Introduction of Accounting, RA 9298, and Accounting

Standards

Question 1 Question 6
Which regulatory bodies require two (2) Which regulatory bodies DO NOT have any
representatives in the Financial Reporting representative in the Auditing and Assurance
Standards Council (FRSC)? Standards Council (AASC)?
I. Board of Accountancy (BOA)
II. Bureau of Internal Revenue (BIR) I. Board of Accountancy (BOA)
III. National Professional Organizations of CPAs in II. Bureau of Internal Revenue (BIR)
the Academe III. Securities and Exchange Commission (SEC)
IV. National Professional Organization of CPAs in IV. Department of Budget and Management (DBM)
the Commerce and Industry V. Bureau of Customs (BOC)
V. National Professional Organization of CPAs in Feedback: Correct! II, IV, and V do not have any
the Research Industry representative in AASC.
Feedback: Correct! III and IV require two (2) Correct answer: II, IV, and V
representatives in FRSC.
Correct answer: III and IV Question 7
Which is NOT among the four (4) practices of
Question 2 accountancy?
This organization defined accounting as the art of Feedback: Correct! This is not among the four (4)
recording, classifying, and summarizing in a practices of accountancy.
significant manner in terms of money, transaction,
or events. Correct answer: Taxation

Feedback: Correct! AICPA defined accounting as Question 8

the art of recording, classifying, and summarizing
in a significant manner in terms of money, Which is NOT included in the qualifications of the
transaction, or events. Board of Accountancy (BOA)?
Correct answer: American Institute of Certified Feedback: Correct! It should be 10 years of
Public Accountants (AICPA) experience.
Correct answer: CPA with at least eight (8) years
Question 3 of experience
It is the process of determining the monetary
amount at which the elements of financial Question 9
statements are to be recognized.
Nicole took the October 200B Certified Public
Feedback: Correct! Measurement is the process of Accountant (CPA) Licensure Examination and
determining the monetary amount at which the obtained a general average of 85%, with four (4)
elements of financial statements are to be subjects higher than 75% and no grade lower
recognized. than 65% in the remaining two (2) subjects. Using
the current Board of Accountancy
Correct answer: Measurement (BOA) Resolution released by the BOA, what is her
status in the examination?
Question 4
Feedback: Correct! Nicole passed because
Which is NOT an objective of the Republic Act No. she obtained a general average of 85%, with four
9298 or The Philippine Accountancy Act of 2004? (4) subjects higher than 75% and no grade lower
Feedback: Correct! This is not an objective of RA than 65% in the remaining two (2) subjects.
9298. Correct answer: Passed
Correct answer: Organization and supervision of
continuing education for certified public Question 10
accountants XYZ’s Statement of Financial Position shows the
following: Cash - P100,000; Property, Plant, and
Question 5 Equipment - P250,000; Total Current Assets -
It refers to the recognition or non-recognition of P200,000; and Total Liabilities - P80,000. What is
accountable events. the total capital account of the company?

Feedback: Correct! Identifying refers to the Feedback: Correct! Total asset P450,000 –
recognition or non-recognition of accountable Current liabilities P80,000 = Total
events. Capital P370,000

Correct answer: Identifying Correct answer: P370,000

 Introduction to Conceptual Framework and Accounting
Standards and Qualitative Characteristics

