PHINMA UNIVERSITY OF PANGASINAN d.

all of these
CONCEPTUAL FRAMEWORK and ACCOUNTING
STANDARDS
7. Which of the following statements is false?
Name: _____________________________________ Section: a. Accountable events are those that have an effect in an
_________ Date: _____ entity's assets, liabilities, equity, income or expenses.
b. The term “recognition” as used in accounting refers
Instructions: Pray first. Relax your mind. Inhale and exhale. to the process of incorporating the effects of an
Write the letter of the correct answer. No erasures and accountable event in the statement of financial
alterations allowed. Erased and altered answers are considered position or the statement of profit or loss and other
wrong.    comprehensive income through a memo entry.
c. External events are those that involve the reporting
1. These are events involving an entity and another external entity and an external party.
party. d. The Board of Accountancy consists of a chairperson
a. external events and six members.
b. internal events
c. transactions
8. During the lifetime of an entity, accountants produce
d. life events
financial statements at arbitrary points in time in
accordance with which basic accounting concept?
2. It is the accounting process of assigning numbers,
a. Cost/benefit constraint
commonly in monetary terms, to the economic
b. Periodicity assumption
transactions and events.
c. Conservatism constraint
a. analyzing c. classifying
d. Matching principle
b. measuring d. interpreting

9. The assumption that a business enterprise will not be sold

3. What is the basic purpose of accounting?
or liquidated in the near future is known as the
a. To provide quantitative financial information about
a. economic entity assumption.
economic activities.
b. monetary unit assumption.
b. To provide all information that users need in making
c. conservatism assumption.
economic decisions.
d. going concern.
c. To provide qualitative financial information about
economic activities intended to be useful in making
economic decisions. 10. When products or other assets are exchanged for cash or
d. To provide quantitative financial information about claims for cash, they are said to be
economic activities intended to be useful in making a. allocated.
economic decisions. b. realized.
c. recognized.
4. Accounting provides which type of information? d. earned.
a. quantitative
b. financial information 11. A soundly developed conceptual framework of concepts
c. qualitative and objectives should
d. all of these a. increase financial statement users' understanding of
and confidence in financial reporting.
b. enhance comparability among companies' financial
5. External users are those statements.
a. who do have the authority to demand financial c. allow new and emerging practical problems to be
reports tailored to their specific needs. more quickly soluble.
b. who do not have the authority to demand financial d. all of these.
reports tailored to their common needs.
c. who do not have the authority to demand financial 12. The overall objective of financial reporting is to provide
reports tailored to their specific needs. information
d. who belong to countries other than the domicile a. about an entity's assets, liabilities, and owners' equity.
country of the reporting entity b. about an entity's financial performance during a
period.
c. that is useful in making economic decisions.
6. The primary objective of financial reporting is to provide d. that allows owners to assess management's
a. information about economic resources, claims to performance.
these resources, and changes in them.
b. information useful for investment and credit 13. The two primary qualities that make accounting
decisions. information useful for decision making are
c. information useful in predicting future cash flows. a. comparability and consistency.
 b. materiality and timeliness. 20. Accounting information is considered to be relevant when
c. relevance and reliability. it
d. faithful representation and relevance. a. can be depended on to represent the economic
conditions and events that it is intended to represent.
b. is capable of making a difference in a decision.
14. Which of the following statements about materiality is not c. is understandable by reasonably informed users of
correct? accounting information.
a. An item must make a difference; otherwise, it need d. is verifiable and neutral.
not be reported.
b. Materiality is affected by an item’s relative size 21. When information about two different entities has been
and/or importance. prepared and presented in a similar manner, the
c. An item is material if its inclusion or omission would information exhibits the characteristic of
influence or change the judgment of a reasonable a. relevance.
person. b. reliability.
d. All of these are correct statements about materiality. c. consistency.
d. comparability.

