ACCOUNTING 5

QUIZ

1.) The financial accounting information is directed toward the common needs of users and is independent of
presumptions about particular needs and desires of specific users.
a. Completeness
b. Verifiability
c. Relevance
d. Neutrality

2.) It is the result of the standard of adequate disclosure.

a. Substance over form
b. Completeness
c. Faithful Representation
d. Neutrality

3.) It is the ability to bring together for the purpose of noting similarities and dissimilarities.
a. Understandability
b. Comparability
c. Reliability
d. Relevance

4.) The effects of transactions and other events are recognized when they occur and not as cash or its
equivalent is received or paid, and they are recorded and reported in the financial statements of the
periods to which they relate.
a. Accrual
b. Going Concern
c. Time Period
d. Monetary Unit

5.) Which of the following is incorrect?

a. In accordance with the unit of measure assumption, accountants normally revise the amounts to
reflect the changing purchasing power of money due to inflation or deflation.
b. Expenses are matched with revenues, not the reverse.
c. In accordance with the going concern assumption, the life of a business is presumed to be
indefinite.
d. The accrual method, which builds directly on the revenue and matching principles, ignores the
timing of cash receipts or payments when determining when to recognize revenue or expenses.

6.) It is the capacity of information to make a difference in decision by helping users evaluate past, present or
future events, or confirming, or correcting, their past evaluations.
a. Understandability
b. Comparability
c. Reliability
d. Relevance

7.) It is the exercise of care and caution in dealing with uncertainties in measurement so as not to overstate
assets and income and not understate liabilities and expenses.
a. Prudence
b. Neutrality
c. Completeness
d. Faithful Representation

8.) If a business is not being sold or closed, the amounts reported in the accounts for assets used in the
business operations are based on the cost of the assets. This practice is justified by
a. Accounting entity
b. Going concern
c. Time period
d. Accrual
9.) Financial reports communicated after an accounting decision has been made defeat the primary purpose
of which characteristic?
a. Timeliness
b. Materiality
c. Conservatism
d. Adequate Disclosure

10.) Historically, managers, investors and accountants have generally preferred that possible errors in
measurement be in the direction of understatement of net income and net assets.
a. Approximation
b. Materiality
c. Conservatism
d. Application of judgment

11.) Financial reporting is concerned only with information that is significant enough to affect evaluation or
decision.
a. Cost and benefit
b. Comparability
c. Materiality
d. Timeliness

12.) This accounting concept justifies the usage of accruals and deferrals.
a. Stable monetary unit
b. Going concern
c. Materiality
d. Consistency

13.) The financial information must be comprehensible or intelligible if it is to be useful.

a. Reliability
b. Comparability
c. Relevance
d. Understandability
14.) In the event of conflict between the economic substance of a transaction and its legal form, the economic
substance shall prevail. This concept is known as
a. Faithful Representation
b. Completeness
c. Substance over form
d. Form over substance

15.) Which accounting process is the recognition or non-recognition of business activities as accountable
events?
a. Recording
b. Identifying
c. Communicating
d. Measuring

16.) Accountants do not recognize that the value of the peso changes over time. This concept is called the
a. Entity concept
b. Cost principle
c. Stable monetary unit concept
d. Going concern concept

17.) The consistency standard of reporting requires that

a. The accounting procedures be adopted which give a consistent rate of return
b. Expenses be reported as charges against the period in which they are incurred
c. The effect of changes in accounting upon income be properly disclosed
d. Extraordinary gains and losses should not appear on the income statement

18.) The periodicity concept

a. Requires that all companies prepare monthly, quarterly and annual financial statements
 b. Results from the Bureau of Internal Revenue requirement that taxable income be reported on an
annual basis
c. Requires all companies to use a fiscal year ending December 31
d. Involves dividing the life of a business entity into accounting periods of equal length thus
enabling the financial users to periodically evaluate the results of business operations

19.) Which area of public accounting means the examination of financial statements by a CPA for the purpose
of expressing an opinion as to the fairness of the statements?
a. External auditing
b. Internal auditing
c. Taxation
d. Management Advisory Services

