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7. Under PFRS, which of the following is the first step within the hierarchy of guidance to
which management refers, and whose applicability it considers, when selecting
accounting policies?
A. Consider the most recent pronouncements of other standard-setting bodies to the
extent they do not conflict with the PFRS or the Conceptual Framework.
B. Apply a standard from PFRS if it specifically relates to the transaction, other event, or
condition.
C. Consider the applicability of the definitions, recognition criteria, and measurement
concepts in the Conceptual Framework.
D. Apply the requirements in PFRS dealing with similar and related issues.
8. Per conceptual framework, the objectives of financial reporting for business enterprises
are based on
A. GAAP C. The need for conservatism
B. Reporting for regulators D. The needs of the user of information
15. External financial statements, according to FRSC Framework for the Preparation and
Presentation of Financial Statements, should provide all of the following information
except
A. Information that is useful to present and potential investors and creditors and other
users in making rational investment, credit, and other decision
B. Information that is comprehensible to those who have reasonable understanding of
business and economic activities and are willing to study the information with
reasonable diligence
C. Information for planning the future of the entity, implementing those plans, and
for controlling daily operations
D. Information about the economic resources of an enterprise, the claims to those
resources and the effects of transactions, events and circumstances that change
resources and claims to those resources
16. During a period when an enterprise is under the direction of a particular management, its
financial statements will directly provide information about
A. Both enterprise performance and management performance
B. Management performance but not directly provide information about enterprise
performance
C. Enterprise performance but not directly provides information about management
performance
D. Neither enterprise performance nor management performance
19. Enhancing qualitative characteristics of financial reporting that make information more
useful are
A. Verifiability, timeliness, understandability, and time-period
B. Relevance, reliability, and faithful representation
C. Comparability, verifiability, timeliness, and understandability
D. Completeness, neutrality, and freedom from error
21. An entity-specific aspect of relevance based on the nature or magnitude (or both) of the
items to which the information relates in the context of an individual entitys financial
report
A. Predictive Value C. Materiality
B. Confirmatory Value D. Faithful representation
23. It means that different knowledgeable and independent observers could reach consensus,
although not necessarily complete agreement, that a particular depiction is a faithful
representation
A. Faithful representation C. Reliability
B. Verifiability D. Enhancing qualitative characteristics
35. Which of the following is not a qualitative characteristic of financial statements according
to the Framework?
A. Materiality C. Comparability
B. Understandability D. Relevance
36. When options and warrants are considered as potential shares in computing diluted earnings
per share, which specific characteristic is achieved?
A. Completeness C. Relevance
B. Reliability D. Substance over form
37. An entity for which there are users who the financial statements as their major source of
financial information about the entity
A. Reporting entity C. Partnership
B. Corporate entity D. Sole proprietorship
38. Which of the following is not a decision that external users of a companys financial
information would make?
A. Whether or not to extend credit to the company
B. Whether or not to hold the companys stock
C. Whether or not the company should add a new product
D. Whether or not to ask for an increase in employees benefits during union contract
negotiations
45. The primary users need information about the resources of the entity to
I. Assess an entitys prospects for future net cash inflows
II. Assess how effectively and efficiently management has discharged their
responsibilities to use the entitys existing resources (i.e., stewardship)
III. Be used in regulation by prudential and market regulators
A. I and II only C. I and III only
B. II and III only D. I, II and III
47. Existing and potential investors are interested in (choose the exception)
A. Risk and return on their investment C. Entitys ability to pay dividends
B. Hold, buy or sell decisions D. Entitys stability and profitability
49. Interested in information about the trends and recent developments in the prosperity
of the entity and its range of activities
A. Government and its agencies C. Employees and unions
B. Public D. Customers
50. They have an interest in information about the continuance of an entity especially when
they have a long term involvement with or dependent on the entity
A. Government and their agencies C. Employees and unions
B. Public D. Customers
54. S1. Assets = Liabilities Owners Equity deals with the performance of the entity
rather that asset valuation
S2. Net assets = Owners Equity exemplifies the entity perspective of financial reporting
S3. The proprietary perspective is also called as wealth concept
A. True True False B. True False True C. False True True D. True True True
57. Per Framework, these are the broad classes of events or transactions that are grouped
according to their economic characteristics
A. Elements of financial statements C. Accountable events
B. Economic transactions D. Financial statements
60. Per Framework: the removal of an account balance from the books of accounts
A. Write-off B. Derecognition C. Retirement D. Disposal
61. These are increases in economic benefits during the accounting period in the form of
inflows or enchantments of assets or decreases of liabilities that result in increases in
equity, other than those relating to contributions from equity participants
A. Eqiuty B. Asset C. Cash D. Income
62. A resource controlled by the entity as a result of past events and from which future
economic benefits are expected to flow to the entity
A. Equity B. Asset C. Cash D. Income
69. The valuation to receive cash in the future at present value on financial statements
justified by which accounting concept?
