Sie sind auf Seite 1von 25

ACCOUNTING THEORY

MULTIPLE CHOICE. Choose the best answer by writing the letter of your choice. Letter only.
The Accountancy Profession
1. 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
2. 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. Philippine Institute of Certified Public Accountants
c. Securities and Exchange Commission
d. Financial Reporting Standards Council
3. The qualifications of the members of the Board of Accountancy include all of the following,
except:
a. Must be natural born citizen and a resident of the Philippines.
b. Must be duly registered CPA with at least ten years of work experience in any scope of
practice of accountancy.
c. Must be of good moral character and must not have been convicted of crime involving
moral turpitude.
d. Must have any pecuniary interest , directly or indirectly, in any school conferring an
academic degree for admission to the practice of accountancy.
4. What are the three main areas in the practice of the accountancy profession?
a. Public accounting, private accounting and managerial accounting.
b. Auditing, taxation and managerial accounting.
c. Financial accounting, managerial accounting and corporate accounting.
d. Public accounting, private accounting and government accounting.
5. What is the primary service of CPA in the public practice?
a. Auditing
b. Taxation
c. Managerial Accounting
d. Controllership
6. Accountants employed in entities in various capacity as accounting staff, chief accountant or
controller are said to be engaged in:
a. Public accounting
b. Private accounting
c. Government accounting
d. Financial accounting
7. It is the area of the accountancy profession that encompasses the process of analyzing,
classifying, summarizing and communicating all transactions involving the receipt and
disposition of government funds and property and interpreting the results thereof.
a. Internal auditing
b. External auditing
c. Private accounting
d. Government accounting
8. The Continuing Professional Development is required for:
a. Renewal of CPA license
b. Accreditation to practice the accountancy profession

c. Both renewal of CPA licenses and accreditation to practice the accountancy profession
d. Neither renewal of CPA licenses nor accreditation to practice the accountancy
profession
9. Which statement is true regarding exemptions from CPD requirements?
a. A CPA shall be permanently exempted from CPD requirement for renewal of CPA license
at the age of 60 years but not for the accreditation to practice the accountancy
profession.
b. A CPA who is working or practicing the profession abroad shall be temporarily exempted
from CPD requirement during the period of stay abroad provided the CPA has been out
of country for at least two years prior to the date of renewal.
c. A CPA who is furthering studies abroad shall be temporarily exempted from CPD
requirement during the period of stay abroad provided the CPA has been out of the
country for at least two years prior to date of renewal.
d. All of the statements are true.
10. Which statement is incorrect in relation to the practice of public accounting?
a. Single practitioners for the practice of public accounting shall be registered CPA s in the
Philippines.
b. Practitioners of partnership formed for the practice of public accounting shall be
registered CPAs in the Philippines.
c. The Securities and Exchange Commission can register any corporation organized for the
practice of public accounting.
d. The Professional Regulation Commission upon favourable recommendation of the Board
of Accountancy shall issue certificate of accreditation to CPAs in public practice provided
the registrant has acquired a minimum of three years of meaningful experience in public
practice.

Answers:
1. A 6. B
2. A 7. D
3. D 8. C
4. D 9. D
5. A 10.C

11. Which is the accounting standard setting body in the Philippines at the present time?
a. Accounting Standards Council
b. Auditing and Assurance Standards Council
c. Philippine Accounting Standards Board
d. Financial Reporting Standards Council
12. Which statement is true regarding the FRSC?
a. The FRSC is created by the Professional Regulation Commission upon recommendation
of the Board of Accountancy in carrying out its powers and functions under R.A. No.
9298.
b. The FRSC shall be composed of 15 with a Chairman and 14 representatives.

c. The Chairman and members of FRSC are appointed by Professional Regulation


Commission upon recommendation of the Board of Accountancy and shall have a term
of three years renewable for another term.
d. All of the statements are true.

13. All of the following are represented in FRSC, except:


a. Board of Accountancy
b. Securities and Exchange Commission
c. Commission on Audit
d. Department of Budget and Management
14. The Philippine Financial Reporting Standards collectively include:
a. PFRS corresponding to IFRS.
b. PAS corresponding to IAS.
c. Philippine Interpretations corresponding to IFRIC and SIC Interpretations and
Interpretations developed by PIC.
d. All of these are included in Philippine Financial Reporting Standards.

11. D 13. D
12. D 14. D

15. The International Accounting Standards Board was formed:


a. To enforce IFRS in foreign countries.
b. To develop a single set of high quality IFRS.
c. To establish accounting standards for multinational entities.
d. To develop accounting standards for countries that does not have their own standard
setting body.
16. The IASB declared that the merit s of proposed standards are assessed:
a. From a position of neutrality
b. From a position of materiality
c. Based on possible impact on behavior
d. Based on arguments of lobbyist
17. What is the chronological order in the evaluation of a typical standard?
a. Exposure draft, Standard and Discussion paper
b. Exposure draft, Discussion paper and Standard
c. Standard, Discussion paper and Exposure draft
d. Discussion paper, Exposure draft and Standard
18. The IASB publishes standards called:
a. International Accounting Standards
b. Financial Reporting Standards
c. International Financial Reporting Standards
d. Statement of Financial Accounting Standards
19. The IASB employs a “due process” system which:
a. Is an efficient system for collecting dues from members
b. Enables interested parties to express their views on issues under consideration.
c. Identifies the most important accounting issues.
d. Requires that all CPAs must receive a copy of IFRS.
20. What is “due process” in the standard-setting by IASB?
a. IASB operates a full view of the public.
b. Public hearings are held on proposed standards.
c. Interested parties can make their views known.
d. All of these are part of due process in standard-setting.
21. What is a possible danger if politics plays too big role in developing IFRS?
a. Accounting standards are not truly generally accepted.
b. Individuals may influence the standards.
c. User groups become active.
d. The IASB delegates its authority to elected officials.
22. Financial accounting standard-setting:
a. Can be described as a social process which 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.
d. Is democratic in the sense that a majority of accountants must agree with a standard.
23. IFRIC Interpretations issued by IASB:
a. Are considered authoritative and must be followed.
b. Cover newly identified financial reporting issues not specifically addressed.
c. Cover issues with conflicting interpretations.
d. All of these are true about IFRIC Interpretations.

