QUIZ NO. 1 (OLD QUESTIONS: BEFORE THE 2018 REVISED CONCEPTUAL FRAMEWORK)
1.
The conceptual framework
a. Is considered a Philippine Financial Reporting Standards
b. Overrides Philippine Financial Reporting Standards
c. Is guided by Philippine Financial Reporting Standard
d. Is used as a guide by Philippine Financial Reporting Standards
2.
The conceptual framework is intended to establish
a. GAAP in financial reporting by entities.
b. The meaning of present fairly in accordance with GAAP.
c. The objectives and concepts used in developing financial reporting standards.
d. The hierarchy of sources of GAAP.
3.
Which is not a basic purpose of the Conceptual Framework of accounting?
a. To assist preparers of financial statements in applying the accounting standards.
b. To assist the FRSC in developing accounting standards.
c. To assist the BOA in promulgating rules and regulations affecting the practice of accountancy
in the Philippines.
d. To assist FRSC in reviewing and adopting IFRS.
4.
Which is not included in the scope of the FRSC conceptual framework?
a. Objective of FS
b. Concepts of capital and capital maintenance
c. Definition, recognition and measurement of the elements of FS
d. Generally accepted accounting principles
5.
What is the objective of FS according to Conceptual Framework?
a. To provide information about the financial position, performance, and changes in financial
position of an entity that is useful to a wide range of users in making economic decisions.
b. To prepare and present a statement of financial position, a statement of comprehensive
income, a statement of cash flows, and a statement of changes in equity.
c. To prepare and present comparable, relevant and reliable, and understandable information to
investors and creditors.
d. To prepare financial statements in accordance with applicable standards and interpretations
6.
The entity’s financial position as to liquidity, solvency and financial structure is portrayed in
which specific FS?
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of cash flows
d. Statement of changes in equity
7.
The objectives of financial reporting for entities are based on
a. The need for conservatism
b. Reporting on management stewardship
c. Generally accepted accounting principle
d. The need of the users of the information
8.
These are accounting information users who are interested in information about the profitability
and stability of an entity in order to assess whether they should buy, hold or sell their shares.
a. Employees
b. Lenders
c. Investors
d. General public
9.
These are accounting information users who are interested in information about profitability and
stability of an entity in order to assess the ability of the entity to provide remuneration,
retirement benefits and employment opportunities.
a. Customers
c. Trade creditors
b. Suppliers
d. Employees
10. These are accounting information users that require information to regulate the activities of the
entity, determine taxation policies and as a basis for national income and similar statistics.
a. Investors
c. General public
b. Academe
d. Government and its agencies
11. The conceptual framework of accounting is applicable to all of the following, except
a. General purpose financial statements
b. Special purpose financial statements
c. Commercial and industrial enterprises
d. Public enterprises
12. These are qualities or attributes that make financial accounting information useful to users.
a. Quantitative techniques
c. Qualitative characteristics
b. Underlying assumptions
d. Accounting principles
13. The overriding qualitative characteristics of accounting information is
a. Usefulness for decision making
c. Relevance
b. Freedom from bias
d. Comparability
14. The two primary qualities that make accounting information useful for decision making are
a. Comparability and consistency
c. Relevance and Faithful Representation
b. Materiality and timeliness
d. Reliability and Relevance
15. Financial information exhibits the characteristics of consistency when
a. Expenses are reported as charges against revenue in the period in which they are paid
b. Accounting entities give accountable events the same accounting treatment from period to
period
c. Gains and losses are not included on the income statement
d. Accounting procedures be adopted that give a consistent rate of return
16. The consistency standard of reporting requires that
a. Expenses be reported as charges against the period in which they are incurred.
b. The effect of changes in accounting upon income be properly disclosed.
c. Gains and losses should not appear in the income statement.
d. Accounting procedures be adopted that give a consistent rate of return.
