Far01 Answered

UCP:FAR 01_INTRODUCTION TO ACCOUNTANCY PROFESSION & PREFACE TO PFRS BATCH 2020
UNIVERSAL COLLEGE OF PARAÑAQUE

COLLEGE OF BUSINESS & ACCOUNTING
COMPREHENSIVE REVIEW IN FINANCIAL ACCOUNTING & REPORTING (FAR)
FAR01 INTRODUCTION TO ACCOUNTANCY PROFESSION &

–
PREFACE TO PFRS
TOPIC OUTLINE
Definition of
The Accountancy Accounting
Profession
The Accountancy
Law
INTRODUCTION TO
ACCOUNTANCY
PROFESSION & The Accountancy
PREFACE TO PFRS Fields
PFRS
Preface to PFRS
Standard Setting
LECTURE NOTES
The Accountancy Profession
Definition of Accounting
Accounting was defined in various ways by various organizations. Those definitions are as follows:
(a) Accounting Standards Council (ASC)
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 decision.
(b) Committee on Accounting Terminology of the American Institute of Certified Public
Accountants (CAT of AICPA)
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.
(c) American Accounting Association (AAA)
Accounting is the process of identifying, measuring and communicating economic information to
permit informed judgment and decision by users of the information.
Note: Based from these definitions we can say that:
1. Accounting is a user-based discipline.
2. Accounting is quantitative in nature.
3. Accounting is subject to interpretation.
The definition that has stood the test of time is the definition given by AAA.
The definition stated three (3) important aspects or components of the accounting process.
(1) Identifying process (Analytical Component)
It is the process of analyzing events and transactions to determine whether or not they will be
recognized. Always remember that only accountable events are recognized (i.e. journalized). On the
other hand non-accountable events are not recognized but disclosed in the notes to financial
statements if they have accounting relevance.
Types of events and transactions
a) External Events – are transactions involving the entity and another entity.
a.1) Exchange – an event wherein there is a reciprocal giving and receiving of economic resources or
extinguishment of obligations. Examples: sale, purchase, payment of liabilities.
a.2) Non-reciprocal transfer – is a one way transaction wherein the entity giving does not receive
anything in return. Examples: donation or gifts, payments of taxes and fines, theft, provision of
capital.
a.3) External event other than transfer – an event that changes an entity’s economic resources or
obligations caused by an external party or event but does not involve transfer of resources or
obligations. Examples: changes in fair value, vandalism, obsolescence.
b) Internal events – are events that do not involve outside party or event.
Financial Accounting & Reporting by Karim G. Abitago, CPA

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Aim…Believe..Claim
b.1) Production
b.2) Casualty
(2) Measuring process (Technical Component)
It 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.
(3) Communicating process (Formal Component)
It is the process of preparing and distributing accounting reports to potential users of accounting
information. Implicit in the communication process are the recording, classifying and summarizing
aspects of accounting.
 Recording or journalizing is the process of systematically maintaining a record of all economic
business transactions after they have been identified and measured.
 Classifying is the sorting or grouping of similar and interrelated economic transactions into their
respective class. Actually, classifying is accomplished by posting to the ledger.
 Summarizing is the preparation of financial statements which include the statement of financial
position, income statement, statement of comprehensive income, statement of cash flows and
statement of changes in equity.
The Accountancy Law
Republic Act No. 9298 is the law regulating the practice of accountancy in the Philippines. This law is
known as the "Philippine Accountancy Act of 2004".
The Professional Regulatory Board of Accountancy (PR-BOA) is the body authorized by law to
promulgate the rules and regulations.
The Accountancy Fields
Under RA 9298, the practice of accountancy is sub-classified into four (4) sectors:
(1) Practice in Public Accountancy – involves rendering of accounting and auditing services to one or more
client on a fee basis.
Services rendered:
(a) Auditing has traditionally been the primary service offered by most public accounting
practitioners. Auditing or specifically external auditing is the "examination of financial
statements by independent certified public accountant for the purpose of expressing an opinion
as to the fairness with which the financial statements are prepared". This represents the “ATTEST
FUNCTION” of CPAs.
(b) Taxation service includes the preparation of annual income tax returns and determination of tax
consequences of certain proposed business endeavors. The CPA not infrequently represents the
client in tax investigations.
(c) Management advisory service has no precise coverage. Generally, this refers to services to
clients on matters of accounting, finance, business policies, organization procedures, product
costs, distribution and many other phases of business conduct and operations.
Limitations:
(a) Certificate of Accreditation
 Requires three (3) year meaningful experience.
 CPD requirements
(b) No corporation form is allowed to be registered for the practice of public accountancy.
(2) Practice in Commerce and Industry – also known as private accounting. This refers to employment in
the private sector in a position which involves decision making requiring professional knowledge in the
science of accounting. The highest accounting officer in a business entity is the controller.
(3) Practice in Education or Academe – employment in an education institution which involves teaching of
accounting, auditing, MAS, law, taxation, finance and other related subjects.
(4) Practice in the Government – employment or appointment to a position in an accounting professional
group in the government or GOCC which involves decision making requiring professional knowledge in
the science of accounting or where civil service eligibility as a CPA is a pre-requisite.
Note: Generally speaking, practicing under numbers 2-4 above are considered in private practice.
Preface to PFRS
The Philippine Financial Reporting Standards (PFRSs)
(a) What are IFRS/ PFRS/ GAAP?
Are the laws in accounting, used as a guide in the preparation of financial statements. PFRSs are
guiding principles rather than law, technically speaking. Meaning, PFRSs are principle-based rather
than rule based.
PFRSs set out recognition, measurement, presentation and disclosure requirements dealing with
transactions and events that are important in general purpose financial statements.
(b) Scope of PFRS

