CONCEPTUAL FRAMEWORK
ACCOUNTANCY PROFESSION
1. What is the law regulating the practice of accountancy in the Philippines?
a. R.A. No. 9298
b. R.A. No. 9198
c. R.A. No. 9928
d. R.A. No. 9892
2. It is the body authorized by law to promulgate rules and regulations affecting the practice of the
accountancy profession in the Philippines.
a. Board of Accountancy
b. Philippine Institute of Certified Public Accountants
c. Securities and Exchange Commission
d. Financial Reporting Standards Council
3. The qualifications of the members of the Board of Accountancy include all of the following,
except
a. Must be a natural-born citizen and a resident of the Philippines,
b. Must be duly registered CPA with at least ten years of work experience in any scope of practice of
accountancy.
c. Must be of good moral character and must not have been convicted of crime involving moral
turpitude.
d. Must have any pecuniary interest, directly or indirectly, in any school conferring an academic
degree necessary for admission to the practice of accountancy.
4. What are the three main areas in the practice of the accountancy profession?
a. Public accounting, private accounting and managerial accounting
b. Auditing, taxation and managerial accounting
c. Financial accounting, managerial accounting and corporate accounting
d. Public accounting, private accounting and government accounting
5. What is the primary service of CPAs in public practice?
a. Auditing
b. Taxation
c. Managerial accounting
d. Controllership
6. Accountants employed in entities in various capacity as accounting staff, chief accountant or
controller are said to be engaged in
a. Public accounting
b. Private accounting
c. Government accounting
d. Financial accounting
7. 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.
a. Internal auditing
b. External auditing
c. Private accounting
d. Government accounting
8. The Continuing Professional Development is required for
a. Renewal of CPA license
b. Accreditation to practice the accountancy profession
c. Both' renewal of CPA license and accreditation to practice the accountancy profession.
d. Neither renewal of CPA license nor accreditation to practice the accountancy profession.
9. Which statement is true regarding exemptions from CPD requirements?
a. A CPA shall be permanently exempted from CPD requirement for renewal of CPA license at the
age of 65 years but not for the accreditation to practice the accountancy profession.
b. A CPA who is working or practicing the profession abroad shall be temporarily exempted from
CPD requirement during the period of stay abroad provided the CPA has been out of the country for
at least two years prior to the date of renewal.
c. A CPA who is furthering studies abroad shall be temporarily exempted from CPD requirement
during the period of stay abroad provided the CPA has been out of the country for at least two years
prior to date of renewal.
d. All of the statements are true.
10. Which statement is incorrect in relation to the practice of public accounting?
a. Single practitioners for the practice of public accounting shall be registered CPAs in the
Philippines
b. Partners of partnership formed tor the practice of public accounting shall be registered CPAs in the
Philippines.
c. The Securities and Exchange Commission can register any corporation organized for the practice
of public accounting.
d. The Professional Regulation Commission upon favorable recommendation of the Board of
Accountancy shall issue certificate of accreditation to CPAs in public practice provided the registrant
has acquired a minimum of three years of meaningful experience in public practice.
11. Which is the accounting standard setting body in the Philippines at the present time?
a. Accounting Standards Council
b. Auditing and Assurance Standards Council
c. Philippine Accounting Standards Board
d. Financial Reporting Standards Council
12. Which statement is true regarding the FRSC?
a. The FRSC is created by Professional Regulation Commission upon recommendation of the Board
of Accountancy in carrying out its powers and functions under R.A. 9298.
b. The FRSC shall be composed of 15 with a Chairman and 14 representatives.
c. The Chairman and members of FRSC are appointed by Professional Regulation Commission upon
recommendation of the Board of Accountancy and shall have a term of three years renewable for
another term.
d. All of the statements are true.
13. All of the following are represented in FRSC, except
a. Board of Accountancy
b. Securities and Exchange Commission
c. Commission on Audit
d. Department of Budget and Management
14. The Philippine Financial Reporting Standards collectively include
a. PFRS corresponding to IFRS.
b. PAS corresponding to IAS
c. Philippine Interpretations corresponding to IFRIC and SIC Interpretations and Interpretations
developed by PIC.
d. All of these are included in Philippine Financial Reporting Standards.
