lOMoARcPSD|13648990 Compilatation of End of chapter Multiple Choice by Valix Conceptual Framework (Polytechnic University of the Philippines) StuDocu is not sponsored or endorsed by any college or university Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer CHAPTER 1-6 QUIZ 1. The IASB was formed to establish accounting standards for multinational entities develop accounting standards for countries that do not have their own standard-setting bodies enforce IFRS in foreign countries develop a single set of high quality IFRS 2. It is a duty or responsibility that an entity has no practical ability to avoid Obligation Right Equity Expense 3. Which of the following is not an essential characteristic of an asset? The economic resource is controlled by the entity as a result of past events The economic resource is a right that has the potential to produce economic benefits The economic resource should be present within the entity The asset is a present economic resource 4. The write off of a worthless patent is an example of which of the following principles? Immediate recognition Objectivity Associating cause and effect Systematic and rational allocation 5. Continuation of an accounting entity in the absence of evidence to the contrary is an example of Entity Time period Going concern Unit of measure 7. Why are certain costs of doing business capitalized when incurred & then depreciated/amortized over subsequent accounting periods? To adhere to the accounting concept of conservatism To aid management in the decision-making process To reduce the income tax liability To match the costs of production w/ the revenue as earned 7. The objective of financial reporting is based on Reporting on management stewardship The need for conservatism The needs of the users of the information Generally accepted accounting principles Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer 8. The principle of objectivity includes the concept of Verifiability Summarization Conservatism Classification 9. Enhancing qualities include all the following, except Comparability Verifiability Understandability Neutrality 10. Which of the following is the best description of ‘faithful representation’ in relation to information in financial statements? Comprehensibility to users Influence on the economic decisions of users Inclusion of a degree of caution Freedom from material error 11. It is the presentation and classification of financial statement items on a uniform basis from one accounting period to the next Comparable information Accrual basis Aggregation Consistency of presentation 12. Generally, revenue is recognized At the point of sale. When cause and effect are associated At the point of cash collection At appropriate points throughout the operating cycle 13. One element of the objective of financial reporting is to provide Information that is useful in assessing cash flow prospects Information about the liquidation value of the resources held by the entity Information that will attract new investors Information about the investors in the entity 14. The underlying theme of the Conceptual framework is Comparability Understandability Decision usefulness Timeliness Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer 15. Which of the following situations violates the concept of faithful representation? Data on segments having the same expected risks are reported to analysts estimating future profit. Management reports to shareholders regularly refer to new projects undertaken Financial statements included in the item of property, plant and equipment with carrying amount increased to management estimate of market value Financial statements were issued 8 months late 16. Predictive & confirmatory roles of information are interrelated. True False 17. Payment of salaries to employees is an example of an external transaction. True False 18. Comparability within an enterprise is also known as intracomparability. True False 19. Information has predictive value when it enables users to correct earlier expectations. True False 20. The financial position of the enterprise comprises its assets, liabilities and equity at a particular time. True False 21. Under conservatism, when alternatives exist, the alternative which has the least effect on liability should be chosen. True False 22. It is appropriate for an enterprise to leave its accounting policies unchanged when more relevant and reliable alternative exist. True False 23. The book value information is more relevant than earnings per share in determining the attractiveness of an investment. True False Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer 24. Under cause & effect association, some costs are expensed by simply allocating them over the periods benefited. True False 25. The SEC allows a one-person corporation (OPC) to register for the practice of public accountancy. True False 26. The work of the accountant starts when the work of the auditor ends. True False 27. If there are no legal rights, control can never exist even if the entity has other means of ensuring that no other party can benefit from an asset. True False 28. The matching principle requires that those costs and expenses incurred in earning a revenue shall be reported in the same period. True False 29. Fair value of an asset is the price that would be received to sell an asset in an orderly transaction between market participants at measurement date. True False 30. A right can meet the definition of an economic resource even if the probability that it will produce economic benefit is low. True False 31. Classify the following costs/expenses. Choose your answer from the following choices: CEA – cause and effect association principle SRA – systematic and rational allocation IR – immediate recognition ANG - answer not given a. b. c. d. e. depreciation of building - SRA utilities expense - IR loss from sale of investment - IR warranty expense - CEA doubtful accounts - CEA Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer 32. Indicate which concept/assumption/principle/constraint is being violated in each of the following situations: a. Expenses are reported whenever the accountant records them rather than when related revenues are earned. – Matching Principle b. An entity follows a policy of recording an item as an asset when the entity is in doubt whether the item is an asset or expense of the current period. - Conservatism c. The owners of a multi-national company base its accounting records on the assumption that the business might close anytime. – Going Concern d. A department store changes accounting method every year in order to report a higher net income possible under accounting standards. - Consistency e. An accounting practitioner mixed personal accounting records with the records of the accounting practice. – Accounting Entity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer CHAPTER 7-12 1. A change from cost model to fair value model in measuring investment property is an example of a change in accounting policy. True False 2. The entity is required only to disclose significant nonadjusting events. True False 3. Acquisition of land by issuing share capital is a transaction that affects the cash flows from financing activities. True False 4. Cash flows arising from the purchase and sale of dealing or trading securities are classified as operating activities. True False 5. Dividend paid to shareholders should also be included in other comprehensive income. True False 6. The functional presentation of income statement is also known as the cost of goods sold method. True False 7. Financial statements must be prepared at least quarterly. True False 8. Biological assets should be reported as current assets. True False 9. Physical capital is the quantitative measure of the physical productive capacity to produce goods and services. True False Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer 10. Return on capital is an erosion of the capital invested in the entity. True False 11. The standard provides that the liability is classified as current even if the lender has agreed, after the reporting period and before the statements are authorized for issue, not to demand payment as a consequence of the breach. True False 12. Information about financial performance is useful in predicting future performance and ability to generate future cash flows. True False 13.A 6-month BSP treasury bill is classified as current asset. True False 14. Changes in accounting estimate are to be handled currently and retrospectively. True False 15. Bankruptcy of a customer which occurs after the reporting period is considered as an adjusting event. True False 16. The physical capital maintenance concept requires the adoption of which measurement basis? Fair value Historical cost present value Current cost 17. An entity has a loan due for repayment in six months' time but the entity has the option to refinance for repayment two years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be presented? Current assets Current liabilities Noncurrent assets Noncurrent liabilities 18. In analyzing an entity's financial statements, which financial statement would a potential investor primarily use to assess liquidity and financial flexibility? Statement of retained earnings Statement of cash flows Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer Income statement Statement of financial position 19. Which of the following changes during a period is not a component of other comprehensive income? Treasury share Unrealized gain on equity instrument measured at fair value through other comprehensive income. Actuarial gain on defined benefit plan Foreign currency translation adjustment 20. The limitation of the income statement includes all of the following, except Income measurement involves judgement. Items that cannot be measured reliably are not reported. Income numbers are affected by accounting method. Only actual amounts are reported in net income. 21. Cash receipts from royalties and commissions are: Cash outflows for financing activities Cash inflows from operating activities Cash outflows for operating activities Cash inflows from investing activities 22. Under IFRS, the dividend received from shares investments can be classified a only as investing activities Either an operating activities or a financing activities only as operating activities Either an operating activities or investing activities 23. A change in accounting policy requires what kind of adjustment to the financial statements? Prospective adjustment Retrospective adjustment Current period adjustment Current and prospective adjustment 24. When it is difficult to distinguish between a change in accounting estimate and a change in accounting policy, the change is treated as change in accounting estimate with no appropriate disclosure change in accounting policy with appropriate disclosure change in accounting estimate with appropriate disclosure correction of an error 25. An entity built a new factory building during the current year. Subsequent to the current year-end and before issuance of financial statements, the building was destroyed by fire and the claim against the insurance entity proved futile because the cause of the fire was negligence on the part of the caretaker of the building. What should be reported at the current year-end? Make a provision for one-half of the carrying amount of the building Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Conceptual Framework & Accounting Standards Reviewer Make a provision for three-fourths of the carrying amount of the building Write off the carrying amount of the building Disclose the nonadjusting event in the notes to financial statements 26. Identify what is being referred to by the statement. Choose your answer from the selection provided: Adding together of assets, liabilities, equity, income and expenses that have similar or shared characteristics and are included in the same classification. AGGREGATION The basic statement that shows the movements in the elements or components of the shareholders’ equity. STATEMENT OF CHANGES IN EQUITY Short-term highly liquid investments that are readily convertible to known amount of cash and which are subject to insignificant risk of change in value. CASH EQUIVALENTS Omissions and misstatements in the financial statements for one or more periods arising from failure to use or misuse of reliable information. PRIOR PERIOD ERROR Events after the reporting period. SUBSEQUENT EVENTS 27. CLASSIFY THE FOLLOWING ACCOUNTS. Choose the appropriate line item among the choices. Advances from customers - Trade and other payable Three-month money market instrument – Cash and Cash Equivalents Office supplies unused - Prepaid expenses Accrued interest income – Trade and other receivables Plant expansion fund – Long Term Investment Freight out – Selling expenses Purchases – Cost of Sales Doubtful accounts – General expenses Dividends payable - Trade and other payable Patterns and dies - Property. plant and equipment Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 5 _ CF Elements of FS Question 1 1 / 1 pts The elements directly related to the measurement of financial position are Asset, liability, equity, income and expenses Correct! Asset, liability and equity Income and expenses Asset and liability Question 2 1 / 1 pts The elements of financial position describe amounts of resources and claims against resources Neither during a period of time nor at a moment in time During a period of time During a period of time and at a moment in time Correct! At a moment in time Question 3 1 / 1 pts The elements directly related to the measurement of financial performance are Asset, liabilities and equity Correct! Income and expenses Asset and liability Income, expenses and equity Question 4 1 / 1 pts It is a present economics resources controlled by the entity as a result of past events Correct! assets equity expenses liabilities Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 5 1 / 1 pts It is a present obligation of the entity to transfer an economic resource as a result of past events expenses asset equity Correct! liability Question 6 1 / 1 pts It is the residual interest in the assets of the entity after deducting all of the liabilities Correct! Equity retained earnings All of the choices match the definition income Question 7 1 / 1 pts It is an increase in asset or a decrease in liability that result in increase in equity other than contribution from equity holders Correct! income expense liability asset Question 8 1 / 1 pts It is a decrease in asset or an increase in liability that results decrease in equity other than distribution to equity holders Correct! Expense liability asset income Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 9 1 / 1 pts Which statement in relation to income is true? Income encompasses revenue only Gain encompasses both income and revenue Revenue encompasses both income and gain Correct! Income encompasses both revenue and gain Question 10 1 / 1 pts Which is not within the new definition of an asset? The economic resource is controlled by the entity as a result of past event An asset is a present economic resources Correct! Future economic benefit is expected to flow to the entity The economic resource is a right that has potential to produce economic benefit Question 11 1 / 1 pts Which of the following criteria need not be satisfied for a liability to exist? Correct! The settlement is expected to result in an outflow of economic benefit The entity has an obligation The obligation is to transfer an economic resource The obligation is a present obligation that exists as a result of a past event Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 12 1 / 1 pts A present obligation exists as a result of past event if The entity has not yet obtained economic benefit but must transfer an economics resource The entity has already obtained economic benefit The entity must transfer an economic resource Correct! The entity has already obtained economic benefit and must transfer economic resource Question 13 1 / 1 pts Rights that have the potential to produce economic benefits and correspond to an obligation of another entity include all, except Right to receive goods Correct! Right over property, plant and equipment Right to exchange economic resources with another entity on favorable terms Right to receive cash Question 14 1 / 1 pts An economic resource could produce economic benefit if an entity is entitled to all, except Correct! To exchange economic resources with another entity on unfavorable terms To receive contractual cash flows To receive cash by selling the economic resource To extinguish a liability by transferring am economic resource Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 15 1 / 1 pts It is the present ability to direct the use of an economic resource and obtain the benefit that may flow from it ownership Legal right Correct! control obligation Question 16 1 / 1 pts It is a duty or responsibility that an entity has no practical ability to avoid Expense right Correct! Obligation Equity Question 17 1 / 1 pts Obligation to transfer an economic resource include all, except Obligation to pay cash Obligation to deliver goods Obligation to provide services Correct! Obligation to transfer an economic resource even if a specified future event does not occur Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 18 1 / 1 pts Which statement is not true about income and expense? Expense is decrease in asset or increase in liability that result in decrease in equity other than distribution to equity holders Income is increase in asset or decrease in liability that results in increase in equity other than contribution from equity holders Income encompasses revenue and gain Correct! Income and expenses are the elements that relate to financial position Question 19 1 / 1 pts This is new term refers to the statement of profit or loss and a statement presenting other comprehensive income Statement of financial position Income statement Statement of comprehensive income Correct! Statement of financial performance Question 20 1 / 1 pts Revenue may result from An increase in a liability from incidental transaction An increase in an asset from incidental transaction Correct! A decrease in a liability from primary operation A decrease in an asset from primary operations Question 21 1 / 1 pts What is the primary distinction between revenue and gain? Correct! The nature of the activity that gives rise to the transaction The method of disclosing the transaction The likelihood that the transaction will recur The materiality of the amount Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 22 1 / 1 pts The term income Includes adjustment of prior period error Is the same as retained earnings Correct! Includes gain resulting from the sale of an asset in an arm’s length transaction Includes revaluation of land Question 23 1 / 1 pts A decrease in an asset arising from peripheral or incidental transaction is called Capital expenditure Cost Expense Correct! Loss Question 24 1 / 1 pts An outflow of asset based on an activity that represents the major operations is called Correct! Expense Equity liability Loss Question 25 1 / 1 pts This arises in the course of ordinary regular activities of the entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent Gain Correct! Revenue Profit income Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 6 _ CF Recognition and measurement Question 1 1 / 1 pts It is the process of capturing for inclusion in the financial statements an item that meets the definition of the elements of financial statements. Measurement Derecognition Classifying Correct! Recognition Question 2 1 / 1 pts An item is recognized in the financial statements if It is probable that economic benefits will flow to or from the entity and that the cost can be measured reliably The entity has ownership of such item Correct! It meets the definition of an asset, liability, equity, income and expense It is probable that economics benefits will flow to or from the entity Question 3 1 / 1 pts Recognition of an element is appropriate when information results in Neither relevance nor faithful representation Faithful representation Correct! Both relevance and faithful representation Relevance Question 4 1 / 1 pts It is the removal of all or part of a recognized asset or liability from the statement of financial position Extinguishment Correct! Derecognition Retirement Writeoff Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 5 1 / 1 pts Derecognition normally occurs when The entity no longer has a present obligation for the liability Correct! Under all of these circumstances The entity loses control of the asset An item no longer meets the definition of an asset or a liability Question 6 1 / 1 pts Generally, revenue is recognized Correct! At the point of sale At appropriate points throughout the operating cycle When cause and effect are associated At the point of cash collection Question 7 1 / 1 pts which of the following is not an accepted basis for recognition of revenue? Completion of percentage of a project Performance of service Correct! Upon signing of contract Passage of time Question 8 1 / 1 pts Normally, revenue is recognized Correct! When the title to the goods changes Only if the transaction will create an account receivable When the customer order is accompanied by a check When the customer order is received Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 9 1 / 1 pts Which of the following practices may not be an acceptable deviation from recognizing revenue a the point of sale? During production Correct! Upon receipt of order End of production Upon receipt of cash Question 10 1 / 1 pts Which of the following represent the least desirable choice for the recognition of revenue? Correct! Recognition of revenue when cash is collected Recognition of revenue during production Recognition of revenue when sale occurs Recognition of revenue when production is completed Question 11 1 / 1 pts Revenue recognition conventionally refers to Correct! The process of identifying transactions to be recorded as revenue in an accounting period The process of measuring and relating revenue and expenses during a period The earnings process which gives rise to revenue realization The process of identifying those transaction that result in an inflow of asset to the entity Question 12 1 / 1 pts Which of the following in the most precise sense means the process of converting noncash resources and rights into cash or claims to cash? Recognition allocation Correct! Realization Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 collection Question 13 1 / 1 pts Gains on assets unsold are identified, in a precise sense, by the term Correct! Unrealized Unallocated Unrecorded Unrecognized Question 14 1 / 1 pts The term recognized is synonymous with the term Correct! Recorded matched realized allocated Question 15 0 / 1 pts Which statement conforms to the realization concept? Cash was collected on accounts receivable You Answered Depreciation was assigned to product unit cost Product unit costs were assigned to cost of goods sold Correct Answer Equipment was sold in exchange for a note receivable Question 16 1 / 1 pts Which of the following is not a theoretical basis for the allocation of expense? Cause and effect association Immediate recognition Systematic and rational allocation Correct! Profit maximization Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 17 1 / 1 pts Costs that can be reasonably associated with specific revenue but not with specific product should be Allocated to the specific product based on the best estimate of the product processing time Expensed in the period incurred Correct! Expensed in the period in which the related revenue is recognized Capitalized and then amortized over reasonable period Question 18 1 / 1 pts Which of the following is an example of the cause and effect association principle? Officers’ salaries Correct! Sales commission Allocation of insurance cost Depreciation of property, plant and equipment Question 19 1 / 1 pts Which of the following is an application of the systematic and rational allocation principle? Correct! Amortization of intangible asset Research and development cost Doubtful accounts Warranty cost Question 20 1 / 1 pts Which of the following would be matched with current revenue on a basis other than association of cause and effect? Correct! Goodwill Cost of goods sold Sales commission Warranty cost Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 21 1 / 1 pts Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting periods? To adhere to the accounting concept of conservation To aid management in the decision-making process Correct! To match the cost of production with revenue To reduce the income tax liability Question 22 1 / 1 pts Which of the following principle best describes the conceptual rationale for the method of matching depreciation with revenue? Immediate recognition Correct! Systematic and rational allocation Associating cause and effect Partial recognition Question 23 1 / 1 pts Which of the following should be expensed under the principle of systematic and rational allocation? Correct! Insurance premiums Transportation to customers Salesmen’s monthly salaries Electricity to the light office building Question 24 1 / 1 pts The writeoff of a worthless patent is an example of which of the following principles