TRUE OR FALSE
Materiality is one of the basic
3.Capital markets are increasingly
integrated, and companies have greater
flexibility in deciding where to raise
capital.
4.Companies consider only quantitative
factors in determining whether an item is
material.
5.The International Accounting
Standards Board’s (IASB’s) Conceptual
Framework includes supplementary
information
6.The International Accounting
Standard Board requires that companies
assess their receivables for impairment
each reporting period and begin the
impairment assessment by considering
whether objective evidence indicates
that one or more loss events have
occurred.
7.Under International Financial
Reporting Standards (IFRS) companies
need not report immaterial items within
the body of the financial statements but
must disclose them in the notes or
supplementary information that
accompany the financial statements.
8.A soundly developed conceptual
framework enables the International
Accounting Standards Board (IASB) to
issue more useful and consistent
pronouncements over time
9.Short-term, highly liquid investments
may be included with cash on the
statement of financial position.
10.
assumptions of accounting used by the
International Accounting Standards
Board (IASB).
11.The expense recognition principle
states that debits must equal credits in
each transaction.
12.Companies include postdated checks
and petty cash funds as cash.
13.When buying receivables with
recourse, the purchaser assumes the
risk of collectibility and absorbs any
credit loss.
14.Under IFRS, a company may select
the fair value option or amortized cost
for valuing its receivables at each
statement of financial position date.
15.The International Accounting
Standards Board’s (IASB) rule for
materiality is any item under 5% of net
income is considered immaterial
16.The receivables turnover ratio is
computed by dividing net sales by the
ending net receivables
17.Users of financial statements are
assumed to have no knowledge of
business and financial accounting
matters by financial statement preparers
18.Verifiability and predictive value are
two ingredients of faithful representation.
19.Trade discounts are used to avoid
frequent changes in catalogs and to
alter prices for different quantities
purchased.
20.The International Accounting
Standards Board’s (IASB) definition of
retained earnings is “the residual
interest in the assets of the entity after
deducting all its liabilities.”
28.In order to provide information that is
useful in decision making and capital
allocation, the International Financial
Reporting Standards (IFRS) requires all
companies to use a common currency.

21.IFRS are a product of careful logic or 29.To be a faithful representation as

empirical findings and are not influenced
by political action.
22.The periodicity assumption of
accounting (used by the International
Accounting Standards Board) makes
depreciation and amortization policies
justifiable and appropriate
23.Users of the financial information
provided by a company use that
information to make capital allocation
decisions.
24.Financial statements are the principal
means through which financial
information is communicated to those
outside an enterprise.
described by the International
Accounting Standards Board’s (IASB’s)
Conceptual Framework, information
must be confirmatory.
30.Relevance and faithful representation
are the two fundamental qualities that
make accounting information useful for
decision making.
31.Politics and political pressure in
establishing IFRS is a negative force.
32.The percentage-of-sales method
results in a more accurate valuation of
receivables on the balance sheet.

25.The International Organization of

Securities Commissions (IOSCO) sets
accounting standards for those countries
which have not yet adopted IFRS.

26.The conceptual framework for

accounting has been discovered through
empirical research.

27.The International Accounting

Standards Board has indicated that they
believe that financial statements would
be more transparent and
understandable if companies recorded
and reported all financial instruments at
amortized cost.
MULTIPLE CHOICE
3.Which of the following should be
recorded in Accounts Receivable?
4.The International Accounting
Standards Board (IASB) follows specific
steps in developing International
Financial Reporting Standards (IFRS).
Place the following steps in the correct
order:
1) Research and analysis conducted;
preliminary views of pros and cons
issued.
2) Topics identified and placed on the
agenda.
3) Board evaluates responses, final
standard issued.
4) Public hearing on proposed standard
5) Board evaluates research, issues
exposure draft.
5.What is the normal journal entry for
recording bad debt expense under the
allowance method?
6.The process of identifying, measuring,
analyzing, and communicating financial
information needed by management to
plan, evaluate, and control an
organization’s operations is called?
7.An implicit assumption of the
International Accounting Standards
Board’s (IASB’s) Conceptual Framework
is that.
8.What is a purpose of having a
conceptual framework?
9.Which of the following is a generally
accepted method of determining the
amount of the adjustment to bad debt
expense?
10.Accrual accounting is used because
11.A Cash Over and Short account
12.The information provided by financial
reporting pertains to
13.What is a possible reason for
accounts receivable turnover to increase
from one year to the next year
14.The International Accounting
Standards Board’s (IASB’s) Conceptual
Framework includes all of the following
except:
15.Why would a company sell
receivables to another company
16.Why is the allowance method
preferred over the direct write-off
method of accounting for bad debts
17.Which of the following is a
fundamental quality of useful accounting
information?.
18.The accounts receivable turnover
ratio is computed by dividing
19.What is due process in the context of
standard setting at the IASB?
20.Which of the following is an
ingredient of relevance?
21.In the conceptual framework for
financial reporting, what provides “the
why”–the purpose of accounting
22.At the beginning of 2010, ABC
Company received a three-year zero-
interest-bearing P1,000 trade note. The
market rate for equivalent notes was 8%
at that time. ABC reported this note as a
P1,000 trade note receivable on its 2010
year-end statement of financial position
and P1,000 as sales revenue for 2010.
What effect did this accounting for the
note have on ABC's net earnings for
2010, 2011, 2012, and its retained
earnings at the end of 2012,
respectively?
23.The second level of the International
Accounting Standards Board’s (IASB’s)
Conceptual
24.Company A issuing its annual
financial reports within one month of the
end of the year is an example of which
enhancing quality of accounting
information?
25.Decision makers vary widely in the
types of decisions they make, the
methods of decision making they
employ, the information they already
possess or can obtain from other
sources, and their ability to process
information. Consequently, for
information to be useful there must be a
linkage between these users and the
decisions they make. This link is
26.The financial statements most
frequently provided include all of the
following except the
27.Assuming that the ideal measure of
short-term receivables in the statement
of financial position is the discounted
value of the cash to be received in the
future, failure to follow this practice
usually does not make the statement of
financial position misleading because

28.The International Accounting

Standards Board’s (IASB) conceptual
framework

29.The purpose of the International

Accounting Standards Board is

30.Users of financial reports include all

of the following except:

31.Assuming that the ideal measure of

short-term receivables in the statement
of financial position is the discounted
value of the cash to be received in the
future, failure to follow this practice
usually does not make the statement of
financial position misleading because

32.An effective capital allocation

process