PFRSs apply to all profit-oriented entities preparing general purpose financial statements. These
financial statements are directed towards the common information needs of a wide range of users.
(c) Structure of PFRS
Standards approved by FRSC include paragraphs in bold type and plain type, which have equal
authority. Paragraphs in bold type indicate the main principles while paragraphs in plain type indicate
supporting principles.

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Any limitation of the scope of PFRS is made clear in the standard.

Standard Setting
(a) Standard Setting Bodies
The current standard setting body in the Philippines is the Financial Reporting Standards Council
(FRSC) while the current standard setting body internationally is the International Accounting
Standards Board (IASB). FRSC is the successor of Accounting Standards Council (ASC). To fully
understand these bodies, let us differentiate them.
Table 1.1 (FRSC vs. IASB)
FRSC IASB
(a) Setting Local International
(b) Successor of ASC IASC
(c) Pronoucement PFRS IFRS
(d) Creator BOA (2006) IFRS Foundation (2001)
Table 1.2 (FRSC vs. ASC)
FRSC ASC
(a) Creator BOA (2006) PICPA (1981)
(b) Pronouncement PFRS PAS
(c) Composition Chairman + 14 members 8 members including chairman
COA 1 -
BOA 1 1
SEC 1 1
BSP 1 1
BIR 1 -
Major Org. of FS Preparers
1 1
and Users (FINEX)
PICPA (APO) 8 4
2 per sector 1 per sector
14 8
The pronouncements of FRSC are called PFRS, collectively known as:
(a) PFRS – corresponding to IFRS
(b) PAS – corresponding to IAS
(c) Philippine Interpretations – corresponding to interpretations issued by IFRIC and SIC of IASC
and interpretations issued by PIC.
Note: Interpretations are issued to give authoritative guidance on issues that are likely to receive
divergent or unacceptable treatment, in the absence of such guidance. Philippine Interpretations
Committee (PIC) is created by FRSC.
(b) FRSC’s appointment and term of office
The chairman and all the members of FRSC are appointed by PRC upon recommendation of BOA in
coordination with APO, with a term of 3 years and are renewable for another term. Any member of
ASC is not disqualified from being appointed to FRSC.
FRSC members are required to render service to the council on a part-time basis without
compensation.
The chairman should be a senior practitioner in any scope of accounting practice.
(c) The Standard Setting Process (Due Process)
PFRSs are developed through a due process that involves accountants and various interested parties
and individuals. Due process normally involve the following steps.
STEP 1: Consideration of pronouncements of the IASB.
STEP 2: Formation of a task force, when deemed necessary, to give advice to FRSC.
STEP 3: Issuing for comment an exposure draft approved by a majority of the FRSC members;
comment period will be at least 60 days, unless a shorter period (not less than 30 days) is considered
appropriate by the FRSC.
STEP 4: Consideration of all comments received within the comment period and, when appropriate,
preparing a comment letter to the IASB.
STEP 5: Approval of a standard or an interpretation by a majority of the FRSC members.

