TOPIC: OVERVIEW OF ACCOUNTING

MULTIPLE CHOICE: Choose the letter or the best/correct answer. Use CAPITAL letter in writing your
answer.
1. All of the following describe accounting, except
A. A service activity C. A universal language of business B. An information system D. An
exact science rather than an art.
2. The important points made in the definition of accounting include all of the following, except
A. Accounting information is quantitative
B. Accounting information is both quantitative and qualitative.
C. Accounting information is financial in nature
D. Accounting information is useful in decision making
3. This accounting process is the recognition or non-recognition of business activities as accountable
events.
A. Identifying C. Communication
B. Measuring D. Reporting
4. The events that affects the entity and in which other entities participate are known as
A. Internal events C. Current events B. External events D. Obligating events
5. Which statements is incorrect in relation to an accountable event?
A. An events is accountable when it has effects on assets, liability, or equity.
B. The subject matter of accounting is the measurement of economic resources and obligation
C. Only economic activities are emphasized and recognized in accounting.
D. Sociological and psychological matters are quantifiable.
6. What is the measuring component in the definition of accounting?
A. The recognition or non-recognition of business activities as accountable events.
B. The assigning of peso amounts to the accountable events.
C. The preparation and distribution of accounting reports to users of accounting information.
D. The preparation of audit report by CPAs.
7. The most common financial attributes used in measuring financial information is
A. Historical cost C. Realizable value
B. Current cost D. Present value
8. The communicating process of accounting includes all of the following, except
A. Recording C. Summarizing
B. Classifying D. Interpreting
9. What is the overall objective of accounting?
A. To provide the information that the managers of an economic entity need to control the
operations.
B. To provide information that the creditors can use in deciding whether to grant loans to an
entity.
C. To measure the periodic income of economic entity
D. To provide quantitative financial information about an entity that is useful in making economic
decision.
10. What is the law regulating the practice of accountancy in the Philippines?
A. RA No. 9288 C. RA No. 9928
B. RA No. 9198 D. RA No. 9892
11. What is the authorizing body authorized by the law to promulgate rules and regulations affecting
the practice of the accountancy profession in the Philippines?
A. Board of Accountancy
B. Philippine Institute of Certified Public Accountants
C. Securities and Exchange Commission
D. Financial Reporting Standards Council
12. Which statement is correct in relation to the practice of public accountancy?
A. Single practitioners for the practice of public accountancy shall be registered CPAs in the
Philippines.
B. Partners of Partnership formed for the practice of public accountancy shall be registered CPAs in
the Philippines.
C. Securities and Exchange Commission can register any corporation organized for the practice of
public accountancy.
D. All of these statements are incorrect.
13. What is the standard setting body in the Philippines at the present time?
A. Accounting Standards Council
B. Auditing and Assurance Standards Council
C. Philippine Accounting Standards Council
D. Financial Reporting Standards Council
14. All of the following are represented in FRSC, except
A. Board of Accountancy
B. Securities and exchange Commission
C. Commission on Audit
D. Department of Budget and Management
15. The Philippine Financial Reporting Standards collectively include
A. PFRS corresponding IFRS
B. PAS corresponding to AIS
C. Philippine Interpretations corresponding to IFRIC and SIC Interpretations and Interpretations
developed by PIC.
D. All of these are included in Philippine Financial Reporting Standards
16. Accounting standard-setting body has been characterized as
A. A political process C. Pure deductive reasoning
B. Using the scientific method D. A legal process
17. What is the primary service of CPAs in public practice?
A. Auditing C. Managerial Accounting
B. Taxation D. Controllership
18. Financial accounting is concerned with
A. General purpose reports of financial position and financial performance
B. Special reports for inventory management.
C. Special report for income tax computation
D. General purpose reports on changes in share prices.
19. Financial accounting emphasizes reporting to
A. Management C. Internal auditors
B. Regulatory bodies D. Creditors and investors