15. Which of the following does not provide evidence of 22. A decrease in net assets arising from peripheral or
future economic benefits from a resource? incidental transactions is called a(n)
a. The resource cannot be used in the entity’s operations a. capital expenditure.
but has a resale value. b. cost.
b. The resource has no use for the entity but it can be c. loss.
swapped for other resources. d. expense.
c. The entity does not intend to sell or use the resource
but instead distribute it to the owners as dividends. 23. Which of the following is not an element that is directly
d. The resource is expected to be used only in the related to the measurement of an entity’s financial
current period and that’s it. position?
a. assets
b. liabilities
16. Which of the following would most likely result to the c. equity
recognition of a liability? d. income
a. Customers become entitled to rebates for their past
purchases. 24. This type of presentation of statement of financial
b. Intention to acquire inventories in a future period. position does not show distinctions between current and
c. Entering into a purchase contract for future delivery. noncurrent items.
d. Agreeing on an irrevocable future commitment that is a. Classified presentation
not burdensome at present. b. Unclassified presentation
c. Non-discriminating presentation
d. Awesome presentation
17. The adage “Aanhin mo pa and kabayo pag patay na ang
damo” relates to which of the following qualitative 25. In making an economic decision, an investor needs
characteristics? information on the amounts of an entity’s economic
a. Relevance resources and claims to those resources. That investor
b. Timeliness would most likely refer to which of the following
c. Faithful representation financial statements?
d. Comparability a. Statement of financial position
b. Statement of comprehensive income
18. According to the Conceptual Framework, predictive value c. Statement of cash flows
relates to d. Statement of changes in equity
Relevance Faithful representation
a. Yes Yes 26. Which of the following financial statements would be
b. No Yes dated as at a certain date?
c. Yes No a. Statement of financial position
d. No No b. Statement of profit or loss and other comprehensive
income
19. Information is neutral if it c. Statement of cash flows
a. provides benefits which are at least equal to the costs
d. All of these
of its preparation.
b. can be compared with similar information.
27. According to PAS 8, these are the specific principles,
c. has no impact on a decision maker.
bases, conventions, rules and practices applied by an
d. is free from bias toward a predetermined result.
entity in preparing and presenting financial statements.
 a. Accounting policies c. Accounting b. The Stock Exchange
standards c. The International Accounting Standards Board
b. Accounting estimates d. Accounting d. The Government
assumptions
35. The IASB Conceptual Framework identifies user groups.
28. A change in the pattern of consumption of economic Which of the following is not an information need for the
benefits from an asset is most likely a ‘investor’ group?
a. change in accounting policy. c. error. a. Assessment of repayment ability of an entity
b. change in accounting estimate. d. any of b. Measuring performance, risk and return
these c. Taking decisions regarding holding investments
d. Taking buy/sell decisions
29. PAS 8 permits a change in accounting policy only if the
change 36. Which one of the following can be recognized as an asset
a. is required by a PFRS in the financial statements in accordance with the
b. results in reliable and more relevant information Conceptual Framework?
c. a or b a. Php2,000.00 paid to train staff members
b. Php70,000.00 research costs that may result in
d. PAS 8 does not permit a change in accounting policy
the development of a new product
c. A Php100,000.00 contract with a customer to
30. These arise from misapplication of accounting policies,
deliver goods at a specified date in the future
mathematical mistakes, oversights or misinterpretations of
d. The Php2,000,000.00 transfer fee paid by a
facts, or fraud.
basketball team to acquire a player on contract
a. Error
from another team.
b. Change in accounting estimate
c. Change in accounting policy 37. Which of the following would not necessarily lead to a
d. Impracticable application liability being classified as a current liability?
a. The liability is expected to be settled in the
31. How should the following changes be treated, according course of the entity’s normal operating cycle.
to PAS 8? b. The liability has arisen during the current
I. A change is to be made in the method of calculating accounting period.
the provision for uncollectible receivables. c. The liability is held primarily for the purpose of
II. Investment properties are now measured at fair value, trading.
having previously been measured at cost. d. The liability is due to be settled within 12