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DISCUSSION EXERCISES
1. Accounting has been given various definitions, which of the following is not one of those definitions?
A. 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.
B. 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 of at least, of a financial character
and interpreting the results thereof.
C. Accounting is a systematic process of objectively obtaining and evaluating evidence regarding
assertions about economic actions and events to ascertain the degree of correspondence
between these assertions and established criteria and communicating the results to interested
users.
D. Accounting is the process of identifying, measuring, and communicating economic information to
permit informed judgment and decisions by users of information.
2. Consider the following definitions:
I. The recognition or nonrecognition of business activities as accountable events.
II. The assigning of peso amounts to the accountable events.
A. I – Identifying, II – Measuring C. I – Recording, II - Measuring
B. I – Identifying, II – Recording D. I – Measuring, II – Recording
3. What is the basic purpose of accounting?
A. To provide quantitative financial information about economic activities.
B. To provide all information that users need in making economic decisions.
C. To provide qualitative financial information about economic activities intended to be useful in
making economic decisions.
D. To provide quantitative financial information about economic activities intended to be
useful in making economic decisions.
4. Which of the following statements is true?
I. Loss from theft should be classified as a nonreciprocal transfer
II. Internal events are changes in economic resources by actions of other entities that do not
involve transfers of enterprise resources and obligations
III. Nonreciprocal transfers involve the transfer of resources in only one direction, either from an
entity to other entities or from other entities to the entity.
IV. Internal events are sudden, substantial, unanticipated reductions in enterprise resources not
caused by other entities
V. Fire, earthquake and flood are examples of accountable events classified as internal events.
A. I, II, III, V C. II, III, IV, V
B. I, III, V D. I, III, IV, V
5. One of the basic features of financial accounting is
A. Direct measurement of economic resources and obligations and changes in them in terms of
money.
B. Direct measurement of economic resources and obligations and changes in them in terms of
money and sociological impact.
C. Direct measurement of economic resources and obligations and changes in them in terms of
money and psychological impact.
D. Direct measurement of economic resources and obligations and changes in them in terms of
money and sociological and psychological impact.
6. The practice of accountancy in the Philippines is regulated under
A. R.A. 9892 C. R.A. 8992
B. R.A. 9298 D. RH bill
7. Consider the following statements:
S1: The Board of Accountancy (BOA) shall be composed of a Chairman and six (6) members for a
total of seven (7) individuals
S2: Continuing Professional Education is required for both renewal of CPA license and accreditation
to practice the accountancy profession
S3: All firms practicing public accountancy in the Philippines are formed in any type of business
organization.
A. False, true, true C. False, true, false
B. True, true, false D. False, false, false
8. Determine whether the following statements are true or false:
I. Independent external auditors perform attest function.
II. If a CPA wants to practice public accountancy, one must obtain first certificate of recognition
from the board of accountancy.
A. True, false C. False, false
B. False, true D. True, true