15. B 19. B 23. D


16. A 20. D
17. D 21. A
18. C 22. A

24. Financial reporting must be broadly defined as the area of accounting that prepares:
a. General purpose financial statements to be used by parties internal to the entity.
b. Financial statements to be used by the investors.
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.
25. Financial accounting emphasizes reporting to:
a. Management
b. Regulatory bodies
c. Internal auditors
d. Creditors and investors
26. Managerial accounting emphasizes:
a. Reports financial information to external users.
b. Reporting to the Securities and Exchange Commission.
c. Combining accounting with data processing.
d. Developing accounting information for use within an entity.
27. Which statement is true regarding managerial accounting and financial accounting?
a. Managerial accounting is generally more precise.
b. Managerial accounting need not follow generally accepted accounting principles while
financial accounting must follow GAAP.
c. Managerial accounting has a future focus.
d. The emphasis of managerial accounting is relevance and the emphasis of financial
accounting is timeliness.

24. C 26. D
25. D 27. B

28. Generally accepted accounting principles:


a. Are accounting principles based on law.
b. Derive their credibility and authority from law.
c. Derive their authority from regulatory authority.
d. Derive their credibility and authority from recognition and acceptance by the
accountancy profession.

29. Which statement best describes generally accepted accounting principles?


a. The accounting principles have been formulated in the public sector.
b. The accounting principles have been developed on the basis of such factors as usage and
practical necessity.
c. The accounting principles are the same as laws.
d. The accounting principles do not apply to SMEs.
30. Proper application of accounting principles is most dependent upon:
a. Existence of specific guidelines.
b. Oversight of regulatory bodies
c. External audit function.
d. Professional judgment of the accountant.
31. Once an accounting standard has been established:
a. The standard is continually reviewed to see if modification is necessary.
b. The standard is not reviewed.
c. The task of reviewing the standard is given to a national organization of CPAs.
d. No revisions should be made to the standard.

28. D 30. D
29. B 31. A

CONCEPTUAL FRAMEWORK (Assumptions and financial reporting)

32. What is the only underlying assumption mentioned in the Conceptual Framework for Financial
Reporting?
a. Going concern
b. Accounting entity
c. Time period
d. Monetary unit
33. Which statement best describes the term “going concern”?
a. When current liability of an entity exceed current assets.
b. The ability of the entity to continue in operation for the foreseeable future.
c. The potential to contribute to the flow of cash and cash equivalents to the entity.
d. The expenses exceed income.
34. Which of the following is not an implication of the going concern assumption?
a. The historical cost principle is credible.
b. Depreciation and amortization policies are justifiable and appropriate.
c. The current and noncurrent classification of assets and liabilities is justifiable and
significant.
d. Amortizing research and development costs over several periods is justifiable and
appropriate.
35. The relatively stable economic, political and social environment supports:
a. Conservatism
b. Materiality
c. Timeliness
d. Going concern
36. Which basic assumption may not be followed when an entity in bankruptcy reports financial
results?
a. Economic entity assumption
b. Going concern assumption
c. Time period assumption
d. Monetary unit assumption
37. The financial statements of the business entity are separate and distinct from the financial
statements of the owners.
a. Going concern assumption
b. Matching principle
c. Economic entity assumption
d. Accounting period assumption
38. The economic entity assumption:
a. Is inapplicable to unincorporated businesses.
b. Recognizes the legal aspects of business organizations.
c. Requires periodic income measurement.
d. Is applicable to all forms of business organizations.
39. Which underlying assumption serves as the basis for preparing financial statements at regular
arbitrary or artificial points in time?
a. Accounting entity
b. Going concern
c. Accounting period
d. Stable monetary unit
40. Which basic accounting assumption is threatened by the existence of severe inflation in an
economy?
a. Monetary unit assumption
b. Periodicity assumption
c. Going concern assumption
d. Economic entity assumption
41. Which 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 exceed the costs.