Question 1 Question 6
Due to Typhoon Arnel, source documents of It is an accounting assumption which assumes
accounting transactions of a company were that the entity has neither the intention nor the
destroyed by the flood. The accountant is need to liquidate or materially curtail the scale of
preparing the financial statement for that year but Feedback: Correct! Relevance refers to the
cannot recover all the data needed. What capacity of information to make a difference
accounting assumption is affected in this case? in the users' decisions. Financial information
Feedback: Correct! This is the applicable is capable of making a difference in decisions
accounting assumption as the event affected a if it has predictive value, confirmatory value,
specific time period for financial reporting. or both.its operation.
Correct answer: Time period Feedback: Correct! This accounting assumption
assumes that the entity has neither the intention
Question 2 nor the need to liquidate or materially curtail the
scale of its operation.
This requires financial information to be
comprehensible or intelligible in order to be useful. Correct answer: Going concern
Feedback: Correct! Understandability requires Question 7
financial information to be comprehensible or
intelligible in order to be useful. This concept Under this assumption, the entity is separate from
assumes a reasonable knowledge of business by the owners, managers, and employees who
the reader but does not require advanced constitute the entity.
business knowledge to gain a high level of
comprehension. Feedback: Correct! Under this assumption, the
entity is separate from the owners, managers, and
Correct answer: Understandability employees who constitute the entity.
Correct answer: Accounting entity
Question 3
This means having information available to Question 8
decision-makers the moment it is needed.
It refers to the capacity of information to make a
Feedback: Correct! Timeliness means having difference in the users' decisions.
information available to decision-makers the
moment it is needed. It is particularly important Feedback: Correct! Relevance refers to the
in the four (4) areas of business: financial capacity of information to make a difference in the
statements, variance analysis, responsibility users' decisions. Financial information is capable
reporting, and regulatory reporting. of making a difference in decisions if it has
predictive value, confirmatory value, or both.
Correct answer: Timeliness
Correct answer: Relevance
Question 4
Question 9
Arjay, the CEO of Shayne's Restaurant, provided a
free workshop about effective management. Which qualitative characteristic enables users to
Winnie Joy, the company’s accountant, vouched identify and understand similarities and
for the source documents to account for the cost differences among items?
of the said training. Which accounting Feedback: Correct! Comparability enables users to
assumption is affected in this case? identify and understand similarities and
Feedback: Correct! This is the applicable differences among items. Financial statements are
accounting assumption because it discussed the more comparable when the same accounting
quantifiability and stability of currency in policies and standards are applied across
reporting. The moment Winnie Joy vouched for multiple reporting periods, as well as across
the source documents, it means she is quantifying multiple entities within an industry.
the cost of the said transaction. Correct answer: Comparability
Correct answer: Monetary unit
Question 10
Question 5 These are basic notions or fundamental premises
This means that different knowledgeable and on which an accounting process is based.
independent observers could reach a consensus. Feedback: Correct! Accounting
Feedback: Correct! Verifiability means that assumptions are basic notions or
different knowledgeable and independent fundamental premises on which an
observers could reach a consensus. It states that accounting process is based.
it should be possible for an organization's
reported financial results to be reproduced by a Correct answer: Accounting assumptions
third party, given the same facts and assumptions.
Correct answer: Verifiability
 PAS 1, PAS 2, PAS 7, PAS 8, PAS 10, PAS 12, and PAS 16

Question 1 Question 7
Which of the following should NOT be included in Which is an example of cash flow from a financing
the physical inventory of a company? activity?
Feedback: Correct! Goods held on consignment Feedback: Correct! Issuance of debt for cash is a
should not be included because another company financing activity. Financing activity includes cash
has title (ownership) to the goods. activities related to noncurrent liabilities and
owner’s equity.
Correct answer: Goods held on consignment from
another company Correct answer: Issuance of debt for cash

Question 2 Question 8
Which of the following DOES NOT result in a Which of the following is NOT an adjusting event
deferred tax asset? after the reporting period?
Feedback: Correct! This is the direct opposite of a Feedback: Correct! Because the settlement of a
deferred tax asset. Taxable temporary difference court case happened before the reporting period,
will result in taxable amounts in the taxable profit not after the reporting period
(or loss) of a future period.
Correct answer: The settlement before the
Correct answer: Taxable temporary differences reporting period of a court case that confirms the
entity had a present value after the present
Question 3 obligation at the end of the reporting period
This document accompanies the numerical data
Question 9
listed in the financial statements.
These events are indicative of conditions that
Feedback: Correct! Notes to the financial
arose after the reporting period.
statements is a document accompanying the
numerical data listed in the financial statements. Feedback: Correct! Non-adjusting events are
indicative of conditions that arose after the
Correct answer: Notes to the financial statements
reporting period. Examples of which are
declaration of dividends and initiation of litigation
Question 4 against the company arising out after the
Nocum Company shows the following assets in its reporting period.
statement of financial position: Prepaid Rent - Correct answer: Non-adjusting events
P500,000 Unearned Revenue - P350,000
Inventory - P276,000 Building - P2,000,000 Cash
Equivalents - P100,000. What is the total current
Question 10
assets? Analyze the following costs incurred by ABC
Company: I .Incurred P10,000 to advertise
Feedback: Correct! This is the total current assets
product XYZ. II. Incurred P15,000 worth of wasted
(P500,000 + P276,000 + P100,000).
materials due to machine breakdown. III. Paid
Correct answer: P876,000 P30,000 import duty in acquiring product XYZ.
Which of the following is/are part of the cost of
Question 5 inventories?

