QUIZ 1 – CFAS



Which underlying concept serve as the basis for
preparing financial statements at regular
intervals?
o Time period
Information about financial flexibility is useful in
predicting the
o Ability of the enterprise to use its available
cash for

Financial accounting
o Focuses
on the preparation and
presentation of general-purpose reports
knowns as financial statements
Information has the quality of relevance when
o It influences the economic decisions of users
by helping them evaluate past, present, or
future events or confirming or correcting
their past evaluations

Which of the following is incorrect concerning
financial statements?
o Financial statements provide all the
information that users may need to make
economic decisions since they largely
portray the financial effects of past events
and do not necessarily provided
nonfinancial information

The primary responsibility for the financial
statements of an enterprise rests with its
o Management

Generally accepted accounting principles
o Derive their credibility and authority from
general recognition and acceptance by the
accounting profession

Under financial capital concept, capital is
synonymous with
o Net assets or equity of the enterprise
(money invested or invested purchasing
power)

Under a physical capital concept, a profit is
earned if the physical productive capacity at the
end exceeds
o The physician productive capacity at the
beginning, after excluding any distribution
to and contribution from owners

Which of the following best describes financial
accounting?
It focuses on the preparation and presentation of
general-purpose reports known as financial
statements
The
IASB’s
Conceptual

Which of the following is not a valid statement
regarding the Conceptual Framework?
a. It applies to the financial statements of all
commercial, industrial and business reporting
enterprises, whether in public or private sector
b. It sets out the concepts that underlie the
preparation and presentation of financial statements
for external users
c. It is concerned with special financial reports; for
example, prospectuses and computations prepared
for taxation purposes

An independent private body that had been
formed to make uniform the accounting principles
that companies throughout the world use for
financial reporting was the
o International
Accounting
Standards
Committee

Which of the following represents the best source
of assessing the consistency of a company’s
financial statements?
o The face of the financial statements
Framework
I. Sets out the concepts that underlie the preparation
and presentation of financial statements for external
users
II. Is an International Financial Reporting Standard
and hence defines the various recording,
measurement,
and
presentation
issues
III. Is concerned with specific-purposes financial
reporting, including consolidated financial statements
a. I, II, and III
c. I only
d. I and III

Which is not part of the FRSC’s due process of
developing an accounting standard?
a. Publication of the draft in the Official Gazette or
a newspaper of general circulation
b. Vote of approval by majority of the FRSC
members
c. Exposure of the proposed accounting standard

A profit is earned under financial capital
maintenance concept if
o The financial amount of net assets at the
end of the period exceeds the net assets at
the beginning of the period, after excluding
distributions to and contributions from
owners during period

Which users of the financial information require
information to regulate the activities of enterprise,
determine taxation policies and as a basis for
national income and similar statistics?
o Government and its agencies

Which accounting standard setting body was
created by the Professional Regulation
Commission, upon recommendation of the Board
of Accountancy, to assist the BOA in carrying out
its powers and functions under RA 9298?
o FRSC

Which statement is incorrect concerning the users
and their information needs?
o Suppliers and trade creditors have interest
in information about the continuance of an
enterprise, especially when they have a
long-term involvement with or are
dependent on the enterprise

Which of the following is not within the scope of
Conceptual Framework?
o Form of presentation of financial statements

The IASB’s Conceptual Framework considers a
pervasive constraint on the information that can
be provided by financial reporting. What is this
pervasive constraint?
o Cost constraint

Which financial statement provides users with
information about the performance of an
enterprise that is required in order to assess
potential changes in the economic resources that
it is likely to control in the future?
o Statement of comprehensive income

Which of the following represents the definition
of accounting?
I. It is not service activity and its function is to provide
quantitative information, primarily financial in nature,
about economic entities, that is intended to be useful
in making economic decisions
II. The art of recording, classifying, and summarizing
in a significant manner in terms of money,
transactions, and events which are in part at least of
a financial character and interpreting the results
thereof
III. The process of identifying, measuring, and
communicating economic information to permit
informed judgment and decision by users of
information
o II and III

Which factor determines whether or not financial
information should be presented?
o The usefulness of the information for
decision-making purpose.