Correct! Immediate recognition Systematic and rational allocation Associating cause and effect objectivity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 25 1 / 1 pts What is an example of cost that cannot be directly related to particular revenue but incurred to obtain benefits that are exhausted in the period when the cost is incurred? Prepaid insurance Freight in Correct! Sales salaries Sales commission Question 26 1 / 1 pts The matching principle is best demonstrated by Correct! Associating effort with accomplishment Recognizing prepaid rent received as revenue Not recognizing any expense unless some revenue is realized Establishing an appropriation for contingency Question 27 1 / 1 pts Bad debt expense is recognized according to which expense recognition principle? Immediate recognition Critical event recognition Correct! Direct matching Systematic and rational allocation Question 28 1 / 1 pts What is the general approach as to when product costs are recognized as expense? Correct! In the period when the related revenue is recognized In the period when the expenses are paid In the period when the expenses are incurred In the period when the vendor invoice is received Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 29 1 / 1 pts When should an expenditure be recorded as an asset rather than an expense? If the amount is material never Correct! When there is a right that has the potential to produce economic benefit always Question 30 1 / 1 pts Which accounting principle is being observed when an accountant charges to expense a cost that contributed to revenue during a period? Revenue realization Correct! Matching conservatism Monetary unit Question 31 1 / 1 pts Which of the following is not an acceptable basis for the recognition of expense? Immediate recognition Correct! Cash disbursement Systematic and rational allocation Direct matching Question 32 1 / 1 pts A cause and effect relationship is implicit in the Realization principle Correct! Matching principle Going concern assumption Historical cost principle Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 33 1 / 1 pts An example of direct matching of an expense with revenue would be Depreciation expense Correct! Direct labor costs incurred to produce inventory sold during a period Advertising expense Office salaries expense Question 34 1 / 1 pts Which category of expenses is subject to immediate recognition in the income statement? Correct! The salary of the entity president The salary of the production foreman Repairs and maintenance expense incurred on production equipment of a manufacturer Utilities expense for the production line of a manufacturer Question 35 1 / 1 pts Which principle best describe the rational for matching distribution costs and administrative expenses with revenue of the current period? Systematic and rational allocation Partial recognition Direct matching Correct! Immediate recognition Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 36 1 / 1 pts Which statement is true about current value? Fair value of an asset is the price that would be received to sell an asset in an orderly transaction between two market participants at the measurement date Value in use is the present value of the cash flows expected to be derived from the use and ultimate disposal of an asset Correct! All of the given statements are true about current value Fulfillment value is the present value of the cash expected to be transferred for the payment of liability Question 37 1 / 1 pts The measurement bases include Correct! Historical cost and current value Historical cost assessed value current value Question 38 0 / 1 pts Current value includes Fair value and present value You Answered Fair value and current cost Current cost and present value Correct Answer Fair value, present value and current value Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 39 1 / 1 pts Which measurement attribute is not currently used in practice Fair value Current cost Present value Correct! Inflation adjusted cost Question 40 1 / 1 pts It is the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset was acquired currently Historical cost Present value Realizable value Correct! Current cost Exercise _ Chapter 7 _ CF Presentation and disclosure Question 1 1 / 1 pts The presentation and disclosure requirement achieves all of the following, except Understandability and comparability of information An effective communication tool More relevant and faithfully represented financial information Correct! Financial position, financial performance and cash flows Question 2 1 / 1 pts It is the sorting of assets, liabilities, equity, income and expenses with similar characteristics. Correct! Classification Interpretation Recognition Summarization Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 3 1 / 1 pts All of the following can considered appropriate classification, except Current and noncurrent assets Current and noncurrent liabilities Ordinary share capital and preference share capital Correct! offsetting asset and liability Question 4 1 / 1 pts Income and expenses are classified as Profit or loss and retained earnings Retained earnings and other comprehensive income Ordinary and extraordinary Correct! Profit or loss and other comprehensive income Question 5 1 / 1 pts What is the new term to describe the statement of profit or loss together with the statement showing other comprehensive income Correct! Statement of financial performance Statement of profit or loss Statement of other comprehensive income Income statement Question 6 1 / 1 pts Financial capital is defined as Correct! Net assets in monetary terms Share capital issued and outstanding Net assets in terms of physical productive capacity legal capital Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 7 1 / 1 pts The physical capital maintenance concept requires the adoption of which measurement basis? Historical cost Fair value present value Correct! Current cost Question 8 1 / 1 pts Which concept is applied to net income and other comprehensive income? Correct! Financial capital legal capital borrowed capital Physical capital Question 9 1 / 1 pts Which statement regarding the term profit is true? Correct! All of these statements are true about the term profit. Profit is any amount over and above that required to maintain the capital at the beginning of the period. Profit is equal to income minus expenses Profit is the equivalent of net income under IFRS Question 10 1 / 1 pts Under the Financial capital concept, net income occurs when Correct! The nominal amount of net assets at year-end increased after excluding distributions to and contributions from owners. The nominal amount of net assets at year-end increased. The physical productive capital at year-end increased. The physical productive capital at year-end increased after excluding any distributions to and contributions from owners. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 8 _ Presentation of FS - SFP Question 1 1 / 1 pts The major financial statements include all, except Statement of changes in equity Correct! Statement of changes in financial position Statement of comprehensive income Statement of financial position Question 2 1 / 1 pts The major financial statements include all, except Correct! Statement of retained earnings Statement of cash flows Statement of financial position Income statement Question 3 1 / 1 pts What is the objective of financial statements? Correct! To provide information about the financial position, financial performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions. To present relevant, reliable, comparable and understandable information to investors. To present financial statements in accordance with all applicable standards. To present a statement of financial position and a statement of comprehensive income. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 4 1 / 1 pts Financial statements must be prepared at least quarterly semiannually every two years Correct! annually Question 5 1 / 1 pts When entity changed the end of reporting period longer or shorter than one year, the entity shall disclose all, except The reason for using a longer or shorter period The fact that amounts presented are not entirely comparable Period covered by the financial statements Correct! The fact that similar entities have done so Question 6 1 / 1 pts When there is much variability, the operating cycle is measured at Three years The mean value Correct! Twelve months The median value Question 7 1 / 1 pts The operating cycle of an entity Refers to the seasonal variation experienced by entities Is the period of time normally elapsed in converting trade receivables back into cash ls a period of one year Correct! Is the time between the acquisition of materials entering into a process and their realization in cash Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 8 1 / 1 pts An entity shall classify an asset as current under all of the following conditions, except The entity expects to realize the asset within twelve months after the reporting period Correct! The asset is cash or a cash equivalent that is restricted to settle a liability for more than twelve months after the reporting period The entity expects to realize the asset or intends to sell or consume it within the entity's normal operating cycle. The entity holds the asset for the purpose of trading Question 9 1 / 1 pts An entity shall classify a liability as current when under all of the following conditions, except The entity holds the liability primarily for the purpose of trading The liability is due to be settled within twelve months after the reporting period Correct! The entity has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. The entity expects to settle the liability within the entity's normal operating cycle Question 10 1 / 1 pts Which obligations are classified as current even if these are due to be settled after more than twelve months from the end of the reporting period? Correct! Trade payables and accruals for employee and other operating cost Dividends payable Bank overdrafts Current portion of interest-bearing liabilities Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 11 1 / 1 pts Current and noncurrent presentation of assets and liabilities provides useful information when the entity is a nonprofit organization Is a financial institution Is a public utility Correct! Supplies goods or services within a clearly identifiable operating cycle Question 12 1 / 1 pts A presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than a current and noncurrent presentation for Service provider Manufacturing entity Public utility Correct! Financial institution Question 13 0 / 1 pts In the Philippines, the common practice is to present in the statement of financial position You Answered Current assets before noncurrent assets, noncurrent liabilities before current liabilities and equity after liabilities Noncurrent assets before current assets, current liabilities before noncurrent liabilities and equity after liabilities Noncurrent assets before current assets, noncurrent liabilities before current liabilities and equity after liabilities Correct Answer Current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 14 1 / 1 pts A financial liabilities due within twelve months after the reporting period shall be classified as noncurrent Correct! When it is refinanced on a long-term basis on or before the end of reporting period. When it is refinanced on a long-term basis after the end of reporting period When it is refinanced on a long-term basis before the issue of financial statements. When the entity has no discretion to refinance for at least twelve months Question 15 1 / 1 pts When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect the liability becomes payable on demand, the liabilities is classified as Noncurrent under all circumstances Correct! Current if the lender has agreed after the reporting period and before the issuance of the statements not to demand as a consequence of the breach Current under all circumstances Noncurrent if the lender agreed after the reporting period to provide a grace period for at least twelve months after the reporting period Question 16 1 / 1 pts In presenting a statement of financial position, an entity Correct! Must make the current and noncurrent presentation, except when a presentation based on liquidity provides information that is reliable and more relevant. Must make the current and noncurrent presentation. Must present assets and liabilities in order of liquidity. Must choose either the current and noncurrent or the liquidity presentation, meaning free choice of presentation. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 17 1 / 1 pts Assets to be sold, consumed or realized as part of the normal operating cycle are Classified as current or noncurrent in accordance with other criteria Noncurrent assets Noncurrent investments Correct! Current assets Question 18 1 / 1 pts Liabilities that an entity expects to settle within the normal operating cycle are classified as Current or noncurrent liabilities in accordance with other criteria Correct! Current liabilities Noncurrent liabilities Equity Question 19 1 / 1 pts In which section of the statement of financial position should cash that is restricted for the settlement of a liability due 18 months after the reporting period be presented? Correct! Noncurrent assets Noncurrent liabilities Equity Current assets Question 20 1 / 1 pts In which section of the statement of financial position should employment taxes that are due for settlement in 15 months' time be presented? Correct! Current liabilities Noncurrent assets Noncurrent liabilities Current assets Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 21 1 / 1 pts An entity has a loan due for repayment in six months' time but the entity has the option to refinance for repayment two years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be presented? Correct! Noncurrent liabilities Noncurrent assets Current assets Current liabilities Question 22 1 / 1 pts Which of the following must be included on the face of the statement of financial position? Shares in an entity owned by that entity Correct! Investment property Contingent asset Number of shares authorized Question 23 1 / 1 pts Which of the following is not required to be presented as minimum information on the face of the statement of financial position? Biological asset Investment accounted under the equity method Investment property Correct! Contingent liability Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 24 1 / 1 pts Which of the following must be included as a line item in the statement of financial position? Property, plant and equipment analyzed by class Contingent asset Share capital and reserves analyzed by class Correct! Deferred tax liability Question 25 1 / 1 pts Which statement about the statement of financial position is not true? The number of shares authorized for issue should be reported in the statement of financial position or the statement of changes in equity or in the notes. Biological assets should be reported in the statement of financial position. Provisions should be recognized in the statement of financial position. Correct! A revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement. Question 26 1 / 1 pts In analyzing an entity's financial statements, which financial statement would a potential investor primarily use to assess liquidity and financial flexibility? Income statement Statement of retained earnings Statement of cash flows Correct! Statement of financial position Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 27 1 / 1 pts Which is an essential characteristic of an asset? An asset is obtained at a cost An asset is tangible Correct! An asset is a right that has the potential to produce economic benefit The claims to an asset's benefits are legally enforceable Question 28 1 / 1 pts The essential characteristics of an asset include all of the following, except The economic resource is a right that has the potential to product economic benefit Correct! The asset is tangible. The asset is controlled by the entity as a result of past event The asset is a present economic resource Question 29 1 / 1 pts Conceptually, asset valuation accounts are Liabilities assets Part of shareholders equity Correct! Neither assets nor liabilities Question 30 1 / 1 pts Working capital is Capital which has been reinvested in business The group of assets needed by the entity to operate profitably Correct! Current assets less current liabilities Unappropriated retained earnings Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 31 1 / 1 pts As generally used, the term net assets represents Total contributed capital Retained earnings Correct! Total assets less total liabilities Current assets less current liabilities Question 32 1 / 1 pts Treasury shares should be, reported as Correct! Reduction of shareholders' equity Investment Current asset Other asset Question 33 1 / 1 pts The term "deficit" refers to An excess of current liabilities over current assets A prior period error. Correct! A debit balance in retained earnings An excess of current assets over current liabilities Question 34 1 / 1 pts When classifying assets as current and noncurrent Prepayments are included in other assets Correct! Assets are classified as current if reasonably expected to be realized in cash or consumed during the normal operating cycle. Current assets are determined by the seasonal nature The amounts at which current assets are carried and Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 35 1 / 1 pts The basis for classifying assets as current or noncurrent is the period of time normally required to convert cash invested in Property, plant and equipment back into cash or 12 months, whichever is longer Receivables back into cash or 12 months, whiçhever is longer Inventory back into cash or 12 months, whichever is shorter. Correct! Inventory back into cash or 12 months, whichever is longer Question 36 1 / 1 pts Which should be classified as current asset? Correct! Trade installment accounts receivable normally collectible in 18 month Cash designated for the redemption of callable preference shares A deposit on machinery ordered, delivery of which will be made within six months Cash surrender value of a life insurance policy Question 37 1 / 1 pts Which should not be considered as current asset? Trading securities Prepaid taxes Installment notes receivable due over 18 months in accordance with normal trade practice Correct! Cash surrender value of life insurance policy Question 38 1 / 1 pts Current assets should never include A receivable not collectible within one year Correct! Goodwill arising in a business combination Premium paid on a bond investment Current tax asset Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 39 1 / 1 pts Equity investments held to finance construction of additional plant should be classified as Current assets Intangible assets Correct! Noncurrent investments Property, plant, and equipment Question 40 1 / 1 pts Which of the following is not a noncurrent investment? Land held for speculation Cash surrender value of life insurance policy Correct! Franchise A sinking fund Question 41 1 / 1 pts The statement of financial position is useful for analyzing all of the following, except financial flexibility Correct! Profitability solvency liquidity Question 42 1 / 1 pts The statement of financial position is useful for all of the following, except Correct! To analyze cash inflows and outflows for the period To evaluate capital structure To assess future cash flows To compute rate of return Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 43 1 / 1 pts What is one criticism not normally aimed at a statement of financial position? Correct! The extensive use of separate classifications Failure to include items of financial value that cannot be recorded objectively An extensive use of estimate Failure to reflect current value information Question 44 1 / 1 pts The statement of financial position Correct! Omits many items that are of financial value Makes very limited use of judgment and estimate All of the choices are correct Uses fair value for most assets and liabilities Question 45 1 / 1 pts Which is a limitation of a statement of financial position? Judgment and estimate are used Correct! All of these are a limitation of the statement of financial position Current fair value is not reported Many items that are of financial value are omitted Question 46 1 / 1 pts The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as Exchangeability Solvency Financial flexibility Correct! Liquidity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 47 1 / 1 pts Which of the following is not an acceptable major asset classification? Investments Correct! Deferred charges Property, plant, and equipment Current assets Question 48 1 / 1 pts What is an example of an item which is not an element of working capital? Accrued interest on notes receivable Temporary investments Correct! Goodwill Goods in process Question 49 1 / 1 pts Accrued revenue would normally appear in the statement of financial position under Correct! Current assets Noncurrent liabilities Noncurrent assets Current liabilities Question 50 1 / 1 pts Which of the following is usually classified as a noncurrent asset goods in process Prepaid rent Correct! Plant expansion fund supplies Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 51 1 / 1 pts Notes to financial statements Document the source of financial statement facts Are irrelevant facts that are immaterial in amount. Correct! Are an integral part of an entity's financial statements Are relatively unimportant facts that do not belong in the basic financial statements. Question 52 1 / 1 pts Which of the following best demonstrates the full disclosure principle? The tax return The separate income statement The auditor's report Correct! The notes to financial statements Question 53 1 / 1 pts To meet the needs of full disclosure, entities use supplemental information including Disclosure notes conveying additional insights about operations, accounting principles, contractual agreements and pending litigation. Supplemental financial statements that report more detailed information. Parenthetical comments or modifying comments placed on the face of the financial statements. Correct! All of these are correct Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 54 1 / 1 pts The recognition and measurement concepts recognize which of the following as a principle rather than an assumption? time period Correct! Full disclosure going concern monetary unit Question 55 1 / 1 pts The full disclosure principle requires a balance between Correct! Relevance and cost effectiveness Timeliness and predictive value Comparability and consistency Reliability and neutrality Question 56 1 / 1 pts For a liability to exist Correct! There must be past event The exact amount must be known There must be an obligation to pay cash in the future The identity of the party to whom the liability is owed must be known. Question 57 1 / 1 pts Which statements best describes the term liability? resources to meet financial commitments when due Correct! a present obligation arising from past event the residual interest in the assets of the entity after deduction all of the liabilities an excess of equity over current assets Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 58 1 / 1 pts Which item is not a current liability? Correct! Share dividends payable unearned revenue trade accounts payable the currently maturing portion of long-term debt Question 59 1 / 1 pts Noncurrent liabilities include bonds payable deferred tax liability short-term obligation refinanced on a long-term basis at the end of reporting period. Correct! all of the choices are noncurrent liabilities Question 60 1 / 1 pts Which is not within the definition of a liability? A note payable with no specified maturity date An obligation to provide goods in the future Correct! The signing of a three-year employment contract at a fixed annual salary A present obligation that is estimated in amount Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 CFAS REVIEWER CHAPTER 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 decisions. This accounting definition is given by accounting standards Council All of the following describe accounting, except an exact science rather than an art The important points made in the definition of accounting include all of the following, except accounting information is both quantitative and qualitative This accounting process is the recognition or nonrecognition of business activities as accountable events Identifying What are the events that affect the entity and in which other entities participate? External events Which is incorrect in relation to an accountable event? Sociological and psychological matters are quantifiable What is the measuring component in the definition of accounting? The assigning of peso amounts to the accountable events The most common financial attribute used in measuring financial information is Historical cost The communicating process of accounting includes all of the following, except interpreting What is the overall objective of accounting? To provide quantitative financial information about an entity that is useful in making economic decision What is the law regulating the practice of accountancy in the Philippines? R.A. No. 9298 What is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines? Board of Accountancy What are the three main areas in the practice of the accountancy profession?Public accounting, private accounting and government accounting Which statement is incorrect in relation to the practice of public accountancy? The Securities and Exchange Commission can register any corporation organized for the practice of public Securities and Exchange Commission What is the standard-setting body in the Philippines at the present time? Financial Reporting Standards Council All of the following are represented in FRSC, except Department of Budget and Management The Philippine Financial Reporting Standards collectively include All of these are included in Philippine Financial Reporting Standards Accounting standard-setting has been characterized as A political process GAAP is an abbreviation for Generally accepted accounting principles What is the primary service of CPAs in public practice? Auditing Accountants employed in entities in various capacity as accounting staff, chief accountant or controller are said to be engaged in Private accounting It is the area of the accountancy profession that encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof. Government Auditing How many CPD credit units are required for accreditation to practice the accountancy profession? 