MULTIPLE CHOICE.

Instructions:
Choose the best answer and Underline the LETTER AND CHANGE THE FONT
TO RED.
1. What is the qualitative characteristic of financial statements according to the
Framework?
A. Qualitative characteristics are broad classes of financial effects of transactions and
other events.
B. Qualitative characteristics are the attributes that make the information provided in
financial statements useful to others.
C. Qualitative characteristics measure the extent to which an entity has complied with all
relevant Standards and Interpretations.
D. Qualitative characteristics are non-quantitative aspects of an entity’s position and
performance and changes in financial position.

2. Which of the following are parts of the “due process” of the IASB in issuing a new
International Financial Reporting Standard?

I. Establishing an advisory committee to give advice

II. Developing and publishing a discussion document for public comment
III. Issuance of an interpretation as authoritative guidance
IV. Reviewing compliance and enforcement procedures
V. Issuance of the final standard with number and title
A. I, II and III only C. I, II, III & IV only
B. I, II and V only D. I, II, III, IV & V

3. Which of the following bodies is responsible for reviewing accounting issues that are
likely to receive divergent or unacceptable treatment in the absence of authoritative
guidance, whit a view to reaching consensus as to the appropriate accounting
treatment?

A. Standards Advisory Council (SAC)

B. International Accounting Standards Board (IASB)
C. International Financial Reporting Interpretations Committee (IFRIC)
D. International Accounting Standards Committee Foundation (IASC Foundation)

4. Which of the following statements about international accounting standards is true?

A. Accounting professionals in the USA consider US GAAP superior to IAS and has no
intention to adopt International Accounting Standards.
B. The IASB is able to enforce its standards by prohibiting the listing of companies which
do not comply on stock exchanges which sell internationally.
C. The International Accounting Standards Board (IASB) was established with the
purpose of narrowing the range of divergence in accounting standards throughout the
world.
D. Legal and psychological hurdles to achieving common reporting standards will be
fully overcome by the year 2012, the time frame set for convergence between IAS and
US GAAP.

5. Which of the following bodies report to the IFRS Foundation?

A. The IASB and AASB.

B. The IASB and the FASB.
C. The IASB and the IFRS Advisory Council.
D. The IASB, AASB, and the IFRS Advisory Council.
6. Which body appoints the members of International Accounting Standards Board
(IASB) that make the present IFRS?

A. IFRS Foundation.
B. IFRS Advisory Council.
C. International Accounting Standards Committee.
D. International Financial Reporting Interpretations Committee.
7. Financial accounting standard-setting

A. is based solely on research and empirical findings.

B. is a legalistic process based on rules promulgated by governmental agencies.
C. is democratic in the sense that a majority of accountants must agree with a standard
before it becomes enforceable.
D. can be described as a social process which reflects political actions of various
interested user groups as well as a product of research and logic.

8. The “due process” system in developing financial reporting standards A. is an efficient

system for collecting dues from members.
B. identifies the accounting issues that are the most important.
C. enables interested parties to express their views on issues under consideration.
D. requires that all accountants must receive a copy of financial accounting standards.

9. What is due process in the context of standard setting at the IASB?

A. IASB operates in full view of the public.
B. Interested parties can make their views known.
C. Public hearings are held on proposed accounting standards.
D. All of these.

10. What is the chronological order in the evaluation of a typical standard?

A. Discussion paper, Exposure draft and Standard.

B. Exposure draft, Discussion paper and Standard.
C. Exposure draft, Standard and Discussion paper.
D. Standard, Discussion paper, and Exposure draft.

11. The IASB declared that the merits of proposed standards are assessed

A. from a position of neutrality.

B. from a position of materiality.
C. based on arguments of lobbyist.
D. based on possible impact on behavior.
12. Under Philippine Financial Reporting Standards

A. the cash basis of accounting is accepted.

B. events are recorded in the period in which the event occurs.
C. net income will be lower under the cash basis than accrual basis accounting.
D. all of the choices are correct.