32. A 37. C
33. B 38. D
34. D 39. C
35. D 40. A
36. B 41. A

42. The concept of accounting entity is applicable:


a. Only to the legal aspects of business organizations.
b. Only to the economic aspects of business organizations.
c. Only to business organizations.
d. Whenever accounting is involved.
43. 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
44. The valuation of a promise to receive cash in the future at present value is valid because of the
accounting concept of:
a. Entity
b. Time period
c. Going concern
d. Monetary unit
45. What is the accounting concept that justifies the usage of accruals and deferrals?
a. Going concern
b. Materiality
c. Consistency
d. Stable monetary unit

42. D 44. C
43. B 45. A

46. What is the authoritative status of the Conceptual Framework?


a. The Conceptual Framework has the highest level of authority.
b. In the absence of a standard or an interpretation that specifically applies to a
transaction, the Conceptual Framework shall be followed.
c. In the absence of a standard or an interpretation that specifically applies to a
transaction, management shall consider the applicability of the Conceptual Framework
in developing and applying an accounting policy that result in information that is
relevant and reliable.
d. The Conceptual Framework applies only when the International Accounting Standard
Board develops new or revised standards.
47. Which statement is true concerning the Conceptual Framework for Financial Reporting?
a. The Conceptual Framework is not a reporting standard and does not define standard for
any particular measurement or disclosure issue.
b. The Conceptual Framework is concerned with general purpose financial statements
including consolidated financial statements.
c. Nothing in the Conceptual Framework overrides any specific Philippine Financial
Reporting Standard.
d. All of these statements are true about the Conceptual Framework.
48. The Conceptual Framework deals with all of the following, except:
a. The objective of financial reporting.
b. The qualitative characteristics of useful financial information.
c. The definition, recognition and measurement of the elements of financial statements.
d. Supplementary information.
49. The Conceptual Framework is intended to establish:
a. Generally accepted accounting principles.
b. The meaning of “present fairly in accordance with GAAP”.
c. The objective and concepts for use in developing standards of financial accounting and
reporting.
d. The hierarchy of sources of GAAP.
50. The Conceptual Framework should:
a. Lead to uniformity of financial statements among entities within the same industry.
b. Eliminate alternative accounting principles.
c. Guide multinational entities in developing generally accepted auditing standards.
d. Define the basic objectives, terms and concepts of accounting.

51. Which is not a purpose of the Conceptual Framework?


a. To provide definitions of the key terms and concepts.
b. To provide specific guidelines for resolving situations not covered by existing accounting
standards.
c. To assist accountants in selecting among alternative accounting and reporting methods.
d. To assist IASB in the standard-setting process.
46. C 49. C
47. D 50. D
48. D 51. B

52. In the Conceptual Framework for Financial Reporting, what provides the “why” of accounting?
a. Measurement and recognition concept.
b. Qualitative characteristic of accounting information.
c. Element of financial statement.
d. Objective of financial reporting.
53. The underlying theme of the Conceptual Framework is:
a. Decision usefulness
b. Understandability
c. Timeliness
d. Comparability
54. Which is an important characteristic of the Conceptual Framework?
a. To provide the accountancy profession to solve more quickly emerging practical
problems.
b. To provide a foundation from which to build more useful financial accounting standards.
c. To enhance comparability of financial statements across entities.
d. All of these are important characteristics of the Conceptual Framework.
55. Which statement is not true concerning the Conceptual Framework?
a. The Conceptual Framework should be a basis for standard setting.
b. The Conceptual Framework should allow practical problems to be solved more quickly.
c. The Conceptual Framework should be based on the fundamental truth derived from law
of nature.
d. The Conceptual Framework should increase users’ understanding and confidence in
financial reporting.

52. D 54. D
53. A 55. C

56. The primary focus of financial reporting has been on meeting the needs of which of the
following groups?
a. Management
b. Existing and potential investors, lenders and other creditors.
c. National and local taxing authorities.
d. Independent CPAs.
57. The overall objective of financial reporting is to provide information:
a. That is useful for decision making.
b. About assets, liabilities and owners’ equity.
c. About financial performance during a period.
d. That allows owners to assess management performance.

58. Which is an objective of financial reporting?


a. To provide information that is useful to those making investing and credit decisions.
b. To provide information that is useful to management.
c. To provide information about prospective investors.
d. To provide information about ways to solve internal and external conflicts about the
entity.
59. Which is an objective of financial reporting?
a. To provide information that is useful to management in making decisions.
b. To provide information that clearly portrays nonfinancial transactions.
c. To provide information that is useful to assess the amount, timing and uncertainty of
prospective cash receipts.
d. To provide information that excludes claims against the resources.
60. An objective of financial reporting is to provide:
a. Information about the investors in the entity.
b. Information about the liquidation value of the resources held by the entity.
c. Information that is useful in assessing cash flow prospects.
d. Information that will attract new investors.
61. “Assessing cash flow prospects” as an objective of financial reporting is interpreted to mean:
a. Cash basis accounting is preferred over accrual basis of accounting.
b. Information about the financial effects of cash receipts and cash payments is generally
considered the best indicator of present and continuing ability to generate favourable
cash flows.
c. Over the long run, trends in revenue and expenses are generally more meaningful than
trends in cash receipts and disbursements.
d. All of the following choices are correct regarding “assessing cash flow prospects”.

56. B 59. C
57. A 60. C
58. A 61. C

62. The objective of financial reporting are based on:


a. The need for conservatism.
b. Reporting on management stewardship.
c. Generally accepted accounting principles.
d. The needs of the users of the information.
63. Financial reporting pertains to:
a. Individual business entities, rather than to industries or an economy as a whole or to
members of society as consumers.
b. Individual business entities and an economy as a whole or to members of society as
consumers.
c. Individual business entities and an economy as a whole, rather than to industries or to
members of society as consumers.
d. Individual business entities, industries and an economy as a whole, rather than to
members of society as consumers.
64. During the period when an entity is under the direction of a particular management, financial
reporting will directly provide information about:
a. Both entity performance and management performance.
b. Management performance but not entity performance.
c. Entity performance but not management performance.
d. Neither entity performance nor management performance.