120 units Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 A CPA shall be permanently exempted from the renewal of CPA license at the age of 65 years The International Accounting Standards Board was formed To develop a single set of high quality IFRS The International Accounting Standards Board Promotes the use of high-quality and understandable global accounting standards The IASB declared that the merits of proposed standards are assessed. From a position of neutrality. The standard-setting process includes in the correct order. Research, discussion paper, exposure draft and accounting standard The IASB employs a due process system which Enables interested parties to express their views on issues under consideration. What is due process in standard-setting by IASB?All of these are part of due process in standard-setting. The standards published by IASB are called International Financial Reporting Standards What is a possible danger if politics plays too big a role in developing IFRS? Financial reporting standards are not truly generally accepted. Accounting standard-setting Can be described as a political process which reflects political actions of various interested user groups as well as a product of research and logic. IFRIC Interpretations issued by IASB All of the statements are true about IFRIC Interpretations. Financial accounting is concerned with General purpose reports on financial position and financial performance. Financial accounting can be broadly defined as the area of accounting that prepares General purpose financial statements to be used by parties both internal and external to the entity. Financial accounting emphasizes reporting to creditors and investors Managerial accounting emphasizes Developing accounting information for use within an entity Which statement is true regarding managerial and financial accounting Managerial accounting need not follow generally accepted accounting principles while financial accounting must follow GAAP. Generally accepted accounting principles Derive their credibility and authority from general recognition and acceptance by the accountancy profession Which statement best describes GAAP? The accounting principles have been developed on the basis of such factors as usage and practical necessity. Proper application of accounting principles is most dependent upon Professional judgment of the accountant Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Once an accounting standard has been established The standard is continually reviewed to see if modification is necessary. The primary responsibility for properly applying GAAP lies with Management CPAs are licensed by State government CHAPTER 2 Which statement is true about the Conceptual Framework for Financial Reporting? In case of conflict, the requirements of the IFRS prevail over the Conceptual Framework. The Conceptual Framework describes the concepts for general purpose financial reporting. The Conceptual Framework is not a Standard. All of these statements are true about the Conceptual Framework Which is not a purpose of the Revised Conceptual Framework? To assist regulatory agencies in issuing rules and regulations for a particular industry. The scope of the Revised Conceptual Framework comprises how many chapters?8 The Conceptual Framework provides the foundation for Standards that Strengthen accountability of management, Contribute to transparency by enhancing international comparability and quality of financial information, Contribute to economic efficiency by helping investors to identify opportunities and risks All of these are the result of Standards developed based on consistent concepts What is the authoritative status of the Conceptual Framework? In the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in information that is relevant and faithfully represented. The Conceptual Framework is intended to establish The objectives and concepts for use in developing standards of financial accounting and reporting. A Conceptual Framework should Define the basic objectives, terms and concepts of accounting Which is not a purpose of the Conceptual Framework? To provide specific guidelines for resolving situations not covered by existing accounting standards In the Conceptual Framework for Financial Reporting, what provides the "why" of accounting? Objective of financial reporting The underlying theme of the Conceptual Framework is Decision usefulness The objective of financial reporting is the foundation for the Conceptual Framework Which of the following is not a benefit associated with the Conceptual Framework? Business entities will need far less assistance from accountants. Which statement is not true concerning the Conceptual Framework? The Conceptual Framework should be based on fundamental truth derived from the law of nature. Users of financial reports include which of the following? Creditors, government agencies and unions The primary users of financial information include Existing and potential investors, lenders and other creditors Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Which group is not among the external users for whom financial statements are prepared? Employees, Customers, Suppliers All of these are external users of financial statements Which of the following is an internal user of financial information? Board of Directors These users require information on risk and return provided by their investment Investors These users are interested in information about the profitability and stability of the entity in order to assess the ability of entity to provide remuneration, retirement benefits and employment opportunities. Employees These users are interested in information that enables them to assess whether their loans, the related interest thereon, and other amounts owing to them will be paid when due Lenders and other creditors These users are interested in information about the continuance of an entity, especially when they have a long-term involvement with or are dependent on the entity Customers These users are interested in information in order to regulate the activities of an entity, determine taxation policies and provide a basis for national statistics. Governments and their agencies These users need information on trends and recent developments where an entity makes a substantial contribution to the local economy providing employment and using local suppliers. The public The overall objective of financial reporting is to provide information That is useful for decision making The primary focus of financial reporting has been on meeting the needs of which of the following groups? Existing and potential investors, lenders and other creditors The primary objective of financial reporting is to provide useful information to Capital providers Which is an objective of financial reporting? To provide information that is useful in making investing and credit decisions An objective of financial reporting is to provide Information that is useful in assessing cash flow prospects Assessing cash flow prospects is interpreted to mean Over the long run, trends in revenue and expenses are generally more meaningful than trends in cash receipts and disbursements In measuring financial performance, accrual accounting is used because It provides a better indication of ability to generate cash flows than cash basis The most useful information in predicting future cash flows is Current earnings based on accrual accounting The accrual basis of accounting is most useful for Predicting the long-term financial performance The objective of financial reporting is based on The needs of the users of the information Which statement is not true about financial reporting? Financial reporting shall not provide information useful in evaluating management stewardship. Which of the following is not an objective of financial To provide information about the liquidation value of an entity Financial reporting pertains to information about Individual business entities, rather than to industries or an economy as a whole or to members of society as consumers Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Under the Revised Conceptual Framework, during a period when an entity is under the direction of a particular management, financial reporting provides information about entity performance and management performance A Conceptual Framework should define the basic objectives, terms and concepts of accounting CHAPTER 3 Information that has no bearing on an economic decision to be made is useless. Relevance It is the ability to bring together for the purpose of noting points of likeness and difference. Comparability It requires that users have some knowledge of the complex economic economic activities of entities, the accounting process and the technical terminology in the statements. Understandability Preparers of statements should not try to increase the usefulness of the information to a few users to the detriment of others who may have opposing interests. Neutrality In case of conflict between economic substance and legal form or a transaction, the economic substance shall prevail. Substance over form Small expenditures for tools are expensed immediately. Materiality When in doubt, recognize all loses and don’t recognize gains. Conservatism The information should be presented in a manner that facilitates understanding and avoids erroneous implication. Completeness It is the capacity of the information to influence a decision. Relevance The description and numbers of figures must watch what really existed or happened. Faithful representation The financial statements shall be accompanied by notes to financial statements. Completeness There are no errors or omissions in the description of the phenomenon. Free from error It is the goal achieved by consistency. Comparability This enhancing qualitative characteristics implies consensus. Verifiability The older the information, the less useful. Timeliness What are the attributes that make the information provided in the financial statements useful to the readers? Qualitative characteristics of financial information Qualitative characteristics Are considered either fundamental or enhancing, Distinguish better information from inferior information for decision-making purposes, Contribute to the decisionusefulness of financial reporting information All of the choices are correct The fundamental qualitative characteristics are Relevance and faithful representation Accounting information is considered relevant when it Is capable of making a difference in a decision The ingredients of relevant financial information are Predictive value and confirmatory value What is the quality of information that gives assurance that it is reasonably free of error and bias? Faithful representation Which of the following is the best description of “faithful representation” in relation to information in financial statements? Freedom from material error To achieve faithful representation, the financial statements must be complete, neutral and reasonably free from error The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users neutrality In the event of conflict between the economic substance of a transaction and the legal form, the economic substance shall prevail Substance over form The enhancing qualitative characteristics of financial information are Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 comparability, understandability, verifiability and timeliness Financial information exhibits consistency when Accounting entities give similar events the same accounting treatment each period When information about two different entities engaged in the same industry has been prepared and presented in similar manner, the information exhibits the enhancing qualitative characteristics of comparability The characteristic that is demonstrated when a high degree of consensus can be secured among independent measures using the same measurement method is verifiability Which concept of accounting holds that, to the maximum extent possible, financial statements shall be based on arm’s length transactions verifiability An entity issuing the annual financial reports within one month after the end of reporting period is an example of which enhancing quality of accounting information? Timeliness Allowing entities to estimate rather than physically count inventory at interim periods is an example of a trade off between timeliness and verifiability Which qualitative characteristic of financial information requires that the information should not be biased in favor of one group of users to the detriment of others? neutrality For information to be useful, the linkage between the users and the decisions made is understandability The overriding qualitative characteristics of accounting information is Decision usefulness Which statement is true in relation to the enhancing quality of understandability? Users have a reasonable knowledge of business and economic activities and review the information with reasonable diligence. Which of the following terms best describes information that influences the economic decisions of users? Relevant What is the quality of information that enables users to better forecast future operations? Relevance According to the Conceptual Framework, predictive value and confirmatory value are ingredients of Relevance Which term best describes information in financial statements that is neutral? Unbiased What is meant by comparability when discussing financial accounting information? Information is measured and reported in a similar fashion across entities What is meant by consistency when discussing financial accounting information? Information is measured and reported in a similar fashion across points in time Which of the following is not an enhancing qualitative characteristics? profit-oriented Changing the method of inventory valuation should be reported in the financial statements under what enhancing quality of accounting information? Comparability When an entity applies the same accounting treatment to similar events from period to period, the entity is exhibiting which of the following qualities? Consistency When there is agreement between a measure or description and the phenomenon it purports to represent, the information possesses which characteristics Faithful representation The qualitative characteristics of faithful representation includes neutrality Enhancing qualitative characteristics of accounting information include all of the following, except: materiality Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 The enhancing quality of understandability means that the information should be understood by Those who have a reasonable understanding of business and economic activities Enhancing qualitative characteristics of accounting information include: comparability and timeliness When different competent accountants independently agree on the amount and method of reporting an economic event, what is the concept demonstrated? verifiability According to the conceptual framework, verifiability implies consensus When an entity has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors, the qualitative concept involved is timeliness When an entity changed the inventory valuation method, which characteristics is jeopardized by this change? Consistency Recognizing expected losses immediately but deferring expected gains is an example of conservatism Which statement about materiality is true? An item is material if the omission or misstatement would influence the judgment of a primary user, An item must make a difference or it need not be disclosed, Materiality is a matter of relative size or importance All of the given statements are true about materiality An item would be considered material when Omitting, misstating or obscuring the information would make a difference to the primary users. The Conceptual Framework includes which constraint? Cost Which best describes the cost-benefit constraint? The benefit of the information must be greater than the cost of providing it What is an enhancing quality of accounting information? Users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements. The ability through consensus among measures to ensure that information represents what it purports to represent is an example of the concept of? Verifiability Which of the following accounting concepts states that an accounting transaction shall be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion? objectivity Objectivity is assumed to be achieved when a transaction Involves an arm’s length transaction between two independent parties The principles of objectivity includes the concept of verifiability Proponents of historical cost maintain that statements prepared using historical cost are more Objective The consistency standard requires that The effect of accounting changes upon income should be properly disclosed Which of the following relates to both relevance and faithful representation? comparability Which of the following situations violates the concept of faithful representation? Financial statements included an item of property, plant and equipment with carrying amount increased to management estimate of market value What is the underlying concept governing the GAAP pertaining to recording gain contingencies? Conservatism The usefulness of providing information in financial statements is subject to the constraint of cost-benefit A conceptual framework is a coherent system of interrelated objectives and fundamentals that lead to consistent standards True Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Fundamental qualitative characteristics of financial accounting information are either relevant or prudent. False An enhancing qualitative characteristic is confirmatory value False A fundamental qualitative characteristic is understandability False To be a faithful representation, an information must be predictive and confirmatory False An enhancing quality of financial accounting information is comparability True Applying different accounting treatment to similar event from period to period is violation of verifiability. False The idea of consistency does not mean that entities cannot switch from one accounting method to another. True Financial statement users are assumed to have no reasonable knowledge of business and financial accounting matters. False Entities consider only quantitative factors in determining whether an item is material False Neutrality and predictive value are characteristics of relevant information. False The tendency to recognize favorable events early is an example of conservatism False The Conceptual Framework focuses primarily on the needs of internal users of financial information. False The overall objective of financial reporting is to provide information for making economic decisions. True Once an accounting method is adopted, it should never be changed False CHAPTER 4 What is the general objective of financial statements? To provide information about economic resources of an entity, claims against the entity and changes in the economic resources and claims A reporting entity is an entity that is required or choose to prepare financial statements A reporting entity Can compromise more than one entity, Can be a single entity, Can be a portion of a single entity All of the given answers can be considered a reporting entity If the reporting entity comprises both the parent and its subsidiaries, the financial statements are referred to as Consolidated financial statements Combined financial statements provide financial information about Two or more entities without a parent-subsidiary relationship Which best describes the term going concern? The ability of the entity to continue in operation for the foreseeable future Which is an implication of the going concern assumption? The historical cost principle is credible. Depreciation and amortization policies are justifiable and appropriate. The current and noncurrent classification of assets and liabilities is justifiable and significant All of these are an implication of going concern. Which of the following is not a basic assumption underlying financial accounting? historical cost assumption Which basic assumption may not be followed when an entity in bankruptcy reports financial results? going concern assumption Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 The economic entity assumption Is applicable to all forms of business organizations What is being violated if an entity provides financial reports in connection with a new product introduction? Economic entity Which underlying assumption serves as the basis for preparing financial statements at regular artificial points in time? accounting period Which basic accounting assumption is threatened by the existence of severe inflation in the economy? monetary unit assumption Inflation is ignored in accounting due to monetary unit assumption The concept of accounting entity is applicable whenever accounting is involved. When a parent and subsidiary relationship exists, consolidated financial statements are prepared in recognition of Economic entity The valuation of a promise to receive cash in the future at present value is valid because of what accounting concept? going concern What is the accounting concept that justifies the usage of accruals and deferrals? going concern During the lifetime of an entity accountants produce financial statements at arbitrary points in time in accordance with what basic accounting concept? Periodicity The relatively stable economic, political and social environment supports going concern The operations of a savings bank are being evaluated by the BSP. During the investigation, the BSP has determined that numerous loans made by top management were unwise and have seriously endangered the future of the saving bank. going concern The parent entity in Manila has a subsidiary in Japan. The financial statements of the subsidiary are translated to pesos for consolidation with the financial statements of the parent entity at year-end. Accounting entity A machinery was imported from USA at a certain cost five years ago. Because of inflation, the machinery has now a current replacement cost which is very much higher that the historical cost. Management would like to report the machinery at current replacement cost. Monetary unit An entity has experienced a drastic reduction in revenue by reason of a long try spell in the area where the entity grows its tobacco. The management decided to wait until next year and present financial statements for a two-period rather than prepare now the financial statements. Time period A subsidiary was exhibiting poor financial performance for the current year. In an effort to increase the subsidiary’s reported income, the parent entity purchased goods from the subsidiary at twice the normal markup. Accounting entity An entity decided to publish financial statements only in the years when it had good news to report. Time period An entity reported inventory, property, plant and equipment and intangible assets at current value at year-end. going concern An electronics entity owned by a proprietor reported the cost of the proprietor’s swimming pool as an asset of the entity. Accounting entity An entity prepared financial statements adjusted for changes in purchasing power. Monetary unit A mining entity kept no accounting records after starting business. The entity is waiting until the mine is exhausted to determine the success or failure of business. Time period An entity reported financial statements in nominal pesos that have mixed rather than uniform amount of purchasing power. Monetary unit A multinational entity published a complete set of financial statements at least once a year, regardless of whether the financial results were good or bad. Time period The pesos of today can buy as much as goods and services as the pesos five years ago. Monetary unit Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 An accounting entity is viewed as continuing in operation in the absence of evidence to the contrary. going concern An accounting