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Conceptual Framework and Qualitative Characteristics Refresher Course

November 14, 2012

1. The basic purpose of accounting is a. To provide the information that the managers of an economic entity need to control its operations. b. To provide information that the creditors of an economic entity can use in deciding whether to make additional loans to the entity. c. To measure the periodic income of the economic entity. d. To provide quantitative financial information about an entity that is useful in making rational economic decision. 2. What is the law regulating the practice of accountancy in the Philippines? a. R.A. No. 9298 b. R.A. No. 9198 c. R.A. No. 9928 d. R.A. No. 9892 3. It is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines. a. Board of Accountancy b. PICPA c. SEC d. Financial Reporting Standards Council

4. It is the accounting standard setting body created by Professional Regulation Commission upon recommendation of the Board of Accountancy to assist the Board of Accountancy in carrying out its powers and functions under R.A. No 9298. a. Accounting Standards Council b. Auditing and Assurance Standards Council c. Philippine Accounting Standards Board. d. Financial Reporting Standards Council 5. The Philippine Financial Reporting Standards collectively include I. PFRS corresponding to IFRS. II. PAS corresponding to IAS. III. Philippine Interpretations corresponding to IFRS and SIC Interpretations and Interpretations developed by PIC. a. I only b. I and II only c. I and III only d. I, II and III 6. 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 entity 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 entity. d. Financial statements to be used primarily by management. 7. Managerial accounting is the area of accounting that emphasizes a. Reporting financial information to external users b. Reporting to the SEC c. Combining accounting knowledge with an expertise in data processing d. Developing accounting information for use within an entity.

8. The purpose of the International Financial Reporting Standards is to: a. Issue enforceable standards which regulate the financial accounting and reporting of multinational entities. b. Develop a uniform currency in which the financial transactions of entities throughout the world would be measured. c. Promote uniform accounting standards among countries of the world. d. Arbitrate accounting disputes between auditors and international entities. 9. Which of the following is not an important characteristic of the financial statements that accountants currently prepare? a. The information in financial statements is expressed in units of money adjusted for changing purchasing power. b. Financial statements articulate with one another because measuring financial position is related to measuring changes in financial position. c. The information in financial statements is summarized and classified to help meet users needs. d. Financial statements can be justified only if the benefits they provide exceed the costs. 10. When a parent and subsidiary relationship exists, consolidated financial statements are prepared in recognition of a. Legal entity b. Economic entity c. Stable monetary unit d. Time period 11. The accounting concept justifies the usage of accruals and deferrals. a. Going concern b. Materiality c. Consistency d. Stable monetary unit 12. Which of the following is not a purpose of the Conceptual Framework? a. To provide definitions of key terms and fundamental concepts. b. To provide specific guidelines for resolving situations not covered by existing accounting standards. c. To assist accountants and others in selecting among alternative accounting and reporting methods. d. To assist the Financial Reporting Standards Council in the standard-setting process. 13. Which is not included in the scope of the Conceptual Framework? a. Qualitative characteristics of useful financial accounting information b. Definition, recognition and measurement of the elements of financial statements c. Objective of financial reporting d. Generally accepted accounting principles 14. Which of the following statements in relation to information needs is true? I. Information that meets the needs of specified primary users is likely to meet the needs of other users, such as employees, customers, governments and their agencies, and the public. II. The management is also interested in financial information but it need not rely on general purpose financial reports because it can access additional information internally.

15. Which of the following statements concerning the objectives of financial reporting is true? a. The objectives are intended to be specific in nature. b. The objectives are directed primarily toward the needs of internal users of accounting information. c. The objectives are the end result of the conceptual framework project. d. The objectives encompass not only financial statement disclosures but other information as well. 16. Which of the following statements in relation to financial reporting is incorrect? a. General purpose financial reports do not and cannot provide all of the information that primary users need. b. General purpose financial reports are designed to show the value of the reporting entity. c. General purpose financial reports are intended to provide common information to users. d. Financial reports are largely based on estimate and judgment rather than exact depiction. 17. Which of the following statements is not normally an objective of financial reporting? a. To provide information about an entitys assets and claims against those assets b. To provide information that is useful in assessing an entitys sources and uses of cash c. To provide information that is useful in lending and investing decisions d. To provide information about an entitys liquidation value 18. Which of the following statements is true in relation to the enhancing qualitative characteristic of understandability of financial information? a. Users have reasonable knowledge of business and economic activities and review the information with reasonable diligence. b. Users are expected to have significant business knowledge. c. Financial statements shall exclude complex matters. d. Financial statements shall be free from material error. 19. Which of the following situations violates the concept of faithful representation? a. Financial statements were issued nine months late. b. Data on segments having the same expected risks and growth rates are reported to analysts estimating future profits. c. Financial statements included an item of property, plant and equipment with carrying amount increased to managements estimate of market value. d. Management reports to shareholders regularly refer to new projects undertaken, but the financial statements never report project results. 20. The conservative approach in the measurement of financial position is best illustrated in which of the following? a. Arbitrary reduction of a property item to report a conservative asset position. b. Recognition of a fictitious liability. c. Inventory is measured at cost or net realizable value, whichever is lower. d. An intangible asset is measured at nominal amount.