TQ in FAR

Name: ____________________ Score: _________
Course and Year: __________ Date: __________
Universidad de Zamboanga – Ipil Campus

Business Administration Department
A.Y. 2019 – 2020 – Second Semester
PRE-MID EXAMINATION
FINANCIAL ANALYSIS and REPORTING
TEST I. MULTIPLE CHOICE. Read the statement(s) carefully. Encircle the letter of the correct answer.
1. A conceptual framework for financial reporting is:

a. A set of items which make up an entity's financial statements
b. A set of principles which underpin financial reporting
c. A set of regulations which govern financial reporting
d. A set of financial reporting standards
2. The primary users of general purpose financial reports are:

a. Employees and lenders b. Investors and employees
c. Investors and customers d. Investors and lenders
3. The abbreviation "GAAP" stands for:

a. Generally accepted accounting practice b. Globally accepted accounting principles
c. Globally accepted accounting practice d. Generally accepted accounting principles
4. A soundly developed conceptual framework of concepts and objectives should

a. increase financial statement users' understanding of and confidence in financial reporting.
b. enhance comparability among companies' financial statements.
c. allow new and emerging practical problems to be more quickly solved.
d. All of these answer choices are correct.
5. Which of the following is not true concerning a conceptual framework in accounting?

a. It should be a basis for standard-setting.
b. It should allow practical problems to be solved more quickly by reference to it.
c. It should be based on fundamental truths that are derived from the laws of nature.
d. All of these answer choices are true.
6. What is a purpose of having a conceptual framework?

a. To make sure that economic activity can be identified with a particular legal entity.
b. To segregate activities among different companies.
c. To provide comparable information for different companies.
d. To enable the profession to more quickly solve emerging practical problems and to provide a foundation from
which to build more useful standards.
7. In the conceptual framework for financial reporting, what provides "the why"--the purpose of accounting?
a. Recognition, measurement, and disclosure concepts such as assumptions, principles, and constraints
b. Qualitative characteristics of accounting information
c. Elements of financial statements
d. Objective of financial reporting
8. The underlying theme of the conceptual framework is
a. decision usefulness. b. understandability.
c. faithful representation. d. comparability.
9. The objective of general-purpose financial reporting is to provide financial information about a reporting entity to
each of the following except
a. potential equity investors. b. potential lenders.
c. present investors. d. All of these answers are correct.
10. The objective of general-purpose financial reporting is?

a. to provide financial information about the reporting entity that is useful to present and potential equity
investors, lenders, and other creditors in making decisions in their capacity as capital providers
b. to provide companies with the option to select information that favors one set of interested parties over
another
c. to provide users with financial information that implies total freedom from error.
d. to provide a metric for financial information used to determine when the boundary between two or more
entities should be disregarded and the entities considered to be a licensing arrangement.
11. Which of the following is a fundamental quality of useful accounting information?

a. Comparability b. Relevance c. Neutrality d. Materiality
12. Which of the following is a fundamental quality of useful accounting information?

a. Conservatism b. Comparability c. Faithful representation d. Consistency
13. What is meant by comparability when discussing financial accounting information?

a. Information has predictive or confirmatory value.
b. Information is reasonably free from error.
c. Information is measured and reported in a similar fashion across companies.
d. Information is timely.
14. What is meant by consistency when discussing financial accounting information?

a. Information presented by a company applies the same accounting treatment to similar events, from period to
period.
b. Information is timely.
c. Information is classified, characterized, and presented clearly and concisely.
d. Information is verifiable.
15. Which of the following is an ingredient of faithful representation?

a. Predictive value b. Materiality c. Neutrality d. Confirmatory value
16. A company issuing its annual financial reports within one month of the end of the year is an example of which
enhancing quality of accounting information?
a. Comparability b. Timeliness c. Understandability d. Verifiability
17. What is the quality of information that is capable of making a difference in a decision?
a. Faithful representation b. Materiality c. Timeliness d. Relevance
18. The two fundamental qualities that make accounting information useful for decision making are
a. comparability and timeliness. b. materiality and neutrality.
c. relevance and faithful representation. d. faithful representation and comparability.
19. Accounting information is considered to be 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.
20. According to Statement of Financial Accounting Concepts No. 8, neutrality is an ingredient of the fundamental
quality(ies) of:
Relevance Faithful Representation

a. Yes Yes
b. No Yes
c. Yes No
d. No No
21. Neutrality means that information

a. provides benefits which are at least equal to the costs of its preparation.
b. can be compared with similar information about an enterprise at other points in time.
c. would have no impact on a decision maker
d. cannot favor one set of interested parties over another.
22. Which of the following is not a component of a complete set of financial statements?
a. A management commentary b. A set of notes
c. A statement of changes in equity d. A statement of cash flows
23. Items of financial information are material if:

a. They are insignificant
b. They could influence the economic decisions made by the users of financial statements
c. They are aggregated with other items
d. They could not influence the economic decisions made by the users of financial statements
24. The term "accounting policies" refers to:

a. The measurement bases used by an entity
b. The accounting concepts and conventions adopted by an entity
c. The accounting principles applied by an entity
d. All of the above
25. A change in accounting policy which does not result from the initial application of an international standard must
normally be accounted for:
a. Retrospectively
b. Prospectively
c. Either retrospectively or prospectively
d. Prospectively unless it is impracticable to do so
26. An entity may change one of its accounting policies:

a. Never
b. If this would reduce the cost of preparing the financial statements
c. Whenever it wishes to do so
d. If this would result in the provision of reliable and more relevant information
28. A change in an accounting estimate should be accounted for:

a. Prospectively
b. Either retrospectively or prospectively
c. Retrospectively unless it is impracticable to do so
d. Retrospectively
29. Prior period errors could be caused by:
a. Mistakes in applying accounting policies b. Fraud
c. Mathematical errors d. Any of the above
TEST – II. MATCHING TYPE. Listed below are several information characteristics and accounting
principles and assumptions. Match the letter of each with the appropriate phrase that states its
application. (Items a through k may be used more than once or not at all.)
a. Economic entity assumption g. Matching principle
b. Going concern assumption h. Full disclosure principle
c. Monetary unit assumption i. Relevance characteristic
d. Periodicity assumption j. j. Reliability characteristic
e. Historical cost principle k. k. Consistency characteristic
f. Revenue recognition principle
_______1. Earning process completed and realized or realizable.

_______2. Presentation of error-free information with representational faithfulness.
_______3. Yearly financial reports.
_______4. Accruals and deferrals in adjusting and closing process. (Do not use going concern.)
_______5. Useful standard measuring unit for business transactions.
_______6. Notes as part of necessary information to a fair presentation.
_______7. Valuing assets at amounts originally paid for them.
_______8. Application of the same accounting principles as in the preceding year.
_______9. Summarizing significant accounting policies.
_______10. Presentation of timely information with predictive and feedback value.
TEST – III. FILL IN THE BLANKS. Below with the accounting principle, assumption, or related item that
best completes the sentence.
1.________________________ and _______________________ are the two primary qualities that make
accounting information useful for decision making.
2.Information that helps users confirm or correct prior expectations has ________________________.
3.________________________ enables users to identify the real similarities and differences in economic phenomena
because the information has been measured and reported in a similar manner for different enterprises.
4.Some costs which give rise to future benefits cannot be directly associated with the revenues they generate. Such
costs are allocated in a __________________ and _________________ manner to the periods expected to benefit
from the cost.
5._______________________ would allow the expensing of all repair tools when purchased, even though they have
an estimated life of 3 years.
6.The ________________________ characteristic requires that the same accounting method be used from one
accounting period to the next, unless it becomes evident that an alternative method will bring about a better description
of a firm's financial situation.
7.____________________ guides accountants to select the accounting treatment that is least likely to overstate
income and assets.
8.Parenthetical balance sheet disclosure of the inventory method utilized by a particular company is an application of the
_______________________ principle.
9.Corporations must prepare accounting reports at least yearly due to the _______________ assumption.
10.Recording and reporting inflows at the end of production is an allowable exception to the _________________
principle.
TEST- III. TRUE OR FALSE. Write True if the statement is correct, if it is false, underline the word(s)
that make the statement incorrect and provide the correct answer on the space provided before the
number.
________1. Decision usefulness is the underlying theme of the conceptual framework.

________2. Users of financial statements are assumed to have no knowledge of business and financial accounting
matters by financial statement preparers.
________3. Relevance and reliability are the two primary qualities that make accounting information useful for
decision making.
________4. The idea of consistency does not mean that companies cannot switch from one accounting method to
another.
________5. Timeliness and neutrality are two ingredients of relevance.
________6. Verifiability and predictive value are two ingredients of reliability.
.
_______7. The historical cost principle would be of limited usefulness if not for the going concern assumption.
_______8. The economic entity assumption means that economic activity can be identified with a particular legal
entity.
_______9. Companies consider only quantitative factors in determining whether an item is material.
_______10. Conservatism in accounting means the accountant should attempt to understate assets and income
when possible.
Prepared by: Reviewed by: Approved by:
CHRISTINE H. LEAL NEMIA B. HULAGNO, MBA GERALDINE R. TABLATE, ED.D

Instructor Program Chairperson BSA & BSBA School Administrator

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Name: ____________________ Score: _________

Course and Year: __________ Date: __________

Universidad de Zamboanga – Ipil Campus

1. A conceptual framework for financial reporting is:

2. The primary users of general purpose financial reports are:

3. The abbreviation "GAAP" stands for:

4. A soundly developed conceptual framework of concepts and objectives should

5. Which of the following is not true concerning a conceptual framework in accounting?

6. What is a purpose of having a conceptual framework?

10. The objective of general-purpose financial reporting is?

11. Which of the following is a fundamental quality of useful accounting information?

12. Which of the following is a fundamental quality of useful accounting information?

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

14. What is meant by consistency when discussing financial accounting information?

15. Which of the following is an ingredient of faithful representation?

19. Accounting information is considered to be relevant when it

Relevance Faithful Representation

21. Neutrality means that information

23. Items of financial information are material if:

24. The term "accounting policies" refers to:

26. An entity may change one of its accounting policies:

28. A change in an accounting estimate should be accounted for:

_______1. Earning process completed and realized or realizable.

________1. Decision usefulness is the underlying theme of the conceptual framework.

Prepared by: Reviewed by: Approved by:

CHRISTINE H. LEAL NEMIA B. HULAGNO, MBA GERALDINE R. TABLATE, ED.D

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