1. Which of the following enhances the reliability of accounting information

a. accounting entity
b. going concern
c. verifiability
d. time period

2. The conceptual framework of accounting sets out certain qualitative characteristics of accounting information. Which of the following is not a qualitative characteristic

a. understandability
b. profit-oriented
c. reliability
d. comparability

3. Historical cost has been the valuation basis most commonly used in accounting because of its

a. timeliness
b. conservatism
c. reliability
d. accuracy

4. Which of the following qualitative characteristics of financial information requires that information should not be biased in favor of one group of users to the detriment of others

a. relevance
b. reliability
c. verifiability
d. neutrality

5. Conservatism is best described as  selecting an accounting alternative that

a. understates assets and net income
b. has the least favorable impact on owners' equity
c. overstates, as opposed to understates, liabilities
d. is least likely to mislead users of financial information

6. Accounting for inventory by applying the lower of cost or net realizable value is an example of the application of

a. conservatism
b. comparability
c. consistency
d. materiality

7. An item would be considered material and therefore would be disclosed in the financial statements if

a. the expected benefits of disclosure exceed the additional costs
b. the impact on earnings is greater than 10 percent
c. the standard definition of materiality is met
d. the omission or misstatement of the amount would make a difference to the users

8. Recording the purchase price of a pencil sharpener with an estimated useful  life of 10 years as an expense of the current period is justified by the

a. going concern assumption
b. materiality constraint
c. matching principle
d. comparability principle

9. Financial information exhibits consistency when

a. accounting procedures are adopted which smooth net income and make results consistent between years
b. gains and losses are shown separately on the income statement
c. accounting entities give similar events the same accounting treatment each period
d. expenditures are reported as expenses and netted against revenue in the period in which they are  paid

10. When information about two different entities engaged in the same industry has been prepared and presented in similar manner, the information exhibits the qualitative characteristic of

a. relevance
b. reliability
c. consistency
d. comparability


Answer:
1. c
2. b
3. c
4. d
5. b
6. a
7. d
8. b
9. c
10. d


"Questions are lifted from the following sources: PHILCPA, AICPA, ACP, PAS, PFRS, IAS, IFR  

1. The principles which constitute the ground rules for financial reporting are termed generally accepted accounting principles. To qualify as generally accepted, an accounting principle must

a. usually guide corporate managers in preparing financial statements, which will be understood by widely scattered shareholders
b. guide corporate managers in preparing financial statements, which will be used, for collective bargaining agreement with trade unions
c. guide an entrepreneur of the choice of an accounting entity like single proprietorship, partnership or corporation
d. receive substantial authoritative support

2. Under generally accepted accounting principles

a. income and expenses, assets and liabilities are measured based on the occurrence of changes in the economic resources and obligations
b. assets and liabilities are measured on the basis of their liquidation value
c. income and expenses are recognized on the basis of cash receipts and payments, including depreciation of property, plant and equipment
d. financial position and financial performance are measured on the basis of cash received and cash paid

3. There are four phases of accounting. The phase whereby the liquidity, solvency and profitability of an entity are significantly portrayed is known as

a. summarizing
b. classifying
c. recording
d. interpreting

4. Four types of money prices are used in measuring resources in financial accounting. The type which uses such concepts as present value, discounted cash flow and value in use is known as

a. price in a current purchase exchange
b. price in past purchase exchange
c. price based on future exchange
d. price in a current sale exchange

5. External events include all of the following except

a. sale of merchandise
b. borrowing of money from the bank
c. donation received from shareholder
d. casualty loss caused by flood, earthquake or other natural disaster



Answer:
1. d
2. a
3. d
4. c
5. d

"Questions are lifted from the following sources: PHILCPA, AICPA, PAS, PFRS, IAS, IFR

1. The objectives of financial reporting for entities are based on

a. the need for conservatism
b. reporting on management's stewardship
c. generally accepted accounting principles
d. the needs of the users of the information

