ST.

DOMINIC COLLEGE OF ASIA

School of Business and Computer Studies
ACC 223 Financial Accounting and Reporting Pt 1
Preliminary Examination

NAME: ____________________________________________________ Seat No: ______

Program/Year/Section: BSA 4 and BSAT 3 Date: September 18, 2019 Score: ________
Faculty: Prof. Mariano L. Ching Schedule: Wednesdays, 3:00 – 6:00pm

VISION: A community of dynamic scholars and learners within the Asia Pacific Region of higher learning, upholding
the highest standards of excellence in education, research and community service, towards the attainment of a
better quality of life

MISSION: To purposively link quality education, training, and research with community service in pursuing the
holistic development of individuals through innovative programs and productive activities attuned to the needs of
the global community.

GOALS:
St. Dominic College of Asia, a private non-sectarian HEI, aims to:
1. Prepare the students to be competent, productive, and socially responsible individuals professionals.
2. Actively promote research and the utilization of new technology for the enhancement of individual competen-
cies.
3. Assume leadership role in addressing the concerns of the academic community towards improving their quality
of life.

CORE VALUES:
St. Dominic College of Asia performs its various roles toward the achievement of its Vision-Mission-Goals as it an-
chors itself on a four-point set of core values:

S – Service; D – Dynamism; C – Competence; A – Accountability

Choose the best answer from the given choices which corresponds to each statement and question. Shade the
letter of your choice in your Scantron answer sheet.

THE CONCEPTUAL FRAMEWORK

1. The Conceptual Framework
a. is considered a Philippine Financial Reporting Standard (PFRS)
b. shall prevail over the provisions of PFRS in case of rare conflict
c. is used as a guide in developing, applying and interpreting PFRS.
d. deals with a set if comprehensive concepts that underlie the preparation and presentation of finan-
cial statements for internal users

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 2. The Conceptual Framework is intended to establish
a. The generally accepted accounting principles (GAAP) in financial reporting standards
b. The objectives and concepts used in developing financial reporting standards.
c. The meaning of “fairly presented” in accordance with GAAP
d. The hierarchy of sources of GAAP

3. The underlying theme of the Conceptual Framework is

a. Reliability.
b. Comparability
c. Understandability
d. Decision usefulness

4. Which of the following is NOT a function of the Conceptual Framework for Financial Reporting?
a. To provide a basis for the use of judgment in resolving accounting issues
b. To facilitate the consistent and logical formulation of Philippine Financial Reporting Standards
c. To address the concepts underlying the information presented in general-purpose financial state-
ments
d. To set out specific recognition, measurement, presentation and disclosure requirements dealing
with transactions and other events and conditions that are important in general-purpose financial
statements.

5. Under the Conceptual Framework, a REPORTING ENTITY is best described as an entity that
a. Chooses to prepare financial statements
b. Is required to prepare financial statements
c. In not required to prepare financial statements
d. Is required, or chooses, to prepare financial statements.

6. Determine the FALSE statement about a reporting entity.

a. A reporting entity is essentially the same as a legal entity.
b. A reporting entity can be a single entity or a group of entities
c. A reporting entity can be a single entity or a component of an entity
d. Determining the boundary of a reporting entity is based in the information needs of the primary
users of the reporting entity’s financial statements

7. The objective of financial reporting indicates that a reporting entity must provide information about:
a. Economic resources and claims.
b. Changes in economic resources and claims resulting from financial performance
c. Changes in economic resources an claims NOT resulting from financial performance
d. All of the choices

8. Under the Conceptual Framework for Financial Reporting, the objective of general-purpose financial report-
ing is to provide financial information about the reporting entity that is useful to
a. Existing and potential investors.
b. Existing investors, lenders and other creditors
c. Potential investors, lenders and other creditors
d. Existing and potential investors, lenders and other creditors

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 9. As accounting information users, LENDERS are interested in information
a. That enables them to determine whether their loans, and the interests attaching to them, will be
paid.
b. About profitability and stability of an entity in order to asses the ability of the entity to provide
remuneration, retirement benefits and employment opportunities
c. To regulate the activities of the entity, determine taxation policies and as a basis for national in-
come and similar statistics.
d. About the continuance of an entity especially when they have a long-term involvement with or are
dependent on the entity.