A. Monetary B. Time period C. Accrual D. Going concern
70. Choose the correct statement about generally accepted accounting principles.
A. They are laws.
B. The BIR enforces GAAP.
C. GAAP and tax principles are the same.
D. Firms that do not comply with GAAP may suffer negative economic consequences.
71. Statement 1. The economic entity assumption is applicable not only to business
organizations, but whenever accounting is involved.
Statement 2. When a parent and subsidiary relationship exists, consolidated financial
statements are presented in recognition of the economic entity assumption.
A. True ; True C. False ; True
B. True ; False D. False ;False
75. Revenue is expressed as the number of pesos received or the peso equivalent of the
commodities or services received. Cost is expressed as the number of pesos paid out or
the peso equivalent of the items given up. Fluctuations in value of peso are ignored. What
is the applicable accounting assumption?
A. Realization C. Going concern
B. Historical cost D. Unit of measure
76. Statement 1. The realizable value of an asset is the amount of cash or cash equivalents
that would be obtained in orderly disposal.
Statement 2. The current cost of a liability is the undiscounted amounts of cash or cash
equivalents that would be required to settle the obligation currently.
A. True ; True C. False ; True
B. True ; False D. False ; False
78. Materials and other supplies held for use in the production of inventories are not written
down below cost if the finished products in which they will be incorporated are expected
to be sold at or above cost. However, when a decline in the price of the materials
indicates that the cost of the finished products exceeds net realizable value, the materials
are written down to net realizable value. In such circumstances, what is the best available
measure of the materials net realizable value?
A. Settlement value C. Present value
B. Replacement cost D. Historical cost
79. A corporation needed a new warehouse, a contractor quoted a P250,000 price to construct
it. The corporation believed that it could build the warehouse for P215,000 and decided to
use company employees to construct the warehouse. The final construction cost incurred
by the corporation was P240,000 but the asset was recorded at P250,000. This is a
violation of the
A. Matching principle C. Cost principle
B. Revenue recognition principle D. No principle is violated
80. When a P300 asset with a 6-year useful life is recorded as an expense at the date of
purchase, this is an application of the:
A. Matching principle C. Materiality constraint
B. Cost principle D. Separate entity assumption
81. The primary measurement basis currently used to value assets in general purpose
financial statement 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 currently held by an entity were purchased on
the open market
C. The present value of the cash flows assets are expected to generate over their
remaining useful lives
D. The market price of the assets at the date the assets were acquired
82. A firm signs a major contract in December to construct custom machinery for a client. No
work is begun the current year yet the footnotes to the firms financial statements discuss
the nature and peso amount of the contract. This is an example of
A. Reliability C. Historical cost
B. Full disclosure D. Conservatism
83. A corporation report the sale of some of its shares to shareholder in its financial
statements, and the shareholder reports the same transaction as an investment. Therefore,
A. The revenue principle has been violated
B. The separate entity assumption has been violated
C. The double entry accounting concept has been violate
D. No accounting concept has been violated