Problem 2-1 Multiple choice (IFRS) b.

Suppliers
4. Which is not a purpose of the Conceptual c. Employees
1. Which statement is true about the Conceptual Framework? d. All of these are external users of financial statements
Framework for Financial Reporting? a. To provide definitions of key terms and fundamental 4. Which of the following is an internal user of financial
a. The Conceptual Framework is not a Standard. concepts. information?
b. The Conceptual Framework describes the concepts b. To provide specific guidelines for resolving a. Board of Directors
for general-purpose financial reporting. situations not covered by existing accounting b. Shareholder
c. In case of conflict, the requirements of the IFRS standards. c. Holder of bonds
prevail over the Conceptual Framework. c. To assist accountants in selecting among alternative d. Creditor with long-term contract
d. All of these statements are true about the accounting and reporting methods. 5. These users require information on risk and return
Conceptual Framework. d. To assist the International Accounting Standards provided by their investment.
Board in the standard-setting process. a. Investors
2. Which is not a purpose of the Revised Conceptual b. Employees
Framework? c. Lenders
a. To assist the IASB to develop IFRS based on d. Customers
consistent concepts. 6. These users are interested in information about the
Problem 2-3 Multiple choice (IAA)
b. To assist preparers to develop consistent profitability and stability of the entity in order to assess
accounting policy when no Standard applies to a the ability of entity to provide remuneration, retirement
1. In the Conceptual Framework for Financial
particular transaction or when Standard allows a benefits and employment opportunities.
Reporting, what provides the "why" of accounting?
choice of accounting policy. a. Customers
a. Measurement and recognition concept
c. To assist all parties to understand and interpret the b. The public
b. Qualitative characteristic of accounting information
Standards. c. Governments and their agencies d. Employees
c. Element of financial statement
d. To assist regulatory agencies in issuing rules and 7. These users are interested in information that
d. Objective of financial reporting
regulations for a particular industry. enables them to assess whether their loans, the related
interest thereon, and other amounts owing to them will
2. The underlying theme of the Conceptual Framework
3. The scope of the Revised Conceptual Framework be paid when due.
is
comprises how many chapters? a. Lenders and other creditors
a. Decision usefulness
a. Five b. Borrowers
b. Understandability
b. Six c. Trade creditors
c. Timeliness
c. Seven d. Owners
d. Comparability
d. Eight 8. These users are interested in information about the
continuance of an entity, especially when they have a
3. The objective of financial reporting
4. The Conceptual Framework provides the foundation long-term involvement with or are dependent on the
a. Is the foundation for the Conceptual Framework
for Standards that: entity.
b. Includes the qualitative characteristics of useful
a. Contribute to transparency by enhancing a. Customers b. Employees c. Trade unions
information
international comparability and quality of financial d. Suppliers
c. Is not found in the Conceptual Framework
information 9. These users are interested in information in order to
d. All of these are correct choices regarding the
b. Strengthen accountability of management. regulate the activities of an entity, determine taxation
objective of financial reporting
c. Contribute to economic efficiency by helping policies and provide a basis for national statistics.
investors to identify opportunities and risks. a. Governments and their agencies b. Major
4. Which of the following is not a benefit associated
d. All of these are the result of Standards developed organization of users c. Bureau of Internal Revenue d.
with the Conceptual Framework?
based on consistent concepts. Department of Finance
a. A Conceptual Framework should increase users'
10. These users need information on trends and recent
understanding and confidence in financial reporting.
developments where an entity makes a substantial
b. Pratical problems should be more quickly solvable.
contribution to the local economy providing
c. A coherent set of accounting standards should
employment and using local suppliers.
Problem 2-2 Multiple choice (IFRS) result.
a. The public
d. Business entities will need far less assistance from.
b. Governments and their agencies
1. What is the authoritative status of the Conceptual accountants.
c. Finance entities
Framework?
d. Private entities
a. The Conceptual Framework has the highest level of 5. Which statement is not true concerning the
authority. Conceptual Framework?
b. In the absence of a standard or an interpretation that a. The Conceptual Framework should be a basis for
Problem 2-5 Multiple choice (IAA)
specifically applies to a transaction, the Conceptual standard setting.