13. RA 9298 is officially known as

A. The Revised Accountancy Act.

B. The Revised Accountancy Law.
C. The Philippine Accountancy Act of 2004.
D. The Accountancy Law of the Philippines, 2007.

14. Under Section 5 of RA 9298, who shall appoint the members of the Professional
Regulatory Board of Accountancy?

A. The chairman of the Board of Accountancy.

B. The president of the Republic of the Philippines.
C. The chairperson of Professional Regulations Commission.
D. The president of Philippine Institute of Certified Public Accountants.

15. The following statements relate to the Board of Accountancy. Select the incorrect
statement:
A. The Board consists of a Chairman and
 six members.
B. The chairman and members of the
Board are appointed by the President of
the Philippines upon recommendation
of the Professional Regulation
Commission.
C. The Professional Regulation
Commission may remove from the
Board of Accountancy, any member
whose certificate to practice has been
revoked or suspended.
D. All sectors of accountancy practice shall
as much as possible be equitably
represented in the Board.

16. this accounting objective emphasizes the importance of the Income Statement as it
is geared toward proper income or performance determination of the enterprise.
A. Entity theory. C. Proprietary theory.
B. Fund theory D. Residual equity theory.

18. Which of the following is not a description or a function of the Financial Reporting
Standards Council (FRSC)?

A. It establishes generally accepted accounting principles in the Philippines.

B. It receives financial support principally from the Professional Regulations Commission
(PRC).
C. It is the successor of Accounting Standards Council (ASC) and the creator of
Philippine Interpretations Committee (PIC).
D. It assists the Professional Regulatory Board of Accountancy (BOA) in carrying out its
power and function to promulgate accounting standards in the Philippines.

19. Which of the following situations violates the concept of reliability?

A. Data on segments having the same expected risks and growth rates are reported to
analysts estimating future profits.
B. Financial statements are issued nine months late.
C. Management reports to stockholders’ new projects undertaken, but the financial
statements never report the projected results.
D. Financial statements include a property with a carrying amount increased to
management’s estimate of market value.

20. Which of the following statements about financial statements is incorrect?

A. They are the primary responsibility of the management of the enterprise.

B. They show the results of the stewardship of the management for the resources
entrusted to it by the capital providers.
C. They are prepared at least annually and are directed to both the common and specific
information needs of a wide range of statement users.
D. The provide information about the financial position, performance and cash flows of
an enterprise that is useful to a wide range of users in making economic decisions.

21. Under the Conceptual Framework for Financial Reporting which of the following
statements is not a feature of financial information’s “comparability” characteristics?

A. Comparability is uniformity.
B. A comparison requires at least two items.
C. Consistency, although related to comparability, is not the same.
D. Comparability is the goal; consistency helps to achieve that goal.
22. When fair value is used in measuring assets in the financial statements, current
GAAP provides following references as basis of fair value, except

A. Price in active market.

B. Price in recent transaction.
C. Price taken from industry or sector benchmarks.
D. Price based on assessed value of government bodies.

23. The objectives of financial reporting for business enterprises are based on

A. the need for conservative information

B. the needs of the users of the information
C. the need to report on management’s stewardship
D. the need to comply with financial accounting standards

24. Which of the following statements regarding users of financial information is correct?

A. Managers of an entity are considered to be internal decision makers.

B. Accounting information is prepared for and useful to only outside decision makers.
C. External decision makers can obtain whatever financial data they need and whenever
they need it.
D. The members of the Board of Directors are not internal rather than external users of
financial information.

