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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.

c. and the public. 10. governments and their agencies. Financial statements can be justified only if the benefits they provide exceed the costs. Which is not included in the scope of the Conceptual Framework? a. Develop a uniform currency in which the financial transactions of entities throughout the world would be measured. Promote uniform accounting standards among countries of the world. d. d. Stable monetary unit 12. b. 13. Generally accepted accounting principles 14. Issue enforceable standards which regulate the financial accounting and reporting of multinational entities. The accounting concept justifies the usage of accruals and deferrals. Which of the following statements in relation to information needs is true? I. Consistency d. To assist the Financial Reporting Standards Council in the standard-setting process. such as employees. The purpose of the International Financial Reporting Standards is to: a. II. customers. Materiality c. b. Stable monetary unit d. b. Objective of financial reporting d. a. Legal entity b. Qualitative characteristics of useful financial accounting information b. consolidated financial statements are prepared in recognition of a. The information in financial statements is expressed in units of money adjusted for changing purchasing power. Definition. Arbitrate accounting disputes between auditors and international entities. Which of the following is not a purpose of the Conceptual Framework? a. c. Going concern b. The information in financial statements is summarized and classified to help meet users’ needs. Information that meets the needs of specified primary users is likely to meet the needs of other users. 9. Time period 11.8. . Economic entity c. To assist accountants and others in selecting among alternative accounting and reporting methods. When a parent and subsidiary relationship exists. recognition and measurement of the elements of financial statements c. d. 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. To provide definitions of key terms and fundamental concepts. To provide specific guidelines for resolving situations not covered by existing accounting standards. Financial statements articulate with one another because measuring financial position is related to measuring changes in financial position. Which of the following is not an important characteristic of the financial statements that accountants currently prepare? a. c.

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