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Class Activity April 19 CFAS
Class Activity April 19 CFAS
3. The accounting standards used in the Philippines are adapted from the standards issued by the
a. Federal Accounting Standards Board (FASB).
b. International Accounting Standards Board (IASB).
c. Philippine Institute of Certified Public Accountants (PICPA).
d. Democratic People's Republic of Korea Accounting Standards Committee (DPKRASC).
4. Which of the following statements is incorrect regarding the basic accounting concepts?
a. One of ABC Co.’s delivery trucks was involved in an accident. Although no lawsuits have
yet been filed against ABC, ABC recognized a liability for the probable loss on the event.
This is an application of the prudence or conservatism concept.
b. Under the consistency concept, the financial statements should be prepared on the basis of
accounting principles which are followed consistently.
c. Under the entity theory, the business is viewed as a separate entity. Therefore, the personal
transactions of the business owners are not recorded in the business’ accounting records.
d. The time period concept means that financial statements are prepared only at the end of the
life of a business.
5. Entity A appropriates ₱1M to fund employee benefits for the last quarter of the following year.
Entity A deposits the ₱1M fund in a payroll account. This economic activity is most
appropriately referred to as
a. production.
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b. savings.
c. exchange.
d. investment.
6. It is the branch of accounting that focuses on the preparation of general purpose financial
statements.
a. Financial accounting
b. General Accounting
c. All-purpose Accounting
d. All-around accounting
8. Entity A computes for its profit or loss periodically instead of waiting until the end of the life of
the business before doing so. This is an application of which of the following accounting
concepts?
a. historical cost
b. stable monetary unit
c. accrual basis
d. time period or reporting period
9. This refers to the use of caution in the exercise of judgments needed in making estimates
required under conditions of uncertainty, such that assets or income are not overstated and
liabilities or expenses are not understated.
a. faithful representation
b. prudence
c. consistency
d. relevance
10. The bottom part of each of Entity A’s financial statements states the following “This statement
should be read in conjunction with the accompanying notes.” This is most likely an application of
which of the following accounting concepts?
a. articulation
b. consistency
c. accrual basis
d. time period
e. payment of liabilities
13. Financial statements are said to be a mixture of fact and opinion. Which of the following items is
factual?
a. cost of goods sold
b. discount on capital stock
c. retained earnings
d. patent amortization expense
14. This concept defines the area of interest of the accountant. It determines which transactions are
recognized in the books of accounts and which are not.
a. Articulation
b. Matching
c. Separate entity
d. Full disclosure
17. Which of the following statements about the Norwalk Agreement is correct?
a. The Norwalk Agreement requires all domestic companies in the U.S. to prepare financial
statements in accordance with the IFRSs.
b. The Norwalk Agreement is a short-term convergence between the FASB and the IASB which
has long-time been abolished.
c. The Norwalk Agreement is a convergence between the FASB and the IASB to make their
existing financial reporting standards compatible and coordinate their future work programs
to ensure that once achieved, compatibility is maintained.
d. The Norwalk Agreement does not affect the financial reporting standards in the Philippines.
18. The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization’s operations is called
a. financial accounting.
b. tax accounting.
c. managerial accounting.
d. auditing.
20. It is the official accounting standard setting body in the Philippines. It is composed of a
chairperson and 14 members.
a. Financial Reporting Standards Committee (FRSC)
b. Financial Reporting Standards Council (FRSC)
c. Accounting Standards Committee (ASC)
d. Accounting Standards Council (ASC)
23. You are the accountant of ABC Co. During the period, your company purchased staplers worth
₱1,500. Although the staplers have an estimated useful life of 10 years, you have charged their
cost as expense. Which of the following is most likely to be true?
a. You are applying the concept of matching.
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24. All of the following statements incorrectly refer to the concepts in the Conceptual Framework
except
a. The Conceptual Framework is concerned with all-purpose financial statements.
b. Financial statements are prepared and presented at least annually and are directed toward
both the common and specific information needs of a wide range of users.
c. The objective of general purpose financial statements is similar to the objective of general
purpose financial reporting.
d. The financial statements prepared by a reporting entity comprising a parent and its
subsidiaries are referred to as ‘combined financial statements’.