2. The information provided by financial reporting pertains to

a. individual business entities, rather than to industries or an economy as a whole or to members of society as consumers
b. individual business entities and an economy as a whole or to members of society as consumers or to members of society as consumers
c. individual business entities and an economy as a whole, rather than to industries or to members of society as consumers
d. individual business entities, industries and an economy as a whole, rather than to members of society as consumers

3. During a period when an entity is under the direction of a particular management, financial reporting will directly provide information about

a. both entity performance and management performance
b. management performance but not entity performance
c. entity performance but not management performance
d. neither entity performance nor management performance

4. Which of the following items is not listed as a major objective of financial reporting

a. financial reporting shall provide information about entity resources, claims to those resources and changes in them
b. financial reporting shall provide information useful in evaluating management's stewardship
c. financial reporting shall provide information useful in investment, credit and similar decisions
d. financial reporting shall provide information useful in assessing cash flow projects

5. Which of the following statements is not normally an objective of financial reporting

a. to provide information about an entity's assets and claims against those assets
b. to provide information that is useful in assessing an entity's sources and uses of cash
c. to provide information that is useful in lending and investing decisions
d. to provide information about an entity's liquidation value


Answer:
1. d
2. a
3. c
4. b
5.d

"Questions are lifted from the following sources: PHILCPA, AICPA, ACP, PAS, PFRS, IAS, IFR

1. The theory of accounting which best describes the accounting equation expressed assets = liabilities + equity is the

a. entity theory
b. fund theory
c. proprietary theory
d. residual equity theory

2. What theory of ownership equity is enumerated by the following equation: assets minus liabilities minus preference share equity equals ordinary share equity?

a. fund
b. entity
c. proprietary
d. residual equity

3. Classifying preference dividends as expense is an application of what concept?

a. entity
b. proprietary
c. residual equity
d. fund

4. The primary accounting objective is fair presentation of the financial performance of the entity

a. entity
b. proprietary
c. residual equity
d. fund

5. Fiduciary accounting is an application of

a. entity theory
b. proprietary theory
c. residual equity theory
d. fund theory

6. The overall objective of financial reporting is to provide information

a. that is useful for decision making
b. about an entity's assets, liabilities  and owners' equity
c. about an entity's financial performance during a period
d. that allows owners to assess management's performance

7. Which of the following statements concerning the objectives of financial reporting is correct

a. the objectives are intended to be specific in nature
b. the objectives are directed primarily toward the needs of internal users of accounting information
c. the objectives are the end result of the conceptual framework project
d. the objectives encompass not only financial statement disclosures but other information as well

8. Information about financial structure is useful in predicting

a. future borrowing needs and how future profits and cash flows will be distributed among those with an interest in the entity
b. the ability of the entity to meet its financial commitments as they fall due over a longer term
c. the ability of the entity to use its available cash for unexpected requirements and investment opportunities
d. the capacity of the entity to generate cash flows from its operations

9. Which of the following statements best describes the term financial position

a. the net income and expenses of an entity
b. the net of financial assets less liabilities of an entity
c. the potential to contribute to the flow of cash and cash equivalents to the entity
d. the assets, liabilities and equity of an entity

10. Which of the following best describes financial performance of an entity

a. the revenue, expenses and net income or loss for a period of an entity
b. the assets, liabilities and equity of an entity
c. the total assets minus total liabilities
d. the total cash inflows minus cash outflows


Answer:
1. a
2. d
3. c
4. a
5. d
6. a
7. d
8. a
9. d
10. a


"Questions are lifted from the following sources: PHILCPA, AICPA, ACP, PAS, PFRS, IAS, IFR

1. Which of the following is an internal user of an entity's financial information?

a. board of directors
b. shareholder in the entity
c. holder of the entity's bond
d. creditor with long-term contracts with the entity