17. The financial information must be comprehensible or intelligible if it is to be useful
a. Relevance
c. Understandability
b. Reliability
d. Comparability
18. Accounting information is considered to be relevant when it
a. Is verifiable and neutral
b. Is capable of making a difference in a decision
c. Is understandable by reasonably informed users of accounting information
d. Is able to present complete information
19. Financial accounting is communicated early enough to be used for the economic decision which it
might influence and to avoid delay in making the decision.
a. Predictive value
c. Neutrality
b. Timeliness
d. Completeness
20. If there is undue delay in reporting financial information, then it may lose its
a. Relevance
c. Objectivity
b. Reliability
d. Conservatism
21. A quality of financial information that assures users that the information is complete and
faithfully represents what it purports to show.
a. Reliability
b. Relevance
c. Comparability
d. Understandability
22. The ability through consensus among measurers to ensure that financial information represents
what it purports to represent is an example of the concept of
a. Relevance
b. Verifiability
c. Comparability
d. Feedback value
23. 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 conclusions?
a. Prudence
c. Periodicity
b. Objectivity
d. Stable monetary unit
24. The assurance that financial accounting information is reasonably free from bias and does not
cater to the needs of specific users.
a. Consistency
c. Neutrality
b. Verifiability
d. Completeness
25. Conservatism is best described as selecting an accounting information that
a. Understates assets and net income
b. Has least favorable impact on owners’ equity
c. Overstates liabilities and expenses
d. Is likely to mislead users of accounting information
26. Comparability is sometimes sacrificed for
a. Relevance
c. Objectivity
b. Conservatism
d. Reliability
27. The usefulness of providing information in the financial statements is subject to the constraint of
a. Reliability
b. Consistency
c. Cost-benefit
d. Representational faithfulness
28. Statement I: Materiality is a primary qualitative characteristic rather than a threshold or cut off
point in determining useful information.
Statement II: Information is material if its omission or misstatement could influence the economic
decisions of users taken on the basis of the financial statements.
Statement III: Materiality depends on the size of the item or error judged in the particular
circumstances of its omission or misstatement.
a. Only statement I is true
c. Only statement I is false
b. Only statement II is true
d. Only statement III is false
29. Based on the conceptual framework, when should an item that meets the definition of an element
be recognized?
a. When it is probable that any future economic benefit associated with the item will flow to or
from the entity
b. When an element has a cost or value that can be measured reliably
c. When the entity obtains control of the rights or obligations associated with the item
d. When it is probable that any future economic benefit associated with the item will flow to or
from the entity and the item has a cost that can be measured with reliability.
30. According to the conceptual framework of accounting, the elements directly related to the
measurement of performance are
a. Assets, liabilities and equity
c. Income and expenses
b. Gains and losses
d. Revenues and losses
31. Determine the true statement
a. Income covers both revenues and gains
b. Revenues covers both income and gains
c. Gains cover both income and revenue
d. Income, revenues and gains are one and the same item
32. Which measurement bases are used in preparing the financial statements according to the
conceptual framework?
a. Historical cost and realizable value
b. Historical cost, current cost and realizable value
c. Historical cost, realizable value and present value
d. Historical cost, current cost, realizable value and present value
33. What are the two capital concepts included in the scope of the Conceptual Framework?
a. Borrowed and invested capital
c. Monetary and non-monetary capital
b. Financial and physical capital
d. Accounting and economic capital
34. What are(is) the underlying assumptions as mentioned by the conceptual framework?
a. Accrual and going concern
b. Accrual and accounting entity
c. Accrual
d. Going Concern
35. Continuation of accounting entity in the absence of evidence to the contrary is the basic concept
of
a. Accounting entity
c. Going concern
b. Time period
d. Accrual
36. This means that there are no errors or omissions in the description of the phenomenon, and the
process used to produce the reported information has been selected and applied with no errors in
the process.
a.Freedom from error
c. Objectivity
b.Verifiability
d. Errorless Accounting
37. Revenues are recognized as earned, regardless of when the related cash is received; expenses are
recognized as incurred, regardless of when the related cash is paid.
a. Cash basis
b. Accrual basis
c. Modified accrual basis
d. Modified cash basis
Items 38 to 40 are based on the following
“Ac c ounting is a servic e ac tivity. Its func tion is to provide quantitative information,
primaril y financ ial in nature, about ec onomic entities, that is intended to be useful in
making ec onomic dec isions.”
