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FND ACT 1 – IA12115

Prelim Quiz 1

November 28, 2013
Mr. Michael Q. Liggayu

General Instructions: Write all answers on the ½ cut cross-wise yellow paper. Part I answers should
be written on the front page. Part II answers should be written on the back
page. Use only ballpen in writing the answers. Any form of erasure will be
considered wrong. Failure to follow instruction will have 10-point deduction
from the raw score. Anyone caught cheating will be rated zero.
Part I.

Identify the term being referred by the statements that follow. Each correct item will be
rated two points.

1.
2.
3.
4.

A business organization owned by one person.
Field of accounting that deals with providing information needs of the internal decision makers.
Two or more individuals, joining their resources together to form a business.
The purpose of accounting to provide on a periodic basis, which the accountant is required by
owners to prepare, and which contains financial information on the status and performance of the
business.
5-7.
The following candidates have received the results of their CPA Board Examinations taken October
2008:
Candidate
General Average
Remarks
A, no previous exam taken
94.57%
Perfect scores in six subjects, and
one subject has a rating of 62%
B, no previous exam taken
75.00%
No subjects below 65%
C, only previous try was in May 2008 79.67%
This is C's removal examination for
three (3) subjects. These subjects
were rated as 75%, 100% and 64%,
respectively
5.
6.
7.
8.
9.
10.

11.
12.
13.
14.
15.

Did candidate A passed or failed the CPA Board Exam or is A conditional?
Did candidate B passed or failed the CPA Board Exam or is B conditional?
Did candidate C passed or failed the CPA Board Exam or is C conditional?
Company A bought a binding machine for P400,000 which can last for five years. The company
charged this cost to an Asset account. This is an example of what kind of measurement of the
elements of financial statements?
Under this basis, the effects of transactions and other events are recognized when they occur (and
not as cash or its equivalent are received or paid) and they are recorded in the accounting records
and reported in the financial statements of the periods to which they relate.
A qualitative characteristic of financial accounting information which states that financial
statements should be presented in general-purpose, and should be directed towards the common
information needs of a wide range of users. They should not influence the making of a decision or
judgment; in order achieve a predetermined result or outcome.
The process of determining the monetary amounts at which the elements of the financial
statements are to be recognized and carried in the balance sheet and income statement.
This accounting organization aims to promulgate and improve accounting standards that will
constitute GAAP in the Philippines.
The personal assets of the owner of a company will not appear on the company's balance sheet
because of which fundamental concept?
Financial reporting is concerned only with information that is significant enough to affect
evaluation or decision is stated in what qualitative characteristic?
Which principle/guideline requires a company's balance sheet to report its land at the amount the
company paid to acquire the land, even if the land could be sold today at a significantly higher
amount?

Recognition is the process of incorporating. and the matching principle. 20. while relevance and reliability refer to the presentation of financial statements. Each item will be rated two points. From the accounting viewpoint. A CPA candidate must have an average of at least 75% with no grade lower than 60% in order to pass the CPA Board Examinations. that is. Source documents are examples of objective evidence of transactions that have taken place. 3. 7. It is the desire for objectivity that explains why historical cost rather than market value forms the basis of valuation of assets. 5. education. one must finish a degree in Bachelor of Science in Accountancy and pass a rigorous licensure examination given by the Board of Accountancy 6. Which area of public accounting means the examination of financial statements by a CPA for the purpose of expressing an opinion as to the fairness of the statements? 17. Part II. 12. 18. in the financial statements an item that meets the definition of an element and satisfies the criteria for recognition set out in the Framework. . 8. A merchandising business is one which buys goods from suppliers and sells them for a price not higher than cost. A service business is the most basic legal form of business organization. 15. Information is relevant if it has a predictive role. 16. There are four sectors of the accountancy profession today: public practice. with the intention of dividing the profits among themselves 2. 1. 10. or industry to a common fund. 14.16. State whether each statement that follow is True or False. They encompass the conventions. Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance sheet and income statement. 9. such that assets or income are not understated and liabilities or expenses are not overstated. commerce and industry. the sole proprietorship is distinct from its proprietor. 4. going concern. rules and procedures necessary to define what accepted accounting practice is. it is not considered part of the accounting data. Prudence is the inclusion of a degree of caution in the exercise of judgment needed in making the estimates required under conditions of uncertainty. The business entity concept does not apply to a sole proprietorship business. Consistency in accounting methods is observed to prevent misleading profits arising from different accounting methods being reported. 19. This concept involves dividing the life of a business entity into accounting periods of equal length thus enabling the financial users to periodically evaluate the results of business operations. Migs uses his business bank account to pay for his monthly personal utility bills and recorded it as Utilities expense. 20. 13. and government. when it is used to confirm or correct the earlier expectations of a financial statement user. A partnership is a business owned and operated by two or more persons who bind themselves to contribute money. Understandability and comparability refer to content. State the accounting principle or concept that was not adhered to? 18. An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow from the enterprise. property. If economic event cannot be measured in monetary terms. There are three underlying assumptions mentioned in the Framework: accrual basis. Only large amounts are considered as material in nature. To be a CPA. 11. 17. 21. Financial reports communicated after an accounting decision has been made defeat the primary purpose of which characteristic of financial statements? 19.

15. 11. 17. 5. 13. 10. 9. 11. 2. 6. 15. 2. 18. 14. 8. 9. 1. 16. True False (not higher than cost) False (business organization activity) True True False (65%) True False (all refers to content and presentation) False (predictive confirmatory role) False (only large amounts) False (assets or income not understated overstated. Sole Proprietorship Management Accounting Partnership Financial Statements A is conditional B passed C failed Historical Cost Accrual Accounting Neutrality Measurement Financial Reporting Standards Council Entity Concept Relevance Historical Cost External Auditing Entity Concept Timeliness Generally Accepted Accounting Principles Periodicity Concept 1. 8. 7. 16. 19. going concern) False (does not apply) False (it is not still considered) True True False (methods being reported used) . 7. liabilities and expense not overstated understated) False (flow from to the enterprise) BONUS True True False (three two underlying assumptions: accrual basis. 13. 3.Part II. 4. KEY ANSWERS Part I. 5. 4. 18. 10. 14. 17. 3. 12. 19. 6. 12. 20. 20.