2. These users require information on risk and return on investment and hence an entity's ability to pay dividends.

a. investors
b. employees
c. lenders
d. customers

3. These users are interested in information about the profitability and stability of an entity in order to assess the ability of the entity to provide remuneration, retirement, benefits and employment opportunities

a. customers
b. the public
c. governments and their agencies
d. employees

4. These users are interested in information that enables them to determine whether amounts owing to them will be paid when due.

a. suppliers and trade creditors
b. lenders
c. banks
d. finance entities

5. These users are interested in information that enables them to assess whether an entity is able to repay loans and the related interest when the loans fall due.

a. lenders
b. borrowers
c. trade creditors
d. owners

6. These users are interested in information about the continuance of an entity, especially when they have a long-term involvement with or are dependent on the entity

a. customers
b. employees
c. trade unions
d. suppliers

7. These users are interested in information in order to regulate the activities of an entity, determine taxation policies and provide a basis for national statistics

a. governments and their agencies
b. major organization of users
c. bureau of internal revenue
d. department of finance

8. These users need information on trends and recent developments where an entity makes a substantial contribution to the local economy providing employment and using local suppliers

a. the public
b. government and their agencies
c. finance entities
d. private entities

9. The providers of risk capital and their advisers

I. Are concerned with the risk inherent in and return provided by their investments
II. Need information to help them determine whether they should buy or sell.

a. I only
b. II only
c. both I and II
d. neither I nor II

10. Which statement is correct regarding information needs

I. All information needs of users cannot be met by financial statements
II. As investors are providers of risk capital to the entity, the provision of financial statements that meet their needs will also meet most of the needs of other users that financial statements can satisfy.

a. I only
b. II only
c. both I and II
d. neither I nor II


Answer:
1. a
2. a
3. d
4. a
5. a
6. a
7. a
8. a
9. c
10. c



"Questions are lifted from the following sources: PHILCPA, AICPA, ACP, PAS, PFRS, IAS, IFRS

1. The concept of accounting entity is applicable

a. only to the legal aspects of business organizations
b. only to the economic aspects of business organizations
c. only to business organizations
d. whenever accounting is involved

2. When a parent and subsidiary relationship exists, consolidated financial statements are prepared in recognition of

a. legal entity
b. economic entity
c. stable monetary unit
d. time period

3. The valuation of a promise to receive cash in the future at present value is valid because of the accounting concept of

a. entity
b. time period
c. going concern
d. monetary unit

4. Continuation of an accounting entity in the absence of evidence to the contrary is the basic concept of

a. accounting entity
b. time period
c. going concern
d. accrual

5. This accounting concept justifies the usage of accruals and deferrals

a. going concern
b. materiality
c. consistency
d. stable monetary unit

6. One of the basic features of financial accounting is the

a. direct measurement of economic resources and obligations and changes in them in terms of money and sociological and psychological impact
b. direct measurement of economic resources and obligations and changes in them in terms of money
c. direct measurement of economic resources and obligations and changes in them in terms of money and sociological impact
d. direct measurement of economic resources and obligations and changes in them in terms of money and psychological impact

7. During the lifetime of  an entity accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept

a. accrual
b. periodicity
c. unit of measure
d. continuity

8. Historical cost is a measurement base commonly used in financial accounting. Which of the following measurement bases is also currently used in financial accounting

                          Current selling price            Discounted cash flow           Replacement cost
a.                                     Yes                                               No                                                          Yes
b.                                     Yes                                             Yes                                                          Yes
c.                                      Yes                                              No                                                            No
d.                                      No                                             Yes                                                           Yes

9. When discussing asset valuation, the following valuation bases are sometimes mentioned: replacement cost, exit value and discounted cash flow. Which of these bases should be considered a current value measure

a. replacement cost and exit value only
b. replacement cost and discounted cash flow only
c. exit value and discounted cash flow only
d. replacement cost, exit value and discounted cash flow