practitioner mixed personal accounting records with the records of the accounting practice. Accounting entity CHAPTER 5 The elements directly related to the measurement of financial position are - Asset, liability and equity The elements of financial position describe amounts of resources and claims against resources - At a moment in time The elements directly related to the measurement of financial performance are - Income and expenses It is a present economics resources controlled by the entity as a result of past events - assets It is a present obligation of the entity to transfer an economic resource as a result of past events - liability It is the residual interest in the assets of the entity after deducting all of the liabilities - Equity It is an increase in asset or a decrease in liability that result in increase in equity other than contribution from equity holders - income It is a decrease in asset or an increase in liability that results decrease in equity other than distribution to equity holders - Expense Which statement in relation to income is true? - Income encompasses both revenue and gain Which is not within the new definition of an asset? - Future economic benefit is expected to flow to the entity Which of the following criteria need not be satisfied for a liability to exist? - The settlement is expected to result in an outflow of economic benefit A present obligation exists as a result of past event if - The entity has already obtained economic benefit and must transfer economic resource Rights that have the potential to produce economic benefits and correspond to an obligation of another entity include all, except - Right over property, plant and equipment An economic resource could produce economic benefit if an entity is entitled to all, except - To exchange economic resources with another entity on unfavorable terms It is the present ability to direct the use of an economic resource and obtain the benefit that may flow from it - control It is a duty or responsibility that an entity has no practical ability to avoid - Obligation Obligation to transfer an economic resource include all, except - Obligation to transfer an economic resource even if a specified future event does not occur Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Which statement is not true about income and expense? - Income and expenses are the elements that relate to financial position This is new term refers to the statement of profit or loss and a statement presenting other comprehensive income - Statement of financial performance Revenue may result from - A decrease in a liability from primary operation What is the primary distinction between revenue and gain? - The nature of the activity that gives rise to the transaction The term income - Includes gain resulting from the sale of an asset in an arm’s length transaction A decrease in an asset arising from peripheral or incidental transaction is called - Loss An outflow of asset based on an activity that represents the major operations is called - Expense This arises in the course of ordinary regular activities of the entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent - Revenue CHAPTER 7 The presentation and disclosure requirement achieves all of the following, except - Financial position, financial performance and cash flows It is the sorting of assets, liabilities, equity, income and expenses with similar characteristics. - Classification All of the following can considered appropriate classification, except - offsetting asset and liability Income and expenses are classified as - Profit or loss and other comprehensive income What is the new term to describe the statement of profit or loss together with the statement showing other comprehensive income - Statement of financial performance Financial capital is defined as - Net assets in monetary terms The physical capital maintenance concept requires the adoption of which measurement basis? - Current cost Which concept is applied to net income and other comprehensive income? - Financial capital Which statement regarding the term profit is true? - All of these statements are true about the term profit. Under the Financial capital concept, net income occurs when - The nominal amount of net assets at year-end increased after excluding distributions to and contributions from owners. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 CHAPTER 8 1. The major financial statements include all, except -Statement of changes in financial position 2. The major financial statements include all, except - Statement of retained earnings 3. What is the objective of financial statements? - To provide information about the financial position, financial performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions. 4. Financial statements must be prepared at least - Annually 5. When entity changed the end of reporting period longer or shorter than one year, the entity shall disclose all, except - The fact that similar entities have done so 6. When there is much variability, the operating cycle is measured at - Twelve months 7. The operating cycle of an entity Is the time between the acquisition of materials entering into a process and their realization in cash 8. An entity shall classify an asset as current under all of the following conditions, except - - The asset is cash or a cash equivalent that is restricted to settle a liability for more than twelve months after the reporting period 9. An entity shall classify a liability as current when under all of the following conditions, except - The entity has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. 10. Which obligations are classified as current even if these are due to be settled after more than twelve months from the end of the reporting period? -Trade payables and accruals for employee and other operating cost 11. Current and noncurrent presentation of assets and liabilities provides useful information when the entity -Supplies goods or services within a clearly identifiable operating cycle 12. A presentation of assets and liabilities in increasing or decreasing order of liquidity provides information that is reliable and more relevant than a current and noncurrent presentation for - Financial institution 13. In the Philippines, the common practice is to present in the statement of financial position - Current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities. 14.A financial liabilities due within twelve months after the reporting period shall be classified as noncurrent - When it is refinanced on a long-term basis on or before the end of reporting period. 15. When an entity breaches under a long-term loan agreement on or before the end of the reporting period with the effect the liability becomes payable on demand, the liabilities is classified as - Current if the lender has agreed after the reporting period and before the issuance of the statements not to demand as a consequence of the breach 16. In presenting a statement of financial position, an entity - Must make the current and noncurrent presentation, except when a presentation based on liquidity provides information that is reliable and more relevant. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 17. Assets to be sold, consumed or realized as part of the normal operating cycle are - Current assets 18. Liabilities that an entity expects to settle within the normal operating cycle are classified as - Current liabilities 19. In which section of the statement of financial position should cash that is restricted for the settlement of a liability due 18 months after the reporting period be presented? - Noncurrent assets 20. In which section of the statement of financial position should employment taxes that are due for settlement in 15 months' time be presented? - Current liabilities 21.An entity has a loan due for repayment in six months' time but the entity has the option to refinance for repayment two years later. The entity plans to refinance this loan. In which section of the statement of financial position should this loan be presented? - Noncurrent liabilities 22. Which of the following must be included on the face of the statement of financial position? Investment property - 23. Which of the following is not required to be presented as minimum information on the face of the statement of financial position? Contingent liability - 24.Which of the following must be included as a line item in the statement of financial position? - Deferred tax liability 25.Which statement about the statement of financial position is not true? - A revaluation surplus on a noncurrent asset in the current year should be recognized in the income statement. 26. In analyzing an entity's financial statements, which financial statement would a potential investor primarily use to assess liquidity and financial flexibility? - Statement of financial position 27. Which is an essential characteristic of an asset? - An asset is a right that has the potential to produce economic benefit 28.The essential characteristics of an asset include all of the following, except - The asset is tangible. 29. Conceptually, asset valuation accounts are - Neither assets nor liabilities 30. Working capital is - Current assets less current liabilities 31. As generally used, the term net assets represents - Total assets less total liabilities Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 32. Treasury shares should be, reported as - Reduction of shareholders' equity 33. The term "deficit" refers to - A debit balance in retained earnings 34. When classifying assets as current and noncurrent - Assets are classified as current if reasonably expected to be realized in cash or consumed during the normal operating cycle. 35. The basis for classifying assets as current or noncurrent is the period of time normally required to convert cash invested in - Inventory back into cash or 12 months, whichever is longer 36. Which should be classified as current asset? - Trade installment accounts receivable normally collectible in 18 month 37. Which should not be considered as current asset? - Cash surrender value of life insurance policy 38.Current assets should never include - Goodwill arising in a business combination 39. Equity investments held to finance construction of additional plant should be classified as - Noncurrent investments 40. Which of the following is not a noncurrent investment? - Franchise 41.The statement of financial position is useful for analyzing all of the following, except - Profitability 42.The statement of financial position is useful for all of the following, except - To analyze cash inflows and outflows for the period 43. What is one criticism not normally aimed at a statement of financial position? - The extensive use of separate classifications 44. The statement of financial position - Omits many items that are of financial value 45. Which is a limitation of a statement of financial position? - All of these are a limitation of the statement of financial position 46. The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as - Liquidity 47. Which of the following is not an acceptable major asset classification? - Deferred charges 48. What is an example of an item which is not an element of working capital? - Goodwill Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 49. Accrued revenue would normally appear in the statement of financial position under - Current assets 50.Which of the following is usually classified as a noncurrent asset - Plant expansion fund 51. Notes to financial statements - Are an integral part of an entity's financial statements 52. Which of the following best demonstrates the full disclosure principle? - The notes to financial statements 53. To meet the needs of full disclosure, entities use supplemental information including - All of these are correct 54. The recognition and measurement concepts recognize which of the following as a principle rather than an assumption? - Full disclosure 55. The full disclosure principle requires a balance between - Relevance and cost effectiveness 56. For a liability to exist - There must be past event 57. Which statements best describes the term liability? - a present obligation arising from past event 58. Which item is not a current liability? - Share dividends payable 59. Noncurrent liabilities include - all of the choices are noncurrent liabilities 60. Which is not within the definition of a liability? -The signing of a three-year employment contract at a fixed annual salary CHAPTER 6 It is the process of capturing for inclusion in the financial statements an item that meets the definition of the elements of financial statements. Correct! Recognition Question 2 1 / 1 pts An item is recognized in the financial statements if Correct! It meets the definition of an asset, liability, equity, income and expense Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 3 1 / 1 pts Recognition of an element is appropriate when information results in Correct! Both relevance and faithful representation Question 4 1 / 1 pts It is the removal of all or part of a recognized asset or liability from the statement of financial position Correct! Derecognition Question 5 1 / 1 pts Derecognition normally occurs when An item no longer meets the definition of an asset or a liability The entity loses control of the asset The entity no longer has a present obligation for the liability Correct! Under all of these circumstances Question 6 1 / 1 pts Generally, revenue is recognized Correct! At the point of sale Question 7 1 / 1 pts which of the following is not an accepted basis for recognition of revenue? Correct! Upon signing of contract Question 8 1 / 1 pts Normally, revenue is recognized Correct! When the title to the goods changes Question 9 1 / 1 pts Which of the following practices may not be an acceptable deviation from recognizing revenue a the point of sale? Correct! Upon receipt of order Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 10 1 / 1 pts Which of the following represent the least desirable choice for the recognition of revenue? Correct! Recognition of revenue when cash is collected Question 11 1 / 1 pts Revenue recognition conventionally refers to Correct! The process of identifying transactions to be recorded as revenue in an accounting period Question 12 1 / 1 pts Which of the following in the most precise sense means the process of converting noncash resources and rights into cash or claims to cash? Correct! Realization Question 13 1 / 1 pts Gains on assets unsold are identified, in a precise sense, by the term Correct! Unrealized Question 14 1 / 1 pts The term recognized is synonymous with the term - Recorded Question 15 1 / 1 pts Which statement conforms to the realization concept? Correct! Equipment was sold in exchange for a note receivable Question 16 1 / 1 pts Which of the following is not a theoretical basis for the allocation of expense? Correct! Profit maximization Question 17 1 / 1 pts Costs that can be reasonably associated with specific revenue but not with specific product should be Correct! Expensed in the period in which the related revenue is recognized Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 18 1 / 1 pts Which of the following is an example of the cause and effect association principle? Correct! Sales commission Question 19 1 / 1 pts Which of the following is an application of the systematic and rational allocation principle? Correct! Amortization of intangible asset Question 20 1 / 1 pts Which of the following would be matched with current revenue on a basis other than association of cause and effect? Correct! Goodwill Question 21 1 / 1 pts Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting periods? Correct! To match the cost of production with revenue Question 22 1 / 1 pts Which of the following principle best describes the conceptual rationale for the method of matching depreciation with revenue? Systematic and rational allocation Question 23 1 / 1 pts Which of the following should be expensed under the principle of systematic and rational allocation? Insurance premiums Question 24 1 / 1 pts The writeoff of a worthless patent is an example of which of the following principles Correct! Immediate recognition Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 25 1 / 1 pts What is an example of cost that cannot be directly related to particular revenue but incurred to obtain benefits that are exhausted in the period when the cost is incurred? Correct! Sales salaries Question 26 1 / 1 pts The matching principle is best demonstrated by Correct! Associating effort with accomplishment Question 27 1 / 1 pts Bad debt expense is recognized according to which expense recognition principle? Correct! Direct matching Question 28 1 / 1 pts What is the general approach as to when product costs are recognized as expense? Correct! In the period when the related revenue is recognized Question 29 1 / 1 pts When should an expenditure be recorded as an asset rather than an expense? Correct! When there is a right that has the potential to produce economic benefit Question 30 Which accounting principle is being observed when an accountant charges to expense a cost that contributed to revenue during a period? Matching Question 31 1 / 1 pts Which of the following is not an acceptable basis for the recognition of expense? Correct! Cash disbursement Question 32 1 / 1 pts A cause and effect relationship is implicit in the Correct! Matching principle Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 33 1 / 1 pts An example of direct matching of an expense with revenue would be Correct! Direct labor costs incurred to produce inventory sold during a period Question 34 1 / 1 pts Which category of expenses is subject to immediate recognition in the income statement? Correct! The salary of the entity president Question 35 1 / 1 pts Which principle best describe the rational for matching distribution costs and administrative expenses with revenue of the current period? Correct! Immediate recognition Question 36 Which statement is true about current value? Fulfillment value is the present value of the cash expected to be transferred for the payment of liability Value in use is the present value of the cash flows expected to be derived from the use and ultimate disposal of an asset Fair value of an asset is the price that would be received to sell an asset in an orderly transaction between two market participants at the measurement date All of the given statements are true about current value Question 37 The measurement bases include Historical cost and current value Question 38 Current value includes Fair value, present value and current value Question 39 Which measurement attribute is not currently used in practice Inflation adjusted cost Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 40 It is the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset was acquired currently Current cost Exercise _ Chapter 9 _ FS - SCI (2) (with correct answer) Score for this quiz: 39 out of 40 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. - Earnings Exclude certain gains and losses included in comprehensive income Comprehensive income includes all of the following, except Preference share dividend Other comprehensive income includes all, except Dividend paid to shareholders. Which term cannot be used to describe a line in the statement of comprehensive income? Extraordinary item Net income equals Revenue minus expenses Which is not generally accepted in presenting the income statement? Including prior period error in determining income Which of the following would appear first in a statement of retained earnings? Prior period error What is the purpose of reporting comprehensive income? To report measure of overall entity performance. The income statement reveals. Net earnings for a period of time Comprehensive income always Could be greater than or less than net income. The income statement would help in which of the following? Estimate amount, timing and uncertainty of future cash flows 12. All of the following components of OCI should be reclassified to profit or loss, except 13. Remeasurement of equity investment at FVOCI It is the total of income less expenses, excluding other comprehensive income - Profit or loss Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 14. 15. 16. 17. 18. 19. 20. - The income statement would help in which of the following? Estimate future cash flows Corrections of errors in prior period are included in Retained earnings Income determination is arrived at by Using a transaction approach The limitation of the income statement includes all of the following, except Only actual amounts are reported in net income All of the following are components of other comprehensive income, except Unrealized gain and loss on financial asset held for trading Conceptually, net income is a measure of Change of wealth Comprehensive income includes Both profit or loss and other comprehensive income 21. It is a change in equity during a period resulting from transaction and other events, other than those changes resulting from transactions owner in their capacity as owners. Comprehensive income 22. When a complete set of financial statements is preempted, comprehensive income and its components should Be displayed in a statement that has the same prominence as other financial statements. 23. - Which of the following components of OCI should be reclassified to retained earnings? All of these components of OCI should be reclassified to retained earnings. 24. - Which of the following is not an acceptable option in presenting other comprehensive income? In the notes to financial statements 25. Comprehensive income includes all of the following, except 26. 27. 28. 29. 30. Investment by owners Change in equity from nonowner sources is Comprehensive income Which of the following would represent the least likely use of the income statement? Use by investors interested in financial position/ Items of other comprehensive income should be analyzed By nature Gains are Increases in equity from peripheral transactions Separate line items in an analysis of expenses by nature include Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 - Cost of goods sold, administrative costs, transport costs and distribution costs - (Correct answer: Depreciation, purchases, transport costs, employee benefits) 31. Total comprehensive income for the period is presented Showing separately the total amount attributable to owners of the parent and the noncontrolling interest 32. What is the two -statement approach of presenting comprehensive income? - A separate income statement and a separate statement of comprehensive income 33. Which of the following changes during a period is not a component of other comprehensive income? Treasury share 34. 35. 36. - An entity shall present an analysis of expenses based on Either the nature of expenses or the function of expense Under IFRS, the extraordinary item presentation has been eliminated Which of the following does not appear in a statement of retained earnings? Other comprehensive income 37. Which of the following items would cause net income to differ from comprehensive income? Unrealized loss on equity investment measured at fair value through other comprehensive income. 38. It comprises items of income and expense, including reclassification adjustments, that are not recognized in profit or loss as required or permitted by PFRS. Other comprehensive income 39. 40. - Separate line items in an analysis of expenses by function include Cost of goods sold, administrative expenses, and distribution expenses Investors and creditors use the income statement for all of the following, except To evaluate the future performance of an entity. Exercise _ Chapter 10 _ Statement of Cash Flows Score for this quiz: 20 out of 20 1. - Interest received is classified as cash flow from: operating activities 2. Which classification of the cash flow arising from the proceeds from an earthquake disaster settlement would be most appropriate? Cash flow from operating activities 3. 4. - Cash equivalents are All of the choices are features of cash equivalents The primary purpose of a statement of cash flows is to provide relevant information about The cash receipts and cash disbursements of an entity during a period. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 5. - Under IFRS, dividend paid can be classified as Either as operating activities or a financing activities 6. Cash receipts from royalties and commissions are: - Cash inflows from operating activities 7. 8. 9. 10. Under IFRS, the dividend received from shares investments can be classified as Either an operating activities or investing activities Under IFRS, an entity can report interest paid on bank loan in the statement of cash flows Either in operating activities or financing activities Noncash investing and financing activities are Disclosed in a note of separate schedule Which of the following is not considered as a cash equivalent? A three-year treasury note maturing on January 31 of next year purchased by the entity on October 1 of the current year 11. Cash receipts from issuing shares are - Cash inflows from financing activities 12. Bank overdrafts that are repayable on demand and the bank balance often fluctuates from positive to overdrawn shall be classified as component of cash and cash equivalent 13. 14. 15. 16. 