25. Which of the following statements is (are) true, concerning the Going Concern
assumption?

I. When preparing financial statements, management is required to make an

assessment of an enterprise’s ability to continue as a going concern which should be at
least twelve months from balance sheet date.
II. When an enterprise has a history of profitable operations and ready access to
financial resources it is not a detailed analysis as to is ability to operate as a going
concern is not necessary.
III. When the financial statements are not prepared on a going-concern basis, this fact
should disclose
A. I and II only C. II and III
B. II and III only D. I, II, and III

26. If accounting information is timely, and has predictive as well as feedback value,
then it is considered to be

A. relevant C. understandable
B. reliable D. verifiable

27. In the first week of December 2016, Elisa Company signs a major contract to
develop an accounting information system for Edward Inc. No work is begun the current
year, yet the notes to the financial statements discuss the nature and peso amount of
the contract. This is an example of:

A. completeness or full disclosure C. historical cost

B. conservatism D. relevance

28. Which of the following statements best describes the term “going concern”?

A. The expenses of an entity exceed its income

B. When current liabilities of an entity exceed current assets
C. The ability of the entity to continue in operation for the foreseeable future
D. The potential to contribute to the flow of cash and cash equivalents to the entity

29. Which TWO of the following are listed in the IASB Framework as ‘underlying
assumptions’ regarding financial statements?
A. The financial statements are prepared under the accrual basis
B. The entity can be viewed as a going concern
C. The financial statements are reliD. Accounting policies are consistently applied
A. A and B C. B and D
B. B and C D. C and D

30. Which of the following situations violates the concept of reliability?

I. Relevance is the capacity of information to make difference in decision by helping

users from predictions about outcome of past, present and future events or
confirm/correct prior expectations
II. The quality of reliability assures readers that the financial information is free from bias
and faithfully represents what it purports to show, including adequate disclosure of
significant information
III. Under the IASB Framework for the Preparation and presentation of financial
statements, conservatism is not a concept that is recognized as a qualitative objective.
A. I and II only C. II and III only
B. I and III only D. I, II and III

31. Which of the following is the best description of reliability in relation to information in
financial statements?

A. Comprehensibility to users C. Influence on the economic decisions

B. Freedom from material error and bias D. Inclusion of degree of caution of users

32. According to the IASB Framework for the preparation and presentation of financial
statements, which TWO of the following are examples of expenses?

I. A loss on the disposal of a non-current asset

II. A decrease in equity arising from a distribution to equity participants
III. A decrease in economic benefits during the accounting period
IV. A reduction in income for the accounting period
A. I and II C. II and III
B. I and III D. III and IV

33. An expiration of cost which is incurred without compensation or return and is not
absorbed as cost of revenue is called

A. Deferred charge C. Indirect cost

B. Deferred credit D. Loss
34. Which of the following best describes the distinction between expenses and losses?

A. Losses are material items whereas expenses are immaterial items

B. Losses are extraordinary charges whereas expenses are ordinary charges
C. Losses are reported net-of-related-tax effect whereas expenses are not reported not-
of-tax
D. Losses results from peripheral or incidental transactions whereas expenses result
from ongoing major or central operations of the entity

35. Which of the following statements about accounting recognition is (are) true?

I. In accounting, there are instances when a gain/loss would arise upon initial recognition
of an asset.
II. No asset can simultaneously be an asset of more than one entity
III. At times, two or more entities may share the benefits that an asset provides
IV. An appropriate basis for recognizing an asset is when a particular enterprise acquires the
right to utilize and control access to the asset’s benefits able
A. I and II only C. I, II and III only
B. I and IV only D. I, II, III and IV

36. Which one 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 C. Residual value

B. Realizable value D. Value in use

37. Which of the following assets are initially and subsequently measured at Fair Value?

I. Biological assets IV. Property and Equipment

II. Available for sale securities V. Held for trading securities
III. Inventories VI. Intangible assets
A. I and II only C. I, II, III and V only
B. I, II and III only D. I, II, IV, and V only

38. The capital maintenance concept followed under present GAAP is

A. Economic capital C. Physical capital

B. Financial and physical capital D. Real capital

39. What concept is critical in distinguishing an enterprise’s return on investment from

return of its investment?