Which of the following is not a purpose of the
Conceptual Framework for Financial Reporting?
o To assist the Board of Accountancy in
promulgating rules and regulations
affecting the practice of accountancy in the
Philippines
 A conceptual framework for financial reporting is
b. An embodiment of generally accepted accounting
principles that guide users of financial statements in
assessing the reliability of financial statements
c. A theoretical foundation that guides the Financial
Reporting Standard Council, preparers and users of
financial accounting information in the preparation
and presentation of financial statements
d. A basic accounting assumption that guides the
accountants in the preparation of financial statements

What is the quality of financial information that
makes it needed and worthy for the purpose it
was prepared?
b. Understandability
c. Completeness
d. Relevance

The process of “matching of cost with revenue”
involves the simultaneous or combined recognition
of revenue and expenses that result directly and
jointly from the same transactions or other events.
Which of the following exemplifies this approach?
a. An expense is recognized immediately when an
expenditure produces no future economic benefits or
when future economic benefits do not qualify or cease
to qualify for recognition as an asset
b. Expenses are recognized in the statement of
comprehensive income on the basis of direct
association between the costs incurred and the
earning of specific items of income
d. When economic benefits are expected to arise
over several accounting periods and the association
with income can only be broadly or indirectly
determined, expenses are recognized on the basis of
systematic and rational allocation


How many members, including the chairman,
compose the accounting standards setting body in
the Philippines?
o 15
Which statement is incorrect concerning the
qualitative characteristics of relevance?
o The predictive and confirmatory roles of
information are not interrelated.

Which of the following is not an appropriate
description of financial statements?
o They are prepared and presented at least
annually and are directed toward the
specific information needs of a wide range
of users.

What is the authoritative status of the Conceptual
Framework?
o In the absence of a standard or an
interpretation that specifically applies to a
transaction,
should
consider
the
applicability of the Conceptual Framework
in developing and applying an accounting
policy that results in information that is
relevant and faithfully represented

Which of the following is not a theoretical basis
for the recognition of an expense?
o Profit maximization

In assessing the financial position of an entity,
what indicates the amount of the assets financed
by creditors and owners?
a. Capacity of adaptation
c. Financial position
d. Financial structure

The currently functioning body responsible for the
promulgation of the International Financial
Reporting Standards is the
o International Accounting Standards Board

What is the basis of measurement under the
physical capital maintenance concept?
o Current cost

Which of the following is not an element of
relevant accounting information?
o Faithful representation

How many CPD credit units are required for
accreditation to practice the accountancy
profession?
o 120 units

What area of public accounting is concerned with
the examination of financial statements by a CPA
for the purpose of expressing an opinion as to the
fairness of the financial statements?
o External auditing

Which of the following is not represented in the
FRSC?
o Social Security System
QUIZ 2 – CFAS

Financial statements portray the financial effects
of transactions and other events by grouping them
into broad classes according to their economic
characteristics. These broad classes are termed as
the
o Elements of financial statements

It is the process of incorporating in the financial
statements an item that meets the definition of an
element
o Recognition

Which statement is incorrect concerning the
elements directly related to the measurement of
performance?
o The definition of revenue encompasses
both income and gains
The elements directly related to the measurement
of profit are income and expense. Which
definition is correct?
I. Income is an increase in economic benefit during an
accounting period in the form of inflows or increase in
asset or decrease in liability that results in an increase
in equity other than the contribution from equity
participants
II. Expense is a decrease in economic benefits during
an accounting period in the form of inflows or
decrease in assets or increase in liability that results
in a decrease in equity other than distributions to
equity participants
o I only



The overriding criterion by which accounting
information can be judged is that of
o Usefulness for decision making

Which of the following is not generally used
currently in measurement of financial statement
elements?
o Inflation-adjusted cost



recognition as an asset in the statement of financial
position
o Either I or II
A liability is
o A present obligation of the enterprise
arising from past events the settlement of
which is expected to result in an outflow
from the enterprise of resources embodying
economic benefits
The providers of risk capital (investors)
o Are concerned with the risk inherent in and
return provided by their investments and
need information to help them determine
whether they should buy, hold or sell the
investments
An expense is recognized immediately in the
financial statements
I. When the expenditure produces no economic
benefits
II. When the costs incurred ceases to qualify for
Comparability of financial information depends
on
a. Regular reporting periods only
b. Neither consistency of accounting policies nor
regular reporting periods
c. Both consistency of accounting policies and regular
reporting periods

Which of the following refers to the relative size
and magnitude of a financial statement element?
o Materiality

Which of the following statements is not valid
concerning materiality?
o Materiality is a fundamental qualitative
characteristic that provides a threshold or
cut-off point to determine which
information must be reported to users

Which financial statement elements directly relate
to the measurement of performance?
o Income and expenses

Accounting information is considered to be
relevant when it
o Is capable to making a difference in a
decision