17. - Interest payments to lenders are classified as operating activities Cash flows arising from trading securities are Classified as operating activities Cash flows relating to asset held for rental to others are classified as Operating Cash advances and loans made by a financial institution are usually classified as operating activities All can be classified as cash and cash equivalents, except Equity investments 18. When an entity purchased a three-month Treasury bill, how would the purchase be treated in preparing the statement of cash flows? Not reported 19. 20. - Dividends payments to shareholders are classified as Cash outflows for financing activities Cash payments to acquire equity investment are Cash outflows for investing activities Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 11 _ Accounting Policies, Estimate and Errors Score for this quiz: 24 out of 25 (with correct answer) 1. Which is the first step within the hierarchy of guidance when selecting accounting policies? - Apply a standard from IFRS if it specifically relates to the transaction. 2. In the absence of an accounting standard that applies specifically to a transaction, what is the most authoritative source in developing and applying an accounting policy? - The requirement and guidance in the standard or interpretation dealing with similar and related issue. 3. A change in accounting policy shall be made when Required by law. I. Required by an accounting standard II. The change will result in more relevant or reliable information about the financial position, financial performance and cash flows of the entity. III. - II and III only 4. Why is an entity is permitted to change an accounting policy? - the change would result in financial statements providing more reliable and relevant information about financial position, financial performance and cash flows. 5. A change in accounting policy requires what kind of adjustment to the financial statements? - Retrospective adjustment. 6. A change in accounting policy required that the cumulative effect of the change for prior periods should be reported as an adjustment to - beginning retained earnings for the earliest period presented. 7. Which of the following is accounted for as a change in accounting policy? - A change in inventory valuation from FIFO to average method. 8. Which is a change in accounting policy? - All of these are considered change in accounting policy. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 9. Which of the following should be treated as change in accounting policy? - A change from cost model to fair value model in measuring investment property. 10. When it is difficult to distinguish between a change in accounting estimate and a change in accounting policy, the change is treated as - change in accounting estimate with no appropriate disclosure. - (Correct answer: change in accounting estimate with appropriate disclosure.) 11. How should the effect of a change in accounting estimate be accounted for? - In the period of change and future periods if the change affects both. 12. Which is characteristics of a change in accounting estimate? - It does not affect the financial statements of the prior period. 13. Which of the following is the proper time period to record the effect of a change in accounting estimate? - Current period and prospectively. 14. Why is retrospective treatment of change in accounting estimate prohibited? - A change in accounting estimate is a normal recurring correction or adjustment. 15. Which is required for a change from sum of years’ digits to straight line depreciation? - Recomputation of depreciation for current and future years. 16. Which is not classified as an accounting change? - Error in the financial statements. 17. When financial statements for a single year are being presented, a prior period error should - Be shown as an adjustment of the beginning balance or retained earnings 18. Prior period errors - are omissions and misstatements in the financial statements of prior periods. 19. An example of correction of an error is a change - from cash basis to accrual basis of accounting. 20. A change from cash basis to accrual basis should be reported. - retroactively as correction of an error. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 21. A change in the periods benefited by a deferred cost because additional information has been obtained is - An accounting change that should be reported in the period of change and future periods if the change affects both. 22. A change in residual value of an asset arising because additional information has been obtained is - an accounting change that should be reported in the period of change and future periods if the change affects both. 23. Which statement in relation to a change in accounting estimate is true? - Change in accounting estimate results from new information or new development. 24. The effect of change in accounting policy that is inseparable from the effect of a change in accounting estimate should be reported - as a component of income from continuing operations in the period of change and future periods if the change affects both. 25. When an entity changed the expected service life of an asset because additional information has been obtained, which of the following should be reported? - An accounting change that should be reported in the period of change and future periods if the change affects both. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 12 _ Events after the reporting period Score for this quiz: 14 out of 14 1. Events after the reporting period are favorable or unfavorable events that occur between - the end of the reporting period and the date when the financial statements are authorized for issue. 2. Adjusting events are those that - provide evidence of conditions that existed at the end of the reporting period. 3. When after the end of reporting period an event occurs that is indicative of conditions that arose the end of reporting period - The entity shall disclose the nature and effect of the event in the financial statements 4. Financial statements are authorized for issue - when the board of directors reviews and authorizes the financial statements for issue. 5. Which event after reporting period would require adjustment? - Loss on a lawsuit the outcome of which was deemed uncertain at year-end. 6. Events that occurs after the current year-end but before the financial statements are issued and affect the realizability of accounts receivable should be - used to record an adjustment to bad debts expense. 7. Nonadjusting events include all, except - destruction of a major production plant by a fire before the end of the reporting period. 8. Nonadjusting events included all, except - a mistake in the calculation of allowance for uncollectible accounts receivable. 9. Which event after the end of reporting period would generally require disclosure? - Issue of a large amount of ordinary shares. 10. At the end of the current reporting period, an entity carried a receivable from a major customer who declared bankruptcy after the end of reporting period and before the issuance of financial statements. What should be reported at the current year-end? - Make a provision for the event after reporting period in the financial statements. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 11. An entity decided to build and operate an amusement park next year. The entity applied for a letter of guarantee which was issued before the issuance of the financial statements of the current year. What is the adjustment required at the current year-end? - Do nothing. 12. An entity built a new factory building during the current year. Subsequent to the current yearend and before issuance of financial statements, the building was destroyed by fire and the claim against the insurance entity proved futile because the cause of the fire was negligence on the part of the caretaker of the building. What should be reported at the current year-end? - Disclose the nonadjusting event in the notes to financial statements. 13. An entity deals extensively with foreign currency transactions. Subsequent to the end of reporting period and before the date of authorization of the issuance of the financial statements, there were abnormal fluctuations in foreign currency rate. What should be reported at the current year-end? - Disclose the post-reporting period event. 14. Which statements is true in relation to events after reporting period? - Notes to the financial statements should give details of material nonadjusting events which could influence the economic decision of users. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 13 _ Related Party Disclosure Score for this quiz: 15 out of 15 1. Related parties included all of the following, except - two ventures simply because they share joint control over a joint venture. 2. A related party transaction is a transfer - between related parties, regardless of whether a price is charged. 3. Unrelated parties include which of the following? - All of these are unrelated parties. 4. Close family members of an individual include all, except - Brother and sisters of the individual 5. The minimum disclosure about related party transactions include all of the following, except - nature of the relationship. 6. Which is not included in key management personnel compensation? - Reimbursement of out-of-pocket expenses 7. Which of the following is not a mandated disclosure about related party transactions? - Names of all the associates that an entity has dealt with during the year. 8. Which of the following is not a required minimum discloser about related party transaction? - The amount of similar transaction with unrelated parties to establish that comparable related party transaction has been entered at arm’s length. 9. Related party transaction include all, except - Sold a car to the another entity’s finance director 10. All of the following are related party transaction, except - took out a huge bank loan 11. An entity that entered into a related party transaction would be required to disclose all of the following information, except - nature of any future transactions planned between the parties and the terms involved. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 12. Which is not require as a related party disclosure? - An entity that has a common director with the entity 13. All of the following are related parties, except - the partner of a key manager is a major supplier of the entity. 14. Which of the following is not a related party of an entity? - An entity providing banking facilities to the entity. 15. Which of the following should be included in key management personnel compensation? - Social security contributions and postemployment benefits. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Chapter 14 – Inventories 1. LCNRV of inventory Is always either the net realizable value or cost 2. Which of the following costs should be included in inventory valuation? Fixed production overhead 3. Costs incurred in bringing the inventories to their present location and condition include Cost of designing products for specific customers 4. A property developer must classify properties that it holds for sale in the course of business as Inventory 5. Lower of cost and net realizable value as it applies to inventory is best described as Reporting of a loss when there is a decrease in the future utility below the original cost 6. Inventories are defined by all of the following, except Used in the production or supply of goods and services for administrative purposes 7. When the allowance method is used to record inventory at net realizable value A loss is recorded separately 8. When inventory is misstated, the presentation lacks Faithful representation 9. Which of the following cost flow assumptions is used for inventory when an entity builds townhouses? Specific identification 10. How should import duties be dealt with when measuring inventory at LCNRV? Added to cost 11. Which of the following is not an acceptable method of applying LCNRV? Inventory location 12. Which of the inventory method measures most closely the current cost of inventory? FIFO 13. The costs of conversion of inventories include all, except Systematic allocation of administrative overhead 14. Inventories shall be measured at Lower of cost and net realizable value 15. Fixed production overheads include all, except Indirect materials and indirect labor 16. Inventories encompass all of the following, except Land and other property not held for sale 17. In a period of falling prices, which inventory method provides the lowest amount of ending inventory? FIFO 18. Which of the following would not be reported as inventory? Machinery acquired for use in the production process 19. Which is the reason why the specific identification method may be considered ideal for assigning cost to inventory? The cost flow matches the physical flow 20. Which of the following is likely to be a circumstance where the specific identification method can be used? Inventory turnover is low 21. The cost of purchase of inventory does not include Trade discount and rebate 22. Which of the following would not be separately accounted for in the computation of cost of goods sold? Trade discounts applicable to purchases 23. The amount of any writedown of inventory to net realizable value is Recognized as component of cost of goods sold 24. How should prompt payment discount be dealt with when measuring inventory at LCNRV? Ignored 25. Which statement is true regarding inventory writedown and reversal of writedown? Separate reporting of reversal of inventory writedown is required 26. Which of the following costs of conversion cannot be included in cost of inventory? Salaries of sales staff 27. IFRS prohibits which of the following cost flow assumptions? LIFO 28. Lower of cost and net realizable value Gives the lowest valuation if applied individually 29. Why is inventory included in the computation of net income? To determine cost of goods sold 30. Which of the following should not be reported in inventory? Equipment 31. How should trade discounts be dealt with when measuring inventory at LCNRV? Deducted in arriving at cost 32. Inventories are usually written down to net realizable value Item by item 33. The cost of inventory is the sum of Cost of purchase, cost of conversion and other cost incurred in bringing the inventory to the present location and condition 34. In a period of declining prices, the inventory method which tends to give the highest amount of cost of goods sold is FIFO 35. The costing of inventory must be deferred until the end of reporting period under which of the following method of inventory valuation? Weighted average 36. The cost of inventory shall be measured using Either FIFO or average method Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 37. In a period of rising prices which inventory method provides the highest amount of net income? FIFO 38. Factory supplies to be consumed in the production process are included in Inventory 39. The cost of inventories does not include Abnormal amount of wasted material 40. Which of the following should not be taken into account when determining the cost of inventory? Trade discount 41. Net realizable value is Estimated selling price less estimated cost to complete and estimated cost of disposal 42. How should sales staff commission to dealt with when measuring inventory at LCNRV? Deducted in arriving at net realizable value 43. The specific identification method is required for Inventory that is not interchangeable and goods produced and segregated for specific project 44. Which of the following should be taken into account when determining the cost of inventory? Storage cost of part-finished goods 45. Which of the following costs should not be included as part of the cost of inventory? Abnormal freight CHAPTER 15 – PPE 1. Which of the following costs should be included in the carrying amount of property, plant and equipment? None of these should be included 2. All of the following factors need to be considered in determining the useful life of an asset, except Residual value 3. Which statement describes the proper accounting for loss in a nonmonetary exchange? A loss is recognized immediately. 4. Which of the following is not a characteristic of property, plant and equipment? The property, plant and equipment are subject to depreciation 5. The carrying amount of property, plant and equipment shall be derecognized On disposal and when no future economic benefits are expected from the use of the asset. 6. The cost of property, plant and equipment acquired in a nonmonetary exchange that lacks commercial substance is measured at Carrying amount of the asset given 7. In an exchange with commercial substance Gain or loss is recognized entirely 8. Depreciation is best described as a method of Cost allocation 9. When property is acquired by issuing equity shares, which of the following is the best basis for establishing the historical cost of the acquired asset? Fair value of the asset received 10. A nonmonetary exchange is recognizéd at fair value of the asset exchanged unless Far value is not determinable 11. What is the proper treatment of freight and interest on the loan to fund the cost of an imported machinery? Freight is capitalized but interest cannot be capitalized. 12. Which statement is true concerning acquisition by self-construction? All of the statements are true 13. The initial operating loss should be Expensed and charged to the income statement. 14. The cost of property, plant and equipment comprises all of the following, except Initial estimate of the cost of dismantling the asset for which the entity has no present obligation. 15. Which statement is incorrect with respect to depreciation? Depreciation is not recognized if the fair value of an asset exceeds carrying amount. 16. The useful life of property, plant and equipment is I. The period of time over which an asset is expected to be used by the entity. II. The number of production or similar units expected to be obtained from the asset by the entity. ANSWER: Both I and II 17. The cost of property, plant and equipment acquired in an exchange is measured at the Fair value of the asset given plus cash payment. 18. The cost of property, plant and equipment comprises the purchase price and Directly attributable cost necessary to bring the asset to the location and condition for the intended use 19. When a plant asset is acquired by deferred payment, which condition generally does not indicate the need to consider the imputation of interest? The face amount of the deferred obligation is equal to the fair value of the plant asset exchanged. 20. Which cost should be expensed immediately? All of these are expensed immediately Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 21. Which statement is true with respect to residual value? All of these statements are true. 22. For a nonmonetary exchange, the configuration of cash flows includes which of the following? The risk, timing and amount of cash flows of the assets 23. If the present value of a note issued in exchange for a plant asset is less than the face amount, the difference is Amortized as interest expense over the life of the note 24. As generally used in accounting, what is depreciation? It is an accounting process which systematically allocates cost of property, plant and equipment to accounting periods. 25. What valuation model should an entity use to measure property, plant and equipment? Cost model and revaluation model 26. Which statement best describes the term "depreciation”? The systematic allocation of the cost of an asset less residual value over the useful life 27. Which statement regarding depreciation is true? If the carrying amount of an asset is less than the residual value, depreciation is not charged. 28. Which statement is true about depreciation? All of the statements are true. 29. Which of the following shall not be capitalized as cost of property, plant and equipment? Cost of excess materials from a purchasing error 30. Which cost should be expensed immediately? All of these are expensed immediately 31. An entity purchased a new machinery that it does not have to pay until after three years. The total payment on maturity will include both principal and interest. The cost would be the total payment multiplied by what time value of money? Present value of 1 32. An item of property, plant and equipment shall be recognized as an asset when It is probable that economic benefits will flow to the entity and the cost of the asset can be measured reliably. 33. Which exchange has commercial substance? Exchange of assets with difference in future cash flows. 34. Carrying amount is Amount at which an asset is recognized in the statement of financial position after deducting any accumulated depreciation and accumulated impairment loss. QUIZ 1 1. What is the branch of accounting that makes financial information about an entity accessible to the external users? Financial Accounting 2. 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 Certified Public Accountants V. Bureau of Internal Revenue VI. Social Security System ANSWER: I, III, IV and V 3. The body that authors the International Financial Reporting Standards is the International Accounting Standards Board 4. Which is an objective of financial reporting To provide information that is useful to assess the amount, timing, and uncertainty of prospective cash receipts 5. Which of the following are among the four (4) enhancing characteristics of financial information? A. Comparability B. Timeliness D. Materiality E. Neutrality C. Relevance ANSWER: A and B 6. The IASB’s Conceptual Framework deals with the I. objectives of the financial statements II. qualitative characteristics that make the financial statement useful to users. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 III. concepts of capital and capital maintenance IV. generally accepted accounting principles ANSWER: I, II and III 7. Under a lease where the lessee acquires the benefits of ownership of an asset, the lessee often recognizes the present value of future rental payments as an asset even though legal title to the property is not acquired. This is an example of the application of substance over form 8. Which of the following statement is true? 1. The objective of financial reporting is based on generally accepted accounting principles. 2. An item would be considered material when omitting, misstating or obscuring the information would make a difference to the primary users. 3. Revenue encompasses income and gain. 4. Based on the new definition of asset, future economic benefit is expected to flow to the entity. ANSWER: Statement 2 only QUIZ 2 1. Financial statements are structured presentation of the financial position and changes in financial position of an enterprise 2. Which of the following is not an objective of financial statements? To present information about the realizable amount of an entity’s assets in the event of liquidation. 