UNIVERSITY OF CALOOCAN CITY
COLLEGE OF BUSINESS AND ACCOUNTANCY
Camarin Business Campus
Tulip St., Camarin, Caloocan City
FINANCIAL MANAGEMENT
Name:
Course and Section: _________________
Student Number: ___________
Professor: __________________
Date: __________
CHAPTER 1:
Introduction to Financial Reporting
I. MULTIPLE CHOICE
Directions: Read each item carefully. Encircle the letter of the best answer. (1 point each)
1. What does “GAAP” stand for?
A. Generally Accepted Accounting Principles
B. Generally Associated Accounting Program
C. Generally Associated Account Production
D. Genuine Accepted Accounting Principles
2. Which of the following is NOT principle of GAAP?
A. cost
C. return of investment
B. revenue
D. matching
E. disclosure
3. GAAP is based on established _______.
A. objectives
C. standards
B. concepts
D. convention
E. all the aforementioned choices
4. What is “GAAP”?
A. rules by which financial statements
B. concerned with profitability
C. practice of handling company’s finances
D. making a business plan and ensuring all stay on track
5. Refers to obligations to transfer assets or provide services in the future
A. assets
C. profit
E. liabilities
B. concepts
D. convention
6. Refers to probable future economic benefits obtained or controlled
A. assets
C. liabilities
E. standards
B. equity
D. revenue
7. Refers to the owner’s residual interest in the assets after deducting liabilities
A. assets
C. expenses
E. standards
B. equity
D. liabilities
8. Which of the following refers to Inflows and other enhancements of revenue or reductions of
liabilities from delivering or providing goods or services related to the central operations?
A. assets
C. expenses
E. revenues
B. equity
D. liabilities
9. It is the outflows or consumption of assets from delivering or providing goods or services related to
the central operations.
A. assets
C. expenses
E. standards
B. equity
D. liabilities
10. It happens when equity decreases resulting from transfer of asset, rendering of service, or
incurrence of liabilities by the entity to owners
A. change of objectives
C. comprehensive income
E. investments by owners
B. distribution to owners
D. return of investment
II. MODIFIED TRUE OR FALSE
Directions: Write TRUE if the statement is correct. If the statement is wrong, write FALSE and
CHANGE the underline word/s to make the statement correct. (2 points each)
___________________ 1. Enron and WorldCom are major financial failures.
___________________ 2. The business entity is separate and distinct from the owners of the entity.
___________________ 3. In Annual Report on Internal Control System, it does not require a
statement of management’s responsibilities for established and
maintaining an adequate system.
___________________ 4. Financial statements must disclose if the presumption of continuity is
applicable.
___________________ 5. In general, the point of recognition of revenue should be the point in time
when revenue can be reasonably and objectively determined.
___________________ 6. Losses happens when equity decreases from peripheral transactions
of the entity.
___________________ 7. Material items not subject to concepts and principles.
___________________ 8. Transaction approach records transactions that do not affect the
financial position of the entity.
___________________ 9. Consistency refers to the same accounting treatment given to comparable
transactions from period to period.
___________________ 10. The methods of disclosure are parenthetical, supporting schedules,
Cross-references and footnotes.
___________________ 11. Materiality considers the relative size and importance of an item to the
business entity.
___________________ 12. There are no other acceptable methods of recognizing revenue.
___________________ 13. Gains happens when equity increases from peripheral transactions
of the entity.
___________________ 14. Accounting reports must not disclose all the facts that may influence the
judgment of an informed reader.
___________________ 15. In the assumptions of financial reporting, it allows measurement of the
results of operations prior to the liquidation of a business entity’s life.
III. PROVE DEEPER
Directions: Briefly explain the following questions. Answers should not exceed the given lines
after each item. (5 points each)
1. What does “GAAP” stand for and what is its primary purpose?
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_______________________________________
2. What is Financial Statement and explain its importance?
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
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***This is the end part of the examination. If you’re through and still have time, go over the items and check
your answers. ***
May God bless us always!
ANSWER KEY
I. MULTIPLE CHOICE
Directions: Read each item carefully.
Encircle the letter of the best
answer. (1 point each)
1. A
2. C
3. E
4. A
5. E
6. A
7. B
8. E
9. C
10. B
II. MODIFIED TRUE OR FALSE
Directions: Write TRUE if the statement is
correct. If the statement is wrong,
write FALSE and CHANGE the
underline word/s to make the
statement correct. (2 points each)
1. TRUE
2. TRUE
3. FALSE - DOES REQUIRE
4. FALSE – NOT APPLICABLE
5. TRUE
6. TRUE
7. FALSE – IMMATERIAL ITEMS
8. FALSE – DO AFFECT
9. TRUE
10. TRUE
11. TRUE
12. FALSE- ARE MANY
13. TRUE
14. FALSE – MUST DISCLOSE
15. TRUE
III. PROVE DEEPER
Directions: Briefly explain the following questions. Answers should not exceed the given lines
after each item. (5 points each)
1.
ANSWERS MAY VARY
2.