15. The International Accounting Standards Board was formed
a. To enforce IFRS in foreign countries
b. To develop a single set of high quality IFRS
c. To establish accounting standards for multinational entities
d. To develop accounting standards for countries that do not have their own standard-setting bodies
16. The IASB declared that the merits of proposed standards are assessed
a. From a position of neutrality
b. From a position of materiality
c. Based on possible impact on behavior
d. Based on arguments of lobbyist
17. What is the chronological order in the evaluation of a typical standard?
a. Exposure draft, Standard and Discussion paper
b. Exposure draft, Discussion paper and Standard
c. Standard, Discussion paper and Exposure draft
d. Discussion paper, Exposure draft and Standard
18. The IASB publishes standards called
a. International Accounting Standards
b. Financial Reporting Standards
c. International Financial Reporting Standards
d. Statement of Financial Accounting Standards
19. The IASB employs a "due process" system which
a. Is an efficient system for collecting dues from members.
b. Enables interested parties to express their views on issues under consideration.
c. Identifies the most important accounting issues.
d. Requires that all CPAs must receive a copy of IFRS.
20. What is "due process" in the standard-setting by IASB?
a. IASB operates in full view of the public.
b. Public hearings are held on proposed standards.
c. Interested parties can make their views known.
d. All of these are part of due process in standard-setting.
21. What is a possible danger if politics plays too big a role in developing IFRS?
a. Accounting standards are not truly generally accepted.
b. Individuals may influence the standards.
c. User groups become active.
d. The IASB delegates its authority to elected officials.
22. Financial accounting standard-setting
a. Can be described as a social process which reflects political actions of various interested user
groups as well as a product of research and logic.
b. Is based solely on research and empirical findings.
c. Is a legalistic process.
d. Is democratic in the sense that a majority of accountants must agree with a standard.
23. IFRIC Interpretations issued by IASB
a. Are considered authoritative and must be followed.
b. Cover newly identified financial reporting issues specifically addressed.
c. Cover issues with conflicting interpretations.
d. All of these are true about IFRIC Interpretations.
24. Financial accounting can be broadly defined as the area of accounting that prepares
a. General purpose financial statements to be used by parties internal to the entity.
b. Financial statements to be used by investors.
c. General purpose financial statements to be used by parties both internal and external to the entity.
d. Financial statements to be used primarily by management.
25. Financial accounting emphasizes reporting to
a. Management
b. Regulatory bodies
c. Internal auditors
d. Creditors and investors
26. Managerial accounting emphasizes
a. Reporting financial information tò external users.
b. Reporting to the Securities and Exchange Commission
c. Combining accounting with data processing
d. Developing accounting information for use within an entity
27. Which statement is true regarding managerial accounting and financial accounting?
a. Managerial accounting is generally more precise.
b. Managerial accounting need not follow generally accepted accounting principles while financial
accounting must follow GAAP.
c. Managerial accounting has a future focus.
d. The emphasis on managerial accounting is relevance and the emphasis on financial accounting is
timeliness.
28. Generally accepted accounting principles
a. Are accounting principles based on law.
b. Derive their credibility and authority from law.
c. Derive their authority from regulatory authority.
d. Derive their credibility and authority from recognition and acceptance by the accountancy
profession.
29. Which statement best describes generally accepted accounting principles?
a. The accounting principles have been formulated in the public sector
b. The accounting principles have been developed on the basis of such factors as usage and practical
necessity.
c. The accounting principles are the same as laws.
d. The accounting principles do not apply to SMEs.
30. Proper application of accounting principles is most dependent upon
a. Existence of specific guidelines
b. Oversight of regulatory bodies
c. External audit function
d. Professional judgment of the accountant
31. Once an accounting standard has been established
a. The standard is continually reviewed to see if modification is necessary.
b. The standard is not reviewed.
c. The task of reviewing the standard is given to a national organization of CPAs.
d. No revisions should be made to the standard.
Answer key:
1. A
2. A
3. D
4. D
5. A
6. B
7. D
8. C
9. D
10. C
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
D
D
D
D
B
A
D
C
B
D
A
A
D
C
D
D
B
D
B
D
A
ELEMENTS OF FINANCIAL STATEMENTS
1. Which is not within the new definition of an asset?
a. An asset is a present economic resource
b. The economic resource is a right that has potential to produce economic benefit.
c. The economic resource is controlled by the entity as a result of past event
d. Future economic benefit is expected to flow to the entity.
2. Which of the following criteria need not be satisfied for a liability to exist?
a. The entity has an obligation
b. The obligation is to transfer an economic resource.
c. The obligation is a present obligation that exists as a result of a past event.
d. The settlement is expected to result in an outflow of economic benefit.
3. A present obligation exists as result of past event if
a. The entity has already obtained economic benefit.
b. The entity must transfer an economic resource
c. The entity has not yet obtained economic benefit but must transfer an economic
resource
d. The entity has already obtained economic benefit and must transfer economic resource.
4. Rights that have the potential to produce economic benefits and correspond to an obligation of
another entity include all,
a. Right to receive cash
b. Right to receive goods
c. Right to exchange economic resources with another entity on favourable terms
5.
