Quiz 1. Conceptual Framework and Accounting Standards: Points

1/5/2021 Quiz 1.
Conceptual Framework and Accounting Standards
Quiz 1. Conceptual Framework and

Accounting Standards
Choose the Best Answer
Points: 69/100
1. The development of accounting standards is primarily driven by the needs of

(2/2 Points)
Standard-setting bodies
Government agencies
Investors 
Employees
2. The correct order in the standard-setting process is
I. Standard-setting program
II. Maintenance Program
III. Agenda Consultation
IV. Research Program
(2/2 Points)
IV, III, II, I
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1/5/2021 Quiz 1. Conceptual Framework and Accounting Standards
II, I, IV, III
I, II, III, IV
III, IV, I, II 
3. It replaces the International Accounting Standards Committee (IASC) in 2001.

(2/2 Points)
Philippine Accounting Standards Committee
Philippine regulatory Board of Accountancy
International Financial Reporting Standard Council
International Accounting Standards Board 
4. What are the main qualifications for membership in IASB?

(2/2 Points)
professional competence and technical expertise
can serve in an individual capacity and demonstrate their independence
professional competence and practical experience 
practical experience and market experience
5. A herd of twenty 2-year-old animals was held on January 1, 2020. Five animals,
aged 2.5 years old, were purchased on July 1, 2020. On the same date, 4 animals
were born. Ten animals were sold on December 31, 2020, aged 3 years old, at fair
value.
Per unit fair values less estimated cost to sell were as follows:
January 1, 2020 – 2-year-old animal, P15,000
July 1, 2020 – newborn animal, P8,000; 2.5-year-old animal, P20,000.
December 31, 2020 – newborn animal, P8,500, 0.5 year-old animal, P9,500; 2 year-
old animal, P16,500; 2.5 year-old animal, 23,000; 3 year-old animal, P28,000.
Using the physical concept maintenance, how much would be considered as

capital adjustment.
(0/3 Points)
259,000
280,000
47,000 
306,000

6. Which of the following best describes the objective of accounting?
(0/2 Points)
To verify the accuracy or completeness of financial information provided to users
To use expertise to collect, classify and summarize financial information 
To enable the accountant to enhance the credibility of information
To enable a CPA to express an opinion whether the financial statements are prepared, in all
material respects, in accordance with Philippine Financial Reporting Standards
7. Which is the best proof why standard-setting process is described as a social

process rather than a democratic process?
(2/2 Points)
Election conducted by CPAs all over the world to approve the issuance of new accounting
standard
Publications of accounting standards in official gazette and newspaper of general circulation
Exposure draft subject to comment and review by professional accountants 
SEC Memorandum Circulars adopting Philippines Financial Reporting Standards
8. Comparability can be achieved by

(2/2 Points)
Neutrality
Consistency 
Understandability
Verifiability
9. Which of the following is not a valid definition of accounting?

(2/2 Points)
Accounting is the art of recording, classifying, and summarizing in a significant manner and
in terms of money, transactions, and events which are in part at least of a financial character
and interpreting the results thereof.
Accounting is both an art and science of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and Philippine Financial Reporting Standards and
communicating the results to interested users

Accounting is a service activity. Its function is to provide quantitative information, primarily

financial in nature, about economic entities, that is intended to be useful in making
economic decisions.
Accounting is the process of identifying, measuring, and communicating economic

information to permit informed judgment and decision by users of the information.
10. The Financial Accounting Standards Board employs a "due process" system which
(1/1 Point)
enables interested parties to express their views on issues under consideration. 
identifies the accounting issues that are the most important.
requires that all accountants must receive a copy of financial standards
is an efficient system for collecting dues from members.