65. Which of the following is not listed as an objective of financial reporting?


a. Financial reporting shall provide information about entity resources, claims against those
resources and changes in them.
b. Financial reporting shall provide information useful in evaluating management
stewardship.
c. Financial reporting shall provide information useful in investment, credit and similar
decisions.
d. Financial reporting shall provide information useful in assessing cash flow prospects.
66. Which is not an objective of financial reporting?
a. To provide information about the assets and claims against those assets.
b. To provide information that is useful in assessing sources and uses of cash.
c. To provide information that is useful in lending and investing decisions.
d. To provide information about liquidation value of an entity.

62. D 64. C 66. D


63. A 65. B

CONCEPTUAL FRAMEWORK (Qualitative Characteristics)

67. What are the qualitative characteristics of financial statements?


a. Qualitative characteristics are the attributes that make the information provided in the
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 financial position and financial
performance.
d. Qualitative characteristics measure the extent to which an entity has complied with all
relevant standards and interpretations.
68. Qualitative characteristics:
a. Are considered either fundamental or enhancing.
b. Contribute to the decision-usefulness of financial reporting information.
c. Distinguish better information from inferior information for decision-making purposes.
d. All of the choices are correct.
69. The fundamental qualitative characteristics are:
a. Relevance and faithful representation.
b. Relevance, faithful representation and materiality.
c. Relevance and reliability.
d. Faithful representation and materiality.
70. Accounting information is considered relevant when it:
a. Can be dependent upon to represent the economic conditions and events that is
intended to represent.
b. Is capable of making a difference in a decision.
c. Is understandable by reasonably informed users.
d. Is verifiable and neutral.
71. The ingredients of relevant financial information are:
a. Predictive value and confirmatory value.
b. Predictive value, confirmatory value and timeliness.
c. Predictive value, confirmatory value and materiality.
d. Predictive value, timeliness, materiality and confirmatory value.

72. What is the quality of information that gives assurance that is reasonably free from error and
bias?
a. Relevance
b. Faithful representation
c. Verifiability
d. Neutrality
73. Which of the following is the best description of faithful representation in relation to information
in financial statements?
a. Influence on the economic decision of users.
b. Inclusion of a degree of caution.
c. Freedom from material error.
d. Comprehensibility to users.
74. The ingredients of faithful representation are:
a. Completeness and neutrality.
b. Completeness and free from error.
c. Completeness, neutrality and free from error.
d. Completeness, neutrality, free from error and conservatism.
75. The financial accounting information is directed toward the common needs of users and is
independent of presumptions about particular needs and decisions of specific users.
a. Relevance
b. Verifiability
c. Neutrality
d. Completeness

67. A 70. B 73. C


68. D 71. A 74. C
69. A 72. B 75. C

76. The enhancing qualitative characteristic of financial information are:


a. Comparability and understandability
b. Verifiability and timeliness
c. Comparability, understandability and verifiability
d. Comparability, understandability, verifiability and timeliness.
77. Financial information exhibits consistency when:
a. Accounting procedures are adopted which smooth net income and make results
consistent between years.
b. Gains and losses are shown separately in the income statement.
c. Accounting entities give similar events the same accounting treatment each period.
d. Expenditures are reported as expenses and netted against revenue in the period when
paid.
78. When information about two different entities engaged in the same industry has been prepared
and presented in similar manner, the information exhibits the enhancing qualitative
characteristic of:
a. Relevance
b. Faithful representation
c. Consistency
d. Comparability
79. The characteristic that is demonstrated when a high degree of consensus can be secured among
independent measurers using the same measurement method is:
a. Relevance
b. Understandability
c. Verifiability
d. Neutrality
80. Which concept of accounting holds that, to the maximum extent possible, financial statements
shall be based on arm’s length transactions?
a. Revenue recognition
b. Verifiability
c. Monetary unit
d. Matching
81. An entity issuing the annual financial reports within one month at the end of reporting period is
an example of which enhancing quality of accounting information?
a. Neutrality
b. Timeliness
c. Predictive value
d. Representational faithfulness
82. Allowing an entities to estimate rather than physically count inventory at an interim period is an
example of a tradeoffs between:
a. Verifiability and comparability
b. Timeliness and comparability
c. Timeliness and verifiability
d. Neutrality and consistency
83. Which statement is true in relation to the enhancing qualitative characteristic of
understandability of financial information?
a. Users have a 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.

