[CONCEPTUAL FRAMEWORK SCORE:

CODE: AC109 ANDACCOUNTING STANDARD]

QUIZ NO. 1

1. Certified public accountants are licensed by:

a. PICPA
b. The Securities and Exchange Commission
c. The Financial Executives Institute of the Philippines
d. The state government

2. The International Accounting Standards Board was formed

a. To enforce the IFRS in foreign countries
b. To develop a single set of highly quality IFRS
c. To establish accounting standards for multinational entities
d. To develop accounting standards for countries that do not have their own standard-
setting body

3. The IASB publishes standards called

a. International Accounting Standard
b. Financial Reporting Standards
c. International Financial Reporting Standards
d. Statement of Financial Accounting Standards

4. What is a possible danger if politics plays too big role in developing IFRS?
a. Accounting standards are not truly generally accepted
b. Individuals may influence the standards
c. User groups become active
d. The IASB delegates its authority to elected officials

5. The International Accounting Standards Board

a. Was the predecessor to the IASC
b. Can overrule the USA GAAP
c. Promotes the use of high quality and understandable global accounting standards
d. Has its headquarters in Geneva

6. Proper application of generally accepted accounting principles is most dependent upon

a. Existence of specific guidelines
b. Oversight of regulatory bodies
c. External audit function
d. Professional judgement of the accountant

7. Which statement is not true about the Conceptual Framework for Financial Reporting?
a. The Conceptual Framework is an IFRS
b. The Conceptual Framework describes the concepts for general purpose financial
reporting
c. In case of conflict, the requirements of the IFRS prevail over the Conceptual Framework
d. Nothing in the Conceptual Framework overrides any specific IFRS

8. A Conceptual Framework should

a. Lead to uniformity of financial statements
b. Eliminate alternative accounting principles
c. Guide multinational entities in developing GAAP

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d. Define the basic terms and concepts of accounting

9. The Conceptual Framework is intended to establish

a. GAAP in financial reporting
b. The meaning of “present fairly in accordance with GAAP”
c. The objectives and concepts for use in developing standards for financial
accounting and reporting
d. The hierarchy of sources of GAAP

10. Which is not a purpose of Conceptual Framework?

a. To enable the accountancy profession to solve more quickly emerging practical
problems
b. To provide foundation from which to build more useful financial accounting standards
c. To enhance comparability of financial statements across entities
d. To assist regulatory agencies in issuing rules and regulations for a particular
industry

11. The objective of financial reporting is to provide

a. Information about investors in the entity
b. Information about the liquidation value
c. Information useful in assessing cash flow prospects
d. Information that will attract new investors

12. During a period when an entity is under the direction of a particular management, financial
reporting will directly provide information about
a. Both entity performance and management performance
b. Management performance but not entity performance
c. Entity performance but not management performance
d. Neither entity performance nor management performance

13. What 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 form material error
d. Comprehensibility to users

14. 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
characteristics of
a. Relevance
b. Faithful representation
c. Consistency
d. Comparability

15. The characteristics 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

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d. Neutrality

16. For information to be useful, the linkage between the users and the decisions made is
a. Relevance
b. Faithful representation
c. Undestandability
d. Verifiability

17. The overriding qualitative characteristic of accounting information is

a. Relevance
b. Understandability
c. Faithful representation
d. Decision usefulness

18. Which term best describes information that in financial statements that is unbiased
a. Understandable
b. Comparable
c. Relevant
d. Neutral

19. What is meant by comparability when discussing financial accounting information?

a. Information has predictive and confirmatory value
b. Information is reasonable and free from error
c. Information is measured and reported in a similar fashion across entities
d. Information is timely

20. Technically, when an entity applies the same accounting treatment to a similar events from
period to period, the entity is exhibiting which quality?
a. Verifiability
b. Consistency
c. Predictive Value
d. Comparability

21. The enhancing quality of understandability means information should be understood by

a. Those who are experts in the interpretation of financial information
b. Those who have a reasonable understanding of business and economic activities
c. Financial analysts
d. CPAs

22. Enhancing qualitative characteristics of accounting information include

a. Relevance and comparability
b. Comparability and timeliness
c. Understandability and relevance
d. Neutrality and comparability

23. When an entity has started placing its quarterly financial statements on its web page,
thereby reducing by ten days to get information to investors and creditors, the qualitative
concept involved is
a. Comparability
b. Consistency

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c. Timeliness
d. Faithful representation

24. When an entity changed the inventory valuation method, which characteristic is jeopardized
by this change?
a. Comparability
b. Representational Faithfulness
c. Consistency
d. Feedback Value