1. The overall objective of financial reporting is to
Framework shall be followed. b. The Conceptual Framework should allow practical
provide
c. In the absence of a standard or an interpretation that problems to be solved more quickly.
information
specifically applies to a transaction, management shall c. The Conceptual Framework should be based on
a. That is useful for decision making.
consider the applicability of the Conceptual Framework fundamental truth derived from the law of nature. d.
b. About assets, liabilities and equity of an entity. c.
in developing and applying an accounting policy that The Conceptual Framework should increase users'
About financial performance during a period. d. That
results in information that is relevant and faithfully understanding and confidence in financial reporting.
allows owners to assess management performance.
represented.
2. The primary focus of financial reporting has been on
d. The Conceptual Framework applies only when the
meeting the needs of which of the following groups? a.
LASB develops new standards. Problem 2-4 Multiple choice (AC)
Management
1. Users of financial reports include which of the
b. Existing and potential investors, lenders and other
2. The Conceptual Framework is intended to establish following?
creditors
a. GAAP in financial reporting. a. Creditors
National taxing authorities
b. The meaning of present fairly in accordance with b. Creditors and government agencies
2. Independent CPAS
GAAP c. Creditors and unions
3. The primary objective of financial reporting is to
c. The objectives and concepts for use in developing d. Creditors, government agencies and unions
provide useful information to
standards of financial accounting and reporting. 2. The primary users of financial information include
a. Management
d. The hierarchy of sources of GAAP. a. Existing and potential investors
b.
b. Existing and potential lenders and other creditors c.
Capital providers
3. A Conceptual Framework should User group such as employees, customers,
c. Regulatory body
a. Lead to uniformity of financial statements. governments and their agencies, and the public
d. Government
b. Eliminate alternative accounting principles. d. Existing and potential investors, lenders and other
4. Which is an objective of financial reporting?
c. Guide multinational entities in developing generally creditors
a. To provide information that is useful in making
accepted auditing standards. 3. Which group is not among the external users for
investing and credit decisions.
d. Define the basic objectives, terms and concepts of whom financial statements are prepared?
b. To provide information that is useful to management.
accounting. a. Customers
c. To provide information about the potential users. d.
To provide information about ways to solve internal consumers. 9. The financial accounting information is directed
and external conflicts about the entity. b. Business industries, rather than to individual entities toward the common needs of users and is independent
5. Which is an objective of financial reporting? or an economy as a whole or to members of society as of presumptions about particular needs and desires of
a. To provide information that is useful to management consumers. specific users.
in making decisions. c. Individual business entities, industries, and an a. Relevance b. Verifiability c. Neutrality d.
b. To provide information that clearly portrays economy as a whole, rather than to members of Completeness
nonfinancial transactions. society 10. In the event of conflict between the economic
c. To provide information that is useful to assess the as consumers. substance of a transaction and the legal form, the
amount, timing, and uncertainty of prospective cash d. An economy as a whole and to members of society economic substance shall prevail.
receipts. as consumers, rather than to individual entities or a. Form over substance
d. To provide information that excludes claims against industries. b. Substance over form
the resources 5. Under the Revised Conceptual Framework, during c. Relevance
6. An objective of financial reporting is to provide a . period when an entity is under the direction of a d. Completeness
a. Information about the investors in the entity. b. particular management, financial reporting provides
Information about the liquidation value. information about
c. Information that is useful in assessing cash flow a. Entity performance and management performance Problem 3-2 Multiple choice (IAA)
prospects. b. Management performance but not entity 1. The enhancing qualitative characteristics of financial
d. Information that will attract new investors. performance c. Entity performance but not information are
7. Assessing cash flow prospects is interpreted to management performance d. Neither entity a. Comparability and understandability
mean a. Cash basis accounting is preferred over performance nor management performance. b. Verifiability and timeliness
accrual basis. b. Information about the financial effects c. Comparability, understandability and verifiability d.