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9. Standards approved by the FRSC include paragraphs in bold type and plain type, which have equal au -
thority. Paragraphs in bold type indicate main principles.
Any limitation of the scope of a PFRS is made clear in the standard.
A. True, True C. False, False
B. False, True D. True, False
I. Any limitation of any standard is made clear on the standard itself.
II. PFRS apply to all profit-oriented entities even though Government owned and/or controlled.
III. PFRS is collectively known as PFRS, PAS and Philippine Interpretations.
A. False, false, true C. True, true, false
B. False, true, true D. True, true, true
11. Arrange in proper order the due process for projects of FRSC:
I. Issuing for comment an exposure draft approved by a majority of the FRSC members; comment
period will be at least 60 days, unless a shorter period (not less than 30 days) is considered
II. Consideration of pronouncements of the IASB.
III. Formation of a task force, when deemed necessary, to give advice to FRSC.
IV. Approval of a standard or an interpretation by a majority of the FRSC members.
V. Consideration of all comments received within the comment period and, when appropriate,
preparing a comment letter to the IASB.
A. I, II, III, IV and V C. II, III, I, V and IV
B. III, II, I, V and IV D. II, III, V, I and IV
Statement 1: FRSC members are appointed by PRC with a term of 3 years renewable for another 3
years.
Statement 2: PIC members are appointed by PRC.
Statement 3: All sectors of the accountancy profession are represented in FRSC but majority of which
came from Public Practice
Statement 4: FRSC members render services on a part-time basis and receive financial support from
the Bangko Sentral ng Pilipinas.
A. True, false, false, false C. True, false, false, true
B. True, true, false, false D. True, true, true, true
13. Representatives from the following is included in the composition of FRSC, except
I. CHED IV. SEC
II. BIR V. FINEX
III. PDIC
A. II, IV and V D. I and III
B. I, III and V E. I, III and IV
C. II and IV
14. The process of establishing financial accounting standards
A. Is a democratic process in that majority of practicing accountants must agree with a standard
before it becomes implemented.
B. Is a legislative process based on rules promulgated by government agencies.
C. Is based solely on economic analysis of the effects each standard will have if implemented.
D. Is a social process which it incorporates political actions of various interested user groups as well
as professional research and logic.
15. Financial Reporting Standards Council (FRSC) has
A. 14 members with a chairman C. 16 members with a chairman
B. 15 members with a chairman D. 8 members with a chairman

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QUIZZER (DO-IT-YOURSELF DRILL)

1. The important points made in the definition of accounting include all of the following, except (E)
A. Accounting information is quantitative.
B. Accounting information is financial in nature.
C. Accounting information is useful in decision-making.
D. Accounting information is both quantitative and qualitative.
I. The term "recognition" as used in accounting refers to the process of incorporating the effects of
an accountable event in the statement of financial position or the statement of profit or loss and
other comprehensive income through a journal entry.
II. The accounting process of assigning numbers, commonly in monetary terms, to the economic
transactions and events is referred to as classifying.
3. The following statements correctly refer to the accounting process.
I. Measuring is the accounting process of analyzing business activities as to whether or not they
will be recognized in the books.
II. Recognition refers to the process of including the effects of an event in the totals of the
statement of financial position or the statement of profit or loss and other comprehensive
income through memo entries.
III. Disclosure of events in the notes to financial statement without including in the totals of the
statement of financial position or statement of profit or loss and other comprehensive income is
not an application of the recognition principle.
IV. An accountable event is an event that has an effect on the assets, liabilities or equity of an
entity and its effect can be measured reliably.
V. Sociological and psychological matters are within the scope of accounting.
A. I, II, III, IV, V C. IV
B. I, II, III, IV D. III, IV
4. What is the basic purpose of accounting?
A. To provide quantitative financial information about economic activities.
B. To provide all information that users need in making economic decisions.
C. To provide qualitative financial information about economic activities intended to be useful in
D. To provide quantitative financial information about economic activities intended to be
useful in making economic decisions.
5. Which of the following statements is correct?
I. Accounting provides qualitative information, financial information, and quantitative information.
II. Qualitative information is found on the notes to the financial statements only.
III. Accounting is considered an art because of it is supported by an organized body of knowledge
IV. Accounting is considered a science because it involves the exercise of skill and judgment.
V. Measurement is the process of assigning numbers to objects such inventories or plant assets
and to events such as purchases sales.
VI. All quantitative information is also financial in nature.
VII. The accounting process of assigning peso amounts or numbers to relevant objects and events is
known as Identification.
A. I, V C. I, II, III, IV, V
B. I, II, VI, V D. II, VI, V
6. Classifying preference dividends as expense is an application of what concept?
A. Entity C. Proprietary
B. Fund D. Residual equity
7. Fiduciary accounting is an application of
A. Entity theory C. Proprietary theory
B. Fund theory D. Residual equity theory
8. Which of the following statements is true?
I. Loss from theft should be classified as a nonreciprocal transfer
II. Internal events are changes in economic resources by actions of other entities that do not
involve transfers of enterprise resources and obligations
III. Nonreciprocal transfers involve the transfer of resources in only one direction, either from an
entity to other entities or from other entities to the entity.
IV. Internal events are sudden, substantial, unanticipated reductions in enterprise resources not
caused by other entities
V. Fire, earthquake and flood are examples of accountable events classified as internal events.
A. I, II, III, V C. II, III, IV, V
B. I, III, V D. I, III, IV, V
9. All of the following are events considered as exchange or reciprocal transfer, except
A. purchase of investment in equity securities