A. Capital maintenance concept C. Current operating performance concept

B. Comprehensive income concept D. Return on investment concept

40. Under the Conceptual Framework of Financial Reporting, users of financial

information may be classified into

A. Heavy users (management) and slight users (public, government).

B. Primary users (existing and potential investors and creditors) and other users.
C. Internal users (employees, customers) and external users (investors, creditors).
D. Main users (existing investors, creditors) and incidental users (potential investors,
creditors)

41. Which of the following situations violates the concept of reliability?

A. Data on segments having the same expected risks and growth rates are reported to
analysts estimating future profits.
B. Financial statements are issued nine months late.
C. Management reports to stockholders’ new projects undertaken, but the financial
statements never report the projected results.
D. Financial statements include a property with a carrying amount increased to
management’s estimate of market value.

42. What is the authoritative status of the Conceptual Framework?

A. The Framework applies when FRSC develops new or revised Standards. An

enterprise is never required to consider the framework.

B. It has the highest level of authority. In case of a conflict between the Framework and
s Standard or Interpretation, the Framework overrides the Standard or Interpretation.

C. If there is a Standard or Interpretation that specifically applies to a transaction, it

overrides the Framework. In the absence of a Standard or an Interpretation that
specifically applies, the Framework should be followed.
D. If there is a Standard or Interpretation that specifically applies to a transaction,
management should consider the applicability of the Framework in developing and
applying an accounting policy which results in information that is relevant and reliable.

43. Which of the following is the first step within hierarchy of guidance to which
management refers, and whose applicability at considers, when selecting accounting
policies?

A. Apply the requirements in PFRS dealing with similar and related issues.
B. Apply a standard from PFRS if it specifically relates to the transaction, event, or
condition.
C. Consider the applicability of the definitions, recognition criteria, and measurement
concepts in the Conceptual Framework.
D. Consider the most recent pronouncements of other standard-setting bodies to the
extent they do not conflict with PFRS or the Conceptual Framework?

44. Under the Conceptual Framework for Financial Reporting 2010, which of the
following is a new item added in its scope but is still a work-in-progress?

A. Consolidated financial statements. C. The government entity.

B. Mergers and acquisitions. D. The reporting entity.

45. What is the qualitative characteristic of financial statements according to the

Framework?

A. Qualitative characteristics are broad classes of financial effects of transactions and

other events.
B. Qualitative characteristics are the attributes that make the information provided in
financial statements useful to others.
C. Qualitative characteristics measure the extent to which an entity has complied with all
relevant Standards and Interpretations.
D. Qualitative characteristics are non-quantitative aspects of an entity’s position and
performance and changes in financial position.

True or False. Write the word true if correct after the phrase and false if not correct and
underline with red font that makes the statement incorrect.

1. The principal difference between two concepts of capital maintenance is the same of
the effects of changes in the prices of assets and liability of the entity.

2. The selection of the appropriate concept of capital by an entity should be based on

the needs of the users of its financial statements.

3. The concept of capital maintenance chosen by an entity shall determine the

measurement bases used in the preparation of its financial statements.

4. The Conceptual Framework serves as a standard in developing future financial

reporting standards and in reviewing existing ones.

5. The Conceptual Framework is a source of standards for determining an accounting

treatment where a standard does not provide specific guidance.

6. The Conceptual Framework does not in any was assist prepares of financial
statements in applying PFRS and in dealing with topics that have yet to form the subject
of PFRS.
7. The Conceptual Framework is a PFRS, and some provisions in it overrides any
specific PFRS, including PFRS that is in some respect in conflict with the Conceptual
Framework.

8. The GPFS show the results of the stewardship of the management for the resources
entrusted to it by the capital providers.

9. The GPFS are prepared at least annually and are directed to both the common and
specific information needs of a wide range of statement users.

10. The GPFS provide information about the financial position, performance and cash
flows of an enterprise that is useful to a wide range of users in making economic
decisions.