Chapter 2

Accounting Concepts and Principles

NAME: EJERTIMA, DANIELLE MARGARETTE N. Date: 01/09/23

Professor: LYSSANDER RODAN DELA CRUZ Section: MAR222 Score:

QUIZ: MULTIPLE CHOICE

1. Which of the following terms may not refer to the logical notions and procedures that guide the
accountant in recording and communicating financial information?
a. Accounting concepts
b. Accounting principles
c. Accounting standards
d. Accounting laws and regulations

2. Under this concept, a business is not expected to end its operations in the near term.
a. Separate entity concept
b. Going concern
c. Stable monetary unit
d. Materiality

3. Transactions and other events are recorded in the periods in which they occur, not when they affect
cash.
a. Going concern
b. Accrual basis
c. Reporting period
d. Consistency

4. The personal transactions of the business owner that do not involve the business are not recorded in
the books of accounts of the business. This relates to the concept of
a. Separate entity concept.
b. Going concern.
c. Stable monetary unit.
d. Materiality.

5. Presenting all amounts in the financial statements in Philippine pesos and disregarding the effects of
inflation on the purchasing power of the Philippine peso relate to the concept of
a. Separate entity concept.
b. Going concern.
c. Stable monetary unit.
d. Materiality.

6. Under this concept, the life of the business is divided into series of reporting periods.
a. Time period
b. Periodicity
c. Reporting period
d. All of these

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7. The banking industry in the Philippines is mainly regulated by the
a. CDA.
b. SEC.
c. BSP.
d. BIR.

8. The Standards used in the Philippines are patterned from

a. U.S. GAAP.
b. Spanish Standards.
c. Japanese Financial Reporting Standards
d. international standards, called the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board (IASB) which is based in the U.K.

9. Recording assets at their acquisition cost (entry value), rather than at their net selling price (exit
value), is in line with the concept of
a. Single entity concept.
b. Historical cost concept.
c. Going concern concept.
d. Matching principle.

10. Which of the following relates to the concept of consistency?

a. Treating the business as a separate entity from its owner.
b. Recording sales revenue when a sale occurs rather than when the sale price is collected.
c. Measuring assets at their acquisition cost.
d. Using the same accounting treatment for similar items from period to period.

11. Which of the following is an application of the concept of prudence or conservatism?

a. Choosing a potentially unfavorable outcome over a potentially favorable one.
b. Choosing a potentially favorable outcome over a potentially unfavorable one.
c. Deliberately understating assets and income and deliberately overstating liabilities and expenses.
d. Doing nothing in cases of uncertainty.

12. The cost of providing or using information should not exceed the information’s usefulness.
a. Materiality
b. Cost-benefit or Cost constraint
c. Going concern
d. Relevance

13. Under this concept, some costs are initially recognized as assets and recognized only as expenses
when the related revenue is recognized.
a. Separate entity concept
b. Historical cost concept
c. Going concern
d. Matching principle

14. Businesses are required by law to file tax returns with this government agency.
a. Security and Exchange Commission
b. Bureau of Internal Revenue

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 c. Cooperative Development Authority
d. Bangko Sentral ng Pilipinas

15. The accounting standards that are currently used in the Philippines are referred to as the
a. Philippine Financial Reporting Standards (PFRS).
b. Philippine GAAP.
c. Filipino Accounting Standards (FAS).
d. Juan’s GAAP.

16. The usefulness of information is assessed in terms of its

a. qualitative characteristics.
b. verifiability.
c. timeliness.
d. size.

17. Which of the following is one of the fundamental qualitative characteristics?

a. Comparability
b. Relevance
c. Timeliness
d. Verifiability

18. Which of the following is correct concerning the qualitative characteristics?

a. Free from error means the information contained in the financial statements is perfectly accurate
in all respects.
b. Neutrality means information is selected or presented with bias to increase the probability that
the information will be received favorably by the users.
c. Information that is not capable of affecting the decisions of users is considered irrelevant.
d. The enhancing qualitative characteristics can convert non-useful information to useful
information.

19. A business purchased equipment for ₱10,000 but deliberately reported it as ₱100,000. Which of the
following principles is most likely not violated?
a. Faithful representation
b. Free from error
c. Historical cost
d. Materiality

20. This qualitative characteristic requires at least two items.

a. Comparability
b. Timeliness
c. Verifiability
d. Understandability

“The Spirit of the Lord will rest on him — the Spirit of wisdom and of understanding,
the Spirit of counsel and of might, the Spirit of the knowledge and fear of the Lord.“
(Isaiah 11:2)

- END –

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 Answer Sheet!

1 C 6 D 11 A 16 A

2 B 7 C 12 B 17 B

3 B 8 D 13 D 18 C

4 A 9 B 14 B 19 D

5 C 10 D 15 A 20 A