27. What is the objective of general purpose financial statements according to the Conceptual
Framework?
a. To provide information about the financial position, financial performance, and changes in
financial position of an entity that is useful to primary users in making economic decisions.
b. To prepare and present a balance sheet, an income statement, a cash flow statement, and a
statement of changes in equity.
c. To prepare and present comparable, relevant, reliable, and understandable information for
investors and creditors.
d. To prepare financial statements in accordance with all applicable Standards and
Interpretations.
28. The primary users of financial statements under the Conceptual Framework include
I. Existing and potential investors
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II. Employees
III. Lenders and other creditors
IV. Suppliers and other trade creditors
V. Customers
VI. Governments and their agencies
VII. Public
VIII. Professional accountants, including auditors
a. I and III
b. I, II, III, IV, V, VI, VII
c. I, II, III, IV, V, VI
d. all of these
29. The Conceptual Framework broadly classifies the qualitative characteristics into
a. primary and secondary qualitative characteristics.
b. major and minor qualitative characteristics.
c. fundamental and enhancing qualitative characteristics.
d. cold and hot qualitative characteristics.
30. Identify the fundamental qualitative characteristics under the Conceptual Framework.
I. Relevance
II. Reliability
III. Faithful representation
IV. Comparability
V. Verifiability
VI. Timeliness
VII. Understandability
a. I and II
b. I and III
c. I, II, III, IV, V and VI
d. IV, V, VI and VII
31. Identify the qualitative characteristics that enhance the usefulness of financial information.
I. Relevance
II. Reliability
III. Faithful representation
IV. Comparability
V. Verifiability
VI. Timeliness
VII. Understandability
a. I and II
b. I and III
c. II, III, IV, V and VII
d. IV, V, VI and VII
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32. Which of the following are considered aspects of the qualitative characteristic of relevance under
the Conceptual Framework?
I. Predictive value
II. Confirmatory value
III. Timeliness
IV. Materiality
a. I and II
b. I, II and III
c. I, II and IV
d. I, II, III and IV
33. Under this qualitative characteristic, users are assumed to have a reasonable knowledge of
business activities and willingness to study the information with reasonable diligence.
a. Relevance
b. Faithful representation
c. Understandability
d. Comparability
36. The ability through consensus among measurers to ensure that information represents what it
purports to represent is an example of the concept of
a. relevance.
b. comparability.
c. verifiability.
d. feedback value.
37. According to the Conceptual Framework, the pervasive constraint on the information that can be
provided by financial reporting is
a. materiality.
b. historical.
c. cost-benefit.
d. going concern.
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38. The element that is related to the measurement of an entity’s financial performance is
a. income.
b. expenses.
c. a and b
d. neither a nor b
41. The Conceptual Framework uses the term “economic resources” to refer to
a. assets.
b. equity.
c. liabilities.
d. income.
42. Which of the following is incorrect regarding the use of the term ‘reporting entity’ under the
Conceptual Framework?
a. A reporting entity one that is required, or chooses, to prepare financial statements.
b. A reporting entity must be a legal entity.
c. A reporting entity can be a parent and its subsidiaries viewed as a single entity.
d. All of these are correct.
44. “I say red; you say green.” The information lacks which of the following qualitative
characteristics?
a. Relevance
b. Verifiability
c. Timeliness
d. Colorfulness
45. Which of the following is not one of the decisions that primary users make?
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46. Entity A is making a materiality judgment. Entity A considers an item to be material, and
therefore included in the financial statements, if it pertains to a related party transaction. What
type of materiality assessment is Entity A using?
a. Quantitative
b. Qualitative
c. Faithful representation
d. Relevance
47. According to the Conceptual Framework, the needs of the primary users that are met by financial
statements are
a. all of their needs.
b. all of their common needs only.
c. majority of their common needs only.
d. substantially a majority of their common and specific needs only.
48. The term ‘liquidity’, as used in relation to the assessment of an entity’s financial position, refers
to
a. the entity’s ability to pay its short-term obligations.
b. the entity’s ability to pay its long-term obligations.
c. the entity’s ability to collect its current receivables.
d. the entity’s ability to flow like water.
49. The measurement bases described under the Conceptual Framework are least applicable to the
measurement of
a. assets.
b. liabilities.
c. equity.
d. income.
50. Information on the utilization of economic resources is most useful when assessing an entity’s
a. management stewardship.
b. liquidity and solvency.
c. financial position and financial performance.
d. financial strengths and weaknesses, including the entity’s needs for additional financing.