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FRAMEWORK OF ACCOUNTING
2. In evaluating the reliability of accounting information, which of the following need not be
considered?
(a) neutrality (c) accessibility
(b) verifiability (d) representational faithfulness C
4. Decision makers vary widely in the types of decisions they make, the methods of decision
making they employ, the information they already possess or can be obtain from other
sources, and their ability to process information. Consequently, for information to be
useful there must be a linkage between these users and the decisions they make. This
link is:
(a) relevance (c) understandability
(b) reliability (d) materiality C
5. Which of the following concepts means that there should be no attempt on the part of the
preparers of financial reports to induce a predetermined outcome or a particular mode of
behavior?
(a) conservatism (c) representational faithfulness
(b) neutrality (d) consistency B
9. An operating cycle:
(a) is twelve months or less in length.
(b) is the average time required for an enterprise to collect its receivables.
(c) is used to determine current assets when the operating cycle is longer than one year.
(d) starts with inventory and end with cash. C
10. When the entity has substantially accomplished what it must do to be entitled to the
benefits represented by the revenues, revenues are:
(a) earned (c) recognized
(b) realized (d) all of these A
11. A sale should not be recognized as revenue by the seller at the time of sale if:
(a) payment was made by check
(b) the selling price is less than the normal selling price
(c) the buyer has a right to return the product and the amount of future returns cannot be
reasonably estimated
(d) none of the these C
15. Comparability of financial statements of a single enterprise for one date or period of time
with those of other dates or for other periods would be more informative if the following
conditions exist, except:
(a) the presentations are in the same form
(b) the contents of the statements are identical.
(c) accounting principles are not changed at all.
(d) changes in circumstances or the nature of the underlying transactions are disclosed.
C
18. Information about different entities and about different periods of the same entity can be
prepared and presented in a similar manger. Comparability and consistency are related
to which of these objectives?
Comparability Consistency Comparability Consistency
(a) Entities Entities (c) Periods Entities
(b) Entities Periods (d) Periods Periods B
19. Valuing assets at their liquidation values rather than their cost is inconsistent with the:
(a) periodicity assumption (c) materiality constraint
(b) matching principle (d) historical cost principle D
20. Trade-offs between the characteristics that make information useful may be necessary or
beneficial. Issuance of interim financial statements is an example of a trade-off between:
(a) relevance and reliability (c) timeliness and materiality
(b) reliability and periodicity (d) understandability and timeliness A
28. When a company makes a change in accounting principle, prior year statements are not
generally restated to reflect the change. This procedure would prevent a dilution of public
confidence in financial statements but that it would conflict with the accounting concept of:
(a) materiality (c) objectivity
(b) conservatism (d) comparability D
29. This feature of financial accounting considers that determination of periodic income and
financial position depends on measurement of economic resources and obligations and
changes in them as the changes occur rather than simply on recording receipts and
payments of money.
(a) measurement of economic resources and obligations
(b) use of the accrual basis of accounting
(c) measurement in terms of money
(d) exchange price B
30. On December 31, 2005, F Corporation sued J, Inc. for breach of the contract of carriage
in the amount of P1 million. F’s financial statements should report the expected award of
P1 million as a:
(a) recoverable and revenue (c) receivable and deferred payments
(b) revenue (d) disclosures by footnotes only D
33. It is the body authorized by law to promulgate rules and regulations affecting the practice
of accountancy in the Philippines.
(a) PICPA (c) Board of Accountancy
(b) ASC (d) PRC C
34. The ASC will not issue any SFAS without the approval of at least:
(a) eight members (c) four members
(b) five members (d) three members B
35. The financial information is designed to serve the common needs of owners, creditors,
managers, and other users, with primary emphasis on the needs of present and potential
owners and creditors.
(a) general purpose financial information
(b) fundamentally related financial statements
(c) substance over form
(d) materiality A
38. The qualitative objective in accounting that information should be made available without
delay before decisions are to be made.
(a) relevance (c) completeness
(b) timeliness (d) understandability B
40. In cases of any departure from conformity with GAAP, the CPA must indicate:
A B C D
Nature of departure Yes Yes No No
Approximate effects thereof No Yes No Yes B
41. The basis for valuing or recording transactions where cash is not involved:
(a) historical cost (c) selling price
(b) fair value (d) home consumption value B
42. The following are related to objectivity except:
(a) arm’s length-transactions (c) periodicity
(b) neutrality (d) verifiability C
49. What is the primary criterion by which accounting information can be judged?
(a) consistency (c) usefulness for decision-making
(b) predictive value (d) comparability C
50. This refers to the tendency of accountants to resolve uncertainty in a way least likely to
overstate assets and revenues?
(a) comparability (c) conservatism
(b) materiality (d) consistency C