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a compilation of cpa review questions that can help aspiring student
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Theory of Accounts 1-6

12/5/2017

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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



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