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B. sale of equipment for non-interest bearing note

C. subscription of the entity's own equity instrument
D. exchange of a note payable for an account payable
E. borrowing of money from a bank
10. These are events result to a sudden or unanticipated loss from fortuitous events
A. Internal Events C. External Events Other Than Transfers
B. Non-reciprocal transfers D. Casualty
11. Which of the following is not an important characteristic of the financial statements that accountants
currently prepare?
A. Financial statements can be justified only if the benefits they provide exceed the costs.
B. The information in financial statements is summarized and classified to help meet users' needs.
C. The information in financial statements is expressed in units of money adjusted for changing
purchasing power.
D. Financial statements articulate with one another because measuring financial position is related
to measuring changes in financial position.
12. Which of the following applies to financial accounting?
I. Information meets general needs of particular statement users
II. Emphasized objective data
III. Past/Historical-oriented
IV. Basically not concerned with income determination and asset valuation
A. Yes, No, Yes, No C. No, No, Yes, No
B. No, Yes, No, Yes D. No, No, No, Yes
13. RA 9298 is known as
A. The Philippine Accounting Law C. Philippine Accountancy Law
B. The Law on Commerce and Accounting D. Philippine Accountancy Code
14. The Board of Accountancy (BOA) shall be composed of a
A. Six (6) members with a chairman for a total of six (6) individuals
B. Chairman and six (6) members for a total of seven (7) individuals
C. Chairman and fifteen (15) members
D. Chairman and seventeen (17) members
15. Who is permanently exempted from the CPE requirement for the renewal of CPA license?
A. A 60-year old CPA
B. A 65-year old CPA
C. A CPA studying abroad during the period of stay.
D. A CPA practicing the profession abroad during the period of stay.
16. As independent or external auditors, CPAs are primarily responsible for
A. Filing financial statements with the SEC
B. Certifying the accuracy of financial statements
C. Preparing financial statements in conformity with GAAP
D. Expressing an opinion as to the fairness of financial statements
17. 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. External auditing C. Internal auditing
B. Government accounting D. Private accounting
18. Which of the following correctly refer to the various branches of accounting?
I. Government accounting deals with accounting for the national government and its
instrumentalities, focusing attention on the custody of public funds and the purpose or purposes
to which such funds are committed.
II. Institutional accounting deals handling of accounts managed by a person entrusted with the
custody and management of property for the benefit of another.
III. Estate accounting deals with the handling of accounts for fiduciaries who wind up the affairs of a
deceased person.
IV. Social responsibility accounting is the process, of measuring and disclosing the performance of
firm in terms of community involvement and related criteria.
V. Accounting Systems deals with the installation of accounting procedures for the accumulation of
financial data; includes designing of accounting forms to be used in data gathering.
VI. Cost accounting is the systematic recording and analysis of the costs of material, labor, and
overhead incident to production.
VII. Fiduciary accounting is the accounting for not-for-profit entities other than the government.
A. I, II, III, IV, V, VI, VII C. I, III, IV, V, VI, VII
B. I, II, IV, V, VI, VII D. I, III, IV, V, VI
19. Mr. Maestro Yessur, a topnotch CPA, is a professor in a university where he teaches mainly home eco -
nomics, music and physical education. Those subjects require that the teacher must be awesome. Mr.
Maestro is also frequently invited as a judge in beauty pageants and singing contests and as a referee

