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This document contains a pre-week summary that discusses key concepts in financial accounting, including: 1) The nature of accounting and key statements about accounting theory and the accounting profession. 2) Applications of the science and art aspects of accounting. 3) The differences between financial accounting, bookkeeping, auditing, and management accounting. 4) Limitations of financial accounting and financial statements. 5) The objectives of the International Accounting Standards Board and their process for issuing new standards.

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Gia Serilla
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96 views2 pages

Questions

This document contains a pre-week summary that discusses key concepts in financial accounting, including: 1) The nature of accounting and key statements about accounting theory and the accounting profession. 2) Applications of the science and art aspects of accounting. 3) The differences between financial accounting, bookkeeping, auditing, and management accounting. 4) Limitations of financial accounting and financial statements. 5) The objectives of the International Accounting Standards Board and their process for issuing new standards.

Uploaded by

Gia Serilla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Pre-week Summary I – Oct 2006 Page

1 FINANCIAL ACCOUNTINGAccounting and Financial Accounting Concepts 1.0 Overview of


Accounting1. Which of the following statements about the nature of accounting is not true?a.
Accounting is the language of business.b. Accounting identifies, measures and communicates financial
information about economic entities for use by both external and internalusers in making economic
decisionsc. Before accounting can render communication services, an economic entity should first be
createdd. Accounting communication services are available only to publiclyaccountable, medium-sized
and small industries and not to micro entities 2. Which of the following statements regarding
accounting theory is [are} true? I . Accounting concepts are human made II. Accounting
Theory can be defined as a coherent set of hypothetical, conceptual and pragmatic principles
that form a general frame of reference for a field of inquiry III. Accounting theory has developed
primarily in response to government regulations. Statement 1 Statement II Statement III
Statement I Statement II Statement III a. true false true c. false
true false b. true true false d. true true true 3. Which of
the following statements does not properly describe the fact that the Accountancy Profession is a
communication profession?a. Financial statements should use terminology within the level of
understanding of the statement user.b. Financial statements can be expressed in the Spanish or Chinese
languagec. Financial statements, as far as possible, should show information thatcan be verified from
documentary evidence in order to gain the confidence of statement usersd. Financial statements can be
expressed in any dialect of a country4. Which one of the following is an application of the science
aspect of Accounting?a. Exercise of creative skill and judgmentb. Interpreting the information presented
in the financial statements through ratios and trend analysisc. Use of an accounting equation to express
the relationship of accountable eventsd. Attesting to the fairness of presentation of financial condition
and operating results5. The art aspect of accounting is applied in the following circumstances except
whena. The accountant refers to a body of organized knowledge in processing accounting information.

b. A provision is recognized on the basis of the company lawyer’s professional opinion that there
is a strong probability that the company will lose in a lawsuit in the corridor of P 5 M to P 8 M
c. The accountant chooses the most appropriate method of inventory valuation for the entity. D..
The external auditor gives an unqualified opinion that the financial statements are fairly presented
in conformity with generally accepted accounting principles6. Which of the following statements is
incorrect?a. General purpose financial statements were developed primarily because all outside party
users have the same information needs b.The double-entry system of accounting has been used for
centuries.c. The practice of accounting requires considerable professional judgmentd.The objective of
external financial statements is to communicate the economic effects of completed transactions and
other events in the entity7. The branch of accounting that focuses on general purpose reports on
financial position and results of operations is known asa. Financial accounting c.
Bookkeepingb. Auditing d. Management Accounting8. Which of the
following applies to financial accounting? A. b. c. d
Information meets specific needs of particular statement users yes no no no
Emphasizes objective data yes no yes no Future-
oriented no no no yes Basically
concerned with income determination and asset valuation no yes yes no9. The following
descriptions pertain to limitations of financial accounting and financial statements excepta. Historical in
nature c. Centered on quantifiable informationb. Use of estimates d. Records
information on the basis of business papersAccounting standard setting (institutions and process) 10.
According to the Preface to International Financial Reporting Standards, which of the following are
objectives of the IASB?I. To harmonize financial reporting between IFRS and US GAAP and the
European II. To work actively with national standard setters III. To promote the use and strict
application of financial accounting standards a. I and II b. I and III c. II and III
d. I, II and III11. Which of the following are parts of the “due process” of the IASB in issuinga new
International Financial Reporting Standard?I. Establishing an advisory committee to give adviceII.
Developing and publishing a discussion document for

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