20. Proper application of accounting principles is most dependent upon
A. Existence of specific guidelines
B. Oversight of regulatory bodies
C. External audit function
D. Professional judgment of the accountant
21. Once an accounting standards has been established
A. The standard is continually reviewed to see if modification is necessary
B. The standard is not reviewed unless a regulatory authority makes a complaint.
C. The task of reviewing the standards is given to the national accounting organization.
D. The principle of consistency requires that no revision ever be made to the standards.
22. Entity A buys banana and converts them into banana chips. The conversion of banana chips is a
(an)
A. Non-accountable event C. Non-reciprocal transfer
B. External event D. Internal event
23. Which of the following is considered valued by fact rather than by opinion?
A. Depreciation C. Discount on share capital
B. Cost of goods sold D. Retained earnings
24. Which of the following is not one of the several measurement basses used in accounting
A. Historical cost C. Present value
B. Fair value D. All of these are used
25. Entity A is owned by Mr. X and Ms. Y. which of the following transactions does not violate the
separate entity concept and therefore is appropriately recorded in the accounting records of entity
A? A. Mr. X purchases groceries for his home consumption.
B. Mr. X gives Ms. Y chocolate and flower on Valentine’s Day.
C. Ms. Y provides capital to Entity A.
D. Ms. Y provides capital to entity B, another business entity.
26. Mr. A is assessing the ability of Entity A to generate future cash and cash equivalents. In making
the assessment, Mr. A uses not only the statement of cash flows but also the other components of
a complete set of financial statements. This is because of which of the following concepts?
A. Going concern C. Intercalation
B. Time period D. Articulation
27. Entity A acquires a stapler. Instead of recognizing the cost of the stapler as an assets to be
subsequently depreciated, entity A immediately charges it as expense. This is an application of
which of the following concepts?
A. Prudence C. Cost-benefit
B. Materiality D. B and C
28. What types of users’ need is catered by general purpose financial statements
A. Common needs C. A and B
 B. Specific needs D. Neither A not B
29. Which of the following is not the Four Sectors on the practice of accountancy as enumerated in
30. Philippine Accountancy Act of 2004? C. Practice in Education
A. Practice in Commerce and Industry D. Practice of Private Accountancy
B. Practice in Government
31. The Philippines Financial Reporting Standards (PFRSs) comprise:
I. Philippines Financial Reporting Standards
II. Philippines Accounting Standards
III. Interpretations
IV. Accounting Practice Statements and Interpretation Guidance
A. I, II and III C. A and II
B. I, II, III and IV D. I and III
32. To be useful, accounting information should be presented using
A. Monetary amounts C. Historical cost
B. A common denominator D. Fair value
33. Changes to reporting standards are primarily made in response to
A. Governmental regulations C. Global modernization
B. Users’ needs D. All of this
34. Preparing financial statements at least annually is an application of which of the following
accounting concepts?
A. Historical cost C. Stable monetary unit
B. Accrual basis D. Time period
35. On day 1, a customer buys goods from entity A and promise to pay the sale price on day 30.
Entity A recognizes sales revenue on day 1 rather than on day 30. This is an application of which
of the following accounting concepts?
A. Prudence C. Consistency
B. Accrual basis D. Materiality
36. Which of the following events is considered a non-reciprocal transfer?
A. Sales on an assets C. Loss from a calamity
B. Donation D. Production of finished goods

MODIFIED TRUE OR FALSE: Read the following statements. Write TRUE if the statement is correct and
Write FALSE and explain why the statement is incorrect. (2 points each)
1. General purpose financial statements are those statements that cater to the common needs and
specific needs of a wide range of external users.

FALSE because general purpose financial statement caters the common needs of external users.

2. The financial statements are the only source of information when making economic decisions.
TRUE

3. All information presented in the financial statements are sourced from the accounting records of
the entity.
TRUE

4. Once promulgated, accounting standards are never changed. TRUE

5. All events and transactions of an entity are recognized in the book of accounts.
FALSE because only the accountable events are recognized by the book of accounts.
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