10. The primary measurement basis currently used to value assets in external financial statements of an entity is

a. the current market price if the assets currently held by an entity were sold on the open market
b. the current market price if the assets held by an entity were purchased on the open market
c. the present value of the cash flows the assets are expected to generate over their remaining useful lives
d. the market price of the assets held by an entity at the date the assets were acquired


Answer:
1. d
2. b
3. c
4. c
5. a
6. b
7. b
8. b
9. d
10. d

" Questions are lifted from the following sources: PHILCPA, AICPA, ACP, PAS, PFRS, IAS, IFRS

1. The conceptual framework specifically mentions two underlying assumptions, namely

a. accrual and going concern
b. accrual and accounting entity
c. going concern and time period
d. time period and monetary unit

2. Which of the following terms best describes financial statements whose basis of accounting recognizes transactions and other events when they occur?

a. accrual basis of accounting
b. going concern basis of accounting
c. cash basis of accounting
d. invoice basis of accounting

3. The accrual basis of accounting is based primarily on

a. conservatism and revenue realization
b. conservatism and matching
c. consistency and matching
d. revenue realization and matching

4. Which of the following statements best describes the term going concern?

a. when current liabilities of an entity exceed current assets
b. the ability of the entity to continue in operation for the foreseeable future
c. the potential to contribute to the flow of cash and cash equivalents to the entity
d. the expenses of an entity exceed its income

5. Which of the following is not an implication of the going concern assumption?

a. the historical cost principle is credible
b. depreciation and amortization policies are justifiable and appropriate
c. the current and noncurrent classification of assets and liabilities is justifiable and significant
d. amortizing research and development costs over several periods is justifiable and appropriate

6.The relatively stable economic, political and social environment supports

a. conservatism
b. materiality
c. timeliness
d. going concern

7. The financial statements that are prepared for the entity are separate and distinct from the owners according to the

a. going concern principle
b. matching principle
c. economic entity assumption
d. accounting period assumption

8. Which underlying concept serves as the basis for preparing financial statements at regular intervals?

a. accounting entity
b. going concern
c. accounting period
d. stable monetary unit

9. Which of the following is not an important characteristic of the financial statements that accountants currently prepare?

a. the information in financial statements is expressed in units of money adjusted for changing purchasing power
b. financial statements articulate with one another because measuring financial position is related to measuring changes in financial position
c. the information in financial statements is summarized and classified to help meet users' needs
d. financial statements can be justified only if the benefits they provide exceed the costs

10. Which of the following statements is incorrect?

a. the accrual method, which builds directly on the revenue and matching principles, ignores the timing of cash receipts or payments in determining when to recognize revenue or expenses
b. in accordance with the unit of measure assumption, accountants normally revise the amounts to reflect the changing purchasing power of money due to inflation or deflation
c. in accordance with the going concern assumption, the life of an entity is presumed to be indefinite
d. accountants prepare financial statements at arbitrary points in time during and entity's lifetime in accordance with the accounting concept of accounting period


Answer:
1. a
2. a
3. d
4. b
5. d
6. d
7. c
8. c
9. a
10. b


"Questions are lifted from the following sources: PHICPA, AICPA, AA,ACP,PAS, PFRS, IAS, IFRS

1. Generally accepted accounting principles

a. are accounting adaptations based on the laws of economic science
b. derive their credibility and authority from legal rulings and court precedents
c. derive their credibility and authority from the national government through the SEC
d. derive their credibility and authority from general recognition and acceptance by the accountancy profession

2. Which of the following statements best describes generally accepted accounting principles?

a. they have been formulated in the public sector
b. they have been developed on the basis of such factors as usage and practical necessity
c. they are the same as laws within our legal system
d. they do not apply to small entities

3. Proper application of accounting principles is most dependent upon the

a. existence of specific guidelines
b. oversight of regulatory bodies
c. external audit function
d. professional judgment of the accountant