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in mixed martial arts competitions. Mr. Maestro is considered to be practicing accountancy in which of
the following sectors?
A. Academe C. Commerce and industry
B. Public accounting D. None of these
20. Once a financial reporting standard has been established
A. the standard is continually reviewed to see if modification necessary.
B. the standard is not reviewed unless the SEC makes a complaint.
C. the task of reviewing the standard to see if modification is necessary is given to the PICPA.
D. the principle of consistency requires that no revisions ever be made to the standard.
21. What is "due process" in the context of standard-setting by IASB?
A. IASB operates in full view of the public.
B. Interested parties can make their views known.
C. Public hearings are held on proposed standards.
D. All of these are part of due process in standard-setting.
22. 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
23. Which is incorrect concerning FRSC?
A. The FRSC replaced the ASC as the standard setting-body in the Philippines.
B. The FRSC is composed of 15 members with a Chairman and 14 representatives from various
sectors.
C. The Chairman and members of the FRSC shall have a term of 3 years renewable for another
term.
D. Any member of the ASC shall be disqualified from being appointed to the FRSC.
24. Which of the following government agency is not represented in FRSC?
A. Bangko Sentral ng Pilipinas C. Bureau of Internal Revenue
B. Securities and Exchange Commission D. Commission on Higher Education
25. The PIC members were appointed by the ___________ and include accountants in public practice, the
academe and regulatory bodies and users of financial statements
A. SEC C. BOA
B. PRC D. FRSC
26. The role of the Philippine Interpretations Committee (PIC) is principally to issue implementation guid-
ance on PFRSs.
Interpretations of PFRSs are intended to give authoritative guidance on issues that are unlikely to re-
ceive divergent or unacceptable treatment, in the absence of such guidance.
A. True, True C. False, False
B. True, False D. False, True
27. The period of exposing the draft of a proposed PFRS will be at least sixty (60) days, unless a shorter
period is considered appropriate by the FRSC. The shorter period should
A. Not less than 30 days. C. Less than 30 days.
B. 30 days no more less. D. More than 30 days but not exceeding 59 days.
28. Due process for projects of FRSC normally includes the following, except
A. Consideration of pronouncement of IASB.
B. Formation of a task force, when deemed necessary, to give advice to the FRSC.
C. Issuing for comment an exposure draft approved by at least eight members of the Council;
comment period will be at least 60 days.
D. Approval of a standard or an interpretation by all of the council members.
Statement 1: FRSC members are appointed by PRC with a term of 3 years renewable for another 3
years.
Statement 2: PIC members are appointed by PRC.
Statement 3: All sectors of the accountancy profession are represented in FRSC but majority of which
came from Public Practice
Statement 4: FRSC members render services on a part-time basis and receive financial support from
the Bangko Sentral ng Pilipinas.
A. True, false, false, false C. True, false, false, true
B. True, true, false, false D. True, true, true, true
30. Which of the following is not part of the due process of FRSC in forming new PFRS and reviewing cur -
rent PFRS?
A. Formation of task force the purpose of which is to give advice to FRSC.
B. Preparation of comment letter, if necessary, after considering all the comments on the exposure
draft.

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C. Approval of the standard by MAJORITY of FRSC members and eventually PRC.

D. Consideration of pronouncement of IAASB.
31. All of the following are represented in the FRSC, except
A. Board of Accountancy (1)
B. Securities and Exchange Commission (1)
C. Bangko Sentral ng Pilipinas (1)
D. Bureau of Internal Revenue (1)
E. None, all of the above are represented in the FRSC
32. All of the following is an incorrect statement regarding the due process of standard setting, except:
A. Consideration of pronouncements of the IFRIC
B. Formation of a task force, in all cases, to give advice to FRSC.
C. Approval of a standard or an interpretation by a MAJORITY of the FRSC members.
D. Issuing for comment an exposure draft approved by a majority of the FRSC members; comment
period will be at least 90 days, unless a shorter period (not less than 60 days) is considered
33. Which of the following bodies is responsible for reviewing accounting issues that are likely to receive
divergent or unacceptable treatment in the absence of authoritative guidance, with a view to reaching
consensus as to the appropriate accounting treatment?
A. International Financial Reporting Interpretations Committee (IFRIC)
B. Standards Advisory Council (SAC)
C. International Accounting Standards Board (IASB)
D. International Accounting Standards Committee Foundation (IASC Foundation)
34. The International Financial Reporting Interpretations Committee (IFRIC) issues interpretations as au-
thoritative guidance. For which of the following should IFRIC consider issuing an Interpretation?
I. Narrow, industry-specific issues
II. Newly identified financial reporting issues not specifically addressed in IFRSs
III. Issues where unsatisfactory or conflicting interpretations have developed, or seem likely to
develop
IV. Areas where members of the IASB cannot reach unanimous agreement
A. I, II C. III, IV
B. II, III D. II, IV
35. Generally accepted accounting principles
A. Are accounting adaptations based on the law of economic science.
B. Derive their credibility and authority from legal rulings and court precedents.
C. Derive their credibility and authority from the national government through the financial
reporting section of the SEC.
D. Derive their credibility and authority from general recognition and acceptance by the
accountancy profession.
36. PFRSs consist of
A. PFRSs C. Interpretations
B. PASs D. all of these
37. The role of International Financial Reporting Standards (IFRS) and International Accounting Standards
(IAS) is
A. to reduce possible number of accounting differences
B. to produce globally recognized standards.
C. both of the above.
D. neither of the above.
38. PFRSs approved by the FRSC include paragraphs in bold-type and plain text. In relation to the PFRS
paragraphs in bold type, are the following statements true or false?
(1) Bold-type paragraphs should be given greater authority than the paragraphs in plain text.
(2) Bold-type paragraphs indicate the main principles of the standard.
A. False, true C. False, false
B. True, true D. True, false
39. PFRS is applicable to all of the following, except
A. General-purpose financial reports C. Public and state-owned enterprises
B. Special-purpose financial reports D. Commercial and industrial enterprises
40. In the event of conflict between the PFRSs and the local standards, which among the following will
prevail?
A. The provisions of the Corporation Code and Tax Code will prevail
B. The rule of the Philippine Securities and Exchange Commission prevails
C. The rule of the International Accounting Standards prevails
D. The rule of local standards, laws and regulations shall prevail.
I. PFRS are principle-based guidelines.

