1. Which of the following is a correct
To provide financial
statement about accrual accounting?
a. Revenue is recorded only
when cash is received.
b. Expenses are recorded only
when cash is paid.
c. Revenue and expenses are
recorded when they are
earned or incurred,
regardless of when the cash
is received or paid.
d. Both revenue and expenses
are recorded at the end of
the fiscal year.
2. What are the 3 aspects of the
communication process in
accounting?
a. Recording, classifying, and
summarizing
b. Identifying, measuring, and
communicating
c. Budgeting, forecasting, and
reporting
d. Planning, controlling, and
decision making
3. The conceptual framework assumes
that the business will continue to
operate in the foreseeable future.
This is known as the:
a. Periodicity assumption
b. Monetary unit assumption
c. Going concern assumption
d. Economic entity assumption
4. What is the primary purpose of
General Purpose Accounting
Information?
a. To meet the specific needs of
internal management
b. To fulfill the requirements of
tax authorities
c.
information that is useful to a
wide range of users in
making economic decisions
d. To assist in the preparation of
detailed budget reports
5. Which of the following is a type of
information typically provided by
accounting?
a. Personal expenditure records
of employees
b. Financial performance and
position of the entity
c. Strategic business plans for
the future
d. Industry-wide market
analysis reports
6. What is the primary purpose of the
conceptual framework in
accounting?
a. To dictate specific accounting
rules and standards
b. To provide a structure for
developing and applying
consistent accounting
principles
c. To offer guidelines for
preparing tax returns
d. To ensure compliance with
international financial laws
7. What is the primary objective of
financial reporting?
a. To provide information useful
for making investment and
credit decisions
b. To provide information about
the cash flows of an entity
c. To provide information about
an entity's compliance with
tax laws
 d. To provide information useful
for managerial
decision-making
8. Which of the following represents
the hierarchy in the conceptual
framework and accounting
standards?
a. Accounting standards
override the conceptual
framework
b. The conceptual framework
overrides accounting
standards
c. Both the conceptual
framework and accounting
standards have equal
authority
d. The hierarchy depends on
the jurisdiction
9. In the context of financial reporting,
what does relevance refer to?
a. The ability of financial
information to be compared
with similar information from
other companies
b. The extent to which financial
information influences the
economic decisions of users
c. The faithfulness of financial
information to the underlying
economic event it represents
d. The reliability of financial
information based on
verifiable evidence
10. Which of the following is a constraint
on useful financial reporting?
a. Materiality
b. Relevance
c. Faithful representation
d. Understandability
11. Which of the following is not a
financial statement typically required
under IFRS?
a. Statement of financial
position
b. Statement of comprehensive
income
c. Statement of cash flows
d. Statement of tax liabilities
12. The principle of conservatism in
accounting means that:
a. Revenues and gains are
recognized when earned
b. Expenses and losses are
recognized when incurred
c. Potential expenses and
liabilities are recognized
when probable
d. Assets and revenues are
understated to be on the safe
side
13. The cost principle in accounting
states that:
a. Assets should be recorded at
their current market value
b. Revenues should be
recognized when earned
c. Expenses should be
recorded when incurred
d. Assets should be recorded at
their historical cost
14. Faithful representation in financial
reporting implies that the information
is:
a. Comparable, verifiable, and
timely
b. Complete, neutral, and free
from error
c. Relevant, reliable, and
understandable
 d. Consistent, timely, and
verifiable
15. According to the conceptual
framework, which of the following is
not an enhancing qualitative
characteristic?
a. Comparability
b. Verifiability
c. Timeliness
d. Accuracy
16. Which principle states that a
company should include all
information that would affect a
reader’s understanding of the
financial statements?
a. Revenue recognition
principle
b. Full disclosure principle
c. Matching principle
d. Cost principle
17. Which scenario best illustrates the
concept of materiality in financial
reporting?
a. A large corporation reporting
a $10,000 discrepancy in
petty cash transactions
b. A small business omitting a
$1,000 expense for office
supplies
c. A multinational company
misstating its revenue by $1
million
d. A publicly traded company
failing to disclose a $100,000
legal settlement
18. Which scenario best illustrates
faithful representation in financial
reporting?
a. Recording estimated
warranty expenses based on
historical data.
b. Including all relevant
information about contingent
liabilities in the footnotes.
c. Recognizing revenue from a
sale before the customer has
paid.
d. Reporting the fair value of an
asset acquired in a business
combination.
19. In which scenario would the principle
of understandability be most relevant
in financial reporting?
a. When preparing financial
statements for internal
managerial use
b. When presenting complex
financial information to
shareholders and potential
investors
c. When disclosing minor
accounting errors in the
footnotes of financial
statements
d. When applying the matching
principle to recognize
expenses in the same period
as related revenues
20. When a conflict arises between a
Philippine Accounting Standard
(PAS) and the conceptual
framework, what should be followed
as the primary source of guidance?
a. The PAS due to its specificity
in addressing accounting
issues
b. The conceptual framework
provides fundamental
principles for developing
accounting standards
c. A combination of both, with
precedence given to the PAS
if it directly addresses the
issue
d. The conceptual framework is
not a standard. Any conflict
between the two, standards
will prevail.