11. According to the Revised Conceptual Framework, the objective of the general-
purpose financial report is to provide information useful for decision making. Such
decision is primarily related to the following, except:
(0/2 Points)
Determining the value of the company
Providing insights to the entity 
Electing a director
Analyzing the company’s ability to settle its obligation
12. The Revised Conceptual Framework links the definition of income to increases in
assets or decreases in liabilities. Hence, if an entity pays its outstanding liabilities, it
is proper to recognize income.
(2/2 Points)
No, since general-purpose financial reporting uses accrual basis, not cash basis, of
accounting
No, since there is no resulting increase in equity other than those relating to contributions
from holders of equity claims.

Yes, since there is a resulting decrease in liability
Yes, since extinguishment of obligation is legitimate source of income
13. Which of the following is an internal user of a company’s financial information?

(1/1 Point)
Shareholders of the company
Board of directors 
Long-term creditors of an enterprise
Regulatory agencies
14. On December 1, 2019, the Emerald Corporation issued a five-year non-convertible

P5,000,000 face value 12% bonds for P5,386,072, a price that yields 10%. Interest is
payable semiannually on June 1 and December 1.
What is the amortized cost of the bonds on December 31, 2020?

(0/3 Points)
P5,323,144
P5,317,505
P5,000,000
P5,386,072
15. What is the main function of FRSC?

(2/2 Points)
To interpret the application of IFRSs and provide timely guidance on financial reporting
issues not specifically addressed in IFRSs
To comment on exposure drafts of proposed IFRS and other documents that may be issued
for comment by the IASB.
To assist the Board of Accountancy in carrying out its power and function to promulgate
accounting standards in the Philippines.

To prepare and issue International Financial Reporting Standards
16. A particular form of financial reports that provide information about the reporting
entity’s assets, liabilities, equity, income and expenses.
(2/2 Points)
Statement of Assets and Liabilities
Sworn Statement
Financial Statements 
Statement of Account

17. Recycling is the removal of all or part of a recognized asset or liability from an
entity’s statement of financial position to profit or loss in a future period unless
provided by the Standards.
Recognition is the process of determining the monetary amounts when an item

meets the definition of one of the elements of financial statements.
(0/2 Points)
False, True
True, True
False, False 
True, False
18. This is assumption is the primary reason why financial statements are not prepared
using liquidating values
(2/2 Points)
Historical cost base assumption
Going concern assumption 
Value in use assumption
Fair value assumption
19. A new cooler with a market price of P200,000 was purchased on February 10, 2020.
Freight charge of P3,000 and installation cost of P6,000 were paid. What is the cost
of the new cooler?
(3/3 Points)
P204,000
P209,000 
P210,000
P200,000

20. An entity may recognize an asset even if the other party does not have a
corresponding obligation to the said entity.
An entity should continue to recognize a liability when subsequently it becomes a

holder of the negotiable promissory note it issued since such promissory note is
an express declaration of its present obligation to another party.
(0/2 Points)
True, False 
True, True
False, False
False, True

21. BSA Inc., sells P100,000, 10%, 10-year bonds. Because of the current situation
brought by COVID-19, the company pleaded to any buyer that the company will
defer the payment of interest and principal by 10 years. How much are you willing
to pay for the bonds today if the interest rate for similar bonds is 12%?
(0/3 Points)
28,550 
100,000
88,699
200,000
22. This refers to increases in assets, or decreases in liabilities, that result in increases
in equity, other than those relating to contributions from holders of equity claims.
(1/1 Point)
Income 
Liability
Expense
Asset
23. Which of the following is true?
I. Accounting is a service activity intended to fulfill useful information in society;
II. Accounting involves the art of recording, classifying, and summarizing

transaction and events, and interpreting the results thereof;
III. Accounting is an art but not a science;
IV. Accounting provides quantitative financial information intended to be useful in

making economic decisions
(1/1 Point)
I, II, IV 
II, III, IV
I, II, III, IV
I, II, III
24. Prudence
(1/1 Point)
means when in doubt, choose the solution that will be least likely to understate liabilities
and expenses.
is the exercise of caution when making judgements under conditions of uncertainty 
allows for the understatement of assets or income or the overstatement of liabilities or

expenses.
means when in doubt, choose the solution that will be least likely to overstate assets and
income.
25. The decisions of the primary users of general-purpose financial reports depend on
their expectations of return. How can general-purpose financial reports help them
make correct decisions?
(0/2 Points)
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By providing information suited to the individual needs of the users
By emphasizing timing of future cash flows
By presenting figures and numbers that users could accurately derived from available
financial information
By showing the value of the entity on the face of financial statements with explanatory notes
to the financial statements