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II. The current standard setting body internationally is ASC.

III. Any limitation of a standard is made clear on the standard itself.
A. False, false, true C. True, true, false
B. False, true, true D. True, false, true
42. Statement 1: General purpose financial statements are those statements that cater to the common
and specific needs of a wide range of external users.
Statement 2: The practice of accountancy in the Philippines is regulated under R.A. 9892.
43. Which of the following statements is incorrect?
I. The information contained in the financial statements is obtained exclusively from the firm's
accounting records.
II. Financial accounting is a science rather than an art while management accounting is an
art rather than a science.
III. Management decisions are oriented to the future whereas the decisions of external users are
oriented to the past.
IV. Financial accounting is a branch of accounting which deals primarily with the common needs of
users while management accounting is a branch of accounting which deals primarily with the
specific needs of users.
V. Quantitative information is always more useful than non-quantitative information for the purpose
of making economic decisions.
VI. Financial statements are only one source of information needed by users to make rational
economic decisions.
VII. Financial statements have the same basic purpose as financial accounting.
VIII. Financial statements are the only source of information needed by users to make rational
economic decisions.
A. IV, VII, VIII C. IV, VI, VII
B. I, II, III, V, VIII D. I, II, III, V, VI, VII
44. It is the accounting standard-setting body in the Philippines at the present time.
A. Accounting Standards Council C. Philippine Accounting Standards Board
B. Financial Reporting Standards Council D. Auditing and Assurance Standards Council
45. Determine whether the statements are true or false
I. PFRS sets guidelines on how to deal with the internal reports of a company. It should be in
accordance with GAAP.
II. Charities and religious organizations are within the scope of PFRS.
A. True, false C. True, true
B. False, true D. False, false
46. In relation to PFRS, determine which of the following statements is (are) correct?
I. PFRS are generally accepted principles patterned from economic and legislative issues.
II. PFRS governs reports prepared by non-profit organizations.
A. I only C. Both I and II
B. II only D. Neither I nor II
47. Choose the correct statement
A. Financial accounting is a social science and cannot be influenced by changes in legal, political,
business and social environments.
B. Financial accounting is an information system designed to provide information primarily to
internal users.
C. General-purpose financial statements must be prepared by a certified public accountant.
D. The preparation of general-purpose financial statements is usually based on the assumption that
the primary users of the information are external decision makers.
48. Choose the incorrect statement
A. Disclosure notes facilitate the evaluation of enterprise position and performance because they
include information which helps to explain the quality of earnings.
B. Disclosure notes are an integral part of the financial statements.
C. Companies often look for opportunities to smooth earnings.
D. Accounting concepts, principles and standards are just as broad and general today as they were
sixty years ago.
49. Choose the correct statement about financial reporting standards.
A. They are laws
B. The Bureau of Internal Revenue enforces PFRSs
C. Firms that do not comply with PFRSs may suffer negative economic consequences.
D. GAAP in the Philippines is represented by PSAs
50. What are the accounting principles commonly known as?
A. Standards C. Rules
B. Methods D. Regulations
51. Statement 1: In current practice, accounting provides only quantitative information that is useful in