76. D 79. C 82. C


77. C 80. B 83. B
78. D 81. B

84. The overriding qualitative characteristic of accounting information is:


a. Relevance
b. Understandability
c. Faithful representation
d. Decision usefulness
85. Which of the following terms best describes information that influences the economic decisions
of users?
a. Reliable
b. Prospective
c. Relevant
d. Understandable
86. What is the quality of information that enables users to better forecast future operations?
a. Faithful representation
b. Materiality
c. Comparability
d. Relevance

87. Which of the following terms best describes information in financial statements that is
unbiased?
a. Understandable
b. Comparable
c. Relevant
d. Neutral
88. For information to be useful, the linkage between users and the decisions made is:
a. Relevance
b. Faithful representation
c. Understandability
d. Verifiability
89. An enhancing quality of financial accounting information is that:
a. Information must be decision-useful to all potential users of financial reporting.
b. General-purpose financial reporting is the primary source of information for users.
c. Users need reasonable knowledge of business and financial accounting matters to
understand the information contained in financial statements.
d. All of the choices are correct.
90. What is meant by comparability when discussing financial accounting information?
a. Information has predictive and confirmatory value.
b. Information is reasonably free from error.
c. Information is measured and reported in a similar fashion across entities.
d. Information is timely.
91. What is meant by consistency when discussing financial accounting information?
a. Information is measured and reported in a similar fashion across points in time.
b. Information is timely.
c. Information is measured similarly across the industry.
d. Information is verifiable.
92. Which of the following is not an enhancing qualitative characteristic?
a. Understandability
b. Profit-oriented
c. Timeliness
d. Comparability

84. D 87. D 90. C


85. C 88. C 91. A
86. D 89. C 92. B

93. An item would be considered material when:


a. The expected benefits of disclosure exceed the additional costs.
b. The impact on earnings is greater than 10%.
c. The standard definition of materiality is met.
d. The omission or misstatement of the amount would make a difference to the users.
94. Which statement about materiality is true?
a. An item must make a difference or it need not be disclosed.
b. Materiality is a matter of relative size.
c. An item is material if the inclusion or omission would influence or change the judgment
of a reasonable person.
d. All of these statements are true about materiality.

95. The Conceptual Framework includes which of the following constraints?


a. Prudence
b. Substance over form
c. Cost
d. All of the choices are constraints
96. Which statement best describes the cost and benefit constraint?
a. The benefit of the information must be greater than the cost of providing it.
b. Financial information should be free from cost to users of the information.
c. Cost of providing financial information is not always evident or measurable but must be
considered.
d. All of the choices are correct.
97. Conservatism is best described as selecting an accounting alternative that:
a. Understates assets and net income
b. Has the least favorable impact on equity.
c. Overstates liability
d. Is least likely to mislead users of financial information.
98. The Conceptual Framework:
a. Includes prudence or conservatism which means when in doubt, choose the solution
that will be least likely to overstate assets and income.
b. Includes prudence or conservatism which means when on doubt, choose the solution
that will be least likely to understate liabilities and expenses.
c. Includes prudence or conservatism as a desirable but not required quality of accounting
information.
d. Excludes prudence or conservatism because it is inconsistent with neutrality.

93. D 96. A
94. D 97. B
95. C 98. D

99. The ability through consensus among measurers to ensure that information represents what it
purports to represent is an example of the concept of:
a. Relevance
b. Verifiability
c. Comparability
d. Feedback value
100. Which of the following accounting concepts states that an accounting transaction shall
be supported by sufficient evidence to allow two or more qualified individuals to
arrive at essentially similar conclusion?
a. Conservatism
b. Objectivity
c. Periodicity
d. Feedback value
101. Objectivity is assumed to be achieved when an accounting transaction:
a. Is recorded in a fixed amount of pesos.
b. Involves the payment or receipt of cash.
c. Involves an arm’s length transaction between two independent parties.
d. Allocates revenue or expenses in a rational and systematic manner.
102. Proponents of historical costs maintain statements prepared using historical costs are
more:
a. Objective
b. Relevant
c. Indicative of a purchasing power
d. Conservative
103. Which statement is an argument against historical cost?
a. Fair value is more relevant.
b. Historical cost is based on exchange transaction.
c. Historical cost is verifiable and reliable
d. Fair value is subjective.
104. 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 rate are reported to
analysts estimating future profits.
c. Financial statements included an item of property, plant and equipment with carrying
amount increased to management estimate of market value.
d. Management reports refer to new projects undertaken but the financial statements
never report project results.
105. What is the underlying concept governing the generally accepted accounting principles
pertaining to recording gain contingencies?
a. Conservatism
b. Relevance
c. Consistency
d. Reliability
106. The usefulness of providing information in financial statements is subject to the
constraint of:
a. Consistency
b. Cost-benefit
c. Reliability
d. Representational faithfulness.

99. B 103. A
100.B 104. C
101. C 105. A
102. A 106. B

CONCEPTUAL FRAMEWORK (Element of financial statements)

107. The elements directly related to the measurement of financial position are:
a. Assets, liabilities, equity, income and expenses.
b. Assets, liabilities and equity.
c. Income expense
d. Assets and liabilities
108. The elements directly related to the measurement of financial performance are:
a. Assets, liabilities, equity, income and expenses.
b. Assets, liabilities and equity
c. Income and expense
d. Sales, and cost of goods sold
109. It is a resource controlled by the entity as a result of past event and from which future
revenue from which future economic benefits are expected to flow to the entity?
a. Asset
b. Liability
c. Equity
d. Income
110. It is a present obligation of an entity arising from past event the settlement of which is
expected to result in an outflow from the entity of resources embodying economic benefits.
a. Asset
b. Liability
c. Equity
d. Income
111. It is the residual interest in the assets of an entity after deducting all of the liabilities.
a. Income
b. Expense
c. Net income
d. Equity
112. It is an increase in economic benefit during the accounting period related to an increase
in asset or a decrease in liability that results in increase in equity other than contribution from
owners.
a. Asset
b. Liability
c. Income
d. Expense
113. It is a decrease in economic benefit during the accounting period related to a decrease
in asset or an increase in liability that results in decrease in equity other than contribution from
owners.
a. Asset
b. Liability
c. Income
d. Expense
114. This arises in the course of ordinary regular activities and is referred to by a variety of
different names including sales, fees, interest, dividends, royalties and rent.
a. Income
b. Revenue
c. Profit
d. Gain
115. Which statement in relation to income is true?
a. Income encompasses both revenue and gain.
b. Revenue encompasses both income and gain.
c. Gain encompasses both income and revenue.
d. Income is the same as revenue.