38. One of the basic features of financial accounting is the
a. Direct measurement of economic resources and obligations and changes in them in terms of
money and sociological and psychological impact.
b. Direct measurement of economic resources and obligations and changes in them in terms of
money.
c. Direct measurement of economic resources and obligations and changes in them in terms of
money and sociological impact.
d. Direct measurement of economic resources and obligations and changes in them in terms of
money and psychological impact.
39. The information provided by financial reporting pertains to
a. Individual business enterprises, rather than to industries or an economy as a whole or to
members of society as consumers.
b. Business industries, rather than to individual enterprises or an economy as a whole or to
members of society as consumers.
c. Individual business enterprises, industries, and an economy as a whole, rather than to
members of society as consumers.
d.An economy as a whole and to members of society as consumers, rather than to individual
enterprises or industries.
40. During a period when an enterprise is under the direction of a particular management, the
financial reporting will directly provide information about
a. Both enterprise performance and management performance
b. Management performance but not enterprise performance
c. Enterprise performance but not management performance
d. Neither enterprise performance nor management performance
(NEW QUESTIONS)
1. The purpose of the Conceptual Framework is:
a.
b.
c.
d.
To assist the International Accounting Standards Board to develop IFRS Standards
To assist preparers of IFRS financial statements to develop consistent accounting policies
when no IFRS Standard applies to a particular transaction or other event, or when a
Standard allows a choice of accounting policy
To assist all parties to understand and interpret IFRS Standards
All of the above
2.
The Conceptual Framework can override requirements in a Standard.
a. True
b. False
3.
Revision of the Conceptual Framework will automatically lead to changes in Standards that are
inconsistent with the revised concepts.
a. True
b. False
4.
When developing requirements for IFRS Standards, can the International Accounting Standards
Board depart from the Conceptual Framework?
a. No
b. Yes, the Board is not required to use the Conceptual Framework when developing Standards
c. Yes, but only from aspects of the Conceptual Framework and only if doing so is needed to
meet the objective of financial reporting
5.
If an IFRS Standard sets out requirements that are inconsistent with the Conceptual Framework,
preparers have to apply the Conceptual Framework for affected transactions.
a. True
b. False
6.
Entities have to apply the revised Conceptual Framework:
a.
b.
c.
7.
Immediately after it is issued
For annual reporting periods beginning on or after 1 January 2020, with early application
permitted
Never - the Conceptual Framework is only used by the International Accounting Standards
Board
The objective of general purpose financial reporting as described in the Conceptual Frame work is
to:
a.
b.
c.
d.
Provide information to regulators
Support the entity's tax return
Meet the information needs of an entity's stakeholders
Provide financial information about the reporting entity that is useful to existing and potential
investors, lenders and other creditors in making decisions relating to providing resources to
the entity
8.
Which of the following does the Conceptual Framework identify as the primary users of general
purpose financial reports?
a. Employees, investors and trade union representatives
b. Existing and potential investors, lenders and other creditors
c. Lenders and other creditors and customers
d. Existing and potential investors, government agencies and the general public
9.
Information needed to assess management's stewardship is always different from information
needed to assess the prospects for future net cash inflows to the entity.
a. True
b. False
10. Financial reports need to provide information useful in making decisions relating to providing
resources to the entity. Those decisions include decisions about exercising rights to vote on, or
otherwise influence, management's actions that affect the use of the entity's economic resources.
a. True
b. False
11. How does the Conceptual Framework explain the role of stewardship?
a.
