CHAPTER 1

THE ACCOUNTANCY PROFESSION

PRIOBLEM 1-1
ANSWER
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
a. Accounting Standards Council
b. AICPA Committee on Accounting Terminologies
c. American Accounting Association
d. Board of Accountancy

2. All of the following descrbe accounting, except

a. A service activity
b. An information system
c. A universal language of business
d. An exact science rather than an art

3. The important points made in the definition of accounting include all of

the following, except
a. Accounting information is quantitative
b. Accounting information is both quantitative and qualitative
c. Accounting information is financial in nature
d. Accounting information is useful in decision making

4. This accounting process is the recogniton and nonrecognition of

business activities as accountable events.
a. Identifying c. Communicating
b. Measuring d. Reporting

5. The events that affect the entity and in which other entities participate
are known as
a. Internal events c. Current events
b. External events d. Obligating events

6. Which of the following statements is incorrect in relation to accountable

event?
a. An event is accountable when it has an effect on asset, liability
or equity.
b. The subject matter os eccounting is the measurement of
economic resouces and obligations
c. Only economic activities are emphasized and recognized in
accounting
d. Sociological and psychological matters are quantifiable

7. What is the "measuring" component in the definition of accounting?

a. The recognition or nonrecognition of business actvities as
accountable events
b. The assigning of peso amounts to the accountable events
c. The prepaation and distribution of accounting reports to users
of accounting information
d. The preparation of audit report by CPAs.

8. The most common financial attribute used in measuring financial

information is
a. Historical cost c. Realizable value
b. Current cost d. Present value

9. The "communicating" process of accounting ncludes all of the following,

except
a. Recording c. Summarizing
b. Classifying d. Interpreting

10. What is the overall objective of accounting?

a. To provide the information that the managers of an economic
entity need to control the operations
b. To provide information that the creditors can use in deciding
whether to grant loans to an 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 economic decision
PROBLEM 1-2
1. What is the law regulating the practice of accountancy in the Philippines?
a. R.A. No. 9298 c. R.A. No. 9928
b. R.A. No. 9198 d. R.A. No. 9892

2. What 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. 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

4. Which of the followng statements is incorrect in relation to the practice of

public accountancy?
a. Single practitioners for the practice of public accountancy shall be
registered CPAs in the Philippines
b. Partners of partnerships formed for the practice of public accountancy
shall be registeres CPAs in the Philipinnes
c. The Securities and Exchange Commission ca register any
coporaton organized for the practice of public accountancy
d. The Professional Regulation Commission upon favorable
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.

5. What is the primary service of CPAs in public practice?

a. Auditing c. Managerial accounting
b. Taxation 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 c. Government accounting
b. Private 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 c. Private accounting
 b. External auditing 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 license and accreditation to practice the
accountancy profession
d. Neither renewal of CPA license nor accreditation to practice the
accountancy profession

PROBLEM 1-3
1. What is the standard-setting body in the Philippines at present time?
a. Accounting Standards Council
b. Auditing and Assurance Standards Council
c. Philippine Accounting Standards Board
d. Financial Reporting Standards Council

2. Which statement is true regarding the FRSC?

a. The FRSC is created by PRC upon recommendation of BOA to assist
BOA 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

3. All of the followng are represented in FRSC, except

a. Board of Accountancy
b. Securities and Exchange Commission
c. Commission on Audit
d. Department of Budget and Management

4. 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 theses are included in Philippine Financial Reporting Standards
PROBLEM 1-4
1. 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 do not have their
own standard-setting bodies

2. The IASB declared that the merits of proposed standards are assesed
a. From a position of neutrality
b. From a position of materiality
c. Based on possible impact on behavior
d. Based on argument of lobbyist

3. 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

4. The standards published by IASB are called

a. International Accounting Stadards
b. Financial Reporting Standards
c. International Financial Reporting Standards
d. Statement of Financial Accounting Standards

5. The IASB emplys 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 accounting issues that are the most important
d. Requires that all CPAs must receive a copy of IFRS

6. What is due process in the context of standard-setting by IASB