6.
7.
8.
9.
10.
11.
12.
d. Right over property, plant and equipment.
An economic resource could produce economic benefit if an entity is entitled to all, except
a. To receive contractual cash flows
b. To exchange economic resources with another entity on unfavourable terms
c. To receive cash by selling the economic resource
d. To extinguish a liability by transferring an economic resource.
It is the present ability to direct the use of an economic resource and obtain the benefit that
may flow from it.
a. Control
b. Legal right
c. Obligation
d. Ownership
It is a duty or responsibility that an entity has no practical ability to avoid.
a. Right
b. Obligation
c. Equity
d. Expense
Obligations to transfer an economic resource include all, except
a. Obligation to pay cash
b. Obligation to deliver goods
c. Obligation to provide services
d. Obligation to transfer an economic resource even if a specified future event does not
occur.
Which statement is not true about income and expense?
a. Income is increase in asset or decrease in liability that results in increase in equity other
than contribution from equity holders.
b. Expense is decrease in asset or increase in liability that results in decrease in equity
other than distribution to equity holders
c. Income and expenses are the elements that relate to financial position.
d. Income encompasses revenue and gain
This new term refers to the statement of profit or loss and a statement presenting other
comprehensive income.
a. Income statement
b. Statement of comprehensive income
c. Statement of financial performance
d. Statement of financial position.
Revenue may result from
a. A decrease in an asset from primary operations.
b. An increase in an asset from incidental transactions
c. An increase in a liability from incidental transactions.
d. A decrease in a liability from primary operations.
What is the primary distinction between revenue and gain?
13.
14.
15.
16.
17.
18.
19.
20.
a. The materiality of the amount
b. The likelihood that the transaction will recur
c. The nature of the activity that gives rise to the transaction
d. The method of disclosing the transaction
The term income
a. Includes revaluation of land
b. Includes adjustment of prior period error
c. Includes gain resulting from sale of an asset in an arm’s length transaction
d. Is the same as retained earnings.
A decrease is an asset arising from peripheral or incidental transaction is called
a. Capital expenditure
b. Cost
c. Loss
d. Expense
An outflow of asset based on an activity that represents the major operations is called
a. Loss
b. Liability
c. Expense
d. Equity
The elements directly related to the measurement of financial position are
a. Asset, liability and equity
b. Asset and liability
c. Income expense
d. Asset, liability, equity, income and expense
The elements of financial position describe amounts of resources and claims against resources
a. During a period of time
b. At a moment in time
c. During a period of time and at a moment in time
d. Neither during period of time nor a t a moment in time
The elements directly related to the measurement of financial performance are
a. Income and expense
b. Asset, liability and equity
c. Asset and liability
d. Income, expense and equity
It is a present economic resource controlled by the entity as a result of past events.
a. Asset
b. Liability
c. Equity
d. Income
It is present obligation of the entity to transfer an economic resource as a result of past events.
a. Asset
b. Liability
21.
22.
23.
a.
b.
c.
d.
24.
25.
c. Equity
d. Expense
It is the residual interest in the assets of the entity after deducting all of the liabilities.
a. Income
b. Equity
c. Retained earning
d. All of the choices match the definition
It is an increase in asset or a decrease in liability that results in increase in equity other than
contribution from equity holders.
a. Asset
b. Liability
c. Income
d. Expenses
It is a decrease in asset or an increase in liability that results in decrease in equity other than
distribution to equity holders.
Asset
Liability
Income
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.
a. Income
b. Revenue
c. Profit
d. Gain
Which statement in relation to income is true?
a. Income encompasses both revenue and gain
b. Revenue encompasses both income and gain
c. Gain encompasses both income and revenue
d. Income encompasses revenue only
Answer key:
1.
2.
3.
4.
5.
6.
7.
8.
D
D
D
D
B
A
B
D
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
C
C
D
C
C
C
C
A
B
A
A
B
B
C
D
B
A
RECOGNITION AND MEASUREMENT
1. It is the process of capturing for inclusion in the financial statements an item that meets the
definition of the elements of financial statements.
a. Recognition
b. Measurement
c. Classifying
d. Derecognition
2. An item is recognized in the financial statements if
a. It is probable that economic benefits will flow to or from the entity.
b. It meets the definition of an asset, liability, equity, income and expense.
c. The entity has ownership of such item
d. It is probable that economic benefits will flow to or from the entity and that the cost can
be measured reliably.
3. Recognition of an element is appropriate when information result in
a. Relevance
b. Faithful representation
c. Both relevance and faithful representation
d. Neither relevance nor faithful representation.
