First Exam Flashcards by ALAYSAH MINDALANO

What is the overall objective of accounting?

a. To measure the periodic income of the economic entity.
b. To provide information that the creditors can use in deciding whether to grant loans to an entity.
c. To provide the information that the managers of an economic entity need to control the operations.
d. To provide quantitative financial information about an entity that is useful in making economic decisions.

d. To provide quantitative financial information about an entity that is useful in making economic decisions.

How well did you know this?

Not at all

Perfectly

True or False: FRSC members are appointed by PRC with a term of 3 years renewable for another 3 years.

True

How well did you know this?

Not at all

Perfectly

True or False: PIC members are appointed by PRC.

False: PIC members are appointed by FSRSC.

How well did you know this?

Not at all

Perfectly

True or False: All sectors of the accountancy profession are represented in FRSC but majority of which came from Public Practices.

False: All sectors are equally divided.

How well did you know this?

Not at all

Perfectly

True or False: FRSC members render services on a part-time basis and receive financial support from the Bangko Sentral ng Pilipinas.

False: FRSC members render services with no compensation.

How well did you know this?

Not at all

Perfectly

The process of establishing financial accounting standards…

a. Is a democratic process in that majority of practicing accountants must agreewith a standard before it is implemented.
b. Is a legislative process based on rules promulgated by government agencies.
c. Is based solely on economic analysis of the effects each standard will have if implemented.
d. Is a social process which it incorporates political actions
of various interesteduser groups as well as professional
research and logic.

d. Is a social process which it incorporates political actions
of various interesteduser groups as well as professional
research and logic.

How well did you know this?

Not at all

Perfectly

Which of the following is the accounting standard-setting body in
the Philippines atthe present
time?

a . ASC
b . AASC
c . PASB
d . FRSC

d . FRSC

How well did you know this?

Not at all

Perfectly

What is the chronological order in
the evaluation of a typical standard?

a . Exposure Draft – Standard – Discussion Paper
b . Exposure
Draft – Discussion Paper – Standard
c . Standard – Discussion
Paper – Exposure Draft
d . Discussion Paper – Exposure Draft –
Standard

d . Discussion Paper – Exposure Draft –
Standard

How well did you know this?

Not at all

Perfectly

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 significant.
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.

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

How well did you know this?

Not at all

Perfectly

The objectives of financial reporting are based on

a. The need for conservatism
b. Reporting on management stewardship
c. Generally accepted accounting principles
d. The need of the users of the information

d. The need of the users of the information

How well did you know this?

Not at all

Perfectly

Which of the following terms best describes information that influences the economic decision of users?

a. Reliable
b. Prospective
c. Relevant
d. Understandable

c. Relevant

How well did you know this?

Not at all

Perfectly

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

How well did you know this?

Not at all

Perfectly

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 the liability from incidental transactions.

d. A decrease in the liability from primary operations.

How well did you know this?

Not at all

Perfectly

Employees are interested into what kinds of information?

a. That enables them to determine whether their loans and interest attaching to them
will be paid
b. About profitability and stability of the entity in order to assess the ability of
the entity to provide remuneration, retirement benefits, etc.
c. To regulate the activities of the entity
d. About the continuance of the entity

b. About profitability and stability of the entity in order to assess the ability of
the entity to provide remuneration, retirement benefits, etc.

How well did you know this?

Not at all

Perfectly

Revenue from sale of goods is recognized

a. When the customer order is received
b. When the customer order is accompanied by a check
c. Only if the transaction will create a receivable
d. When the title to the good changes

d. When the title to the good changes

How well did you know this?

Not at all

Perfectly

Which of the following is not a possible combination of a journal entry

a. Increase in asset and increase in liability
b. Decrease in equity and increase in liability
c. Decrease in liability and decrease in asset
d. Increase in asset and decrease in equity

d. Increase in asset and decrease in equity

How well did you know this?

Not at all

Perfectly

The underlying theme of the Conceptual Framework is

a. Decision usefulness
b. Understandability
c. Timeliness
d. Comparability

a. Decision usefulness

How well did you know this?

Not at all

Perfectly

Verifiability implies

a. Legal evidence
b. Logic
c. Consensus
d. Legal verdict

c. Consensus

How well did you know this?

Not at all

Perfectly

The Conceptual Framework is intended to
establish:

A. Accounting standard in financial reporting
B. The meaning of “present fairly in accordance with GAAP”
C. The objectives and concepts for use in developing financial accounting standards.
D. The hierarchy of sources of GAAP

C. The objectives and concepts for use in developing financial accounting standards.

How well did you know this?

Not at all

Perfectly

Which is not a purpose of the Revised Conceptual Framework?

A. To assist the IASB to develop IFRS based on consistent concepts.
B. To assist preparers to develop consistent accounting policy when no standard applies to a particular transaction or when Standard allows a choice of accounting policy.
C. To assist all parties to understand and interpret the Standards.
D. To assist the BOA in issuing rules and regulations affecting the accountancy profession.