107. B 111. D 115. A


108. C 112. C
109. A 113. D
110. B 114. B

116. It is the process of incorporating in the statement of financial position or statement of


comprehensive income an item that meets the definition of an element of the financial
statements.
a. Recognition
b. Measurement
c. Realization
d. Allocation

117. When should an item that meets the definition of an element be recognized?
a. When it is probable that any future economic benefit associated with the item will flow
to or from the entity.
b. When the element has a cost or value that can be measured with reliability.
c. When the entity obtains control of the rights or obligations associated with the item.
d. When it is probable that any future economic benefit associated with the item will flow
to or from the entity and the item has a cost or value that can be measured with
reliability.
118. An asset is recognized when:
a. It is probable that future economic benefit will flow to the entity.
b. The cost or value of the asset can be measured reliably.
c. The entity obtains control of the rights associated with the asset.
d. It is probable that future economic benefit will flow to the entity and the cost or value of
the asset can be measured reliably.
119. A liability is recognized when:
a. It is probable that an outflow of future economic benefit will be required to settle the
obligation.
b. The amount of the obligation can be measured reliably.
c. It is probable that an outflow of future economic benefit will be required to settle an
obligation and the amount of the obligation can be measured reliably.
d. When an entity obtains control of the obligation.
120. An income is recognized when:
a. It is probable that future economic benefit will flow to the entity and the economic
benefit can be measured reliably.
b. It is possible that future economic benefit will flow to the entity and the economic
benefit can be measured reliably.
c. The entity obtains control of the future economic benefit.
d. The future economic benefit can be measured reliably.
121. An expense is recognized when:
a. It is probable that a decrease in future economic benefit has occurred.
b. The decrease in the future economic benefit can be measured reliably.
c. It is probable that a decrease in future economic benefit has occurred and the decrease
in the future economic benefit can be measured reliably.
d. It is probable that an increase in future economic benefit has occurred and the increase
in the future economic benefit can be measured reliably.
122. It is the process that involves the simultaneous or combined recognition of revenue and
expenses that result directly from the same transactions and other events.
a. Matching of cost with revenue
b. Matching of revenue with cost
c. Systematic and rational allocation
d. Immediate recognition
123. When economic benefits are expected to arrive over several accounting periods and the
association with income can only be indirectly determined, expenses are recognized on the basis
of:
a. Cause and effect association
b. Systematic and rational allocation
c. Immediate recognition
d. Realization

124. An expense is recognized immediately:


a. When an expenditure produces no future economic benefit.
b. When cost incurred ceases to qualify as an asset.
c. When expenditure produces future economic benefit.
d. When an expenditure produces no future economic benefit and when cost incurred
ceases to qualify an asset.
125. It is the process of determining the monetary amounts at which the elements of the
financial statements are recognized in the financial statements.
a. Measurement
b. Recognition
c. Presentation
d. Recording

116. A 121. C
117. D 122. A
118. D 123. B
119. C 124. D
120. A 125. A

126. Which measurement is not currently used in practice?


a. Present value
b. Net realizable value
c. Current replacement cost
d. Inflation adjusted cost
127. Which measurement attribute is the most relevant?
a. Present value
b. Exit value
c. Current cost
d. Historical cost
128. It is the amount of cash that would have to be paid if asset was acquired currently.
a. Historical cost
b. Current cost
c. Realizable cost
d. Present value
129. Which term best describes the amount that represents the immediate purchase cost of
an asset?
a. Historical cost
b. Realizable value
c. Present value
d. Current cost
130. It is the amount of cash that could currently be obtained by selling the asset in an
orderly disposal.
a. Realizable value
b. Fair value
c. Market value
d. Present value

126. D 128. B 130. A


127. A 129. D

131. Asset measurement in financial statements:


a. Are confined to historical cost.
b. Are confined to historical cost and current cost.
c. Reflect several financial attributes
d. Do not reflect output value.
132. Which of the following should be considered a current value measure?
a. Replacement cost and exit value
b. Replacement cost and discounted cash flow
c. Exit value and discounted cash flow
d. Replacement cost, exit value and discounted cash flow
133. The primary measurement basis is:
a. The current market price if the asset currently held was sold on the open market.
b. The current market price if the asset held was purchased on the open market.
c. The present value of the cash flows that the asset is expected to generate
d. The market price at the date the asset was acquired.
134. Which measurement basis is currently used in financial statements?
a. Present value
b. Present value and settlement value
c. Settlement value and fair value
d. Present value, settlement value and fair value