Change (1) Change months after the end of the reporting period.
(2)
a. Change of accounting policy Change 38. How does IAS 1 define the ‘operating cycle’ of an entity?
of accounting policy a. The time between acquisition of assets for
b. Change of accounting policy Change processing and delivery of finished goods to
of accounting estimate customers.
c. Change of accounting estimate Change b. The time between delivery of finished goods and
of accounting policy receipt of cash from customers.
d. Change of accounting estimate Change of c. The time between acquisition of assets for
accounting estimate processing and payment of cash to suppliers.
d. The time between acquisition of assets for
32. These are those which do not give rise to a right to receive processing and receipt of cash from customers.
(or an obligation to deliver) a fixed or determinable
amount of money. 39. Where are equity dividends paid presented in the financial
a. Monetary items statements?
b. Non-monetary items a. As a deduction from retained earnings in the
c. Financial items statement of changes in equity.
d. Non-financial items b. As a liability in the statement of financial
position
33. What is the role of the IASB? c. As an expense in profit or loss
a. Oversee the standard setting and regulatory d. As a loss in ‘other comprehensive income’
process
b. Formulate international financial reporting 40. In accordance with IAS 1 Presentation of Financial
standards Statements, which of the following statements is correct?
c. Review defective accounts a. All financial statements must be prepared on an
d. Control the accountancy profession accrual basis
b. Inappropriate accounting policies can be rectified
34. Who issues International Financial Reporting Standards? by disclosure
a. The IFRS Advisory Committee
 c. Financial statements must always be prepared on 47. A discontinued operation is a component of an entity that
a going concern basis either has been disposed of or is classified as held for sale
d. Assets and liabilities should not be offset unless and
required or permitted by an IFRS. I. Represents a separate major line of business or
geographical area of operations
II. Is a part of a single coordinated plan to dispose
41. The basic objective of accounting is of a separate major line of business or
a. To provide the information that the managers of geographical area of operation.
an economic entity need to control its operations. III. Is a subsidiary acquired exclusively with a view
b. To provide information that the creditors of an to resale
economic entity can use in deciding whether to
make additional loans to the entity. a. I only
c. To measure the periodic income of the economic b. I and II only
entity c. I and III only
d. To provide quantitative financial information d. I, II, and III only
about an entity that is useful in making rational 48. Which of the following is not one of the primary users
economic decision. listed in the Conceptual Framework?
a. Investors
c. Creditors
42. Financial Accounting is concerned with b. Lenders
a. General-purpose reports on financial position d. Debtors
and financial performance. 49. Which of the following is least relevant in determining an
b. Specialized reports for inventory management entity’s functional currency?
and control a. The currency that influences the entity’s sales
c. Specialized reports for income tax computation prices and costs
and recognition b. The currency in which the entity generates
d. General-purpose reports on changes in stock financing cash flows
prices and future estimates of market position. c. The currency in which cash flows from operating
activities are retained.
43. The relatively stable economic, political and social d. The currency of the country in which the entity is
environment supports located.
a. Conservatism 50. Changes to reporting standards are primarily made in
c. Timeliness response to
b. Materiality a. Government regulations
d. Going concern b. Users’ needs
c. Global modernization
d. All of these
44. In the Conceptual Framework for financial reporting,
what provides the “why” of accounting?
a. Measurement and recognition concept
b. Qualitative characteristics of accounting
information
c. Element of financial statements
d. Objective of financial reporting

45. Noncurrent asset classified as held for sale shall be

presented in the statement of financial position as “The discerning heart seeks knowledge, but the
a. Current asset mouth of a fool feeds on folly.” (Proverbs 15:14)
b. Other noncurrent asset
c. Noncurrent investment
d. Property, plant and equipment
46. It comprises operations and cash flows that can be clearly
distinguished, operationally. It comprises operations and
cash flows that can be clearly distinguished, operationally
and for financial reporting purposes from the rest of the
entity
a. Component of an entity
b. Disposal group
c. Business segment
d. Corporate asset