26. IASB has complete responsibility for all technical matters of the IFRS Foundation
including the following except:
(0/2 Points)
preparation and issuing exposure drafts
developing and pursuing its technical agenda
approval and issuing of Interpretations
preparation and issuing Interpretations 
27. Financial statements should be prepared from the perspective of the

(2/2 Points)
controlling stockholders
government agencies
primary users of financial statements
reporting entity 
28. An analysis of Jockey Club, Inc. disclosed changes in account balances for 2020
and the following supplementary data:
Increase in Cash, P21,000; increase in Accounts Receivable, P25,000; decrease in

Inventory, P10,000; increase in Equipment, P70,000; decrease in Accounts Payable,
P5,000.
Jockey Club sold 5,000 shares of its P5 par ordinary shares for P8 per share and
received cash in full. Dividends of P15,000 were paid in cash during the year.
Jockey Club borrowed P50,000 from the bank and made interest payments of
P5,000. Jockey Club had no other loans payable. The interest of P1,000 was
payable on December 31, 2020. There was no interest payable on December 31,
2019. Equipment of P20,000 was donated by shareholders during the year.
How much is the profit for the year 2020?

(3/3 Points)
P10,000
P15,000 
P20,000
P65,000

29. This branch of accounting uses relevance as criterion in the preparation of
financial reports.
(0/2 Points)
Management Accounting 
Financial Accounting
Accounting Education
Cost Accounting
30. This external user is given by law the right to inspect the book of accounts of a
corporation.
(2/2 Points)
Public
Creditor
Supplier
Stockholder 
31. Only legal entity can be a reporting entity.
Two or more unrelated entities can prepare a combined financial statement.

(2/2 Points)
True, False
False, True 
True, True
False, False
32. The PFRS consist of
I. Specific Philippine Financial Reporting Standards (PFRS), which are adopted from
the IFRSs
II. Philippine Accounting Standards (PAS), which are adopted from the IASs
III. Philippine Interpretations, which are adopted from the interpretations of the
IFRIC and the SIC
IV. Interpretations of the PIC

(1/1 Point)
I, II, and III
I only
I and II
I, II, III, and IV 
33. This phase in the standard-setting process explores the issues, identify possible
solutions, and decide whether standard-setting is required.
(2/2 Points)
Maintenance Program
Standard-setting program
Research Program 
Agenda Consultation
34. Which qualitative characteristics or sub-characteristics showcase the postulate

substance over form?
(2/2 Points)
Faithful representation 
Verifiability
Relevance
Materiality
35. In 2020, Starbucks offers a limited-edition Starbucks coffee planner/organizer

(“reward”) to celebrate the very long season of Christmas in the Philippines.
Customers receive one sticker for every P200 purchase of any beverage. A
customer must accumulate a total of eighteen (18) stickers to redeem the reward.
Starbucks pays P1,000 for each planner/organizer and estimates that 25% of the
stickers will not be used. Total sales of coffee for the year amounted to P7,200,000.
Customers can start redeeming the planner/organizer the following year. Should
Starbucks report a liability on December 31, 2020’s financial statement in relation
to this offer?
(3/3 Points)
Yes, amounting to P2,000,000, because it has no practical ability to avoid the obligation to
give the planner/organizer to qualified customers
Yes, amounting to P1,500,000, since Starbucks is bound by its offer once accepted by the
customers

