Theory of Accounts 1-8

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