3. The operating cycle allows trade receivables and inventories to be classified as current assets even if they would not be realized in cash within twelve months from the end of the reporting period 4. Which among the following is not presented in profit or loss section of the statement of comprehensive income? Dividends declared during the period 5. When assets and liabilities on the statement of financial position are not presented into current and non-current classification, they should be presented broadly in the order of liquidity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 1 _The Accountancy Profession Question 1 0 / 1 pts 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. This accounting definition is given by You Answered AICPA Committee on Accounting Terminology Board of Accountancy Correct Answer Accounting Standards Council American Accounting Association Question 2 1 / 1 pts All of the following describe accounting, except A service activity A universal language of business Correct! An exact science rather than an art An information system Question 3 1 / 1 pts The important points made in the definition of accounting include all of the following, except Accounting information is financial in nature Accounting information is useful in decision making Accounting information is quantitative Correct! Accounting information is both quantitative and qualitative Question 4 1 / 1 pts This accounting process is the recognition or nonrecognition of business activities as accountable events Communicating Measuring Correct! Identifying Reporting Question 5 1 / 1 pts What are the events that affect the entity and in which other entities participate? obligating events current events Correct! External events internal events Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 6 1 / 1 pts Which is incorrect in relation to an accountable event? An event is accountable when it has an effect on asset, liability or equity Only economic activities are emphasized and recognized The subject matter of accounting is the measurement of economic resources and obligations Correct! Sociological and psychological matters are quantifiable Question 7 1 / 1 pts What is the measuring component in the definition of accounting? The preparation of audit report by CPAs Correct! The assigning of peso amounts to the accountable events The recognition or nonrecognition of business activities as accountable events The preparation and distribution of accounting reports to users of accounting information Question 8 1 / 1 pts The most common financial attribute used in measuring financial information is value in use current cost fair value Correct! Historical cost Question 9 1 / 1 pts The communicating process of accounting includes all of the following, except classifying summarizing Correct! interpreting recording Question 10 1 / 1 pts What is the overall objective of accounting? To measure the periodic income of the economic entity To provide the information that the managers of an economic entity need to control the operations Correct! To provide quantitative financial information about an entity that is useful in making economic decision To provide information that the creditors can use in deciding whether to grant loans to an entity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 11 1 / 1 pts What is the law regulating the practice of accountancy in the Philippines? R.A. No. 9198 R.A. No. 9892 R.A. No. 9928 Correct! R.A. No. 9298 Question 12 1 / 1 pts What is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines? Securities and Exchange Commission Financial Reporting Standards Council Correct! Board of Accountancy Philippine Institute of Certified Public Accountants Question 13 1 / 1 pts What are the three main areas in the practice of the accountancy profession? Auditing, taxation and managerial accounting Financial accounting, managerial accounting and corporate accounting Correct! Public accounting, private accounting and government accounting Public accounting, private accounting and managerial accounting Question 14 1 / 1 pts Which statement is incorrect in relation to the practice of public accountancy? Partners of partnerships formed for the practice of public accounting shall be registered CPAs in the Philippines. All of these statements are correct. Correct! The Securities and Exchange Commission can register any corporation organized for the practice of public Securities and Exchange Commission Single practitioners for the practice of public accounting shall be registered CPAs in the Philippines Question 15 1 / 1 pts CPAs are licensed by The PICPA The city government The SEC Correct! State government Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 16 1 / 1 pts What is the standard-setting body in the Philippines at the present time? Correct! Financial Reporting Standards Council Accounting Standards Council Auditing and Assurance Standards Council Philippine Accounting Standards Board Question 17 1 / 1 pts All of the following are represented in FRSC, except Commission on Audit Board of Accountancy Correct! Department of Budget and Management Securities and Commission Question 18 1 / 1 pts The Philippine Financial Reporting Standards collectively include PFRS corresponding to IFRS Correct! All of these are included in Philippine Financial Reporting Standards Philippine Interpretations and Interpretations developed by PIC PAS corresponding to IAS Question 19 1 / 1 pts Accounting standard-setting has been characterized as Using the scientific method a legal process Correct! A political process Pure deductive reasoning Question 20 1 / 1 pts GAAP is an abbreviation for Generally applied accounting procedure Correct! Generally accepted accounting principles Generally accepted auditing practices Generally authorized accounting procedures Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 21 1 / 1 pts What is the primary service of CPAs in public practice? controllership Managerial Accounting Taxation Correct! Auditing Question 22 1 / 1 pts Accountants employed in entities in various capacity as accounting staff, chief accountant or controller are said to be engaged in Public accounting Correct! Private accounting Government accounting Financial accounting Question 23 1 / 1 pts It is the area of the accountancy profession that encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and disposition of government funds and property and interpreting the results thereof. Correct! Government auditing External auditing Internal auditing Private auditing Question 24 1 / 1 pts How many CPD credit units are required for accreditation to practice the accountancy profession? 15 units 60 units 100 units Correct! 120 units Question 25 1 / 1 pts A CPA shall be permanently exempted from the renewal of CPA license Correct! At the age of 65 years When working abroad When studying abroad When practicing profession abroad Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 26 1 / 1 pts The International Accounting Standards Board was formed To develop accounting standards for countries that do not have their own standard-setting bodies Correct! To develop a single set of high quality IFRS To establish accounting standard for multinational entities To enforce IFRS in foreign countries Question 27 1 / 1 pts The International Accounting Standards Board Was the predecessor to the IASC Can overrule the USA GAAP when their policies disagree. Has its headquarters in Geneva. Correct! Promotes the use of high-quality and understandable global accounting standards Question 28 1 / 1 pts The IASB declared that the merits of proposed standards are assessed. Based on arguments of lobbyist From a position of materiality Correct! From a position of neutrality. Based on possible impact on behavior Question 29 1 / 1 pts The standard-setting process includes in the correct order. Exposure draft, research, discussion paper and accounting standard Discussion paper, research, exposure draft and accounting standard Research, exposure draft, discussion paper and accounting standard Correct! Research, discussion paper, exposure draft and accounting standard Question 30 1 / 1 pts The IASB employs a due process system which Correct! Enables interested parties to express their views on issues under consideration. a. Is an efficient system for collecting dues from members Identifies the accounting issues that are the most important. Requires that all CPAs must receive a copy of IFRS Question 31 1 / 1 pts What is due process in standard-setting by IASB? IASB operates in full view of the public. Interested parties can make their views known. Correct! All of these are part of due process in standard-setting. Public hearings are held on proposed standards. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 32 1 / 1 pts The standards published by IASB are called International Accounting Standards Correct! International Financial Reporting Standards Statement of Financial Accounting Standards Financial Reporting Standards Question 33 1 / 1 pts What is a possible danger if politics plays too big a role in developing IFRS? Individuals ,ay influence the standards Correct! Financial reporting standards are not truly generally accepted. User groups become active The IASB delegates its authority to elected officials Question 34 1 / 1 pts Accounting standard-setting Is a legalistic process Is based solely on research and empirical findings. Correct! Can be described as a political process which reflects political actions of various interested user groups as well as a product of research and logic. Is democratic in the sense that a majority of accountants must agree with a standard before it becomes enforceable. Question 35 1 / 1 pts IFRIC Interpretations issued by IASB Cover newly identified financial reporting issues not specifically addressed. Are considered authoritative and must be followed. Cover issued where unsatisfactory or conflicting interpretations have developed Correct! All of the statements are true about IFRIC Interpretations. Question 36 1 / 1 pts Financial accounting is concerned with Special reports for inventory management. Special reports for income tax computation. General purpose reports on changes in share prices. Correct! General purpose reports on financial position and financial performance. Question 37 1 / 1 pts Financial accounting can be broadly defined as the area of accounting that prepares General purpose financial statements to be used by parties internal to the entity Financial statements to be used by investors Correct! General purpose financial statements to be used by parties both internal and external to the entity. Financial statements to be used primarily by management Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 38 1 / 1 pts Financial accounting emphasizes reporting to Regulatory bodies Correct! Creditors and investors Management internal auditors Question 39 1 / 1 pts Managerial accounting emphasizes Correct! Developing accounting information for use within an entity Reporting to the SEC Reporting financial information to external users Expertise in data processing Question 40 1 / 1 pts Which statement is true regarding managerial and financial accounting Managerial accounting is generally more precise. The emphasis on managerial accounting is relevance and the emphasis on financial accounting is timeliness Correct! Managerial accounting need not follow generally accepted accounting principles while financial accounting must follow GAAP. Managerial accounting has a future focus. Question 41 1 / 1 pts Generally accepted accounting principles Derive their credibility and authority from legal rulings and court precedents. Are accounting adaptations based on law Correct! Derive their credibility and authority from general recognition and acceptance by the accountancy profession Derive their credibility and authority from a government regulatory authority. Question 42 1 / 1 pts Which statement best describes GAAP? The accounting principles do not apply to small and medium-sized entities. Correct! The accounting principles have been developed on the basis of such factors as usage and practical necessity. The accounting principles have been formulated in the public sector. The accounting principles are the same as laws. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 43 1 / 1 pts Proper application of accounting principles is most dependent upon Oversight of regulatory bodies Existence of specific guidelines Correct! Professional judgment of the accountant External audit function Question 44 1 / 1 pts Once an accounting standard has been established The principle of consistency requires that no revisions ever be made to the standard Correct! The standard is continually reviewed to see if modification is necessary. The task of reviewing the standard is given to the national accounting organization. The standard is not reviewed unless a regulatory authority makes a complaint. Question 45 1 / 1 pts The primary responsibility for properly applying GAAP lies with Internal auditor External auditor Correct! Management National accounting organization Exercise_ Chapter 2 _ CF Objective of financial reporting Question 1 1 / 1 pts Which statement is true about the Conceptual Framework for Financial Reporting? In case of conflict, the requirements of the IFRS prevail over the Conceptual Framework. The Conceptual Framework is not a Standard. Correct! All of these statements are true about the Conceptual Framework The Conceptual Framework describes the concepts for general purpose financial reporting. Question 2 1 / 1 pts Which is not a purpose of the Revised Conceptual Framework? To assist preparers to develop consistent accounting policy when no Standard applies to a particular transaction or when Standard allows a choice of accounting policy. To assist the IASB to develop IFRS based on consistent concepts. To assist all parties to understand and interpret the Standards. Correct! To assist regulatory agencies in issuing rules and regulations for a particular industry. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 3 1 / 1 pts The scope of the Revised Conceptual Framework comprises how many chapters? Correct! Eight Five Seven Six Question 4 1 / 1 pts The Conceptual Framework provides the foundation for Standards that Correct! All of these are the result of Standards developed based on consistent concepts Strengthen accountability of management Contribute to economic efficiency by helping investors to identify opportunities and risks Contribute to transparency by enhancing international comparability and quality of financial information Question 5 1 / 1 pts What is the authoritative status of the Conceptual Framework? The Conceptual Framework has the highest level In the absence of a standard or an interpretation that specifically applies to a transaction, the Conceptual Framework shall be followed The Conceptual Framework applies only when the IASB develops new standards. Correct! In the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the applicability of the Conceptual Framework in developing and applying an accounting policy that results in information that is relevant and faithfully represented. Question 6 1 / 1 pts The Conceptual Framework is intended to establish GAAP in financial reporting Correct! The objectives and concepts for use in developing standards of financial accounting and reporting. The meaning of "present fairly in accordance with GAAP". The hierarchy of sources of GAAP. Question 7 1 / 1 pts A Conceptual Framework should Eliminate alternative accounting principles Lead to uniformity of financial statements Correct! Define the basic objectives, terms and concepts of accounting Guide multinational entities in developing generally accepted auditing standards Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 8 1 / 1 pts Which is not a purpose of the Conceptual Framework? Correct! To provide specific guidelines for resolving situations not covered by existing accounting standards To assist accountants in selecting among alternative accounting and reporting methods. To assist the International Accounting Standards Board in the standard-setting process. To provide definitions of key terms and fundamental concepts. Question 9 1 / 1 pts In the Conceptual Framework for Financial Reporting, what provides the "why" of accounting? Qualitative characteristic of accounting information Element of financial statement Measurement and recognition concept Correct! Objective of financial reporting Question 10 1 / 1 pts The underlying theme of the Conceptual Framework is Understandability Comparability Timeliness Correct! Decision usefulness Question 11 1 / 1 pts The objective of financial reporting Correct! Is the foundation for the Conceptual Framework Includes the qualitative characteristics of useful information Is not found in the Conceptual Framework All of these are correct choices regarding the objective Question 12 1 / 1 pts Which of the following is not a benefit associated with the Conceptual Framework? A coherent set of accounting standards should result. Practical problems should be more quickly solvable. Correct! Business entities will need far less assistance from accountants. A Conceptual Framework should increase users’ understanding and confidence in financial reporting. Question 13 1 / 1 pts Which statement is not true concerning the Conceptual Framework? The Conceptual Framework should allow practical problems to be solved more quickly. The Conceptual Framework should increase users' understanding and confidence in financial reporting. Correct! The Conceptual Framework should be based on fundamental truth derived from the law of nature. The Conceptual Framework should be a basis for standard setting. Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 14 1 / 1 pts Users of financial reports include which of the following? Creditors and government agencies Correct! Creditors, government agencies and unions Creditors Creditors and unions Question 15 1 / 1 pts The primary users of financial information include Existing and potential investors Existing and potential lenders and other creditors Correct! Existing and potential investors, lenders and other creditors User group such as employees, customers, governments and their agencies, and the public Question 16 1 / 1 pts Which group is not among the external users for whom financial statements are prepared? Suppliers Employees Customers Correct! All of these are external users of financial statements Question 17 1 / 1 pts Which of the following is an internal user of financial information? Holder of bonds Creditor with long-term contract Shareholder Correct! Board of Directors Question 18 1 / 1 pts These users require information on risk and return provided by their investment Employees lenders customers Correct! Investors Question 19 1 / 1 pts These users are interested in information about the profitability and stability of the entity in order to assess the ability of entity to provide remuneration, retirement benefits and employment opportunities. customers Correct! Employees the public Governments and their agencies Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 20 1 / 1 pts These users are interested in information that enables them to assess whether their loans, the related interest thereon, and other amounts owing to them will be paid when due owners Trade creditors Correct! Lenders and other creditors Borrowers Question 21 1 / 1 pts These users are interested in information about the continuance of an entity, especially when they have a long-term involvement with or are dependent on the entity Correct! Customers trade unions suppliers Employees Question 22 1 / 1 pts These users are interested in information in order to regulate the activities of an entity, determine taxation policies and provide a basis for national statistics. Major organization of users Correct! Governments and their agencies Bureau of Internal Revenue Department of Finance Question 23 1 / 1 pts These users need information on trends and recent developments where an entity makes a substantial contribution to the local economy providing employment and using local suppliers. finance entities Correct! The public private entities Governments and their agencies Question 24 1 / 1 pts The overall objective of financial reporting is to provide information About financial performance during a period Correct! That is useful for decision making That allows owners to assess management performance About assets, liabilities and equity of an entity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 25 1 / 1 pts The primary focus of financial reporting has been on meeting the needs of which of the following groups? Correct! Existing and potential investors, lenders and other creditors Management National taxing authorities independent CPAs Question 26 1 / 1 pts The primary objective of financial reporting is to provide useful information to Management Regulatory body Correct! Capital providers Government Question 27 1 / 1 pts Which is an objective of financial reporting? To provide information about the potential users. To provide information that is useful to management. Correct! To provide information that is useful in making investing and credit decisions To provide information about ways to solve internal and external conflicts about the entity. Question 28 1 / 1 pts An objective of financial reporting is to provide Information that will attract new investors Information about the investors in the entity Correct! Information that is useful in assessing cash flow prospects Information about the liquidation value Question 29 1 / 1 pts Assessing cash flow prospects is interpreted to mean Information about the financial effects of cash receipts and cash payments is generally considered the best indicator of ability to generate favorable cash flows Correct! Over the long run, trends in revenue and expenses are generally more meaningful than trends in cash receipts and disbursements Cash basis accounting is preferred over accrual basis All of the choices are correct regarding assessing cash flow prospects Question 30 1 / 1 pts In measuring financial performance, accrual accounting is used because Correct! It provides a better indication of ability to generate cash flows than cash basis It recognizes revenue when cash is received It is one of the implicit assumptions Cash flows are considered less important Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 31 1 / 1 pts The most useful information in predicting future cash flows is Information regarding the results obtained by using a wide variety of accounting policies Correct! Current earnings based on accrual accounting Information regarding the accounting policies used Information about current cash flows Question 32 1 / 1 pts The accrual basis of accounting is most useful for Determining the amount of dividends to be declared Correct! Predicting the long-term financial performance Predicting the short-term financial performance Determining the amount of income tax liability Question 33 1 / 1 pts The objective of financial reporting is based on Reporting on management stewardship Correct! The needs of the users of the information Generally accepted accounting principles The need for conservatism Question 34 1 / 1 pts Which statement is not true about financial reporting? Financial reporting shall provide information about entity resources, claims against those resources and changes in them Correct! Financial reporting shall not provide information useful in evaluating management stewardship. Financial reporting shall provide information useful in assessing cash flow prospects Financial reporting shall provide information useful in investment, credit and similar decision Question 35 1 / 1 pts Which of the following is not an objective of financial To provide information about an entity's assets and claims against those assets To provide information that is useful in lending and investing decisions To provide information that is useful in assessing an entity's sources and uses of cash Correct! To provide information about the liquidation value of an entity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 36 0 / 1 pts Financial reporting pertains to information about Business industries, rather than to individual entities or an economy as a whole or to members of society as consumers An economy as a whole and to members of society as consumers, rather than to individual entities or industries You Answered Individual business entities, industries, and an economy as a whole, rather than to members of society as consumers Correct Answer Individual business entities, rather than to industries or an economy as a whole or to members of society as consumers Question 37 1 / 1 pts Under the Revised Conceptual Framework, during a period when an entity is under the direction of a particular management, financial reporting provides information about Management performance but not entity performance Entity performance but not management performance Correct! Entity performance and management performance Neither entity performance nor management performance Question 38 1 / 1 pts A Conceptual Framework should Guide multinational entities in developing generally accepted auditing standards Correct! Define the basic objectives, terms and concepts of accounting Lead to uniformity of financial statements Eliminate alternative accounting principles Exercise _ Ch 3 _ CF Qualitative Characteristics - Matching type (Problem 3-7) Question 1 15 / 15 pts Indicate the accounting concept that is defined or described. Correct! Information that has no bearing on an economic decision to be made is useless. Relevance Correct! It is the ability to bring together for the purpose of noting points of likeness and difference. Comparability Correct! It requires that users have some knowledge of the complex economic economic activities of entities, the accounting process and the technical terminology in the statements. Understandability Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Correct! Preparers of statements should not try to increase the usefulness of the information to a few users to the detriment of others who may have opposing interests. Neutrality Correct! In case of conflict between economic substance and legal form or a transaction, the economic substance shall prevail. Substance over form Correct! Small expenditures for tools are expensed immediately. Materiality Correct! When in doubt, recognize all loses and don’t recognize gains. Conservatism Correct! The information should be presented in a manner that facilitates understanding and avoids erroneous implication. Completeness Correct! It is the capacity of the information to influence a decision. Relevance Correct! The description and numbers of figures must watch what really existed or happened. Faithful representation Correct! The financial statements shall be accompanied by notes to financial statements. Completeness Correct! There are no errors or omissions in the description of the phenomenon. Free from error Correct! It is the goal achieved by consistency. Comparability Correct! This enhancing qualitative characteristics implies consensus. Verifiability Correct! The older the information, the less useful. Timeliness Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Exercise _ Chapter 3 _ CF Qualitative Characteristics Question 1 1 / 1 pts What are the attributes that make the information provided in the financial statements useful to the readers? Elements of financial statements Objectives of financial reporting Quantitative characteristics of financial information Correct! Qualitative characteristics of financial information Question 2 1 / 1 pts Qualitative characteristics Correct! All of the choices are correct Contribute to the decision-usefulness of financial reporting information Are considered either fundamental or enhancing