No, since the liability cannot be established with certainty
No, because the redemption period starts only the following year
36. A private company entered into an agreement with the government whereby the
private company will build a facility worth billions of Peso, operate the facility for
25 years to recover the company’s investment, then, at the end of 25 years,
transfer the facility to the government. Should the private company recognize a
liability?
(2/2 Points)
Yes, because it cannot avoid the obligation to transfer the facility to the government 
Yes, because the principle of prudence allows the company to overstate its liabilities in case
of uncertainty in the application of accounting standards
No, because the facility would have been fully depreciated at the end of the 25 years
No, because the company’s obligation to transfer the facility will arise only at the end of 25
years
37. Financial accounting is the branch of accounting that focuses on

(1/1 Point)
financial statements
general purpose reports of financial position and results of operations 
special purpose reports of financial position and results of operations
the various need of statement users
38. This branch of accounting uses Philippine Financial Reporting Standards as criteria
in the preparation of financial reports.
(2/2 Points)
Cost Accounting
Management Accounting
Financial Accounting 
Accounting Education

39. A piece of machinery was acquired on September 1, 2020, on an installment basis.
The total installment price is P1,199,079 and is payable five equal annual
installments beginning September 1, 2020. The company issued a non-interest-
bearing note in lieu of the machinery. There is no established price for the
machinery. The prevailing market rate of interest for similar securities on the
transaction date was at 10%. The new machinery has an estimated useful life of 10
years with an estimated salvage value of 10% based on its cost. How much is the
initial cost of the machinery?
(0/3 Points)
800,000
727,273
1,000,000 
608,148
40. IASB has many members?

(2/2 Points)
16 members
15 members
14 members 
11 members

41. At the beginning of 2017, Joice Company acquired equipment costing P860,000.
The equipment was believed to have an estimated useful life of 9 years and a
residual value of P50,000. The company uses straight-line depreciation for this
type of equipment.
On December 31, 2020, because circumstances indicate that the economic

performance of the asset is less than expected, the equipment was tested for
impairment. The asset’s fair value less cost to sell was estimated to be P370,000.
The asset is expected to provide an annual net cash inflow of P100,000, during the
remaining five years of useful life, at the end of which residual value is expected to
be P20,000 only.
Based on the current market assessments and risk specific to the asset, a discount
rate of 10% is considered appropriate.
Using the historical cost base, the equipment should be carried at what amount on
December 31, 2020?
(0/3 Points)
P361,617
P370,000
P500,000
P391,498 
42. Victoria Corporation completed the following transactions relating to an

investment in Whirlpool Corporation's ordinary shares.
Year 2019
Purchased 1,000 shares at P150 per share, plus transaction costs of P3,750.
At Year-end, the Whirlpool Corporation ordinary shares had a fair value of P180
per share.
Year 2020
Sold 500 of Whirlpool Corporation's ordinary shares at P190 per share, incurring
P1,000 transaction costs on the sale.
At year-end, the fair value of each share was P192.
The carrying value of the investment in Whirlpool Corporation on December 31,

2020, using current value as a measurement base is
(3/3 Points)
77,875
96,000 
90,000
76,875
43. Under this concept, a profit is earned when the amount of the capital at the end of
the period exceeds the amount of capital at the beginning of the period, after
excluding the effects of transactions with owners.
(1/1 Point)
Transaction approach
Entity concept
Going concern concept
Capital maintenance concept 

44. This links an economic resource to an entity.

(2/2 Points)
Economic claims
Economic benefit
Control 
Source of rights
45. What is the authoritative status of the Conceptual Framework?

(1/1 Point)
In the absence of a standard or an interpretation that specifically applies to a transaction,

management shall consider the applicability of the conceptual Framework in developing and
applying an accounting policy that results in information that is relevant and reliable.