10. The objectives of financial reporting for entities are based on

a. The need for conservatism
b. Generally Accepted Accounting Principles
c. The need of the users of the information
d. Management’s demand for day-to-day operation.

11. General purpose financial reports must provide financial information about the reporting entity that is use-
ful to primary users (e.g., investors, lenders) in making decision about all of the following, EXCEPT:
a. Providing or settling loans or other forms of credit
b. Buying, selling or holding equity or det instruments
c. Patronizing major company products and/or services
d. Exercising rights to vote on, or otherwise influence, management’s action that affects the use of
the entity’s resource.

12. Accounting information is considered to be relevant when it

a. Is verifiable and neutral
b. Is able to present complete information
c. Is capable of making difference in a decision
d. Is understandable by reasonably informed users of accounting information.

13. It is an entity-specific aspect of relevance based on the nature and magnitude of the items to which the
information relates in the context of an entity’s financial report.
a. Materiality
b. Predictive value.
c. Feedback value
d. Confirmatory value

14. Prudence refers to the exercise of caution when making judgements under conditions of uncertainty. Which
ingredient of faithful representation is being supported by the exercise if prudence?
a. Neutrality
b. Completeness.
c. Freedom from error
d. Substance over form

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 15. Conservatism or prudence is the best described as selecting an accounting information that
a. Overstates liabilities and expenses
b. Understates assets and net income
c. Has the least favorable impact on owners’ equity
d. Is least likely to mislead users of accounting information.

16. The financial information must be comprehensible if it is to be useful and that users must have reasonable
knowledge of business and economic activities.
a. Reliability.
b. Verifiability
c. Compatibility
d. Understandability

17. It is the qualitative characteristic that helps assure users that information faithfully represents the economic
phenomenon it purports to represent so that different knowledgeable and independent observers could
reach consensus that a particular depiction is a faithful representation.
a. Relevance
b. Verifiability
c. Comparability.
d. Feedback value

18. Consistency in financial reporting requires that

a. Gains and losses should not appear in the income statement
b. Effect of changes in accounting treatments be properly disclosed
c. Accounting procedures be adopted that give a consistent rate of return.
d. Expenses be reported as changes against the period in which they are incurred

19. Which of the following statements best describes the “going concern” assumption?
a. The expenses of an entity exceed its income
b. When current liabilities of an entity exceed current assets
c. The ability of the entity to continue in operation for the foreseeable future
d. The potential to contribute to the flow of cash and cash equivalents to the entity.

20. The usefulness of providing information in the financial statements is subject to the constraint of
a. Cost
b. Reliability.
c. Consistency
d. Representation faithfulness

21. What are the elements that are directly related to the measurement of financial position?
a. Assets and liabilities
b. Assets, liability and equity
c. Assets, liability, income and equity.
d. Assets, liability, expenses, income and equity

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 22. What are the elements that are directly related to the measurement of financial performance?
a. Gains and losses
b. Income and expenses
c. Assets, income and expenses.
d. Assets, liability, expenses, income and equity

23. Determine the TRUE statement regarding the relationship among revenues, gains and income
a. Gains cover both income and gains
b. Revenues cover both income and gains
c. Income covers both revenues and gains
d. Income, revenues and gains are one and the same.

24. Under the Conceptual Framework (2018), recognition of assets, liabilities, equity, income and expenses is
appropriate if
a. It is both probable and measurable
b. It is probable or measurable, but not both
c. It results in both relevant information and faithful representation of he related item
d. It results in relevant information or faithful representation of the related item, but not both.