of cash receipts and cash payments is generally Comparability, understandability, verifiability and
considered the best indicator of ability to generate PROBLEMS timeliness
favorable cash flows. c. Over the long run, trends in Problem 3-1 Multiple choice (IAA) 2. Financial information exhibits consistency when
revenue and expenses are generally more meaningful 1. What are the attributes that make the information a. Accounting procedures are adopted which smooth
than trends in cash receipts and disbursements. provided net income and make results consistent between
d. All of the choices are correct regarding assessing in the financial statements useful to the readers?" a. years. on the income b. Gains and losses are shown
cash flow prospects. Qualitative characteristics of financial information b. separately
8. In measuring financial performance, accrual Quantitative characteristics of financial information statement.
accounting is used because c. Elements of financial statements c. Accounting entities give similar events the same
a. Cash flows are considered less important. d. Objectives of financial reporting accounting treatment each period.
b. It provides a better indication of ability to generate 2. Qualitative characteristics d. Expenditures are reported as expenses.
cash flows than cash basis. a. Are considered either fundamental or enhancing. b. 3. When information about two different entities
c. It recognizes revenue when cash is received. d. It is Contribute to the decision-usefulness of financial engaged in the same industry has been prepared and
one of the implicit assumptions. reporting information. presented in similar manner, the information exhibits
9. The most useful information in predicting future cash c. Distinguish better information from inferior the enhancing qualitative characteristic of
flows is information for decision-making purposes. a. Relevance
a. Information about current cash flows d. All of the choices are correct. b. Faithful representation c. Consistency
b. Current earnings based on accrual accounting c. 3. The fundamental qualitative characteristics are d. Comparability
Information regarding the accounting policies used d. a. Relevance and faithful representation 4. The characteristic that is demonstrated when a high
Information regarding the results obtained by using a b. Relevance, faithful representation and materiality c. degree of consensus can be secured among
wide variety of accounting policies Relevance and reliability independent measurers using the same measurement
10. The accrual basis of accounting is most useful for d. Faithful representation and materiality method is
a. Determining the amount of income tax liability. b. 4. Accounting information is considered relevant when a. Relevance
Predicting the short-term financial performance. c. it b. Understandability
Predicting the long-term financial performance. d. a. Can be depended on to represent the economic c. Verifiability
Determining the amount of dividends to be declared. conditions and events that it is intended to represent. d. Neutrality
b. Is capable of making a difference in a decision. 5. Which concept of accounting holds that, to the
c. Is understandable by reasonably informed users of maximum extent possible, financial statements shall be
Problem 2-6 Multiple choice (AICPA Adapted) accounting information. based on arm's length transactions?
1. The objective of financial reporting is based on d. Is verifiable and neutral. a. Revenue realization
a. The need for conservatism 5. The ingredients of relevant financial information are b. Verifiability
b. Reporting on management stewardship c. Generally a. Predictive value and confirmatory value c. Monetary unit
accepted accounting principles d. The needs of the b. Predictive value, confirmatory value and timeliness d. Matching
users of the information c. Predictive value, confirmatory value and materiality 6. An entity issuing the annual financial reports within
2. Which statement is not true about financial d. Predictive value, confirmatory value, timeliness and one
reporting? materiality month after the end of reporting period is an example
a. Financial reporting shall provide information about 6. What is the quality of information that gives of
entity resources, claims against those resources and assurance that it is reasonably free of error and bias? which enhancing quality of accounting information?
changes in them. a. Relevance a. Neutrality
Financial reporting shall not provide information useful b. Faithful representation b. Timeliness
in evaluating management stewardship. c. Financial c. Verifiability c. Predictive value
reporting shall provide information useful in investment, d. Neutrality d. Representational faithfulness
credit and similar decision. d. Financial reporting shall 7. Which of the following is the best description of 7. Allowing entities to estimate rather than physically
provide information useful in assessing cash flow "faithful representation" in relation to information in count inventory at interim periods is an example of a
prospects.. financial statements? tradeoff between
3. Which of the following is not an objective of financial a. Influence on the economic decisions of users b. a. Verifiability and comparability b. Timeliness and
reporting? Inclusion of a degree of caution comparability c. Timeliness and verifiability d. Neutrality
a. To provide information about an entity's assets and c. Freedom from material error d. Comprehensibility to and consistency
claims against those assets users 8. Which qualitative characteristic of financial
b. To provide information that is useful in assessing an 8. To achieve faithful representation, the financial information requires that information should not be
entity's sources and uses of cash statements a. Must have predictive and confirmatory biased in favor of one group of users to the detriment
c. To provide information that is useful in lending and value. of others?