20.) The measurement phase of accounting is accomplished by

a. Storing data
b. Reporting to decision makers
c. Recording data
d. Processing data
21.) The consistency concept means that
a. Firms in the same industry must account for similar items in the same way
b. Firms may never change the way in which they prepare their accounts
c. When preparing the accounts of a firm, one should normally account for similar items in the
same way from one accounting period to the next
d. None of the above

22.) Which of the following accounting concepts states that an accounting transaction should be supported by
sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion?
a. Periodicity
b. Matching
c. Stable monetary unit
d. Objectivity

23.) The financial accounting process provides information about economic activities of an enterprise for a
specified accounting period that is shorter than the life of the enterprise.
a. Going concern
b. Measurement in terms of money
c. Time period
d. Measurement of economic resources and obligations

24.) Accounting changes are often made and the monetary impact is reflected in the financial statements of a
company even though, in theory, this may be a violation of the accounting concept of
a. Materiality
b. Consistency
c. Objectivity
d. Conservatism

25.) Stating assets and liabilities and changes in them in terms of a common financial denominator is a
prerequisite in measuring financial position and periodic net income.
a. Measurement of economic resources and obligations
b. Exchange price
c. Accrual
d. Unit of measure

26.) The basic purpose of accounting is

a. To provide quantitative financial information about a business enterprise that is useful in making
rational economic decision.
b. To measure the periodic income of the economic entity
c. To provide the information that the managers of an economic entity needed to control its
operations
d. To provide information that the creditors of an economic entity can use in deciding whether to
make additional loans to the entity
27.) The entity concept means that
a. The financial affairs of a firm and its owner are always kept separate for the purpose of preparing
accounts
b. Accounts must be prepared for every firm
c. Because a firm is separate and distinct from its owners , those owners cannot have access to its
assets unless the firm ceases to trade
d. None of the above

28.) They encompass the conventions, rules and procedures necessary to define what is accepted accounting
practice
a. Generally accepted accounting principles
b. Accounting assumptions
c. Conceptual framework
d. Accounting concepts

29.) The main function is to establish and improve accounting standards that will be generally accepted in the
Philippines.
a. Philippine Institute of CPAs
b. Professional Regulation Commission
c. Board of Accountancy
d. Financial Reporting Standards Council

30.) Accountants employed by a particular business firm or not-for-profit organization, perhaps as chief
accountant, controller or financial vice president, are said to be engaged in
a. Practice in commerce and industry
b. Independent accounting
c. General accounting
d. Public accounting

31.) The communicating process of accounting include all of the following, except
a. Recording
b. Classifying
c. Summarizing
d. Interpreting

32.) Accountants employed in entities in various capacity as accounting staff, chief accountant or controller
are said to be engaged in
a. Public accounting
b. Private accounting
c. Government accounting
d. Financial accounting

33.) Financial Accounting is concerned with

a. General purpose reports on financial position and financial performance
b. Specialized reports for inventory management and control
c. Specialized reports for income tax computation and recognition
d. General purpose reports on changes in share prices and future estimates of market position
34.) Financial Accounting is the area of accounting that emphasizes reporting to
a. Management
b. Regulatory bodies
c. Internal auditors
d. Creditors and investors

35.) Managerial accounting is the area of accounting that emphasizes

a. Reporting financial information to external users
b. Reporting to the SEC
c. Combining accounting knowledge with an expertise in data processing
d. Developing accounting information for use within an entity

36.) General purpose financial statements are the product of

 a. Financial accounting
b. Managerial accounting
c. Both financial accounting and managerial accounting
d. Neither financial nor managerial accounting

37.) Generally accepted accounting principles

a. Are accounting adaptations based on the laws of economic science
b. Derive their credibility and authority from legal rulings and court precedents
c. Derive their credibility and authority from the national government through the financial
reporting section of the SEC
d. Derive their credibility and authority from general recognition and acceptance by the
accountancy profession

38.) Which of the following statements best describes generally accepted accounting principles?
a. They have been formulated in the public sector
b. They have been develop on the basis of such factors as usage and practical necessity
c. They are the same as laws within our legal system
d. They do not apply to small entities

39.) The International Accounting Standards Board was formed to

a. Enforce IFRS in foreign countries
b. Develop worldwide accounting standards
c. Establish accounting standards for multinational entities
d. Develop accounting standards for countries that do not have their own standard-setting bodies