25. The accounting basis used in measurement financial performance where an income (expense) is recognized
as earned (incurred), regardless whether ot not cash received (paid).
a. Cash basis
b. Accrual basis
c. Modified cash basis.
d. Modified accrual basis

STATEMENT OF COMPREHENSIVE INCOME & ACCOUNTING CHANGES

26. What is superseded by the Statement of Comprehensive Income as a basic component of general-purpose
financial statements?
a. Balance sheet c. Statement of cash flows
b. Income statement d. Statement of changes in equity

27. Comprehensive income refers to the changes in equity other than changes resulting from distribution to
and contributions from owners. Which of these is NOT a component of comprehensive income?
a. losses c. Expenses
b. Revenue d. Dividends

28. It is the process that involves the simultaneous recognition of revenue and expenses that result directly
from the same transactions or events.
a. Matching of cost with revenue
b. Matching of revenue with cost
c. Immediate recognition
d. Systematic and rational allocation

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 29. The statement of comprehensive income shall include information about
i. Profit or loss
ii. Changes in equity
iii. Other comprehensive income
a. I and II c. II and III
b. I and III d. I, II and III

30. It is the income statement presentation wherein expenses are classified according to function – as part of
cost of sales, selling activities, administrative activities and other operating activities.
a. Cost of sales method c. Account form
b. Nature of expense method d. Report form

31. Which of the following in NOT considered in the cost of good sold?
a. Office supplies c. Raw materials
b. Work-in-process d. Finished goods

32. It is the total income less expenses, excluding the components of other comprehensive income.
a. Profit or loss
b. Retained earnings
c. Accumulated profit or loss
d. Total comprehensive income

33. Prospective application of the effect of change in estimate means that the changes is applied to transac-
tions from the
a. Date of change
b. Balance sheet date
c. Beginning of the year of change
d. Date of issuance of financial statement

STATEMENT OF FINANCIAL NOTES TO THE FINANCIAL STATEMENTS

34. The statement of financial position of a reporting entity presents a structured summary of the
a. Assets, liabilities and equity at the reporting date
b. Cash receipts and payments of cash during the period.
c. Profit and losses not reported in income of the period
d. Revenue and expenses arising during the reporting period

35. What is an essential characteristic of an ASSET?

a. An asset tangible
b. An asset is obtained at a cost
c. An asset provides future economic benefit
d. The claims to an asst’s benefits are legally enforceable.

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36. Which of the following statements best describes a LIABILITY?
a. An excess of equity over current asset
b. A present obligation of the entity arising from past events
c. Resources to meet financial commitments as they fall due.
d. The residual interest in the assets of the entity after deducting all of its liabilities

37. Under PAS 1, assets in the statement of financial position are broadly classified into
a. Current and non-current c. Depreciable and non-depreciable
b. Tangible and intangible d. Monetary and non-monetary

38. Under PAS 1, which of the following does NOT refer to a current asset?
a. It is held primarily for the purpose of being traded
b. It is cash or cash equivalent restricted for more than 12 months BS date
c. It is expected to be realized within 12 months after the balance sheet (BS) date.
d. It is expected to be realized, sold or consumed within the entity’s normal operating cycle

39. Under PAS 1, which of the following does NOT refer to a current liability?
a. It is held primarily for the purpose of being traded.
b. It is expected to be settled within the entity’s normal operating cycle
c. It is due to settled within twelve months after the balance sheet date
d. The entity has an unconditional right to defer settlement of the liability for at least twelve months
after the balance sheet date.

40. Offsetting of assets and liabilities is

a. Allowed in all cases
b. Not allowed in all cases
c. Allowed unless not permitted by PFRS
d. Not allowed unless permitted by PFRS

41. The balance sheet format wherein assets section is shown side-by-side with liabilities &equity section.
a. Account form c. Functional presentation
b. Report form d. Natural presentation

42. These are narrative description or disaggregation of items disclosed on the face of the financial statements
and information about items that do not qualify for recognition.
a. Financial reports c. Notes to the financial statements
b. Value-added statements d. Summary of significant accounting
policies

43. What is the purpose of information presented in NOTES to the financial statements?
a. To present management’s responses to auditor comments
b. To correct improper presentation in the financial statements
c. To provide disclosure required by generally accepted accounting principles
d. To provide recognition of amounts not included in the total of the financial statements

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 44. The application of Philippine Financial Reporting Standards, with additional disclosures if necessary, is
presumed to result in financial statements that achieve
a. Aggregation c. Comparable information
b. Fair presentation d. Consistency of presentation

45. An entity is required to represent the following non-financial disclosures, EXCEPT

a. Domicile and legal form of the entity
b. Description of the nature of entity’s operation
c. Names of major shareholders and board members
d. Name of parent and ultimate parent of the group of companies.