D. To assist the BOA in issuing rules and regulations affecting the accountancy profession.

How well did you know this?

Not at all

Perfectly

What is the primary objective of financial reporting?

A. To provide economic information that is comprehensible to all users.
B. To provide management with an accurate evaluation of their financial performance
C. To provide forecasts for future cash flows and financial performance.
D. To provide information that is useful for economic decision making.

D. To provide information that is useful for economic decision making.

How well did you know this?

Not at all

Perfectly

Which best describes the going concern assumption?

A. When current assets exceed current liabilities
B. The ability of an entity to continue in operation for the foreseeable future
C. The potential to contribute to the flow of a cash to an entity
D. When revenue exceeds expenses

B. The ability of an entity to continue in operation for the foreseeable future

How well did you know this?

Not at all

Perfectly

During the lifetime of an entity, accountants produce financial statements at arbitrary or artificial points in time in accordance with which basic accounting concept?

A. Objectivity
B. Time period assumption
C. Unit of measure
D. Continuity assumption

B. Time period assumption

How well did you know this?

Not at all

Perfectly

Qualitative characteristics of financial statements are:

A. The attributes that make the information provided in financial statements useful to users
B. Broad classes of financial effects of transactions and other events
C. Qualitative aspects of financial position and financial performance
D. Measure the extent to which an entity has complied with all relevant standards and interpretations

Study These Flashcards

A. The attributes that make the information provided in financial statements useful to users

Fundamental qualitative characteristics of accounting information are: A. Relevance and comparability B. Comparability and consistency C. Faithful representation and relevance D. Neutrality and verifiability

C. Faithful representation and relevance

Enhancing qualitative characteristics of accounting information include: A. Relevance, faithful representation and materiality B. Comparability, understandability, timeliness and verifiability C. Faithful representation and timeliness D. Materiality and understandability

B. Comparability, understandability, timeliness and verifiability

Faithful representation includes: A. Predictive value and confirmatory value B. Completeness, free from error and neutrality C. Comparability and understandability D. Timeliness and verifiability

B. Completeness, free from error and neutrality

The financial information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users. A. Comparability B. Verifiability C. Neutrality D. Completeness

C. Neutrality

The qualitative characteristic of relevance includes: A. Predictive value and confirmatory value B. Completeness and neutrality C. Comparability and understandability D. Verifiability and timeliness

A. Predictive value and confirmatory value

Accounting information is considered relevant when it: A. Can be depended on to represent the economic conditions that it is intended to represent B. Is capable of making a difference in a decision C. Is understandable by reasonably informed users of accounting information D. Is verifiable and neutral

B. Is capable of making a difference in a decision

What is meant by comparability when discussing financial accounting information? A. Information has predictive and feedback value. B. Information is reasonably free from error. C. Information is measured and reported in a similar fashion across entities. D. Information is timely.

C. Information is measured and reported in a similar fashion across entities.

The enhancing quality of understandability means that information should be understood by: A. Those who are experts in the interpretation of financial information B. Those who have a reasonable understanding of business and economic activities C. Financial analysts D. CPAs

B. Those who have a reasonable understanding of business and economic activities

According to the Revised Conceptual Framework, verifiability implies: A. Legal evidence B. Logic C. Consensus D. Legal verdict

C. Consensus

When an entity has started placing its quarterly financial statements on its website, thereby reducing ample time to get information to users, the qualitative concept involved is: A. Comparability B. Understandability C. Verifiability D. Timeliness

D. Timeliness

The usefulness of providing information in financial statements is subject to the constraint of : A. Consistency B. Cost-benefit C. Conservatism D. Materiality

B. Cost-benefit

Which statement is not true about income and expenses? A. Income is increase in asset or decrease in liability that results in increase in equity other than that relating to contribution from equity holders. B. Expense is decrease in asset or increase in liability that results in decrease in equity other than that relating to distribution to equity holders. C. Income and expenses are the elements that relate to financial position. D. Income encompasses revenue and gain.

C. Income and expenses are the elements that relate to financial position. It should be **financial performance.**

It is the process of capturing for inclusion in the statement of financial position or the statement of financial performance an item that meets the definition of an element of the financial statements. A. Recognition B. Measurement C. Derecognition D. Disclosure

A. Recognition

Under the Revised Conceptual Framework, the measurement bases include: A. Historical cost B. Current value C. Assessed value D. Historical cost and current value

D. Historical cost and current value

Which of the following is not an acceptable basis for the recognition of expense? A. Systematic and rational allocation B. Cause and effect association C. Immediate recognition D. Cash disbursement

D. Cash disbursement

What is the objective of financial statements? A. To provide information about the financial position, financial performance and changes in the financial position useful to a wide range of users B. To prepare a statement of financial position and statement of comprehensive income C. To present relevant, reliable, comparable and understandable information D. To prepare financial statements in accordance with all applicable standards

A. To provide information about the financial position, financial performance and changes in the financial position useful to a wide range of users

An entity shall present: A. The statement of financial position more prominently B. The income statement more prominently C. The statement of cash flows more prominently D. Each statement with equal prominence

D. Each statement with equal prominence

An entity shall classify a liability as current under all of the following conditions, **except**: A. The entity expects to settle the liability within the normal operating cycle. B. The entity holds the liability primarily for the purpose of trading. C. The liability is due to be settled within twelve months after the reporting period. D. The entity has the right at the end of reporting period to defer settlement of the liability for at least twelve months after the reporting period.