40.) The International Accounting Standards Board publishes its standards in a series of pronouncements
called
a. International Accounting Standards
b. Financial Reporting Standards
c. International Financial Reporting Standards
d. Statement of Financial Accounting Standards
41.) It is a global phenomenon intended to bring about transparency and a higher degree of comparability in
financial reporting, both of which will benefit the investors and are essential to achieve the goal of one
uniform and globally accepted financial reporting standards.
a. IFRS
b. Borderless Accounting
c. World Trade
d. Information Technology

42.) 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 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 faithfully
represented.
d. The Conceptual Framework applies only when the FRSC develops new or revised standards.

43.) Which of the following is not a purpose of the Conceptual Framework?

a. To assists the FRSC in developing accounting standards that will represent GAAP in the
Philippines
b. To assist the FRSC in its review and adoption of existing international accounting standards
c. To assist auditors in forming an opinion as to whether financial statements conform with
Philippine GAAP
d. To assist the Board of Accountancy in promulgating rules and regulations affecting the practice of
public accountancy

44.) These users are interested in information about the continuance of an entity, especially when they have a
long term involvement with or are dependent on the entity.
a. Customers
 b. employees
c. trade unions
d. suppliers

45.) The primary focus of financial reporting has been on meeting the needs of which of the following groups?
a. Managers of an entity
b. National and local taxing authorities
c. Existing and potential investors, lenders and other creditors
d. Independent CPAs

46.) Accounting 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
47.) When information about two different entities engaged in the same industry has been prepared and
presented in similar manner, the information exhibits the enhancing qualitative characteristic of
a. Relevance
b. Faithful representation
c. Consistency
d. Comparability

48.) The characteristic that is demonstrated when a high degree of consensus can be secured among
independent measurers using the same measurement method is
a. Relevance
b. Understandability
c. Verifiability
d. Neutrality

49.) What is the quality of information that enables users to better forecast future operations?
a. Faithful rpresentation
b. Materiality
c. Comparability
d. Relevance

50.) It is an increase in economic benefit during the accounting period related to an increase in asset or a
decrease in liability that results in increase in equity other than contribution from owners.
a. Asset
b. Liability
c. Income
d. Expenses

51.) An asset is recognize when

a. It is probable that future economic benefit will flow to the entity
b. The cost or the value of the asset can be measured reliably
c. The entity obtains control of the rights associated with the asset
d. It is probable that future economic benefit will flow to the entity and the cost or value of the
asset can be measured reliably

52.) It is the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset
was acquired currently.
a. Historical cost
b. Current cost
c. Realizable value
d. Present value

53.) Which of the following terms best describes the amount of cash or cash equivalents that could currently
be obtained by selling an asset in an orderly disposal?
a. Fair value
b. Realizable value
 c. Residual value
d. Value in use

54.) The revenue principle states that revenue shall be recognized at a point when
a. An exchange transaction involving goods and services has occurred and the earnings process is
essentially complete
b. An order for shipment of a definite amount of merchandise has been received
c. A contract between buyer and seller has been signed by both parties
d. The seller has shipped merchandise to a customer under the terms that the customer need not
pay for the merchandise until it is sold

55.) Which of the following is expensed under the principle of systematic and rational allocation?
a. Salesmen’s monthly salaries
b. Insurance premiums
c. Transportation to customers
d. Electricity to light office building

II IDENTIFY THE PRINCIPLE, CONCEPT OR ASSUMPTION THAT IS MOST CLEARLY VIOLATED BY THE
ACCOUNTING PRACTICE DESCRIBED IN EACH STATEMENT BELOW.

1.) An electronics entity owned by Kyle Francis reports the cost of Kyle Francis’ swimming pool as an
asset in the statement of financial position.
2.) An entity changes from weighted average method to FIFO when accounting for inventory.
3.) Expenses are reported whenever the accountant records them rather than when related revenues
are earned
4.) The owners of five-star hotel base its accounting records on the assumption that the hotel might
close any time.
5.) After starting business, a mining entity keeps no accounting records. The entity is waiting until the
mine is exhausted to determine the success or failure of the business.