It reports the results of the business operations Feedback: Correct! III is a part of the cost of
and shows the revenues and expenses of a inventories.
particular period. Correct answer: III only
Feedback: Correct! Income statement reports the
results of the business operations and shows the
revenues and expenses of a particular period.
Correct answer: Income statement

Question 6
Which of the following are part of investing
activities? I. Cash proceeds from issuing shares or
other equity instruments. II. Cash payment to
owners to acquire or redeem the entity's share III.
Cash payments to acquire property, plant, and
equipment, intangible, and other long-term assets.
IV. Cash payments for future contracts V. Cash
payments from contracts held for trading.
Feedback: Correct! III and IV are examples of
investing activities.
Correct answer: III and IV
 PAS 19, PAS 20, PAS 23, PAS 24, PAS 28, PAS 32, and PAS 33

Question 1 Question 6
It is an accounting method whereby the investment It is a transfer of resources, services, or obligations
is initially recognized at cost and adjusted between a reporting entity and a related party,
thereafter for the post-acquisition change in the regardless of whether a price is charged.
investor's share of the investee's net assets.
Feedback: Correct! Related party transaction is a
Feedback: Correct! Equity method is an accounting transfer of resources, services, or obligations
method whereby the investment is initially between a reporting entity and a related party,
recognized at cost and adjusted thereafter for the regardless of whether a price is charged. Examples
post-acquisition change in the investor's share of are transactions of the companies to affiliates, the
the investee's net assets. With this method, the parent entity, and trust for the benefit of employees.
investor company reports the revenue earned by the
other company on its income statement, in an Correct answer: Related party transaction
amount proportional to the percentage of its equity
investment in the other company. Question 7
Correct answer: Equity method Which of the following is NOT a financial
instrument?
Question 2 Feedback: Correct! This fails to meet the definition
It is an asset that necessarily takes a substantial of a financial instrument. A deferred tax liability
period of time to get ready for its intended use or records the fact the company will, in the future, pay
sale. more income tax because of a transaction that took
place during the current period, such as
Feedback: Correct! A qualifying asset necessarily an installment sale receivable.
takes a substantial period of time to get ready for
its intended use or sale. Correct answer: Deferred tax liability

Correct answer: Qualifying asset Question 8

Question 3 It is a joint arrangement whereby the parties with
joint control have the rights to the net assets.
These are interest and other costs that an entity
incurs in connection with the borrowing of funds. Feedback: Correct! Joint venture is a joint
arrangement whereby the parties that have joint
Feedback:Correct! Borrowing costs are interest and control of the arrangement have the rights to the
other costs that an entity incurs in connection with net assets of the arrangement. In a joint venture,
the borrowing of funds. Borrowing costs may each participant is responsible for profits, losses,
include: (1) Interest expense calculated by the and costs associated with it. However, the venture
effective interest method under IAS 39; (2) Finance has its own entity, separate from the participants'
charges in respect of finance leases recognized other business interests.
under IAS 17 Leases; and (3) Exchange differences
arising from foreign currency borrowings to the Correct answer: Joint venture
extent that they are regarded as an adjustment to
interest costs. Question 9
Correct answer: Borrowing cost These are transfers of resources to an entity in
return for past or future compliance with certain
Question 4 conditions relating to the operating activities of the
entity.
It is a financial instrument that has both liability
and equity components. Feedback: Correct! Government grants are transfers
of resources to an entity in return for past or future
Feedback: Correct! Compound financial instrument compliance with certain conditions relating to the
is a financial instrument with both liability and operating activities of the entity. IAS 20 Accounting
equity components. It means that the issuer of for Government Grants and Disclosure of
such an instrument cannot simply show it purely Government Assistance outlines how to account for
as a liability or purely as an equity, because this government grants and other assistance.
instrument contains a little bit of both.
Correct answer: Government grants
Correct answer: Compound financial instrument
Question 10
Question 5
These are benefits other than retirement benefits,
It is a government action that provides economic which are given in exchange for the end of an
benefits to entities qualifying under certain criteria. employee's service in the company.
Feedback: Correct! Government assistance is an Feedback: Correct! Termination benefits are
action by the government designed to provide an benefits other than retirement benefits, which are
economic benefit to an entity or range of entities given in exchange for the end of an employee's
qualifying under certain criteria. IAS 20 Accounting service in the company. Examples are severance
for Government Grants and Disclosure of pay, extended health insurance coverage, and
Government Assistance outlines how to account for assistance in finding a new job.
government grants and other assistance.
Correct answer: Termination benefits
Correct answer: Government assistance
 PAS 34, PAS 36, and PAS 37, PAS 38, PAS 40, PAS 41, and PFRS 1

