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CPAR-THEORY OF ACCOUNTS

ACCOUNTING CONCEPTS
1. Which of the following statements is/are true?
I. Accounting is a service activity intended to fulfill a useful function in society
II. Accounting involves the art of recording, classifying and summarizing
transaction and events, and interpreting the results thereof.
III. Accounting is an art but not a science
IV. Accounting provides quantitative financial information intended to be useful
in making economic decisions
a. I, II, III, IV
b. I, II, III

c. I, II, IV
d. II, III, IV

2. The branch of accounting concerned with the presentation of financial information


primarily for use of third person outside of business enterprise.
a. Financial Accounting
b. Management Accounting

c. Government Accounting
d. All of the above

3. Accounting is an art because


a. of the existence of a body knowledge governing accounting practice
b. of accounting theory
c. the necessity of applying creative skill and ability
d. None of the above
4. Financial accounting is the branch of accounting that focuses on
a. special purpose reports of financial position and results of operations
b. financial statements
c. the various need of statement users
d. general purpose reports of financial position and results of operations
5. General-purpose information is
a. not intended to satisfy the specialized needs of individual users.
b. intended to satisfy the specialized needs of individual users
c. not intended to satisfy the common needs of individual users.
d. Provided by managerial accounting.
6. Which of the following is not true?
a. Accounting is concerned primarily with quantitative information used by
persons who must make economic decisions among alternative actions.
b. Governmental accounting is also known as municipal or fund accounting

c. The branch of accounting concerned with the presentation of financial


information to assist management in planning and controlling operations is called
managerial accounting.
d. Financial accounting emphasizes special purpose information based on
presumption that significant numbers of users need similar information.
7. The body of rules and principles which govern accounting practices is referred to as
a. Accounting practice
c. Accounting concepts
b. Accounting principles
d. Accounting theory
8. The layers of the structure of accounting theory include the following except
a. methods and procedures
c. measurement and recognition
b. principles
d. postulates and conventions
9. The basic assumption or premises on which accounting principles rest are called
a. accounting postulates
c. accounting principles
b. accounting procedures
d. accounting laws
10. The normative attitudes or ideas of the accounting profession as to what ought to
represent good accounting practice and which modify the application of accounting
principles are known as
a. accounting postulates
c. accounting procedures
b. accounting conventions
d. accounting principles
11. The general guidelines used in accounting practice that are based on substantial
authoritative support are called
a. Accounting postulates
c. accounting procedures
b. accounting conventions
d. accounting principles
12. The specific methods used by accountants in carrying out t5he general guidelines
provided by GAAP, including the numerous rules specifying how financial data should be
recorded, classified, summarized and reported are referred to as
a. accounting postulates
c. accounting procedures
b. accounting conventions
d. accounting principles
13. The accounting entity is assumed to be separate and distinct from other entities and
from the owners, managers and employees which constitute the firm. This postulate is
referred to as
a. Matching
c. Historical cost
b. Going concern
d. Specific-separate-entity
14. Unless there is specific evidence to the contrary, the firm will continue to be in
existence in the foreseeable future. This postulate is referred to as
a. Matching
c. Historical cost
b. Going concern
d. Specific-separate-entity

15. Money is the best measuring unit of a firms assets, liabilities and equity, as well as
changes therein; its instability is immaterial. This postulate is referred to as
a. Historical cost
c. Money-measuring unit
b. Revenue recognition
d. Fiscal period
16. Cost is normally the proper money measurement of a firms assets, liabilities, and
equity, and changes in them because it is objective, verifiable and convenient to obtain,
approximating value at time of acquisition. This postulate is referred to as
a. Historical cost
c. Money measuring unit
b. Revenue recognition
d. Fiscal period
17. The life of a business firm can be segmented into short run time periods in order to
provide timely financial information to aid in financial decision making; hence, periodic
reporting implies the use of accrual accounting and use of estimates ( approximations)
and informed judgment by accountants. This postulate is referred to as
a. Historical cost
c. Money measuring unit
b. Revenue recognition
d. Fiscal period
18. The point of sale when goods are delivered or services are rendered, is the time at
which revenue is to be recognized. This postulate is referred to as
a. Historical cost
c. Money measuring unit
b. Revenue recognition
d. Fiscal period
19.Goods and services used (expenses) during the fiscal period can be associated with
the revenue earned during the same fiscal period. This postulate referred to as
a. Matching
c. Historical Cost
b. Going concern
d. Specific-separate entity
20. Exception to the application of accounting theory are permitted if the amount
involve is not material; financial reporting is concerned only with information that is
significant enough to affect evaluations or decisions. This convention is called
a. Conservatism
c. Consistency
b. Objectivity
d. Materiality
21. The same accounting procedures for a given entity should be used from one period
to the next. Changes may however be made if it will result in more accurate or useful
information for decision making provided it disclosed. The convention is called
a. Conservatism
c. Consistency
b. Objectivity
d. Materiality
22. Financial statements of different firms should be based on similar accounting
principles and procedures in order to aid users of financial statements in finding
similarities and differences among firms for purposed of financial decision making This
convention is called
a. Consistency
c. Objectivity
b. Comparability
d. Conservatism

23. Accounting measurement should be based on evidence that is verifiable by


competent persons. This convention is called
a. Consistency
c. Objectivity
b. Comparability
d. Conservatism
24. The accountant should recognize all possible
alternative courses of action are available, he
favorable to owners equity.
a. Consistency
b. Comparability

losses but anticipate no profit. Where


should choose the alternative least
c. Objectivity
d. Conservatism

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