D. The entity has the right at the end of reporting period to defer settlement of the liability for at least twelve months after the reporting period. **No right to defer.**

The presentation of notes to financial statements in a systematic manner is mandatory, as far as practical. What is the purpose of the notes to financial statements? A. To provide disclosures required by IFRS. B. To correct improper presentation in financial statements C. To provide recognition of amounts not included in financial statements D. To present management response to auditor comments

A. To provide disclosures required by IFRS.

Which one of the following bodies is responsible for reviewing accounting issues that are likely to receive divergent or unacceptable treatment in the absence of authoritative guidance, with a view to reaching consensus as to the appropriate accounting treatment? A. International Financial Reporting Interpretations Committee (IFRIC) B. Standards Advisory Council (SAC) C. International Accounting Standards Board (IASB) D. International Accounting Standards Committee Foundation (IASC Foundation)

A. International Financial Reporting Interpretations Committee (IFRIC)

This is normally published by the IASC as its first publication on any major new topic as a vehicle to explain the issue and solicit early comment from constituents. A. Solicitation Letter B. Exposure Draft C. Memorandum of Agreement D. Discussion Paper

D. Discussion Paper

Which of the following statements best describes GAAP? A. They have been formulated in the public sector B. They are the same as laws within our legal system C. They have been developed on the basis of such factors as usage and practical necessity D. They do not apply to small entities

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

Which of the following is not part of IFRSs? A. International Financial Reporting Standards B. International Accounting Standards C. Interpretations issued by the IFRIC D. Conceptual framework for financial reporting

D. Conceptual framework for financial reporting

Decision makers vary widely in the types of decisions they make, the methods of decision making they employ, the information they already possess or can obtain from other sources, and their ability to process information. Consequently, for information to be useful there must be a linkage between these users and the decisions they make. This link is: A. Relevance B. Reliability C. Understandability D. Materiality

C. Understandability

Primary users of general-purpose financial reports do not include: A. Investors. B. Lenders. C. Creditors. D. Management.

D. Management

Other users of general-purpose financial reports exclude: A. Employees. B. Regulators. C. Public. D. Creditors.

D. Creditors

General purpose financial reports provide information about use of the entity’s economic resources to show how efficiently and effectively the reporting entity's management has discharged its responsibilities. This is known as: A. Management discussion and analysis B. Management's stewardship. C. Management’s responsibilities. D. Management’s prerogative.

B. Management's stewardship.

The elements of financial statements linked to a reporting entity’s financial position (economic resources and claims) do not include: A. Assets. B. Liabilities. C. Equity. D. Income.

D. Income

Equity is: A. present economic resource controlled by the entity as a result of past events. An economic resource is a right that has the potential to produce economic benefits. B. A present obligation of the entity to transfer an economic resource as a result of past events. C. The residual interest in the assets of the entity after deducting all its liabilities. D. Contributions from holders of equity claims, and distributions to them.

C. The residual interest in the assets of the entity after deducting all its liabilities.

High Five Corporation reported P35 million for sales when it only had P20 million of actual sales. Which of the following qualities of useful information has Jackson most likely violated? A. Comparability B. Relevance C. Faithful representation D. Consistency

C. Faithful representation

Which of the following accounting concepts means that similar items should receive a similar accounting treatment? A. Matching B. Consistency C. Accruals D. Conformity

B. Consistency

Companies prepare classified and comparative financial statements because: A. They are required by accounting principles B. They provide financial statement readers with useful information about trends in financial position and operating performance C. They are required by the BIR D. They show changes in a company's management policies

B. They provide financial statement readers with useful information about trends in financial position and operating performance

According to the Conceptual Framework, an entity’s revenue may result from: A. A decrease in an asset from primary operations. B. A decrease in a liability from primary operations. C. An increase in an asset from incidental transactions. D. An increase in a liability from incidental transactions.

B. A decrease in a liability from primary operations.

Which of the following basic accounting assumptions is threatened by the existence of severe inflation in the economy? A. Monetary unit assumption. B. Periodicity assumption. C. Going-concern assumption. D. Economic entity assumption.

A. Monetary unit assumption

First Exam Flashcards

(58 cards)