Which of the following is not an essential
characteristic of an asset?
o The cost of the asset can be measured
reliably

Which statement is correct concerning the two
concepts of capital?
I. Under the financial capital concept, such as invested
money or invested purchasing power, capital is
synonymous with the net assets or equity of the entity
II. Under a physical capital concept, such as
operating capability, capital is regarded as the
productive capacity of the entity
o Both I and II

When information about two different enterprises
has been prepared and presented in a similar
manner,
the
information
exhibits
the
characteristics of
o Dimensional comparability

The going concern assumption means that
o The enterprise will continue in operation for
the foreseeable future and the enterprise
has neither the intention nor the need to
liquidate or curtail materially the scale of its
operations

When an information is complete, neutral, and
free from error, then such information meets the
qualitative characteristics of
o Faithful representation

Under accrual basis,
o Income and expenses, assets and liabilities
are measured based on the occurrence of
changes in the economic resources and
obligations

What is incorrect concerning the quality or
relevance?
o The relevance of information is not affected
by its nature and materiality

Which statement is incorrect concerning the
concept of capital?
o A physical capital concept is adopted by
most entities in preparing their financial
statements

Which user of financial information require
information to regulate the activities of the
enterprises, determine taxation policies, and as a
basis for national income and similar statistics?
o Government and its agencies

What is the basis of measurement under the
physical capital maintenance concept?
o Current cost

What is another term for equity?
o Net assets

Which of the following is incorrect concerning the
recognition of a liability?
o A decision by the management of an
enterprise to acquire assets in the future, in
itself, give rise to a present obligation

Under the financial capital maintenance concept,
a profit is earned when
I. The financial amount of the net assets at the end of
the period exceeds the financial amount of the net
asset at the beginning of the period, after excluding
any distributions to and contributions from owners
during
the
period
II. The physical productive capacity of the entity
(funds needed to achieve that capacity) at the end of
the period exceeds the physical productive capacity
at the beginning of the period, after excluding any
distributions to and contributions from owners during
the period.
o I only

Net realizable value is
o Amount of cash or cash equivalent that
could currently be obtained by selling the
asset in an orderly disposal

To achieve faithful representation of information,
transactions must be accounted for and presented
in the financial statements in accordance with the
economic reality and not merely their legal form.
This concept is called
o Substance over form

This process involves the simultaneous or combined
recognition of revenue and expenses that result
directly and jointly from the same transactions or
other events on the basis of direct association
between the costs incurred and the earning of
specific items of income
o Matching of costs with revenue

The accrual basis means that
o The effects of transaction and other events
are recognized when they occur and not as
cash or its equivalent is received or paid
and they are recorded in the accounting
records and reported in the financial
statements of the periods to which they
relate

It is the process of determining the monetary
amounts at which the elements are to be
recognized and carried in the statement of
financial position and statement of comprehensive
income
o Measurement

Under the physical capital concept, a profit is
earned if the physical productive capacity at the
end exceeds
o The physical productive capacity at the
beginning, after excluding any distribution
to and contribution from owners

Information about liquidity is useful in predicting
the
a. Ability of the enterprise to meet its financial
commitments over a longer term
b. Future borrowing needs and how future profits and
cash flows will be distributed among interested users
c. Ability of the enterprise to meet its financial
commitments in the near term
d. Ability of the enterprise to generate cash and cash
equivalents in the future

Financial information exhibits the characteristics
of comparability when
o Accounting entities give accountable events
the same accounting treatment from period
to period

Which is incorrect concerning the comparability of
financial information?
o It is appropriate for an entity to leave its
accounting policies unchanged when more
relevant and reliable alternatives exist

Technically, this arises in the course of the
ordinary regular activities of an enterprise and is
referred to by a variety of different names
including sales, interest, dividends, royalties, and
rent?
o Revenue

It is the inclusion of a degree of caution in the
exercise of judgement needed in making
estimates required under conditions of uncertainty
so that assets and income are not overstated or
liabilities and expenses are not understated
o Prudence

The elements directly related to the measurement
of profit are income and expense. Which
definition is correct?
I. Income is increase in economic benefit during an
accounting period in the form of inflows or increase in
asset or decrease in liability that result in increase in
equity other than contribution from equity
participants
II. Expense is decrease in economic benefit during an
accounting period in the form of outflows or decrease
in asset or increase in liability that results in decrease
in equity other than distributions to equity participants
o Both I and II

Which statement is incorrect concerning capital
maintenance concept?
o Increases in the prices of assets held over
the period are conventionally referred to as
holding gains and conceptually are not
profits