1.

Which of the following terms best describes information that influences the economic decisions
of users?
a. Understandable
b. Prospective
c. Relevant
d. Reliable

2. Which of the following is true of the qualitative characteristics of 'understandability' in relation

to information in financial statements?
a. Users should be willing to study the information with reasonable diligence.
b. Financial statements should exclude complex matters
c. Users are expected to have significant business knowledge
d. Financial statements should be free from material errors.

3. The following statements are based on PAS 1 (Presentation of Financial Statements):

I. An entity can rectify inappropriate accounting policies either by disclosure of the accounting
policies used or by notes or explanatory material.
II. An entity shall not offset assets and liabilities or income or expense, unless required or
permitted by a PFRS.
a. True, true
b. True, false
c. False, true
d. False, false

4. Under the PFRS Conceptual Framework (2010), which is not an ingredient of the fundamental
characteristics Faithful Representation?
a. Conservatism
b. Free from error
c. Neutrality
d. Completeness

5. Under the Conceptual Framework, what are the two criteria required for incorporating items
into the statement of financial position?
a. It meets definition of relevance and reliability
b. It satisfies the criterion of capital maintenance
c. It meets the definition of an element and can be measured reliably
d. It meets the requirements of comparability and consistency.

6. Which of the following organizations is responsible for setting International Financial Reporting
Standards?
a. International Accounting Standards Committee.
b. Financial Accounting Standards Board.
c. Financial Accounting Committee.
d. International Accounting Standards Board.

7. A firm signs a major contract in December 2013 to construct a custom machinery for a client. No
work is begun the current year, yet the footnotes to the financial statements discusses the
nature and peso amount of the contract. This is an example of';
 a. Reliability
b. Completeness or full disclosure
c. Conservatism
d. Historical cost

8. Which of the following is not an element of faithful representation?

a. Freedom from material error
b. Completeness of information
c. Neutral presentation of financial information
d. Influence on the economic decision of users

9. The definition of equity as given in the conceptual framework shows that:

a. Equity = Assets - Expenses.
b. Equity = Assets - Liabilities.
c. Equity = Assets - Liabilities - Expenses.
d. Equity = Income - Expenses.

10. The international financial reporting standards (IFRS) are

a. Focused on quantitative rules
b. Principles based rather than rules based
c. Based on regulations not concepts
d. Rules based rather than principles based

11. It is committed to developing, in the public interest, a single set of high quality, understandable
and enforceable global accounting standards that require transparent and comparable
information in general purpose financial statements.
a. The International Accounting Standards Board (IASB)
b. The Professional Regulatory Board of Accountancy (BOA)
c. The Financial Reporting Standards Council (FRSC)
d. The Financial Accounting Standards Board (FASB)

12. Which is incorrect concerning the qualitative characteristics of financial statements?

a. The need for comparability dictates that the seasonality nature of the activities of an entity
be disclosed in interim financial statements
b. Information has the quality of relevance when it influences the economic decisions of users
by helping them evaluate past, present or future events or confirming or correcting their
past evaluations
c. When information that are a result of related party transactions are shown in the financial
statements these financial statements lose their reliability
d. To achieve the quality of understandability, users are assumed to have a reasonable
knowledge of business and economic activities and accounting, and a willingness to study
the information with reasonable diligence

13. Comparability of financial information should pertain to

a. Qualitative information in the notes to financial statements
b. Quantitative and qualitative information on the face of the financial statements and in the
notes
c. Quantitative information on the face of the financial statements only.
 d. All the contents of the published annual report of an entity

14. The two fundamental qualitative characteristics of useful information are:

a. materiality and relevance.
b. relevance and faithful representation.
c. timeliness and understandability.
d. comparability and verifiability.

15. The Professional Regulatory Board of Accountancy

a. Serves as the author of the Philippine Accountancy Act of 2004
b. Has the power to issue, revoke and reinstate CPA license
c. Is the accounting standard-setting body of the Philippines
d. Works under the organization of Philippine Institute of CPAs

16. Philippine Accounting Standards 1 (Presentation of financial statements) sets the:

a. Overall requirements for the presentation of financial statements and the alternative format
of presentation.
b. Overall requirements for the presentation of financial statements including the required
format of the statements.
c. Requirements for the preparation and presentation of financial statements of banks and
financial institution; however it is also applicable to other profit oriented entities.
d. Overall requirements for the presentation of financial statements and the guidelines for
their structure and minimum requirements for their content.

17. Under the PFRS Conceptual Framework (2010), the usefulness of financial information is
enhanced if it is
a. Prudent, timely, consistent and understandable
b. Complete, neutral, comparable and conservative
c. Timely, comparable, verifiable and understandable
d. Verifiable, understandable and prudent.

18. Which of the following is an example of the expense recognition principle of associating cause
and effect?
a. Depreciation of fixed assets.
b. Sales commissions.
c. Allocation of insurance cost.
d. Officers salaries.

19. Information that is able to confirm or correct past evaluations that have been made by users of
financial information is an example of information that satisfies which of the following
characteristics of financial information identified in The Framework?
a. Reliability
b. Understandability
c. Relevance
d. Comparability

20. The current cost basis of accounting is strictly required under

a. Neither the physical nor financial capital concept.
b. The financial capital concept
c. The physical capital concept
d. Both the physical and financial capital concepts