Providing information needed to assess management's stewardship is identified as an
additional objective of financial reporting, equal in prominence to providing financial
information useful to users in making decisions relating to providing resources to the entity
b.
Decisions relating to providing resources to the entity depend on users' assessment of the
amount, timing and uncertainty of the prospects for future net cash inflows to the entity and
on their assessment of management's stewardship
c.
Providing information needed to assess stewards hip is more important than providing
information needed to assess the prospects for future cash inflows to the entity
d.
Financial reports are not intended to provide information needed to assess stewardship
12. The fundamental qualitative characteristics of us eful financial information are:
a. Comparability and relevance
b. Relevance and reliability
c. Relevance, reliability and comparability
d. Relevance and faithful representation
e. Comparability, relevance and faithful representation
13. For
a.
b.
c.
d.
information to be relevant, it has to possess:
Only predictive value
Only confirmative value
Both predictive and confirmatory value
Either predictive or confirmatory value, or both
14. The Conceptual Framework describes prudence as:
a. The exercise of caution when making judgements under conditions of uncertainty
b. A bias towards understating assets or income and towards overstating liabilities or expenses
c. A preference towards the earlier recognition of expenses and liabilities than of income and
assets
d. A mechanism for smoothing profits over time (understate profits in good years and overstate
profits in bad years)
e. A form of accounting conservatism
15. Which statement is included in the Conceptual Framework?
a. Relevance is a fundamental qualitative characteristic of useful financial information
b. Financial information without both relevance and faithful representation is not useful
c. Enhancing qualitative characteristics cannot make information useful if that information is
irrelevant or does not provide a faithful representation of what it purports to represent
d. All of the above
e. None of the above
16. A trade-off between the fundamental qualitative characteristics of relevance and faithful
representation may need to be made in order to meet the objective of financial reporting.
a. True
b. False
17. Only a legal entity can be a reporting entity.
a. True
b. False
18. Consolidated financial statements provide information about the assets, liabilities, equity, income
and expenses of both the parent and its subsidiaries as:
a. Separate reporting entities
b. A partnership
c. A single reporting entity
d. A legal entity
19. When a reporting entity is not a legal entity and does not comprise only legal entities all linked by
a parent-subsidiary relationship, the boundary of the reporting entity can contain an incomplete
set of economic activities if that entity provides a description of how the boundary was
determined.
a. True
b. False
20. What drives the determination of the boundary of a reporting entity that is not a legal entity and
does not comprise only legal entities all linked by a parent -subsidiary relationship?
a. Management's choice
b. Legal form of the reporting entity
c. Information needs of the primary users of the reporting entity
d. All of the above
e. None of the above
21. A reporting entity can be:
a. A portion of an entity
b. A single entity
c. More than one entity
d. All of the above
e. None of the above
22. The Conceptual Framework defines an asset as:
a. A resource controlled by the entity as a result of past events and from which future economic
benefits are expected to flow to the entity
b. A present economic resource controlled by the entity as a result of past events
c. A right to receive income or reduce expenses in the future
d. None of the above
23. If an entity has a legal ownership of a physical object, its asset is:
a. The set of rights arising from legal ownership of the physical object
b. The physical object
c. The economic benefits that may flow from the physical object
d. All of the above
e. None of the above
24. For a right to meet the definition of an asset, it needs to be likely that the right will produce
economic benefits for the entity.