In the absence of a standard or interpretation that specifically applies to a transaction, the

Conceptual Framework shall be followed.
The Conceptual Framework has the highest level of authority.
The Conceptual Framework applies only when the International Accounting Standard Board
develops new or revised standards.
46. Use financial reports to determine the ability of the enterprise to be continuing
sources of supply
(2/2 Points)
Suppliers
Customers 
Management
Employees
47. The underlying theme of the Conceptual Framework is

(1/1 Point)
Timeliness
Comparability
Decision usefulness 
Understandability
48. MYKO will be paid a pension equivalent of 0.5% of the final year’s salary for every
year of service. MYKO negotiated that the amount of pension shall increase by 4%
every year. Also, the pension shall be payable at the end of each year after
retirement. His retirement is expected to span 10 years. As of January 1, 2020, (a)
MYKO has already rendered service for 15 years; (b) his current salary is P1,000,000
and is expected to increase by 8% annually, and (c) he is expected to retire after
another 20 years. The interest in high-quality corporate bonds is 7%. As of
December 31, 2020, how much is present obligation that MYKO should recognize
if any?
(3/3 Points)
2,884,187
349,571
0 
850,668
49. The absence of this qualitative characteristic may make information lose its
relevance
(2/2 Points)
Verifiability
Timeliness 
Comparability
Neutrality

50. Entity’s financial performance is reflected by
I. Accrual accounting
II. Past cash flows
III. Other events or transactions such as issuing debt or equity
(0/2 Points)
I, II 
I, II, III
II, III
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1/5/2021 Quiz 1.

Conceptual Framework and Accounting Standards

Quiz 1. Conceptual Framework and

1. The development of accounting standards is primarily driven by the needs of

2. The correct order in the standard-setting process is

IV, III, II, I

II, I, IV, III

3. It replaces the International Accounting Standards Committee (IASC) in 2001.

Philippine Accounting Standards Committee

Philippine regulatory Board of Accountancy

International Financial Reporting Standard Council

International Accounting Standards Board 

4. What are the main qualifications for membership in IASB?

professional competence and technical expertise

can serve in an individual capacity and demonstrate their independence

professional competence and practical experience 

practical experience and market experience

January 1, 2020 – 2-year-old animal, P15,000

July 1, 2020 – newborn animal, P8,000; 2.5-year-old animal, P20,000.

Using the physical concept maintenance, how much would be considered as

To verify the accuracy or completeness of financial information provided to users

To use expertise to collect, classify and summarize financial information 

To enable the accountant to enhance the credibility of information

7. Which is the best proof why standard-setting process is described as a social

Publications of accounting standards in official gazette and newspaper of general circulation

Exposure draft subject to comment and review by professional accountants 

SEC Memorandum Circulars adopting Philippines Financial Reporting Standards

8. Comparability can be achieved by

9. Which of the following is not a valid definition of accounting?

Accounting is a service activity. Its function is to provide quantitative information, primarily

Accounting is the process of identifying, measuring, and communicating economic

enables interested parties to express their views on issues under consideration. 

identifies the accounting issues that are the most important.

requires that all accountants must receive a copy of financial standards

is an efficient system for collecting dues from members.

Determining the value of the company

Providing insights to the entity 

Analyzing the company’s ability to settle its obligation

Yes, since there is a resulting decrease in liability

Yes, since extinguishment of obligation is legitimate source of income

13. Which of the following is an internal user of a company’s financial information?

Shareholders of the company

Long-term creditors of an enterprise

14. On December 1, 2019, the Emerald Corporation issued a five-year non-convertible

What is the amortized cost of the bonds on December 31, 2020?

15. What is the main function of FRSC?

To prepare and issue International Financial Reporting Standards

Statement of Assets and Liabilities

Recognition is the process of determining the monetary amounts when an item

Historical cost base assumption

Going concern assumption 

Value in use assumption

Fair value assumption

An entity should continue to recognize a liability when subsequently it becomes a

23. Which of the following is true?

I. Accounting is a service activity intended to fulfill useful information in society;

II. Accounting involves the art of recording, classifying, and summarizing

III. Accounting is an art but not a science;

IV. Accounting provides quantitative financial information intended to be useful in

is the exercise of caution when making judgements under conditions of uncertainty 

allows for the understatement of assets or income or the overstatement of liabilities or

By providing information suited to the individual needs of the users

By emphasizing timing of future cash flows