Question 1
Which standard is applicable for intangible assets?
Question 6
Feedback: Correct! PAS 38 is the standard for
intangible assets. It is the systematic allocation of the depreciable
amount of an intangible asset over its useful life.
Correct answer: PAS 38
Feedback: Correct! Amortization is the systematic
allocation of the depreciable amount of an
Question 2
intangible asset over its useful life. The
It is the phase in the generation of assets wherein term amortization can refer to two (2) situations.
an entity cannot demonstrate the existence of First, it is used in the process of paying
intangible assets. off debt throughregular principal and interest paym
ents over time.
Feedback: Correct! No intangible asset arising from
research (or from the research phase of an internal Correct answer: Amortization
project) shall be recognized. Expenditure on
research (or on the research phase of an internal Question 7
project) shall be recognized as an expense when it
is incurred. It is the management by an entity of the biological
transformation and harvest of biological assets for
Correct answer: Research phase sale or conversion into agricultural produce or
additional biological asset.
Question 3
Feedback: Correct! Agricultural activity is the
It is an original and planned investigation management by an entity of the biological
undertaken to gain new scientific or technical transformation and harvest of biological assets for
knowledge and understanding. sale or conversion into agricultural produce or
additional biological asset.
Feedback: Correct! Research is an original and
planned investigation undertaken with the prospect Correct answer: Agricultural activity
of gaining new scientific or technical knowledge and
understanding. No intangible asset arising from Question 8
research (or from the research phase of an internal
project) shall be recognized. Expenditure on What is the initial measurement of an intangible
research (or on the research phase of an internal asset acquired as part of a business combination?
project) shall be recognized as an expense when it Feedback: Correct! Fair value at the acquisition
is incurred. date is the initial measurement of an intangible
Correct answer: Research asset acquired as part of a business combination.
Fair value represents the estimated worth of
various assets and liabilities that must be listed on
Question 4
a company's books.
What is the initial measurement of an internally
Correct answer: Fair value at the acquisition date
generated intangible asset?
Feedback: Correct! Internally generated intangible Question 9
asset is initially measured using directly
attributable cost incurred after the asset met the It is an amount by which the carrying amount of an
criteria for capitalizing development cost. asset exceeds its recoverable amount.

Correct answer: Directly attributable cost incurred Feedback: Correct! Impairment loss is an amount
after the asset met the criteria for capitalizing by which the carrying amount of an asset exceeds
development cost its recoverable amount. When testing an asset for
impairment, the total profit, cash flow, or other
benefit expected to be generated by that specific
Question 5
asset is periodically compared with its current book
What is the initial measurement of an intangible value.
asset acquired through a government grant?
Correct answer: Impairment loss
Feedback: Correct! Intangible asset acquired
through a government grant is initially measured at Question 10
fair value or nominal account plus any directly
attributable expenditures. Fair value represents the What is the initial measurement of an intangible
estimated worth of various assets and liabilities asset acquired through a separate purchase?
that must be listed on a company's books. Feedback: Correct! Intangible asset acquired
Correct answer: Fair value or nominal account plus through a separate purchase is initially measured
directly attributable expenditures at cost. The cost of intangible assets is
systematically allocated to expense during the
asset's useful life or legal life, whichever is shorter.
Correct answer: Cost