Distinguish better information from inferior information for decision-making purposes Question 3 1 / 1 pts The fundamental qualitative characteristics are Correct! Relevance and faithful representation Faithful representation and materiality Relevance and reliability Relevance, faithful representation and materiality Question 4 1 / 1 pts Accounting information is considered relevant when it Can be dependent on to represent the economic conditions and events that it is intended to represent Is understandable by reasonably informed users of accounting information Correct! Is capable of making a difference in a decision Is verifiable and neutral Question 5 1 / 1 pts The ingredients of relevant financial information are Predictive value, confirmatory value, timeliness and materiality Correct! Predictive value and confirmatory value Predictive value, confirmatory value and materiality Predictive value, confirmatory value and timeliness Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 6 1 / 1 pts What is the quality of information that gives assurance that it is reasonably free of error and bias? Correct! Faithful representation neutrality Verifiability Relevance Question 7 1 / 1 pts Which of the following is the best description of “faithful representation” in relation to information in financial statements? Influence on the economic decision of the users Comprehensibility to users Correct! Freedom from material error Inclusion of a degree of caution Question 8 1 / 1 pts to achieve faithful representation, the financial statements Correct! Must be complete, neutral and reasonably free from error Are understandable, comparable, verifiable and timely Must have predictive and confirmatory value Must possess all of these Question 9 1 / 1 pts The financial accounting information is directed toward the common needs of users and is independent of presumptions about particular needs and desires of specific users verifiability Correct! neutrality relevance completeness Question 10 1 / 1 pts In the event of conflict between the economic substance of a transaction and the legal form, the economic substance shall prevail Relevance completeness Correct! Substance over form Form over substance Question 11 1 / 1 pts The enhancing qualitative characteristics of financial information are Verifiability and timeliness comparability and understandability Correct! comparability, understandability, verifiability and timeliness comparability, understandability and verifiability Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 12 1 / 1 pts Financial information exhibits consistency when Accounting procedures are adopted which smooth net income and make results consistent between years Expenditures are reported as expenses Gains and losses are shown separately on the income statement Correct! Accounting entities give similar events the same accounting treatment each period Question 13 1 / 1 pts When information about two different entities engaged in the same industry has been prepared and presented in similar manner, the information exhibits the enhancing qualitative characteristics of Faithful representation Correct! comparability relevance consistency Question 14 1 / 1 pts The characteristic that is demonstrated when a high degree of consensus can be secured among independent measures using the same measurement method is Correct! verifiability understandability neutrality relevance Question 15 1 / 1 pts Which concept of accounting holds that, to the maximum extent possible, financial statements shall be based on arm’s length transactions matching Correct! verifiability monetary unit Revenue realization Question 16 1 / 1 pts An entity issuing the annual financial reports within one month after the end of reporting period is an example of which enhancing quality of accounting information? representational faithfulness predictive value Correct! timeliness neutrality Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 17 1 / 1 pts Allowing entities to estimate rather than physically count inventory at interim periods is an example of a trade off between Correct! timeliness and verifiability timeliness and comparability verifiability and comparability neutrality and consistency Question 18 1 / 1 pts Which qualitative characteristic of financial information requires that the information should not be biased in favor of one group of users to the detriment of others? Relevance free from error Correct! neutrality completeness Question 19 0 / 1 pts For information to be useful, the linkage between the users and the decisions made is Relevance verifiability You Answered Faithful representation Correct Answer understandability Question 20 1 / 1 pts The overriding qualitative characteristics of accounting information is Faithful representation Relevance Understandability Correct! Decision usefulness Question 21 1 / 1 pts Which statement is true in relation to the enhancing quality of understandability? Correct! Users have a reasonable knowledge of business and economic activities and review the information with reasonable diligence. Financial statements shall exclude complex matters Financial statements shall be free from material error Users are expected to have significant business knowledge Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 22 1 / 1 pts Which of the following terms best describes information that influences the economic decisions of users? Prospective Understandable Reliable Correct! Relevant Question 23 1 / 1 pts What is the quality of information that enables users to better forecast future operations? materiality comparability Faithful representation Correct! Relevance Question 24 1 / 1 pts According to the Conceptual Framework, predictive value and confirmatory value are ingredients of comparability Correct! Relevance understandability Faithful representation Question 25 1 / 1 pts Which term best describes information in financial statements that is neutral? Correct! unbiased relevant comparable Understandable Question 26 1 / 1 pts What is meant by comparability when discussing financial accounting information? Correct! Information is measured and reported in a similar fashion across entities Information is reasonably free from error Information is timely Information has predictive and confirmatory value Question 27 1 / 1 pts What is meant by consistency when discussing financial accounting information? Information is timely Correct! Information is measured and reported in a similar fashion across points in time Information is measured similarly across the industry Information is verifiable Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 28 1 / 1 pts Which of the following is not an enhancing qualitative characteristics? Understandability comparability Correct! profit-oriented timeliness Question 29 1 / 1 pts Changing the method of inventory valuation should be reported in the financial statements under what enhancing quality of accounting information? verifiability timeliness Correct! comparability understandability Question 30 1 / 1 pts When an entity applies the same accounting treatment to similar events from period to period, the entity is exhibiting which of the following qualities? verifiability all of the choices are correct Correct! consistency predictive value Question 31 1 / 1 pts When there is agreement between a measure or description and the phenomenon it purports to represent, the information possesses which characteristics Correct! Faithful representation verifiability predictive value timeliness Question 32 1 / 1 pts The qualitative characteristics of faithful representation includes Correct! neutrality timeliness confirmatory value predictive value Question 33 1 / 1 pts Enhancing qualitative characteristics of accounting information include all of the following, except: comparability Correct! materiality timeliness verifiability Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 34 1 / 1 pts The enhancing quality of understandability means that the information should be understood by Correct! Those who have a reasonable understanding of business and economic activities CPAs Financial analysts those who are experts in the interpretation of financial information Question 35 1 / 1 pts Enhancing qualitative characteristics of accounting information include: understandability and relevance relevance and comparability neutrality and comparability Correct! comparability and timeliness Question 36 1 / 1 pts When different competent accountants independently agree on the amount and method of reporting an economic event, what is the concept demonstrated? completeness reliability comparability Correct! verifiability Question 37 1 / 1 pts According to the conceptual framework, verifiability implies logic legal evidence Correct! consensus legal verdict Question 38 1 / 1 pts When an entity has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors, the qualitative concept involved is Correct! timeliness comparability Faithful representation consistency Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 39 1 / 1 pts When an entity changed the inventory valuation method, which characteristics is jeopardized by this change? Correct! consistency feedback value representational faithfulness comparability Question 40 1 / 1 pts Recognizing expected losses immediately but deferring expected gains is an example of materiality Correct! conservatism cost effectiveness timeliness Question 41 1 / 1 pts Which statement about materiality is true? An item must make a difference or it need not be disclosed Materiality is a matter of relative size or importance Correct! All of the given statements are true about materiality An item is material if the omission or misstatement would influence the judgment of a primary user. Question 42 1 / 1 pts An item would be considered material when Correct! Omitting, misstating or obscuring the information would make a difference to the primary users. The impact on earnings is greater than 10% The expected benefit exceeds the additional cost The standard definition of materiality is met. Question 43 1 / 1 pts The Conceptual Framework includes which constraint? All of the choices are constraints Conservatism Correct! Cost Prudence Question 44 1 / 1 pts Which best describes the cost-benefit constraint? All of the choices are correct Correct! The benefit of the information must be greater than the cost of providing it Cost of providing financial information is not always evident or measurable but must be considered Financial information should be free from cost to users Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 45 1 / 1 pts What is an enhancing quality of accounting information? Correct! Users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements. All of the choices are correct Information must be decision-useful to all users General-purpose financial reporting is the primary source of information for statement users Question 46 1 / 1 pts The ability through consensus among measures to ensure that information represents what it purports to represent is an example of the concept of? Correct! verifiability comparability Relevance feedback value Question 47 1 / 1 pts Which of the following accounting concepts states that an accounting transaction shall be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion? stable monetary unit periodicity Correct! objectivity conservatism Question 48 1 / 1 pts Objectivity is assumed to be achieved when a transaction Is recorded in a fixed amount of pesos Involves the payment or receipts of cash Correct! Involves an arm’s length transaction between two independent parties Allocates revenue and expenses in a rational and systematic manner Question 49 1 / 1 pts The principles of objectivity includes the concept of Correct! verifiability classification conservatism summarization Question 50 1 / 1 pts Proponents of historical cost maintain that statements prepared using historical cost are more Relevant conservative Correct! Objective Indicative of purchasing power Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 51 1 / 1 pts The consistency standard requires that Gains and losses should not be recognized Correct! The effect of accounting changes upon income should be properly disclosed Accounting procedures should be adopted when the result is a consistent rate of return Expenses should be reported when incurred Question 52 1 / 1 pts Which of the following relates to both relevance and faithful representation? Correct! comparability neutrality free from error feedback value Question 53 1 / 1 pts Which of the following situations violates the concept of faithful representation? Financial statements were issued nine months late Management Correct! Financial statements included an item of property, plant and equipment with carrying amount increased to management estimate of market value Data on segments having the same expected risks are reported to analysts estimating future profit. Question 54 1 / 1 pts What is the underlying concept governing the GAAP pertaining to recording gain contingencies? reliability Relevance Correct! Conservatism consistency Question 55 1 / 1 pts The usefulness of providing information in financial statements is subject to the constraint of Correct! cost-benefit consistency reliability representational faithfulness Question 56 1 / 1 pts A conceptual framework is a coherent system of interrelated objectives and fundamentals that lead to consistent standards Correct! True False Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 57 1 / 1 pts Fundamental qualitative characteristics of financial accounting information are either relevant or prudent. True Correct! False Question 58 1 / 1 pts An enhancing qualitative characteristic is confirmatory value True Correct! False Question 59 1 / 1 pts A fundamental qualitative characteristic is understandability True Correct! False Question 60 1 / 1 pts To be a faithful representation, an information must be predictive and confirmatory True Correct! False Question 61 1 / 1 pts An enhancing quality of financial accounting information is comparability Correct! True False Question 62 1 / 1 pts Applying different accounting treatment to similar event from period to period is violation of verifiability. True Correct! False Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 63 1 / 1 pts The idea of consistency does not mean that entities cannot switch from one accounting method to another Correct! True False Question 64 1 / 1 pts Financial statement users are assumed to have no reasonable knowledge of business and financial accounting matters. True Correct! False Question 65 0 / 1 pts Entities consider only quantitative factors in determining whether an item is material. Correct Answer False You Answered True Question 66 1 / 1 pts Neutrality and predictive value are characteristics of relevant information. True Correct! False Question 67 1 / 1 pts The tendency to recognize favorable events early is an example of conservatism True Correct! False Question 68 1 / 1 pts The Conceptual Framework focuses primarily on the needs of internal users of financial information. True Correct! False Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 69 1 / 1 pts The overall objective of financial reporting is to provide information for making economic decisions. Correct! True False Question 70 1 / 1 pts Once an accounting method is adopted, it should never be changed True Correct! False Exercise _ Chapter 4 _ CF FS and reporting entity Underlying assumptions Question 1 1 / 1 pts What is the general objective of financial statements? To satisfy the information needs of users of financial statements Correct! To provide information about economic resources of an entity, claims against the entity and changes in the economic resources and claims To assess future cash flows to the entity To assess management stewardship of economic resources Question 2 1 / 1 pts A reporting entity is Necessarily a legal entity Correct! An entity that is required or choose to prepare financial statements Necessarily an economic entity a regulatory government authority Question 3 1 / 1 pts A reporting entity Correct! All of the given answers can be considered a reporting entity Can be a portion of a single entity Can compromise more than one entity Can be a single entity Question 4 1 / 1 pts If the reporting entity comprises both the parent and its subsidiaries, the financial statements are referred to as Separate financial statements Combined financial statements Correct! Consolidated financial statements Unconsolidated financial statements Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 5 1 / 1 pts Combined financial statements provide financial information about The subsidiaries Correct! Two or more entities without a parent-subsidiary relationship The parent and its subsidiaries The parent Question 6 1 / 1 pts Which best describes the term going concern? The expenses exceed income The potential to contribute to the flow of cash and cash equivalents to the entity When current liability exceeds current assets Correct! The ability of the entity to continue in operation for the foreseeable future Question 7 1 / 1 pts Which is an implication of the going concern assumption? The historical cost principle is credible. The current and noncurrent classification of assets and liabilities is justifiable and significant Correct! All of these are an implication of going concern. Depreciation and amortization policies are justifiable and appropriate. Question 8 1 / 1 pts Which of the following is not a basic assumption underlying financial accounting? Correct! historical cost assumption periodicity assumption Economic entity assumption going concern assumption Question 9 1 / 1 pts Which basic assumption may not be followed when an entity in bankruptcy reports financial results? Economic entity assumption monetary unit assumption Correct! going concern assumption periodicity assumption Question 10 1 / 1 pts The economic entity assumption Is inapplicable to unincorporated businesses. Correct! Is applicable to all forms of business organizations Requires periodic income measurement Recognizes the legal aspects of business organizations Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 11 1 / 1 pts What is being violated if an entity provides financial reports in connection with a new product introduction? periodicity monetary unit Correct! Economic entity continuity Question 12 1 / 1 pts Which underlying assumption serves as the basis for preparing financial statements at regular artificial points in time? stable monetary unit Correct! accounting period accounting entity going concern Question 13 1 / 1 pts Which basic accounting assumption is threatened by the existence of severe inflation in the economy? Economic entity assumption Correct! monetary unit assumption going concern assumption periodicity assumption Question 14 1 / 1 pts Inflation is ignored in accounting due to going concern assumption Economic entity assumption Correct! monetary unit assumption time period assumption Question 15 1 / 1 pts The concept of accounting entity is applicable only to the legal aspects of business organizations only to the economic aspects of business organizations only to business organizations Correct! whenever accounting is involved. Question 16 1 / 1 pts When a parent and subsidiary relationship exists, consolidated financial statements are prepared in recognition of legal entity monetary unit Correct! Economic entity going concern Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 17 1 / 1 pts The valuation of a promise to receive cash in the future at present value is valid because of what accounting concept? Correct! going concern monetary unit entity time period Question 18 1 / 1 pts What is the accounting concept that justifies the usage of accruals and deferrals? materiality consistency Correct! going concern stable monetary unit Question 19 1 / 1 pts During the lifetime of an entity accountants produce financial statements at arbitrary points in time in accordance with what basic accounting concept? Correct! periodicity continuity accrual unit of measure Question 20 1 / 1 pts The relatively stable economic, political and social environment supports materiality conservatism timeliness Correct! going concern Question 21 5 / 5 pts For each situation, identity the underlying assumption involved. - Going concern - Accounting entity - Time period - Monetary unit Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Correct! The operations of a savings bank are being evaluated by the BSP. During the investigation, the BSP has determined that numerous loans made by top management were unwise and have seriously endangered the future of the saving bank. Going concern Correct! The parent entity in Manila has a subsidiary in Japan. The financial statements of the subsidiary are translated to pesos for consolidation with the financial statements of the parent entity at year-end. Accounting entity Correct! A machinery was imported from USA at a certain cost five years ago. Because of inflation, the machinery has now a current replacement cost which is very much higher that the historical cost. Management would like to report the machinery at current replacement cost. Monetary unit Correct! An entity has experienced a drastic reduction in revenue by reason of a long try spell in the area where the entity grows its tobacco. The management decided to wait until next year and present financial statements for a two-period rather than prepare now the financial statements. Time period Correct! A subsidiary was exhibiting poor financial performance for the current year. In an effort to increase the subsidiary’s reported income, the parent entity purchased goods from the subsidiary at twice the normal markup. Accounting entity Question 22 5 / 5 pts Identify the assumption that is most clearly violated by the accounting practice. - Going concern - Accounting entity - Time period - Monetary unit Correct! An entity decided to publish financial statements only in the years when it had good news to report. Time period Correct! An entity reported inventory, property, plant and equipment and intangible assets at current value at year-end. Going concern Correct! An electronics entity owned by a proprietor reported the cost of the proprietor’s swimming pool as an asset of the entity. Accounting entity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Correct! An entity prepared financial statements adjusted for changes in purchasing power. Monetary unit Correct! A mining entity kept no accounting records after starting business. The entity is waiting until the mine is exhausted to determine the success or failure of business. Time period Question 23 5 / 5 pts Identify the assumption that is most clearly violated by the accounting practice. - Going concern - Accounting entity - Time period - Monetary unit Correct! An entity reported financial statements in nominal pesos that have mixed rather than uniform amount of purchasing power. Monetary unit Correct! A multinational entity published a complete set of financial statements at least once a year, regardless of whether the financial results were good or bad. Time period Correct! The pesos of today can buy as much as goods and services as the pesos five years ago. Monetary unit Correct! An accounting entity is viewed as continuing in operation in the absence of evidence to the contrary. Going concern Correct! An accounting practitioner mixed personal accounting records with the records of the accounting practice. Accounting entity Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 First quiz Question 1 1 / 1 pts Accounting standard-setting has been characterized as Pure deductive reasoning a legal process Using the scientific method Correct! A political process Question 2 1 / 1 pts 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. This accounting definition is given by Board of Accountancy American Accounting Association AICPA Committee on Accounting Terminology Correct! Accounting Standards Council Question 3 1 / 1 pts All of the following are represented in FRSC, except Correct! Department of Budget and Management Board of Accountancy Commission on Audit Securities and Commission Question 4 1 / 1 pts All of the following describe accounting, except A service activity Correct! An exact science rather than an art A universal language of business An information system Question 5 1 / 1 pts What is the primary service of CPAs in public practice? controllership Correct! Auditing Managerial Accounting Taxation Question 6 1 / 1 pts GAAP is an abbreviation for Generally authorized accounting procedures Generally accepted auditing practices Generally applied accounting procedure Correct! Generally accepted accounting principles Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 7 1 / 1 pts What is the standard-setting body in the Philippines at the present time? Accounting Standards Council Auditing and Assurance Standards Council Philippine Accounting Standards Board Correct! Financial Reporting Standards Council Question 8 1 / 1 pts The standards published by IASB are called Correct! International Financial Reporting Standards Statement of Financial Accounting Standards Financial Reporting Standards International Accounting Standards Question 9 1 / 1 pts The communicating process of accounting includes all of the following, except Correct! interpreting recording summarizing classifying Question 10 1 / 1 pts The most