EXERCISE – CONCEPTUAL FRAMEWORK AND ACCOUNTING STANDARDS Score: ___

I. MULTIPLE CHOICE: Select the letter of the best answer among the options and write it on
the line provided.

_____1. The highest accounting officer working in a private business entity.

a. Internal Auditor c. Chief Accountant
b. Controller d. Accounting Staff
_____2. The three kinds of services provided by public accounting, except
a. Auditing c. Management Advisory Services
b. Taxation d. Cost Accounting
_____3. Financial accounting emphasizes reporting to
a. Regulatory Bodies c. Creditors and Investors
b. Internal Management d. Public
_____4. The law regulating the practice of Accountancy in the Philippines.
a. R.A. No. 9289 c. R.A. No. 9298
b. R.A. No. 9829 d. R.A. No. 9892
_____5. This accounting process is the recognition or nonrecognition of business activities as
accountable events.
a. Identifying c. Summarizing
b. Communicating d. Recording
_____6. The accounting process that proves accounting is the universal language of
business.
a. Identifying c. Summarizing
b. Communicating d. Recording
_____7. The most common financial attribute used in measuring financial information is
a. Fair Value c. Realizable Value
b. Current Cost d. Historical Cost
_____8. The present standard-regulating body which is created by the PRC through the
recommendation of BOA in extending their powers and functions to formulate accounting
standards and principles in the Philippines.
a. International Accounting Standards Board
b. Financial Reporting Standards Council
c. Accounting Standards Council
d. Philippines Accounting Standards Council
_____9. 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
______10. The methodical process of accounting which is mainly concerned with the custody
of accounting records.
a. Auditing c. Bookkeeping
b. Government Accounting d. Management Accounting
II. IDENTIFICATION: Identify what is being described or violated and write it on the blank
space provided. DO NOT WRITE ANY PRINCIPLE OR STANDARD.

1. K Company purchased a machinery imported from USA at a certain cost three years ago.
Because of inflation, the machinery now has a current replacement cost higher than its
historical cost. The management would like to disclose the asset at its current replacement
cost.

2. A subsidiary was exhibiting poor financial performance for the current year. In an effort to
increase the subsidiary’s reported income, the parent entity purchased goods from the
subsidiary at twice the normal markup.

3. The operations of a saving bank are being evaluated by the BSP. During the investigation,
the BSP has determined that numerous loans made by top management were unwise and
have seriously endangered the future of the saving bank.

4. TXT Company experienced robbery of cash in its store branch because of inferior security
system. The company lost P200,000.00 which is ½ of their sales for the period. This event
alarmed the management which affected their decision-making for the financial statements.
DO NOT WRITE MATERIALITY.

5. The management of S company requires the disclosing of a set of financial statements

with its notes to FS to its external and internal users for greater transparency of its
operations and performance.

6. It requires that users have some knowledge of the complex economic activities of
entities, the accounting process and the technical terminology in the statements.

7. M Corporation expensed immediately small expenditures for tools used in the production
process.

8. In the shoe industry, A company reported financial statements and associated it with the
financial statements of B company to assess their performance and address concerns about
the target sales for the next period.

9. C Company provides quarterly and interim financial reports to its potential investors and
creditors.

10. D Company purchased an equipment to be used in manufacturing their products for

P500,000.oo cash. However, during the preparation of financial statements, the accountant
was bribed and made an intent error of placing only P200,000.00. The company presented
the financial statements to its primary users. DO NOT WRITE NEUTRALITY.