4. The process of establishing financial accounting standards

a. is a democratic process in that a majority of practicing accountants must agree with a standard before it becomes implemented
b. is a legislative process based on rules promulgated by government agencies
c. is based solely on economic analysis of the effects each standard will have if it is implemented
d. is a social process which incorporates political actions of various interested user groups as well as professional research and logic

5. Once an accounting standard has been established

a. the standard is continually reviewed to see if modification is necessary
b. the standard is not reviewed unless the SEC makes a complaint
c. the task of reviewing the standard to see if modification is necessary is given to the PICPA
D. the principle of consistency requires that no revisions ever be made to the standard

6. As independent or external auditors, CPAs are primarily responsible form

a. preparing financial statements in conformity with GAAP
b. certifying the accuracy of financial statements
c. expressing an opinion as to the fairness of financial statements
d. filing financial statements with the SEC

7. The singularly unique function performed by Certified Public Accountant is

a. tax preparation
b. management advisory services
c. the attest function
d. the preparation of financial statements

8. The purpose of the International Financial Reporting Standards is to

a. Issue enforceable standards which regulate the financial accounting and reporting of multinational entities
b. develop a uniform currency in which the financial transactions of entities  throughout the world would be measured
c. promote uniform accounting standards among countries of the world
d. arbitrate accounting disputes between auditors and international entities

9. The International Accounting Standards Board was formed to

a. enforce IFRS in foreign countries
b. develop worldwide accounting standards
c. establish accounting standards for multinational entities
d. develop accounting standards for countries that do not have their own standard-setting bodies

10. It is a global phenomenon intended to bring about transparency and a higher degree of comparability in financial reporting, both of which will benefit the investors and are essential to achieve the goal of one uniform and globally accepted financial reporting standards

a. IFRS
b. Borderless accounting
c. world trade
d. information technology


Answers:
1. d
2. b
3. d
4. d
5. a
6. c
7. c
8. c
9. b
10. a

1. Accounting is a service activity and its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision. This accounting definition is given by:

a. Accounting Standard Council   b. AICPA Committee on Accounting Terminology  c. American Accounting Association d. Board of Accountancy

2. The basic purpose of accounting is

a. To provide the information that the managers of an economic entity need to control its operations
b. To provide information that the creditors of an economic entity can use in deciding whether to make additional loans to the entity
c. To measure the periodic income of the economic entity.
d. To provide quantitative financial information about an entity that is useful in making rational economic decision

3. Which accounting process is the recognition or nonrecognition of business activities as accountable events.
a. Identifying
b. Measuring
c. Recording
d. Communicating

4. These are the events that affect the entity and in which other entities participate
a. Internal events
b. External events
c. Current events
d. Past events

5. The communicating process of accounting includes all of the following except

a. Recording

b. Classifying

c. Summarizing

d. Interpreting

6. What is the law regulating the practice of accountancy in the Philippines ?

a. R.A. No. 9298

b. R.A. No. 9198

c. R.A. No. 9928

d. R.A. No. 9892

7. It is the body authorized by 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

8. Many accountants are employed in entities in various capacity as accounting staff, chief accountant or controller. These accountants are said to be engaged in

a. Public accounting
b. Private accounting
c. Government accounting
d. Financial accounting

9. It is the accounting standard setting body created by PRC  upon recommendation of the Board of Accountancy to assist the Board of Accountancy in carrying out its powers and functions under R.A. No. 9298

a. Accounting Standards Council
b. Auditing and Assurance Standards Council
c. Philippine Accounting Standards Board
d. Financial Reporting Standards Council

10. Which is not required to be represented in the FRSC ?

a. Bangko Sentral ng Pilipinas
b. Bureau of Internal Revenue
c. Commission on Audit
d. Department of Budget and Management


Answers:
1. a
2. d
3. a
4. b
5. d
6. a
7. a
8. b
9. d
10. d