common financial attribute used in measuring financial information is Correct! Historical cost current cost value in use fair value Question 11 1 / 1 pts A CPA shall be permanently exempted from the renewal of CPA license When studying abroad Correct! At the age of 65 years When practicing profession abroad When working abroad Question 12 1 / 1 pts Managerial accounting emphasizes Correct! Developing accounting information for use within an entity Expertise in data processing Reporting to the SEC Reporting financial information to external users Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 13 1 / 1 pts What is a possible danger if politics plays too big a role in developing IFRS? Individuals ,ay influence the standards The IASB delegates its authority to elected officials Correct! Financial reporting standards are not truly generally accepted. User groups become active Question 14 1 / 1 pts What are the three main areas in the practice of the accountancy profession? Financial accounting, managerial accounting and corporate accounting Public accounting, private accounting and managerial accounting Correct! Public accounting, private accounting and government accounting Auditing, taxation and managerial accounting Question 15 1 / 1 pts What is the branch of accounting that makes financial information about an entity accessible to the external users? Correct! Financial Accounting Management accounting Government auditing Auditing Question 16 1 / 1 pts 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 Certified Public Accountants V. Bureau of Internal Revenue VI. Social Security System I, II, III, IV, V and VI II, IV, V and VI I, II, III, V and VI Correct! I, III, IV and V Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 17 1 / 1 pts The body that authors the International Financial Reporting Standards is the International Accounting Standards Committee Correct! International Accounting Standards Board Accounting Standards Council Financial Reporting Standards Council Question 18 1 / 1 pts Which statement is not true about financial reporting? Financial reporting shall provide information useful in investment, credit and similar decision Correct! Financial reporting shall not provide information useful in evaluating management stewardship. Financial reporting shall provide information about entity resources, claims against those resources and changes in them Financial reporting shall provide information useful in assessing cash flow prospects Question 19 1 / 1 pts Which is an objective of financial reporting? To provide information about the potential users. To provide information about ways to solve internal and external conflicts about the entity. To provide information that is useful to management. Correct! To provide information that is useful in making investing and credit decisions Question 20 1 / 1 pts These users are interested in information that enables them to assess whether their loans, the related interest thereon, and other amounts owing to them will be paid when due Correct! Lenders and other creditors Trade creditors owners Borrowers Question 21 1 / 1 pts Which of the following is not an objective of financial To provide information that is useful in lending and investing decisions To provide information about an entity's assets and claims against those assets Correct! To provide information about the liquidation value of an entity To provide information that is useful in assessing an entity's sources and uses of cash Question 22 1 / 1 pts These users are interested in information about the profitability and stability of the entity in order to assess the ability of entity to provide remuneration, retirement benefits and employment opportunities. customers Correct! Employees Governments and their agencies the public Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 23 1 / 1 pts These users need information on trends and recent developments where an entity makes a substantial contribution to the local economy providing employment and using local suppliers. finance entities private entities Correct! The public Governments and their agencies Question 24 1 / 1 pts Which of the following is not a benefit associated with the Conceptual Framework? A coherent set of accounting standards should result. ractical problems should be more quickly solvable. A Conceptual Framework should increase users’ understanding and confidence in financial reporting. Correct! Business entities will need far less assistance from accountants. Question 25 1 / 1 pts Which statement is not true concerning the Conceptual Framework? The Conceptual Framework should be a basis for standard setting. The Conceptual Framework should allow practical problems to be solved more quickly. The Conceptual Framework should increase users' understanding and confidence in financial reporting. Correct! The Conceptual Framework should be based on fundamental truth derived from the law of nature. Question 26 1 / 1 pts Which is not a purpose of the Conceptual Framework? To assist the International Accounting Standards Board in the standard-setting process. Correct! To provide specific guidelines for resolving situations not covered by existing accounting standards To assist accountants in selecting among alternative accounting and reporting methods. To provide definitions of key terms and fundamental concepts. Question 27 1 / 1 pts Which of the following is an internal user of financial information? Holder of bonds Shareholder Creditor with long-term contract Correct! Board of Directors Question 28 1 / 1 pts Which of the following are among the four (4) enhancing characteristics of financial information? A. Comparability B. Timeliness D. Materiality E. Neutrality C. Relevance Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 B and D A and C Correct! A and B B and E Question 29 0 / 1 pts The IASB’s Conceptual Framework deals with the I. objectives of the financial statements II. qualitative characteristics that make the financial statement useful to users. III. concepts of capital and capital maintenance IV. generally accepted accounting principles You Answered I, II, III and IV II and III Correct Answer I, II and III I and II Question 30 1 / 1 pts Under a lease where the lessee acquires the benefits of ownership of an asset, the lessee often recognizes the present value of future rental payments as an asset even though legal title to the property is not acquired. This is an example of the application of Correct! substance over form consistency form over substance prudence Question 31 1 / 1 pts For information to be useful, the linkage between the users and the decisions made is Faithful representation verifiability Correct! understandability Relevance Question 32 1 / 1 pts Allowing entities to estimate rather than physically count inventory at interim periods is an example of a trade off between verifiability and comparability timeliness and comparability Correct! timeliness and verifiability neutrality and consistency Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 33 1 / 1 pts When an entity applies the same accounting treatment to similar events from period to period, the entity is exhibiting which of the following qualities? verifiability predictive value Correct! consistency all of the choices are correct Question 34 1 / 1 pts Which of the following is the best description of “faithful representation” in relation to information in financial statements? Comprehensibility to users Inclusion of a degree of caution Correct! Freedom from material error Influence on the economic decision of the users Question 35 1 / 1 pts The fundamental qualitative characteristics are Faithful representation and materiality Relevance, faithful representation and materiality Relevance and reliability Correct! Relevance and faithful representation Question 36 1 / 1 pts Objectivity is assumed to be achieved when a transaction Is recorded in a fixed amount of pesos Involves the payment or receipts of cash Allocates revenue and expenses in a rational and systematic manner Correct! Involves an arm’s length transaction between two independent parties Question 37 1 / 1 pts The ability through consensus among measures to ensure that information represents what it purports to represent is an example of the concept of? comparability feedback value Relevance Correct! verifiability Question 38 1 / 1 pts The characteristic that is demonstrated when a high degree of consensus can be secured among independent measures using the same measurement method is No answer text provided. No answer text provided. Correct! verifiability relevance Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 39 1 / 1 pts The enhancing quality of understandability means that the information should be understood by Correct! Those who have a reasonable understanding of business and economic activities CPAs those who are experts in the interpretation of financial information Financial analysts Question 40 1 / 1 pts When an entity has started placing its quarterly financial statements on its web page, thereby reducing by ten days the time to get information to investors and creditors, the qualitative concept involved is Faithful representation consistency comparability Correct! timeliness Question 41 1 / 1 pts When different competent accountants independently agree on the amount and method of reporting an economic event, what is the concept demonstrated? comparability completeness Correct! verifiability reliability Question 42 1 / 1 pts What is the underlying concept governing the GAAP pertaining to recording gain contingencies? reliability Correct! Conservatism Relevance consistency Question 43 1 / 1 pts What is meant by consistency when discussing financial accounting information? Information is verifiable Information is timely Information is measured similarly across the industry Correct! Information is measured and reported in a similar fashion across points in time Question 44 1 / 1 pts Which concept of accounting holds that, to the maximum extent possible, financial statements shall be based on arm’s length transactions matching Revenue realization monetary unit Correct! verifiability Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 45 1 / 1 pts A reporting entity Can be a single entity Can be a portion of a single entity Can compromise more than one entity Correct! All of these can be considered a reporting entity Question 46 1 / 1 pts A reporting entity is Necessarily an economic entity a regulatory government authority Correct! An entity that is required or choose to prepare financial statements Necessarily a legal entity Question 47 1 / 1 pts The relatively stable economic, political and social environment supports materiality Correct! going concern conservatism timeliness Question 48 1 / 1 pts The economic entity assumption Is inapplicable to unincorporated businesses. Requires periodic income measurement Correct! Is applicable to all forms of business organizations Recognizes the legal aspects of business organizations Question 49 1 / 1 pts What is the accounting concept that justifies the usage of accruals and deferrals? stable monetary unit materiality consistency Correct! going concern Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 50 1 / 1 pts Which of the following statement is true? 1. The objective of financial reporting is based on generally accepted accounting principles. 2. An item would be considered material when omitting, misstating or obscuring the information would make a difference to the primary users. 3. Revenue encompasses income and gain. 4. Based on the new definition of asset, future economic benefit is expected to flow to the entity. Statement 1 and 2 Correct! Statement 2 only All statements are false Statements 1, 2 and 4 Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Second Quiz Question 1 1 / 1 pts Financial statements are intended to meet the information needs of the management reports about the performance of the management specific purpose financial reports Correct! structured presentation of the financial position and changes in financial position of an enterprise Question 2 1 / 1 pts Which of the following is not an objective of financial statements? To present information about the changes of financial position of an enterprise Correct! To present information about the realizable amount of an entity’s assets in the event of liquidation. To present information about the financial performance of an entity for a given reporting period. To present information about financial position of an entity as of a given date. Question 3 1 / 1 pts When assets and liabilities on the statement of financial position are not presented into current and non-current classification, they should be presented broadly in the order of magnitude in the order of maturity Correct! in the order of liquidity alphabetically Question 4 1 / 1 pts The operating cycle refers to the seasonal variations experienced by business enterprises cannot exceed one year should be used to classify assets and liabilities as current if it is less than one year Correct! allows trade receivables and inventories to be classified as current assets even if they would not be realized in cash within twelve months from the end of the reporting period Question 5 1 / 1 pts Which among the following is not presented in profit or loss section of the statement of comprehensive income? Finance costs incurred during the period Expenses incurred during the period Revenue earned during the period Correct! Dividends declared during the period Question 6 1 / 1 pts A decrease in an asset arising from peripheral or incidental transaction is called Capital expenditure Expense Correct! Loss Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Cost Question 7 1 / 1 pts It is a decrease in asset or an increase in liability that results decrease in equity other than distribution to equity holders income asset Correct! Expense liability Question 8 1 / 1 pts Which statement in relation to income is true? Gain encompasses both income and revenue Revenue encompasses both income and gain Correct! Income encompasses both revenue and gain Income encompasses revenue only Question 9 1 / 1 pts It is the present ability to direct the use of an economic resource and obtain the benefit that may flow from it Correct! control ownership obligation Legal right Question 10 1 / 1 pts The elements of financial position describe amounts of resources and claims against resources During a period of time During a period of time and at a moment in time Neither during a period of time nor at a moment in time Correct! At a moment in time Question 11 1 / 1 pts Which statement is not true about income and expense? Expense is decrease in asset or increase in liability that result in decrease in equity other than distribution to equity holders Correct! Income and expenses are the elements that relate to financial position Income is increase in asset or decrease in liability that results in increase in equity other than contribution from equity holders Income encompasses revenue and gain Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 12 1 / 1 pts This arises in the course of ordinary regular activities of the entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent Profit income Correct! Revenue Gain Question 13 1 / 1 pts An outflow of asset based on an activity that represents the major operations is called Loss Correct! Expense liability Equity Question 14 1 / 1 pts Which of the following criteria need not be satisfied for a liability to exist? The obligation is to transfer an economic resource Correct! The settlement is expected to result in an outflow of economic benefit The obligation is a present obligation that exists as a result of a past event The entity has an obligation Question 15 1 / 1 pts A present obligation exists as a result of past event if The entity has already obtained economic benefit The entity has not yet obtained economic benefit but must transfer an economics resource Correct! The entity has already obtained economic benefit and must transfer economic resource The entity must transfer an economic resource Question 16 1 / 1 pts This is new term refers to the statement of profit or loss and a statement presenting other comprehensive income Statement of financial position Income statement Correct! Statement of financial performance Statement of comprehensive income Question 17 1 / 1 pts What is the primary distinction between revenue and gain? The method of disclosing the transaction The materiality of the amount The likelihood that the transaction will recur Correct! The nature of the activity that gives rise to the transaction Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 18 1 / 1 pts Which of the following would be matched with current revenue on a basis other than association of cause and effect? Correct! Goodwill Warranty cost Cost of goods sold Sales commission Question 19 1 / 1 pts What is the general approach as to when product costs are recognized as expense? In the period when the expenses are paid In the period when the expenses are incurred Correct! In the period when the related revenue is recognized In the period when the vendor invoice is received Question 20 1 / 1 pts A cause and effect relationship is implicit in the Historical cost principle Realization principle Going concern assumption Correct! Matching principle Question 21 1 / 1 pts It is the process of capturing for inclusion in the financial statements an item that meets the definition of the elements of financial statements. Derecognition Correct! Recognition Measurement Classifying Question 22 1 / 1 pts Which accounting principle is being observed when an accountant charges to expense a cost that contributed to revenue during a period? Correct! Matching Monetary unit Revenue realization conservatism Question 23 1 / 1 pts Which of the following principle best describes the conceptual rationale for the method of matching depreciation with revenue? Partial recognition Immediate recognition Correct! Systematic and rational allocation Associating cause and effect Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 24 1 / 1 pts Which of the following practices may not be an acceptable deviation from recognizing revenue a the point of sale? Correct! Upon receipt of order End of production During production Upon receipt of cash Question 25 1 / 1 pts An example of direct matching of an expense with revenue would be Depreciation expense Advertising expense Office salaries expense Correct! Direct labor costs incurred to produce inventory sold during a period Question 26 1 / 1 pts Which measurement attribute is not currently used in practice Current cost Correct! Inflation adjusted cost Present value Fair value Question 27 1 / 1 pts It is the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset was acquired currently Correct! Current cost Realizable value Historical cost Present value Question 28 1 / 1 pts Financial capital is defined as legal capital Correct! Net assets in monetary terms Share capital issued and outstanding Net assets in terms of physical productive capacity Question 29 1 / 1 pts Income and expenses are classified as Retained earnings and other comprehensive income Profit or loss and retained earnings Correct! Profit or loss and other comprehensive income Ordinary and extraordinary Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 30 1 / 1 pts What is the new term to describe the statement of profit or loss together with the statement showing other comprehensive income Statement of profit or loss Statement of other comprehensive income Correct! Statement of financial performance Income statement Question 31 1 / 1 pts The operating cycle of an entity Is the period of time normally elapsed in converting trade receivables back into cash Refers to the seasonal variation experienced by entities ls a period of one year Correct! Is the time between the acquisition of materials entering into a process and their realization in cash Question 32 1 / 1 pts Current assets should never include A receivable not collectible within one year Current tax asset Correct! Goodwill arising in a business combination Premium paid on a bond investment Question 33 1 / 1 pts The major financial statements include all, except Statement of changes in equity Correct! Statement of changes in financial position Statement of financial position Statement of comprehensive income Question 34 1 / 1 pts Assets to be sold, consumed or realized as part of the normal operating cycle are Correct! Current assets Noncurrent investments Classified as current or noncurrent in accordance with other criteria Noncurrent assets Question 35 1 / 1 pts Which statements best describes the term liability? resources to meet financial commitments when due an excess of equity over current assets the residual interest in the assets of the entity after deduction all of the liabilities Correct! a present obligation arising from past event Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 36 1 / 1 pts Which item is not a current liability? unearned revenue trade accounts payable Correct! Share dividends payable the currently maturing portion of long-term debt Question 37 1 / 1 pts In the Philippines, the common practice is to present in the statement of financial position Noncurrent assets before current assets, noncurrent liabilities before current liabilities and equity after liabilities Noncurrent assets before current assets, current liabilities before noncurrent liabilities and equity after liabilities Current assets before noncurrent assets, noncurrent liabilities before current liabilities and equity after liabilities Correct! Current assets before noncurrent assets, current liabilities before noncurrent liabilities and equity after liabilities. Question 38 1 / 1 pts Notes to financial statements Are irrelevant facts that are immaterial in amount. Correct! Are an integral part of an entity's financial statements Document the source of financial statement facts Are relatively unimportant facts that do not belong in the basic financial statements. Question 39 1 / 1 pts Treasury shares should be, reported as Correct! Reduction of shareholders' equity Current asset Investment Other asset Question 40 1 / 1 pts Which of the following is usually classified as a noncurrent asset goods in process Correct! Plant expansion fund Prepaid rent supplies Question 41 1 / 1 pts An entity shall classify a liability as current when under all of the following conditions, except The entity holds the liability primarily for the purpose of trading The entity expects to settle the liability within the entity's normal operating cycle Correct! The entity has an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. The liability is due to be settled within twelve months after the reporting period Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 42 1 / 1 pts Which of the following must be included on the face of the statement of financial position? Shares in an entity owned by that entity Contingent asset Correct! Investment property Number of shares authorized Question 43 1 / 1 pts The statement of financial position is useful for analyzing all of the following, except financial flexibility solvency Correct! Profitability liquidity Question 44 1 / 1 pts A financial liabilities due within twelve months after the reporting period shall be classified as noncurrent Correct! When it is refinanced on a long-term basis on or before the end of reporting period. When it is refinanced on a long-term basis after the end of reporting period When the entity has no discretion to refinance for at least twelve months When it is refinanced on a long-term basis before the issue of financial statements. Question 45 1 / 1 pts Current and noncurrent presentation of assets and liabilities provides useful information when the entity Is a public utility is a nonprofit organization Is a financial institution Correct! Supplies goods or services within a clearly identifiable operating cycle Question 46 1 / 1 pts The major financial statements include all, except Income statement Statement of cash flows Correct! Statement of retained earnings Statement of financial position Question 47 1 / 1 pts The recognition and measurement concepts recognize which of the following as a principle rather than an assumption? going concern Correct! Full disclosure time period monetary unit Downloaded by Lily Pritchett (thesisislyf@gmail.com) lOMoARcPSD|13648990 Question 48 1 / 1 pts Which is a limitation of a statement of financial position? Current fair value is not reported Many items that are of financial value are omitted Correct! All of these are a limitation of the statement of financial position Judgment and estimate are used Question 49 1 / 1 pts To meet the needs of full disclosure, entities use supplemental information including Supplemental financial statements that report more detailed information. Parenthetical comments or modifying comments placed on the face of the financial statements. Disclosure notes conveying additional insights about operations, accounting principles, contractual agreements and pending litigation. Correct! All of these are correct Question 50 1 / 1 pts The term "deficit" refers to An excess of current liabilities over current assets Correct! A debit balance in retained earnings An excess of current assets over current liabilities A prior period error. Downloaded by Lily Pritchett (thesisislyf@gmail.com)