investing decisions b. Must be complete, neutral and reasonably free from a. Relevance.
d. To provide information about the liquidation value of error. b. Free from error
an entity c. Are understandable, comparable, verifiable and c: Completeness d. Neutrality
4. Financial reporting pertains to information about a. timely. 9. For information to be useful, the linkage between the
Individual business entities, rather than to industries or d. Must possess all of these. users and the decisions made is
an economy as a whole or to members of society as a. Relevance
b. Faithful representation b. Consistency would influence the judgment of a primary user. d. All
c. Understandability c. Predictive value of these statements are true about materiality.
d. Verifiability d. All of the choices are correct 2. An item would be considered material when
10. Which statement is true in relation to the enhancing a. The expected benefit exceeds the additional cost. b.
quality of understandability? The impact on earnings is greater than 10%. c. The
a. Users have a reasonable knowledge of business and Problem 3-4 Multiple choice (IAA) standard definition of materiality is met.
economic activities and review the information with 1. When there is agreement between a measure or d. Omitting, misstating or obscuring the information.
reasonable diligence. description and the phenomenon it purports to would make a difference to the primary users.
b. represent, the information possesses which 3. The Conceptual Framework includes which
Users are expected to have significant business characteristic?" constraint?
knowledge. 8. Verifiability a. Prudence
c. Financial statements shall exclude complex matters. b. Predictive value b. Conservatism
d. Financial statements shall be free from material c. Faithful representation d. Timeliness c. Cost
error. 2. The qualitative characteristic of faithful d. All of the choices are constraints
representation 4. Which best describes the cost-benefit constraint?
includes a. The benefit of the information must be greater than
Problem 3-3 Multiple choice (IAA) a. Predictive value the cost of providing it.
1. The overriding qualitative characteristic of b. Neutrality b. Financial information should be free from cost to
information is c. Cor.firmatory value users.
a. Relevance d. Timeliness c. Cost of providing financial information is not always
b. Understandability c. Faithful representation 3. Enhancing qualitative characteristics of accounting evident or measurable but must be considered.
d. Decision usefulness information include all of the following, except d. All of the choices are correct.
accounting a. Timeliness 5. What is an enhancing quality of accounting
2. Which of the following terms best describes b. Materiality information? a. Information must be decision-useful to
information c. Comparability d. Verifiability all users. b. General-purpose financial reporting is the
that influences the economic decisions of users? 4. The enhancing quality of understandability means primary source of information for statement users.
a. Reliable that information should be understood by c. Users need reasonable knowledge of business and
b. Prospective a. Those who are experts in the interpretation of financial accounting matters to understand the
c. Relevant financial information information contained in financial statements. d. All of
d. Understandable b. Those who have a reasonable understanding of the choices are correct.
3. What is the quality of information that enables users business and economic activities Problem 3-6 Multiple choice (AICPA Adapted)
to better forecast future operations? c. Financial analysts 1. The ability through consensus among measurers to
a. Faithful representation d. CPAs ensure that information represents what it purports to
b. Materiality 5. Enchancing qualitative characteristics of accounting represent is an example of the concept of
c. Comparability information include a. Relevance
d. Relevance a. Relevance and comparability b. Comparability and b. Verifiability
4. According to the Conceptual Framework, predictive timeliness. c. Understandability and relevance d. c. Comparability d. Feedback value
value and confirmatory value are ingredients of Neutrality and comparability 2. Which of the following accounting concepts states
a. Relevance 6. When different competent accountants that an accounting transaction shall be supported by
b. Faithful representation independently agree on the amount and method of sufficient evidence to allow two or more qualified
c. Understandability reporting an economic event, what is the concept individuals to arrive at essentially similar conclusion?