CASH & CASH EQUIVALENTS

46. Under existing accounting rules, cash is considered as a
a. Fixed asset
b. Financial asset
c. Depreciable asset
d. Non-monetary asset

47. Which of the following is most likely NOT considered as CASH for financial reporting purposes?
a. Bank drafts and money orders
b. Stale checks issued to creditors
c. Post-dated checks from customers
d. Undelivered checks to trade suppliers

48. A material credit balance in the ‘cash in bank’ account (BANK OVERDRAFT)
a. Is treated as an error
b. Is treated as a current liability
c. Is netted against cash and a net cash amount is reported
d. May be offset against a demand deposit account maintained in another bank

49. CASH EQUIVALENTS are short-term and highly liquid investments that are
a. Classified as available-for-sale securities
b. Readily convertible into cash and acquired one year before maturity
c. Readily convertible into cash and acquired six months before maturity
d. Readily convertible into cash and acquired three months before maturity

50. For balance sheet date December 31, 2018, which of the following in NOT considered as a cash equiva-
lent?
a. 12-month BSP treasury note due February 15, 2019, acquired November 31, 2018
b. 6-month BSP treasury note due January 15, 2019, acquired October 1, 2018
c. 3-month BSP treasury bill due March 15, 2019 acquired December 15, 2018

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 d. 1-month money market placement

51. Cash denominated in foreign currency (e.g., USD, Euro) shall be translated to Philippine peso using
a. Closing rate c. Average rate
b. Passing rate d. Historical rate

52. Significant deposits in a foreign bank subject to foreign exchange restriction should be classified
a. As non-trade receivables with appropriate disclosure
b. As part of noncurrent assets with appropriate disclosure
c. As cash and cash equivalents with appropriate disclosure
d. As held-to-maturity securities with appropriate disclosure

53. Checks drawn before the balance sheet date but held for later delivery (UNDELIVERED CHECKS)
a. Should be treated as trade receivable
b. Should be regarded as cash equivalents
c. Should be restored back to cash balance
d. Should be treated as outstanding checks for bank reconciliation process
54. What happens when an entity records the payment of payable made in the subsequent period as if it were
made in the current period?
a. Kiting c. Lapping
b. Fishing d. Window dressing
55. Which of the following are necessary components of internal control over cash, EXCEPT:
a. Daily deposit of all receipts in the com- c. Petty cash system
pany’s bank account d. Cash reserve
b. Bank reconciliation

56. Petty cash fund is

a. Restricted cash
b. Set aside for the payment payroll
c. Separately classified as a current asset
d. Money kept on hand for making minor disbursement which can not be paid conveniently thru
checks

57. Under the imprest fund system, the ‘petty cash fund’ account is debited
a. Only when the fund is created
b. When the fund is created and every time it is replenished
c. When the fund is created and when the size of the fund is increases
d. When the fund is abolished and when the size of the fund is decreased

58. What is the major purpose of an Imprest petty cash fund?

a. To ease the payment of cash to vendors
b. To effectively control cash disbursements
c. To effectively plan cash inflows and outflows
d. To determine the honesty of petty cashier

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 59. Which of the following is an INCORRECT application of the Imprest System of cash control?
a. Cash receipts must be deposited on a regular basis
b. Cash disbursements must be made through checks, regardless of the amount
c. Material amount of cash disbursements must be made in the form of checks
d. Insignificant cash disbursements must be made out of the petty cash fund

60. A debit balance (i.e, shortage) in the “Cash short or Over” account at the period that can be attribute to
the fault of the petty cashier is treated as
a. Receivable from employee c. Miscellaneous income
b. Miscellaneous expense d. Payable to employee
****End of examination****

Mlching, 44458:ACC223-Preliminary ExamSept11,2019

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