of the Statement of Financial Position is:

a. Prescribed by the standard

b. Not prescribed and no guidance is provided in the standard

c. Not prescribed but details are found in the Conceptual Framework

d. Not prescribed but guidance is provided in the standard for a suitable format.

7. A statement of financial position provides a basis for all of the following, EXCEPT:

a. Evaluating capital structure

b. Computing rates of return

c. Assessing liquidity and financial flexibility

d. Determining profitability and assessing past performance

8. PAS 1 requires disclosure in the balance sheet of the following items:

a. A statement of compliance with Philippine Financial Reporting

Standards(PFRS)

b. Information about the key assumptions used in the depreciation of assets

c. The measurement basis used for the revaluation of assets

d. The carrying amount of property, plant and equipment.

9. The summary of accounting policies is normally presented:

a. Before all of the financial statements in a financial report

b. As the first note, after all the financial statements

c. As the last note in a financial statements

d. Within the auditor’s report

10. Which of the following information is NOT specifically a required disclosure of PAS
1?
 a. Names of major shareholders of the entity

b. Name of the reporting entity or other means of identification

c. Level of rounding used in presenting the financial statements

d. Whether the financial statements cover the individual entity or a group of

entities

11. The Conceptual Framework

a. is considered a Philippine Financial Reporting Standards.

b. shall prevail over the provisions of PFRS in case of rare conflict.

c. is used as a guide in developing, applying and interpreting PFRS.

d. deals with a set of comprehensive concepts that underlie the preparation, and
presentation of financial statements for internal users.

12. The Conceptual Framework is intended to establish

a. The Generally Accepted Accounting Principle(GAAP) in financial reporting by

entities

b. The objectives and concepts used in developing financial reporting standards

c.The meaning of “fairly presented” in accordance with GAAP

d. The hierarchy of sources of GAAP

13. The objective of financial reporting indicates indicates that a reporting entity must
provide information about:

a. Economic resources and claims

b. Changes in economic resources and claims resulting from financial

performance

c. Changes in economic resources and claims NOT resulting from financial

performance

d. All of the choices

14. Accounting information is relevant when it

a. Is verifiable and neutral

 b. Is able to present complete information

c. Is capable of making a difference in decision

d. Is understandable by reasonably informed users of accounting information

15. Which of these is NOT related with relevance as a qualitative characteristic of

financial information?

a. Materiality

b. Conservatism

c. Predictive Value

d. Confirmatory Value

16. An accounting policy

a. Is a judgment applied in deciding whether to recognize a transaction

b. Comprises the principles applied in preparing the financial statements

c. Is the judgment used in deciding on whether to disclose a particular item

d. Is the application of judgment in deciding on the measurement of an item

17. Accounting changes are often made even though this may be a violation of the
accounting concept of

a. Materiality

b. Consistency

c. Prudence

d. Objectivity

18. Which is not classified s an accounting change?

a. Change in accounting policy

b. Change in accounting estimate

c. Error in the financial statements

d. All of these are classified as an accounting change

19. The effect of a change in accounting estimate shall be recognized prospectively by
including it in profit or loss of

a. Current periods only

b. Future periods only

c. Prior periods only

d. Current period and future periods if the change affects both

20. It is an adjustment of the carrying amount of an asset or a liability or the amount of

the periodic consumption of an asset that results from the assessment of the present
status and expected future benefit and obligation associated with the asset and liability.

a. Change in accounting estimate

b. Change in accounting policy

c. Correction of a prior period error

d. Change in reporting entity

21. The recording phase of financial accounting covers the following steps, EXCEPT

a. Business documents are received/prepared

b. Transactions are journalized

c. Transactions are posted to the ledger

d. Financial statements are prepared

22. A complete set of financial statement includes the following components, except

a. Statement of financial position, statement of comprehensive income and

statement of cash flows

b.Statement of changes in equity

c. Notes, comprising a summary of significant accounting policies and other

explanatory information

d. Reports and statement such as environmental reports and value added

statements.

23. What is the objective of financial statements?

 a.To provide information about the financial position, financial performance and
changes in financial position of an entity that is useful to a wide range of users in
making economic decisions.

b. To prepare and present a statement of financial position, statement of

comprehensive income, statement of cash flows and statement of changes in
equity

c. To prepare and present relevant, reliable, comparable and understandable

information to investors and creditors.

d. To prepare and present financial statements in accordance with all applicable

PFRS and Interpretations.

24. The initial application of a policy to revalue assets is

a. A change in accounting policy

b. A change in accounting estimate

c. Correction of a prior period error

d. Not an accounting change

25. Which of the following terms best describes applying a new accounting policy to
transactions as if that policy had always been applied?
a. Retrospective application

b. Retrospective restatement

c. Prospective application

d. Prospective restatement

26. “Substantive over form” is closely associated with the qualitative characteristics of

a. Faithful representation c. Understandability

b. Relevance d. Verifiability

27.Issuance of interim financial statements is an example of a trade-off between

a. Relevance and reliability c. Timeliness and materiality

b. Reliability and periodicity d. Understandability and timeliness

28. What is the valuation basis used in conventional financial statements?

a. Historical costs c. Replacement cost

b. Market value d. A mixture of costs and values

29. What links the decision makers and the decisions they make so that financial
information would be useful?

a. Relevance c. Understandability

b. Reliability d. Materiality

30. Which of the following is not an ingredient of faithful representation according to

Conceptual Framework for Financial Reporting?

a. Freedom from error c. Completeness

b. Confirmatory value d. Neutrality

Answer Key

1. D 16.B

2. D 17.B

3. D 18.C

4. C 19.D

5. B 20.A

6. D 21.D

7. D 22.D

8. D 23.A

9. B 24.A

10.A 25.A

11.C 26.A

12.B 27.A

13.D 28.D

14.C 29.C

15.B 30.B