part 1

• Accounting is a service activity and its function is to provide quantitative information, primarily financial in nature, about economic entities, that is intended to be useful in making economic decision. This accounting definition is given by

  Accounting Standards Council
•  The basic objective of accounting is?

  
  

  To provide quantitative financial information about an entity that is useful in making rational economic decision.
• These are the events that affect the entity and in which other entities participate.

   

  a.Internal events

  b. External events

  c. Current events

  d. Past events

   

  b. External events
• The communicating process of accounting includes all of the following, except

  
  

  a.Recording

  b. Classifying

  c. Summarizing

  d. Interpreting

  d. Interpreting
• 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

  a. R.A. No. 9298
• It is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.

   Board of Accountancy
• Accountants employed in entities in various capacity as accounting staff, chief accountant or controller are said to be engaged in

  Private accounting
• It is the accounting standard setting body in the Philippines at the present time.

  
  

  
  

  Financial Reporting Standards Council
• The Philippine Financial Reporting Standards collectively include

   

  i. PFRS corresponding to IFRS

  ii. PAS corresponding to IAS

  iii. Philippine Interpretations corresponding to IFRIC and SIC Interpretations and Interpretations developed by PIC.

  All of the above
•  Financial accounting is concerned with

  
  

  General-purpose reports on financial position and financial performance.
• 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. d. Financial statements to be used primarily by management.

  c. General purpose financial statements to be used by parties both internal and external to the entity.
• Managerial accounting is the area of accounting that emphasizes

  
  

  a. Reporting financial information to external users

  b. Reporting to the Securities and Exchange Commission

  c. Combining accounting knowledge with an expertise in data processing

  d. Developing accounting information for use within an entity

  d. Developing accounting information for use within an entity
• One of the basic features of financial accounting is

  Direct measurement of economic resources and obligations and changes in them in terms of money
• Generally accepted accounting principles

  Derive their credibility and authority from general recognition and acceptance by the accountancy profession.
• Which of the following statements best describes generally accepted accounting principles?

   

  a. They have been formulated in the public sector.

  b. They have been developed on the basis of such factors as usage and practical necessity.

  c. They are the same as laws within our legal system.

  d. They do not apply to small entities.

  b. They have been developed on the basis of such factors as usage and practical necessity.
• 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

  d. Professional judgment of the accountant
• Financial accounting standard-setting

  Is a social process which incorporates political actions of various interested user groups as well as professional research and logic.
• 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 unless the Securities and Exchange Commission makes a complaint.

  c. The task of reviewing the standard to see if modification is necessary is given to the PICPA.

  d. The principle of consistency requires that no revisions ever be made to the standard.

  a. The standard is continually reviewed to see If modification is necessary.
• As independent or external auditors, CPAs are primarily ;

   

  a. Preparing financial statements in conformity with GAAP

  b. Certifying the accuracy of financial statements

  c. Expressing an opinion as to the fairness of financial statements

  d. Filing financial statements with the SEC

  c. Expressing an opinion as to the fairness of financial statements
• The singularly unique function performed by Certified Public Accountants is

   

  a. Tax preparation

  b. Management advisory services

  c. The attest function

  d. The preparation of financial statements

  c. The attest function
• 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.

  c. Promote uniform accounting standards among countries of the world.
• The International Accounting Standards Board was formed to

  
  

  Develop a single set of high quality IFRS
• It is a “global phenomenon” intended to bring about transparency and a higher degree of comparability in financial reporting in order to achieve the goal of one uniform and globally accepted financial reporting standards.

  
  

  IFRS
• What is the only underlying assumption mentioned in the Conceptual Framework for Financial Reporting?

  
  

  Going concern
• Which of the following statements best describes the term ,“going concern”?

   

  a.When current liabilities 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 of an entity exceed its income

  b. The ability of the entity to continue in operation for the foreseeable future
• 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 non current classification of assets and liabilities is justifiable and significant.

  d. Amortizing research and development costs over several periods is justifiable and appropriate.

  d. Amortizing research and development costs over several periods is justifiable and appropriate.
• The relatively stable economic, political and social environment supports

  
  

  Going concern
• Which basic assumption may not be followed when entity in bankruptcy reports financial results?

   

  a.Economic entity assumption

  b. Going concern assumption

  c. Periodicity assumption

  d. Monetary unit assumption

  b. Going concern assumption
• The financial statements that are prepared for the business 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

  c. Economic entity assumption
• 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

  d. Is applicable to all forms of business organizations
• 4. Which underlying assumption serves as the basis for preparing financial statements at regular artificial points in time?

   

  a. Accounting entity

  b. Going concern

  c. Accounting period

  d. Stable monetary unit

  c. Accounting period
• 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

  a. Monetary unit assumption
• 4. 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 measuring changes in financial position.

  c. The information in financial statements is summarized and classified to help meet users' needs to

  
  

  a. The information in financial statements is expressed in units of money adjusted for changing purchasing power.
• The concept of accounting entity is applicable

  
  

  
  

  Whenever accounting is involved
• 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

  b. Economic entity
• 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

  c. Going concern
• What is the accounting concept that justifies the usage of accruals and deferrals?

  a. Going concern

  b. Materiality

  c. Consistency

  d. Stable monetary unit

  a. Going concern
• During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with what basic accounting concept?

   a.Accrual

  b. Periodicity

  c. Unit of measure

  d. Continuity

  b. Periodicity
• This is a complete, comprehensive and single document promulgated by IASB establishing the concepts that underlie financial reporting.

  a.Conceptual Framework for Financial Reporting

  b. Conceptual Framework for Financial Statements

  c. Conceptual Framework for Business Entities

  d. Conceptual Framework

  a.Conceptual Framework for Financial Reporting
• The Conceptual Framework should

  a.Lead to uniformity of financial statements among entities within the same industry.

  b. Eliminate alternative accounting principles and methods.

  c. Guide the PICPA in developing generally accepted auditing standards.

  d. Define the basic objectives, terms and concepts of accounting.

  d. Define the basic objectives, terms and concepts of accounting.