25. Objectivity is assumed to be achieved when a transaction

a. Is recorded in a fixed amount of pesos
b. Involves the payment or receipt of cash
c. Involves an arm’s length transaction between two independent parties
d. Allocates revenue and expenses in a rational and systematic manner

26. 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. Verifiability
c. Comparability
d. Feedback Value

27. The principle of objectivity includes the concept of

a. Summarization
b. Classification
c. Conservatism
d. Verifiability

28. The consistency standard requires that

a. Expenses should be reported when incurred
b. The effect of accounting changes upon income should be properly disclosed
c. Gains and losses should not be recognized
d. Accounting procedures should be adopted when the result is a consistent rate of return

29. Which of the following relates both relevance and faithful representation?
a. Comparability
b. Feedback value
c. Neutrality
d. Free from error

30. Which violates the concept of faithful representation?

a. Financial Statements were issued nine months late
b. Expected risks are not reported
c. Property, Plant and Equipment with carrying amount increased to management
estimate of market value
d. Management reports regularly refer to new products

31. What is the underlying concept governing the GAAP pertaining to recording gain
contingencies?

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a. Conservatism
b. Relevance
c. Consistency
d. Reliability

32. The usefulness of providing information in financial statements is subject to the constraint of
a. Consistency
b. Cost-benefit
c. Reliability
d. Representational faithfulness

33. Which statement about materiality is not true?

a. An item must make difference or it need not be disclosed
b. Materiality is a matter of relative size or importance.
c. An item is material if the inclusion or omission would influence the judgement of a
primary user
d. The relevance of information is not affected by the nature and materiality

34. An item would be considered material when

a. The expected benefits exceed additional costs
b. The impact on earnings is greater than 10%
c. The standard definition of materiality is met
d. The omission or misstatement would make a difference to the primary users

35. A reporting entity is

a. Necessarily a legal entity
b. Necessarily an economic entity
c. An entity that is required or chooses to prepare financial statements
d. A regulatory government authority

36. Which best describes the term going concern?

a. When current liabilities exceed current assets
b. The ability of the entity to continue in operation for the foreseeable future
c. The potential to contribute to the flow of cash and cash equivalents to the entity
d. The expenses exceed income

37. Which is 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. All of these are an implication of going concern

38. Which basic assumption may not be followed when an entity in bankruptcy reports financial
results?
a. Economic Entity assumption
b. Going Concern assumption
c. Periodicity assumption
d. Monetary Unit assumption

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39. What is being violated if an entity provides financial reports in connection with new product
introduction?
a. Economic entity
b. Periodicity
c. Monetary unit
d. Continuity

40. Which basic accounting assumption is threatened by the existence of sever inflation in the
economy?
a. Monetary unit assumption
b. Periodicity assumption
c. Going concern assumption
d. Economic entity assumption

41. When a parent and subsidiary relationship exists, consolidated financial statements are
prepared in recognition of?
a. Legal entity
b. Economic entity
c. Stable monetary unit
d. Time period

42. What is the accounting concept that justifies the usage of accruals and deferrals?
a. Going concern
b. Materiality
c. Consistency
d. Stable monetary unit

43. The elements of financial position describe amounts of resources and claims against
resources
a. During a period of time
b. At a moment of time
c. During a period of time and at a moment in time
d. Neither during a period of time nor at a moment in time

44. It is an increase in asset or a decrease in liability that results in increase in equity other than
contribution from equity holders.
a. Asset
b. Liability
c. Income
d. Expenses

45. This arise from ordinary regular activities of the entity and is referred to by a variety of
different names including sales, fees, interests, dividends, royalties, and rent.
a. Income
b. Revenue
c. Profit
d. Gain

46. Which is not within the new definition of an asset

a. An asset is a present economic resource

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b. The economic resource is a right that has potential to produce economic benefit
c. The economic resource is controlled by the entity as a result of past event
d. Future economic benefit is expected to flow to the entity

47. Obligations to transfer an economic resource include all except

a. Obligation to pay cash
b. Obligation to deliver goods
c. Obligation to deliver services
d. Obligation to transfer an economic resource even if a specified future event does
not occur

48. Which of the following may not be an acceptable deviation from recognizing revenue at point
of sale?
a. Upon receipt of cash
b. During production
c. Upon receipt of order
d. End of production

49. Which is an example of cause and effect association principle?

a. Sales commission
b. Allocation of insurance cost
c. Depreciation of property, plant and equipment
d. Officer’s salaries

50. Which is not true about current value?

a. Fair value of an asset is the price that would be received to sell an asset in an orderly
transaction
b. Value in use is the present value of the cash flows expected to be derived from an asset
c. Fulfillment value is the absolute amount of cash expected for the payment of
liability
d. Current cost is a current value measure

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