131. C 133. D 132. D 134. D

135. Which statement describes the revenue recognition principle?


a. Cash is received.
b. It is probable that future economic benefit will flow to the entity and the amount can be
measured reliably.
c. Production is complete and there is an active market for the product.
d. Production is complete.
136. The revenue principle states that revenue shall be recognized at a point when:
a. An exchange transaction has occurred and the earning process is essentially complete.
b. An order for shipment of merchandise has been received.
c. A contract between buyer and seller has been signed.
d. The seller has shipped merchandise under terms that the customer need not pay until
sold.
137. Generally, revenue is recognized:
a. At the point of sale
b. When cause and effect are associated.
c. At the point of cash collection.
d. At appropriate points throughout the operating cycle.
138. Normally, revenue from sale of goods is recognized:
a. When the customer order is received.
b. When the customer order is accompanied by check.
c. Only if the transaction will create an account receivable.
d. When the title to the goods changes.
139. Revenue may be recognized:
a. At the point of sale
b. During production
c. At the end of production
d. All of the choices may be acceptable for revenue recognition.
140. Which of the following may not be an acceptable deviation from recognizing revenue at
the point of sale?
a. Upon receipt of cash
b. During production
c. Upon receipt of order
d. End of production
141. Which of the following is not an accepted basis for recognition of revenue?
a. Passage of time
b. Performance of service
c. Completion of percentage of a project
d. Upon signing of contract
142. Which of the following represents the least desirable choice for the recognition of
revenue?
a. During production
b. When a sale occurs
c. When cash is collected
d. When a production is completed
143. Revenue from an artistic performance is recognized when:
a. The audience register for the event online.
b. The tickets for the concert are sold.
c. Cash has been received from the ticket sales.
d. The event takes place.

135. B 139. D 143. D


136. A 140. C
137. A 141. D
138. D 142. C

144. Income recognized using the instalment method of accounting equals cash collected
multiplied by:
a. Net profit rate
b. Net profit rate adjusted for uncollectible accounts.
c. Gross profit rate
d. Gross profit rate adjusted for uncollectible accounts.
145. Under the instalment of accounting, gross profit on instalment sale is recognized in
income:
a. On the date of sale
b. On the date the final cash collection is received
c. In proportion to the cash collection
d. After cash collections equal to the cost of goods sold have been received.
146. Under the cost recovery method of accounting, gross profit on instalment sale is
recognized:
a. After cash collections equal cost of goods sold have been received.
b. In proportion to the cash collection.
c. On the final cash collection is received
d. On the date of sale.

147. Which statement justifies the use of the cost recovery method to account for instalment
sales?
a. The sales contract provides that title only passes to the purchaser when all payments
have been made.
b. No cash payments are due until one year.
c. Sales are subject to a high rate of return.
d. There is no reasonable basis for estimating collectability.
144. C 146. A
145. C 147. D

148. The instalment method of recognizing revenue:


a. Should be used when no reasonable basis exists for estimating the collectability.
b. Is not a generally accepted accounting principle under any circumstances?
c. Should be used for tax purposes.
d. Is an acceptable alternative accounting principle.
149. Under which circumstance is the instalment method appropriate for the recognition of
revenue?
a. For any sales where collection is spread over a reasonable long period of time
b. In any situation where management wishes to delay the recognition of revenue in order
to smooth income.
c. For sales where collection is spread over a reasonable long period of time and significant
doubt exists about ultimate collection of instalments receivable.
d. For sales where collections is spread over a reasonable long period of time and no
significant doubt exists about ultimate collection of instalments receivable.
150. When using the instalment method:
a. Gross profit is deferred until all cash is received.
b. Gross profit is recognized only after the amount of cash collected exceeds the cost of
goods sold.
c. Revenue, costs and gross profit are recognized proportionally as cash is received from
the sale.
d. Total revenue and costs are recognized at the point of sale but gross profit is deferred in
proportion to the cash that is uncollected from the sale.
151. The cost recovery method of revenue recognition:
a. Is used only when circumstances surrounding a sale are so uncertain that earlier
recognition is impossible.
b. Is used on accounting for real estate sales.
c. Is similar to percentage of completion accounting.
d. Is never applicable under GAAP.

148. A 150. D
149. C 151. A

152. The term “revenue recognition” conventionally refers to:


a. The process of identifying transactions to be recorded as revenue in the accounting
period.
b. The process of measuring and relating revenue and expenses of an entity for an
accounting period.
c. The earnings process which gives rise to the revenue realization.
d. The process of identifying those transactions that results in an inflow of assets from
customers.
153. Under what conditions is it proper to recognized revenue prior to the sale of the
merchandise?
a. When the concept of consistency is complied with.
b. When the revenue is to be reported as an instalment sale.
c. When the ultimate sale of the goods is at an assured sales price.
d. When management has a long-established policy.
154. Which terms means the process of converting noncash resources and rights into cash or
claims to cash?
a. Allocation
b. Collection
c. Recognition
d. Realization
155. Gains on assets unsold are identified in a precise sense by the term:
a. Unrecorded
b. Unrealized
c. Unrecognized
d. Unallocated
156. The term “recognized” is synonymous with the term:
a. Recorded
b. Realized
c. Matched
d. Allocated
157. Which statement conforms to the realization concept?
a. Depreciation was assigned to product unit cost.
b. Equipment was sold in exchange for a note receivable.
c. Cash was collected on accounts receivable.
d. Product unit costs were assigned to cost of goods sold.
158. Revenue may result from:
a. A decrease in an asset from primary operations.
b. An increase in an asset from incidental transactions.
c. An increase in a liability from incidental transactions.
d. A decrease in a liability from primary operations.
159. When an entity used the instalment method of revenue recognition?
a. When collectability of instalment accounts receivable is reasonably predictable.
b. When repossessions of merchandise on the instalment plan may result in a future gain
or loss.
c. When there is no reasonable basis for estimating collectability.
d. When collection expenses are deemed immaterial.
160. The instalment method of accounting may be used if the:
a. Collection period extends over more than 12 months.
b. Instalments are due in different years.
c. Ultimate amount collectible is indeterminate.
d. Percentage of completion method is inappropriate.