a. True
b. False
25. The Conceptual Framework defines a liability as:
a. A present obligation of the entity to transfer an economic resource as a result of past events
b. A present obligation of the entity arising from past events, the settlement of which is e xpected
to result in an outflow from the entity of resources embodyiong economic benefits
c. An amount the entity may have to pay after the end of the reporting period
d. None of the above
26. In explaining the meaning of the term 'obligation' in the definition of a liability, the Conceptual
Framework states:
a. That an obligation is a duty or responsibility that an entity has no practical ability to avoid
b. That an obligation can arise from a duty or responsibility conditional on a future action that
the entity itself may take, if the entity has no practical ability to avoid taking that action
c. That an obligation can arise from an entity’s customary practices, published policies or
specific statements, if the entity has no practical ability to avoid those practices, policies or
statements
d. All of the above
e. None of the above
27. The residual interest in the assets of an entity after deducting all its liabilities is:
a. Income
b. Profit or loss
c. Equity
d. Other comprehensive income
28. Recognition is the process of:
a. Capturing, for inclusion in the statement of financial position or the statement(s) of financial
performance, an item that meets the definition of one of the elements of the financial
statements—an asset, a liability, equity, income or expenses
b. Determining where an item should be presented in the financial statements
c. Sorting assets, liabilities, equity, income or expenses on the basis of shared characteristics
d. Adding together of assets, liabilities, equity, income or expenses that have shared
characteristics
29. Some items that do NOT meet the definition of an asset, a liability or equity may be recognised in
the statement of financial position.
a. True
b. False
30. Which factors may indicate that recognition of an item meeting the definition of an asset or a
liability may not provide relevant information?
a. Uncertainty about whether an asset or liability exists
b. Low probability of an inflow or outflow of economic benefits
c. Other factors
d. All of the above
e. None of the above
31. A high level of measurement uncertainty associated with an asset always resul ts in the asset not
being recognised.
a. True
b. False
32. What does the Conceptual Framework state about derecognition?
a. For an asset, derecognition normally occurs when the entity loses control of all or part of the
recognised asset
b. For a liability, derecognition normally occurs when the entity no longer has a present
obligation for all or part of the recognised liability
c.
d.
Derecognition is the removal of all or part of a recognised asset or liability from an entity's
statement of financial position
All of the above
33. Which measurement bases are categorised as current value measurement bases in the
Conceptual Framework?
a. Value in use
b. Fair value
c. Fulfilment value
d. Current cost
e. All of the above
34. Which of the following factors is (or are) considered in selecting a measuremen t basis?
a. Variability of cash flows of the asset or liability
b. How the asset or liability contributes to future cash flows, which depends in part on the
nature of an entity's business activities
c. The level of measurement uncertainty associated with a particul ar measurement basis
d. All of the above
e. None of the above
35. In selecting a measurement basis for an asset or liability, it is more important to consider the
nature of the information that the measurement basis will produce in the statement(s) of financial
performance than in the statement of financial position.
a. True
b. False
36. The Conceptual Framework identifies a preferred measurement basis for all assets and liabilities.
a. True
b. False
37. In principle, all income and expenses are included in the statement of profit or loss.
a. True
b. False
38. An entity may decide to include income or expenses in other comprehensive income when doing
so would result in the statement of profit or loss providing more relevant information, or providing
a more faithful representation of the entity's performance for the period.
a. True
b. False
39. An analysis of income and expenses recognised in the stateme nt of profit or loss is sufficient to
understand an entity's financial performance for the period.
a. True
b. False
40. Income and expenses included in other comprehensive income:
a.
b.
c.
Are never reclassified (recycled) from other comprehensive income into the statement of profit
or loss
Are recycled into the statement of profit or loss if the International Accounting Standards
Board decides that doing so results in the statement of profit or loss providing more relevant
information, or providing a more faithful representation of the entity’s financial performance
for that period
Are always recycled into the statement of profit or loss at the end of the holding period of the
related asset or liability
41. What does the Conceptual Framework s ay about profit or loss?
a. The statement of profit or loss is the only source of information about an entity’s finan cial
performance for the period
b.
c.
d.
e.
In principle, all income and expenses are included in the statement of profit or loss
All income and expenses included in profit or loss arise from ordinary activities of the entity
All of the above
None of the above