CHAPTER 1 – THE NEED FOR FINANCIAL REPORTING

1. Which among the following is an indirect user of accounting information?

a. Management of the enterprise
b. Taxing authority
c. Regulatory agency
d. Lenders of the enterprise

2. Financial accounting is concerned with

a. Recording financial transactions
b. Summarizing and presenting financial information on financial reports.
c. Analyzing the financial reports.
d. All of these

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

a. Board of directors
b. Long-term creditors of an enterprise
c. Shareholders of the company
d. Regulatory agencies

4. Which of the following is considered a direct user of accounting information?

a. A regulatory agency
b. Trade association
c. Taxing authority
d. Labor unions

5. As used in the definition of accounting, an economic entity may be

a. A business enterprise
b. An individual
c. A division within a business enterprise
d. Any of these

6. The objectives of financial reporting for business are based on

a. Generally accepted accounting principles
b. Reporting on management’s stewardship
c. The need for profit maximization
d. The needs of the users of the information

7. What is the branch of accounting that makes financial information about an entity
accessible to the external users?
CHAPTER 1 – THE NEED FOR FINANCIAL REPORTING
a. Auditing
b. Financial accounting
c. Government accounting
d. Management accounting

8. What is the branch of accounting that serves the information needs of internal users?
a. Cost accounting
b. Financial accounting
c. Government accounting
d. Management accounting

9. Which of the following users of accounting information are both an external user and a
direct user?
a. Management
b. Labor unions
c. Creditors
d. Regulatory bodies

10. Which of the following are represented in the financial reporting standards council?
I. Securities and Exchange Commission
II. Department of Trade and Industry
III. Board of Accountancy
IV. Philippine Institute of CPA
V. BIR
VI. Social Security System
D. I, III, IV, and V

11. What is the body authorized by law to promulgate rules and regulations affecting the
practice of accountancy in the Philippines?
a. Accounting standards council
b. Philippine institute of CPA
c. Board of Accountancy
d. Auditing standards and practices council

12. Which of the following are parts of the due process applied by the financial reporting
standards council in developing a financial reporting standard?
I. Formation of a task force to address the issue.
CHAPTER 1 – THE NEED FOR FINANCIAL REPORTING
II. Publication of the exposure draft in the official gazette or newspaper of general
articulation
III. Consideration of comments on the exposure draft
IV. Approval vote by a majority members of the FRSC members.
b. I, III and IV

13. The process of establishing financial reporting standards is

c. A social process, which incorporates political actions of various interested user groups
as well as professional research and logic.

14. The body that authors the international financial reporting standard is the
c. International accounting standards board

15. An independent, not-for-profit private sector organization that governs the activities of the
international accounting standards board is the
b. IFRS foundation

16. As part of the due process of developing an accounting standard, the FRSC issues exposure
draft for comment within a period of 60 days, unless a shorter period is considered
appropriate. How long is this shorter period?
c. not less than 30 days

17. Based on the RA 9298, the FRSC is composed of

c. 15 members

18. RA 9298 is otherwise known as

c. Philippine Accountancy Act of 2004

19. This is the body created by the BOA in 2006 to assist the board in carrying out its power
and function to promulgate accounting standards in the Philippines
D. Financial Reporting Standards Council

20. The PFRS consist of

I. Specific PFRS which are adopted from the IFRS
II. PAS, which are adopted from the IAS
III. Philippine Interpretations, which are adopted from the interpretations of the IFRIC
and the SIC.
IV. Interpretations of the PIC
a. I, II, III, and IV
CHAPTER 1 – THE NEED FOR FINANCIAL REPORTING