152. A 156. A 160. C


153. C 157. B
154. D 158. D
155. B 159. C

161. Costs that can be reasonably associated with specific revenue but not with specific
products should be:
a. Charged to expense in the period incurred.
b. Allocated to specific products based on the best estimate of the product processing
time.
c. Expensed in the period in which the related revenue is recognized.
d. Capitalized and then amortized over reasonable period.
162. Why are certain costs of doing business capitalized when incurred and then depreciated
or amortized over subsequent accounting periods?
a. To reduce the income tax liability
b. To aid management in the decision-making process
c. To match the cost of production with revenue
d. To adhere to the accounting concept of conservatism.
163. Which of the following is an example of the expense recognition principle of associating
cause and effect?
a. Allocation of insurance cost
b. Sales commissions
c. Depreciation of property, plant and equipment
d. Officers’ salaries
164. Which principle best describes the conceptual rationale for the method of matching the
depreciation with revenue?
a. Associating cause and effect
b. Systematic and rational allocation
c. Immediate recognition
d. Partial recognition
165. Which of the following is an application of the principle of systematic and rational
allocation?
a. Amortization of intangible assets
b. Sales commissions
c. Research and development costs
d. Officers’ salaries
166. Which of the following should be expensed under principle of systematic and rational
allocation?
a. Salesman’s monthly salaries
b. Insurance premiums
c. Freight out
d. Electricity to light office building
167. Which of the following would be matched with current revenue on a basis other than
association of cause and effect?
a. Goodwill
b. Sales commission
c. Cost of goods sold
d. Purchases on account
168. Which of the following is not a theoretical basis for the allocation of expense?
a. Summarization
b. Classification
c. Profit maximization
d. Immediate recognition

169. What is an example of cost that cannot be directly related to particular revenue but
incurred to obtain benefits that are exhausted in the period when the cost is incurred?
a. Sales commission
b. Sales salary
c. Freight in
d. Prepaid insurance

161. C 165. A 169. B


162. C 166. B
163. B 167. A
164. B 168. C

170. The matching principle is best demonstrated by:


a. Not recognizing any expense unless some revenue is realized
b. Associating effort with accomplishments
c. Recognizing prepaid rent received as revenue
d. Establishing an appropriation for contingency
171. When an accounting principle is being observed when an accountant charges to expense
a cost that contributed to revenue during a period?
a. Revenue realization
b. Matching
c. Monetary unit
d. Conservatism
172. Which of the following is not an acceptable basis for the recognition of revenue?
a. Systematic and rational allocation
b. Cause and effect association
c. Immediate recognition
d. Cash disbursement
173. Bad debts expense is recognized according to which expense recognition principle?
a. Direct matching
b. Immediate recognition
c. Systematic and rational allocation
d. Critical event recognition
174. An example of direct matching of an expense with revenue would be:
a. Depreciation expense
b. Office salaries expense
c. Direct labor cost incurred to produce inventory sold
d. Advertising expense
175. When category of expense is subject to immediate recognition in the income statement?
a. Utilities expense for the production line of a manufacturer
b. Repairs and maintenance expense incurred in production equipment of a manufacturer
c. The salary of a production foreman
d. The salary of the president
176. Which principles best describes the rationale for matching distribution costs and
administrative expenses with revenue of the current period?
a. Direct matching
b. Systematic and rational allocation
c. Immediate recognition
d. Partial recognition

177. What is the general approach as to when product costs are recognized as expenses?
a. In the period when the expenses are paid
b. In the period when the expenses are incurred
c. In the period when the vendor invoice is received
d. In the period when the related revenue is recognized.
178. When should expenditure be recorded as an asset rather than an expense?
a. Never
b. Always
c. If the amount is material
d. When future benefit exists

170. B 174. C 178. D


171. B 175. D
172. D 176. C
173. A 177. D

179. A decrease in asset arising from peripheral or incidental transaction is called:


a. Capital expenditure
b. Cost
c. Loss
d. Expense
180. An outflow of asset based on an activity that represents the major operations is called:
a. Loss
b. Liability
c. Expense
d. Equity
181. The primary distinction between revenue and gain is:
a. The materiality of the amount.
b. The likelihood that the transaction will recur in the future
c. The nature of the activity that gives rise to the transaction
d. The method of disclosing the transaction.
182. Which statement in relation to the term “expense” is incorrect?
a. All expenses and losses are expired costs but not all expired costs are expenses and
losses.
b. All expenses decreases owner’s equity but not all decreases in owner’s equity are
expenses.
c. Expenses is synonymous with expenditures.
d. Entities do ot incur expenses per se but initially acquire assets.

179. C
180. C
181. C
182. C

Das könnte Ihnen auch gefallen