Submitted by: Hannah V.

Yap Subject Code: 8066

Submitted to: Prof. Lord Eddie I. Aguilar, CPA, MBA

1. The objective of financial reporting for business enterprise is based on the

a. The need for conservatism
b. The need of users of information
c. Generally accepted accounting principle
d. Reporting on management’s stewardship

2. Financial accounting can be broadly defined as the area of accounting that prepares
a. General purpose financial statements to be used by parties internal to the business
enterprise only
b. Financial statements to be used by investors only
c. General purpose financial statements to be used by parties both internal and
external to the business enterprise
d. Financial statements to be used primarily by management

3. Financial accounting standard-setting

a. Can be described as a social process that reflects political actions of various
interested user groups as well as a product of research and logic
b. Is based solely on research and empirical findings
c. Is a legalistic process based on rules promulgated by governmental agencies
d. Is democratic in the sense that a majority of accountants must agree with a standard
before it becomes enforceable

4. These statements users need information that will assist them in determining general trends
and recent developments in the prosperity of the enterprise and the range of its activities.
a. Investors b. Lenders c. General public d. Customers
5. What is the objective of financial statements according to the Framework?
a. To provide information about the financial position, performance, and changes in
the financial position of an entity that is useful to a wide range of users in making
economic decisions.
b. To prepare and present a balance sheet, an income statement, a cash flow statement, and a
statement of changes in equity.
c. To prepare and present comparable, relevant, reliable, and understandable information to
investors and creditors.
d. To prepare financial statements in accordance with all applicable Standards and
Interpretations.

6. The Conceptual Framework is intended to assist

a. The FSRSC c. CPAs in public practice
b. The users of financial statements d. All of these

7. Which is not included in the scope of the Conceptual Framework?

a. Qualitative characteristics that determine usefulness of financial accounting information
b. Definition, recognition, and measurement of the elements of financial statements
c. Generally accepted accounting principles
d. Concepts of capital and capital maintenance

8. Which of the following statements is incorrect regarding the conceptual framework of

accounting?
a. The framework assists the FSRSC in developing accounting standards
b. The framework is not a Philippine Financial Reporting Standard
c. The framework overrides a specific Philippine Financial Reporting Standard
d. The framework does not define standards for any particular measurement issue

9. What are qualitative characteristics of financial statements?

a. Qualitative characteristics are the attributes that make the information provided in
financial statements useful to users.
b. Qualitative characteristics are broad classes of financial effects of transactions and other events.
c. Qualitative characteristics are nonqualitative aspects of an entity’s position and performance and
changes in financial position.
d. Qualitative characteristics measure the extent to which an entity has complied with all relevant
standards and interpretations.

10. Which of the following are underlying assumptions of financial statements?

a. Relevance and reliability
b. Financial capital maintenance and physical capital maintenance.
c. Accrual basis and going concern
 d. Prudence and conservatism

11. The Conceptual Framework sets out two constraints in implementing accounting procedures.
These are
a. Cost-benefit and timeliness c. Comparability and consistency

b. Timeliness and materiality d. Cost-benefit and materiality

12. The overriding qualitative characteristic of accounting information is

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

13. Preparation of consolidated FS when a parent-subsidiary relationship exists is an example of

the
a. Economic entity assumption c. Comparability characteristics
b. Relevance characteristics d. Neutrality characteristics

14. The economic entity assumption

a. Is applicable to unincorporated business
b. Recognizes the legal aspects of business organizations
c. Requires periodic income measurement
d. Is applicable to all forms of business organizations.

15. What are qualitative characteristics of financial statements according to framework?

a. Qualitative characteristics are the attributes that make the information provided in
financial statements useful to users
b. Qualitative characteristics are broad classes of financial effects of transactions and other
events
c. Qualitative characteristics are nonquantitative aspects of an entity’s position and
performance and changes in financial position.
d. Qualitative characteristics measure the extent to which an entity has complied with all
relevant Standards and Interpretations

16. Which of the following is not a qualitative characteristic of financial statements?

a. Materiality c. Comparability

b. Understandability d. Relevance
17. For financial information to be useful, there must be a linkage between the decision makers
and the decisions they make. This link is
a. Relevance b. Reliability c. Understandability d. Materiality

18. The characteristic that is demonstrated when a high degree of consensus can be secured
among independent measurers using the same measurement methods is
a. Relevance b. Reliability c. Verifiability d. Neutrality

19. Issuance of interim financial statements is an example of trade-off between

a. Relevance and Reliability c. Timeliness and materiality
b. Reliability and periodicity d. Understandability and timeliness

20. Which is not requisite of the reliability of financial statement?

a. The statements are presented in accordance with GAAP
b. The statements are examined by independent auditors who prepare adequate statements
c. An effective system of internal control is maintained
d. Income tax returns are properly filed

21. What is the underlying concept governing the GAAP pertaining to recording gain
contingencies?
a. Conservatism b. Relevance c. Consistency d. Reliability

22. Comparability is oftentimes sacrificed for

a. Reliability b. Conservatism c. Objectivity d. Relevance

23. Which of the following situations violates the concept of reliability?

a. Data on segments having the same expected risks and growth rates are reported to
analysts estimating future profits
b. Financial statements are issued nine months late
c. Management reports to stockholders regularly refer to new projects undertaken, but the
FS never report project results
d. FS include property with carrying amount increased to management’s estimate of
market value

24. According to the Conceptual Framework, which of the following relates to both relevance
and reliability?
a. Comparability b. Feedback Value c. Verifiability d. Timeliness
25. Generally accepted accounting principles
a. Are fundamental truths or axioms that can be derived from laws of nature
b. Derive their authority from legal court proceedings
c. Derive their credibility and authority from general recognition and acceptance by
the accounting profession
d. Have been specified in detail in the FSRSC conceptual Framework

26. To qualify as generally accepted, accounting principle must

a. Usually guide corporate managers in preparing financial statements, which will be
understood by widely scattered stockholders
b. Guide corporate managers in preparing financial statements, which will be used for
collective bargaining agreements with trade unions
c. Guide entrepreneur of the choice of an accounting entity like a sole proprietorship,
partnership, or corporation
d. Receive substantial authoritative support

27. Which one of the following is not a source of generally accepted accounting principles in the
Philippines?
a. Existing practices in the Philippines
b. Available literature on the topic or subject under study
c. Pronouncement by the Association of CPAs in Public Practice
d. Statements, recommendations, studies, or standards issued by standard-setting bodies
such as the Financial Accounting Standards Board and the International Accounting
Standards Board

28. The role of Securities and Exchange Commission (SEC) in the formulation of accounting
principles can be the best described as
a. Consistently primary c. Sometimes primary and sometimes secondary
b. Consistently secondary d. Non-existent

29. Which among the following equations best exemplifies the FUND theory of accounting?
a. Assets= Liabilities + Capital

b. Assets – Liabilities = Capital

c. Assets – Liabilities – Preferred SHE = Common SHE

d. None of the above

30. Which of the following is not among the first five steps in the accounting cycle?
a. Record transactions in journals
b. Record closing entries
c. Adjust the general ledger accounts
d. Post entries to general ledger accounts