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Statement 2: The basic purpose of accounting is to provide information about economic activities
intended to be useful in making economic decisions.
52. All of the following are events considered as internal events, except
A. Transfer of goods from work-in-process to finished goods inventory
B. Losses from flood, earthquake, fire and other calamities
C. Transformation of biological assets from immature to mature
D. Vandalism committed by the entity's employees
53. Statement 1: All firms practicing public accountancy in the Philippines are formed in any type of busi-
ness organization.
Statement 2: All firms practicing public accountancy in the Philippines must be first registered,
registration requires 4 years of meaningful experience.
A. Only the first statement is true. C. Both statements are true.
B. Only the second statement is true. D. Both statements are false.
54. Which statement is correct regarding the Financial Reporting Standards Council (FRSC)? (M)
A. Established by PICPA in 2006 under the Implementing Rules and Regulations of the Philippine
Accountancy Act of 2004.
B. The main function is to establish generally accepted auditing standards in the Philippines.
C. The Chairman and members of the FRSC are appointed by the president of the Philippines upon
recommendation of the PRC in coordination with APO.
D. The FRSC is the successor of the Accounting Standards Council (ASC) which was created in
November 1981 by the Philippine Institute of Certified Public Accountants (PICPA).
55. Which of the following is true in comparing ASC and FRSC?
A. ASC is the successor of FRSC.
B. Part of the member of ASC is a representative from BIR which is not represented in FRSC.
C. ASC has 8 members including the chairman while FRSC has 14 members without the chairman.
D. All of the above.
56. The principles which constitute the ground rules for financial reporting are termed "generally accepted
accounting principles". To qualify as "generally accepted," an accounting principle must
A. Receive substantial authoritative support.
B. Guide an entrepreneur of the choice of an accounting entity like single proprietorship,
partnership or corporation.
C. Usually guide corporate managers in preparing financial statements, which will be understood by
widely scattered shareholders.
D. Guide corporate managers in preparing financial statements, which will be used, for collective
bargaining agreement with trade unions.
57. In relation to PFRS, which of the following statements are true or false?
I. PFRS apply to Government Owned and Controlled Corporations (GOCCs) doing business or trade.
II. Any limitation in the PFRS is clearly stated on a separate paragraph in the standard itself.
III. PFRS are rules based rather than principle based.
IV. Bold and plain type paragraphs in a standard are with equal authority. Plain type indicates the
main principles of the standard.
A. True, false, false, false C. False, false, false, false
B. True, true, false, false D. False, true, false, false
- END OF HANDOUTS -

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UCP:FAR 01_INTRODUCTION TO ACCOUNTANCY PROFESSION & PREFACE TO PFRS BATCH 2020

UNIVERSAL COLLEGE OF PARAÑAQUE

FAR01 INTRODUCTION TO ACCOUNTANCY PROFESSION &

Financial Accounting & Reporting by Karim G. Abitago, CPA

(b) Scope of PFRS

Financial Accounting & Reporting by Karim G. Abitago, CPA

Any limitation of the scope of PFRS is made clear in the standard.

Financial Accounting & Reporting by Karim G. Abitago, CPA

Financial Accounting & Reporting by Karim G. Abitago, CPA

Financial Accounting & Reporting by Karim G. Abitago, CPA

QUIZZER (DO-IT-YOURSELF DRILL)

Financial Accounting & Reporting by Karim G. Abitago, CPA

B. sale of equipment for non-interest bearing note

Financial Accounting & Reporting by Karim G. Abitago, CPA

Financial Accounting & Reporting by Karim G. Abitago, CPA

C. Approval of the standard by MAJORITY of FRSC members and eventually PRC.

Financial Accounting & Reporting by Karim G. Abitago, CPA

II. The current standard setting body internationally is ASC.

Financial Accounting & Reporting by Karim G. Abitago, CPA

Financial Accounting & Reporting by Karim G. Abitago, CPA

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