Problem 1-1
Accounting information is
1. Accounting is a service activity and
the function is to provide quantitative
information, primarily financial in
nature, about economic entities, that
is intended to be useful in making
economic decision. This accounting
definition is given by
a. Accounting Standards Council
b. AICPA Committee on Accounting
Terminology
c. American Accounting
Association
d. Board of Accountancy
The Accounting Standards Council
provides the following definition: Accounting
is a service activity, and the function is to
provide quantitative information, primarily
financial in nature, about economic entities,
that is intended to be useful in making
economic decision (Definition of Accounting
Standards Council, Valix, et.al. 2022 ed.,
pg.2).
2. All of the following describe
accounting, except
a. A service activity
b. An information system
c. A universal language of
business
d. An exact science rather
than an art
Accounting is a service activity, and the
function is to provide quantitative
information, primarily financial in nature,
about economic entities, that is intended to
be useful in making economic decisions
(ASC). The communication process is the
reason why accounting has been called the
“universal language of business” (Definition
of Accounting Standards Council &
Measuring, Valix, et.al. 2022 ed., pg.2 & 4).
3. The important points made in the
definition of accounting include all of
the following, except
a.
quantitative.
b. Accounting information is
qualitative.
c. Accounting information is
financial in nature.
d. Accounting information is
useful in decision making.
Accounting is about quantitative
information. The information is likely to be
financial in nature. The information should
be useful in decision making (Definition of
Accounting, Valix, et.al. 2022 ed., pg.2).
4. This accounting process is the
recognition or nonrecognition of
business activities as accountable
events.
a. Identifying
b. Measuring
c. Communicating
d. Reporting
5. What are the events that affect the
entity and in which other entities
participate?
a. Internal events
b. External events
c. Current events
d. Obligating events
6. Which is incorrect in relation to an
accountable event?
a. An event is accountable
when it has an affect on
asset, liability or equity.
b. The subject mater of
accounting is the
measurement of economic
resources and obligations.
c. Only economic activities are
emphasized and recognized
in accounting.
d. Sociological and
psychological matters are
quantifiable.
7. What is the measuring component in
the definition of accounting?
 a. The recognition or b. The Conceptual Framework
nonrecognition of business describes the concepts for
activities as accountable events. general purpose financial
b. The assigning of peso amounts reporting.
to the accountable events. c. In case of conflict, the
c. The preparation and distribution requirements of the IFRS prevail
of accounting reports to users of over the Conceptual Framework
accounting information. d. All of these statements are
d. The preparation of audit report true.
by CPAs.
The Conceptual Framework will be
8. The most common financial attribute
used in future standard setting decision but
used in measuring information is
no changes are made to the current IFRSa.
a. Historical cost
The Conceptual Framework is intended to
b. Current cost
guide standard setters, preparers and users
c. Fair value
of financial information in the preparation
d. Value in use
and presentation of statementsb. In case
9. The communicating process of
where there is conflict, the requirements of
accounting includes all of the
the International Financial Reporting
following, except
Standards shall prevail over the Conceptual
a. Recording
Frameworkc (Conceptual Framework,
b. Classifying
Authoritative status of Conceptual
c. Summarizing
Framework. Valix, et.al., pg.28-29) .
d. Interpreting
10. What is the overall objective of 2. Which is not a purpose of
accounting? Conceptual Framework?
a. To provide the information a. To assist the IASB in developing
that the managers of an IFRS
economic entity need to b. To assist preparers to develop
control the operations. consistent accounting policy
b. To provide information that when no Standard applies to a
the creditors can use in particular transaction or when
deciding whether to grant Standard allows a choice of
loans to an entity. accounting policy.
c. To measure the periodic c. To assist all parties to
income of the economic understand and interpret the
entity. Standards.
d. To provide quantitative d. To assist regulatory agencies in
financial information about an issuing rules and regulations for
entity useful in making a particular industry.
economic decision. 3. What is the authoritative status of
the Framework?
a. The Conceptual Framework has
Problem 2-1
the highest level of authority.
1. Which is true about the Conceptual b. In the absence of a standard or
Framework? an interpretation, the Conceptual
a. The Conceptual Framework is Framework shall be followed.
not a Standard.
 c. In the absence of a standard or
an interpretation, management
shall consider the Conceptual
Framework in developing and
applying an accounting policy
that results in information that is
relevant and reliable.
d. The Conceptual Framework
applies only when the IASB
develops new standards.
4. The Conceptual Framework is
intended to establish
a. GAAP in financial reporting.
b. The meaning of "present
fairly in accordance with
GAAP”
c. The objectives and concepts
for use in developing
standards of financial
accounting and reporting.
d. The hierarchy of sources of
GAAP.
5. The underlying theme of the
Conceptual Framework is
a. Decision usefulness
b. Understandability
c. Timeliness
d. Comparability
Problem 3-1
1. What are the attributes
that make the information
provided in the financial
statements useful to the
readers?
a. Qualitative
characteristics of
financial
information
b. Quantitative characteristics of
financial information
c. Elements of financial
statements
d. Objectives of financial
reporting
2. Qualitative characteristics
a. Are considered either
fundamental or enhancing.
b. Contribute to the decision-
usefulness of financial
reporting information.
c. Distinguish better
information from inferior
information for decision-
making purposes.
d. All of the choices are
correct.
3. The fundamental qualitative
characteristics are
a. Relevance and faithful
representation
b. Relevance, faithful
representation and materiality
c. Relevance and reliability
d. Faithful representation and
materiality
4. Accounting information is considered
relevant when it
a. Can be depended on to
represent the economic
conditions and events that it
is intended to represent.
b. Is capable of making a
difference in a decision.
c. Is understandable by
reasonably informed users of
accounting information.
d. Is verifiable and neutral.
5. The ingredients of relevant financial
information are
a. Predictive value and
confirmatory value
b. Predictive value, confirmatory
value and timeliness
c. Predictive value, confirmatory
value and materiality
d. Predictive value, confirmatory
value, timeliness and
materiality
6. What is the quality of
information that gives that it is
reasonably free of error and
bias?
a. Relevance
b. Faithful representation
c. Verifiability
d. Neutrality
7.