d. Comparability demonstrated? a. Conservatism
5. Which term best describes information in financial a. Reliability b. Objectivity
statements that is neutral? b. Comparability c. Completeness d. Verifiability c. Periodicity
a. Understandable 7. According to the conceptual framework, verifiability d. Stable monetary unit
b. Comparable implies 3. Objectivity is assumed to be achieved when a
c. Relevant a. Legal evidence transaction
d. Unbiased b. Logic a. Is recorded in a fixed amount of pesos
6. What is meant by comparability when discussing c. Consensus b. Involves the payment or receipt of cash
financial accounting information? d. Legal verdict c. Involves an arm's length transaction between two
a. Information has predictive and confirmatory value. b. 8. When an entity has started placing its quarterly independent parties
Information is reasonably free from error. financial statements on its web page, thereby reducing d. Allocates revenue and expenses in a rational and
c. Information is measured and reported in a simile- by ten days the time to get information to investors and systematic manner
fashion across entities. creditors, the qualitative concept involved is 4. The principle of objectivity includes the concept of
d. Information is timely. a. Comparability a. Summarization
7. What is meant by consistency when discussing b. Consistency b. Classification c. Conservatism
financial accounting information? c. Timeliness d. Verifiability
a. Information is measured and reported in a sin r d. Faithful representation 5. Proponents of historical cost maintain that
fashion across points in time. 9. When an entity changed the inventory valuation statements prepared using historical cost are more
b. Information is timely. method, which characteristic is jeopardized by this a. Objective
c. Information is measured similarly across the change? b. Relevant
industry. d. Information is verifiable. a. Comparability c. Indicative of purchasing power d. Conservative
8. Which of the following is not an enhancing b. Representational faithfulness
qualitative characteristic? c. Consistency
a. Understandability d. Feedback value 6. The consistency standard requires that
b. Profit-oriented 10. Recognizing expected losses immediately but a. Expenses should be reported when incurred. b. The
c. Timeliness deferring expected gains is an example of effect of accounting changes upon income should
d. Comparability a. Materiality be properly disclosed.
9. Changing the method of inventory valuation should b. Conservatism c. Cost effectiveness c. Gains and losses should not be recognized.
be reported in the financial statements under what d. Timeliness d. Accounting procedures should be adopted when the
enhancing quality of accounting information? result is a consistent rate of return.
a. Understandability 7. Which of the following relates to both relevance and
b. Verifiability Problem 3-5 Multiple choice (IAA) faithful representation?
c. Timeliness 1. Which statement about materiality is true? a. Comparability b. Feedback value c. Neutrality
d. Comparability a. An item must make a difference or it need not be d. Free from error
10. When an entity applies the same accounting disclosed. 8. Which of the following situations violates the
treatment to similar events from period to period, the b. Materiality is a matter of relative size or importance. concept of faithful representation?
entity is exhibiting which of the following qualities? c. An item is material if the omission or mistatement
a. Verifiability
a. Financial statements were issued nine months late.
b. Data on segments having the same expected risks
are reported to analysts estimating future profit.
c. Financial statements included an item of property,
plant and equipment with carrying amount increased to
management estimate of market value.
d. Management reports to shareholders regularly refer
to new projects undertaken.
9. What is the underlying concept governing the GAAP
pertaining to recording gain contingencies?
a. Conservatism
b. Relevance
c. Consistency
d. Reliability
10. The usefulness of providing information in financial
statements is subject to the constraint of
a. Consistency
b. Cost-benefit
c. Reliability
d. Representational faithfulness
Problem 3-7 Identification (ACP)
Indicate the accounitng concept that is defined or
described.
1. Information that has no bearing on an economic
decision to be made is useless.
2. It is the ability to bring together for the purpose of
noting points of likeness and difference.
3. It requires that users have some knowledge of the
complex economic activities of entities, the accounting
process and the technical terminology in the
statements.
4. Preparers of statements should not try to increase
the usefulness of the information to a few users to the
detriment of others who may have opposing interests.
5. In case of conflict between economic substance and
legal form of a transaction, the economic substance
shall prevail. 6. Small expenditures for tools are
expensed immediately. 7. When in doubt, recognize all
losses and don't recognize gains.
8. The information should be presented in a manner
that facilitates understanding and avoids erroneous
implication.
9. It is the capacity of the information to influence a
decision. 10. The description and numbers or figures
must match what really existed or happened.
11. The financial statements shall be accompanied by
notes to financial statements.
12. There are no errors or omissions in the description
of the phenomenon.
13. It is the goal achieved by consistency.
14. This enhancing qualitative characteristic implies
consensus.
15. The older the information, the less useful.