4. It is the removal of all or part of recognized asset or liability from the statement of financial
position.
5.
6.
7.
8.
9.
10.
11.
a. Write off
b. Derecognition
c. Extinguishment
d. Retirement
Derecognition normally occurs when
a. An item no longer meets the definition of an asset or a liability.
b. The entity loses control of the asset
c. The entity no longer has a present obligation for the liability.
d. Under all of these circumstances.
Generally, revenue is recognized
a. At the point of sale
b. When cause and effect are associated
c. At the point of cash collection
d. At appropriate points throughout the operating cycle
Which of the following is not an accepted basis for recognition of revenue?
a. Passage of time
b. Performance of service
c. Completion of percentage of a project
d. Upon signing of contract
Normally, revenue is recognized
a. When the customer order is received
b. When the customer order is accompanied by a check
c. Only if the transaction will create an account receivable
d. When the title to the goods changes
Which of the following practices may not be an acceptable deviation from recognizing revenue
at the point of sale?
a. Upon receipt of cash
b. During production
c. Upon receipt of order
d. End of production
Which of the following represent the least desirable choice for the recognition of revenue?
a. Recognition of revenue during production
b. Recognition of revenue when a sale occurs
c. Recognition of revenue when cash is collected
d. Recognition of revenue when production is completed
Revenue recognition conventionally refers to
a. The process of identifying transactions to be recorded as revenue in an accounting
period
b. The process of measuring and relating revenue and expenses during a period.
c. The earning process which gives rise to revenue realization
d. The process of identifying those transactions that result in an inflow of assets to the
entity.
12. Which of the following in the most precise sense means the process of converting noncash
resources and rights into cash or claims to cash?
a. Allocation
b. Collection
c. Recognition
d. Realization
13. Gains on assets unsold are identified, in a precise sense, by the term
a. Unrecorded
b. Unrealized
c. Unrecognized
d. Unallocated
14. The term recognized is synonymous with the term
a. Recorded
b. Realized
c. Matched
d. Allocated
15. Which statement conforms to the realization concept?
a. Deprecation was assigned to product unit cost
b. Equipment was sold in exchange for a note receivable
c. Cash was collected on accounts receivable
d. Product unit costs were assigned to cost of goods sold
16. Which of the following is not a theoretical basis for the allocation of expense?
a. Immediate recognition
b. Systematic and rational allocation
c. Cause and effect association
d. Profit maximization
17. Costs that can be reasonably associated with specific revenue but not with specific product
should be
a. Expensed in the period incurred
b. Allocated to the specific product based on the best estimate of the product processing
time
c. Expensed in the period in which the related revenue is recognized
d. Capitalized and then amortized over a reasonable period
18. Which of the following is an example of the cause and effect association principle
a. Sales commission
b. Allocation of insurance cost
c. Depreciation of property, plant and equipment
d. Officers’ salaries
19. Which of the following is an application of the systematic and rational allocation principle?
a. Doubtful accounts
b. Research and development cost
c. Warranty cost
20.
21.
22.
23.
24.
25.
1.
2.
3.
4.
5.
6.
d. Amortization of intangible asset.
Which of the following would be matched with current revenue on a basis other than
association of cause and effect?
a. Goodwill
b. Cost of goods sold
c. Sales commission
d. Warranty cost
Why are certain costs of doing business capitalized when incurred and then depreciated or
amortized over subsequent accounting periods?
a. To reduce the income tax liability
b. To aid management in the decision-making process
c. To match the cost of production with revenue
d. To adhere to the accounting concept of conservatism
Which of the following principle best describes the conceptual rationale for the method of
matching depreciation with revenue?
a. Associating cause and effect
b. Systematic and rational allocation
c. Immediate recognition
d. Partial recognition
Which of the following should be expensed under the principle of systematic and rational
allocation?
a. Salesmen’s monthly salaries
b. Insurance premiums
c. Transportation to customers
d. Electricity to light office building
The write off of a worthless patent is an example of which of the following principles?
a. Associating cause and effect
b. Immediate recognition
c. Systematic and rational allocation
d. Objectivity
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?
a. Sales commissions
b. Sales salaries
c. Freight in
d. Prepaid insurance
A
B
C
B
D
A
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
D
D
C
C
A
D
B
A
B
D
C
A
D
A
C
B
B
B
B
6-5
1. The matching principle is best demonstrated by
a. Not recognizing any expense unless some revenue is realized
b. Associating effort with accomplishment
c. Recognizing prepaid rent received as revenue
d. Establishing an appropriation for contingency
2. Bad debt expense is recognized according to which expense recognition principle
a. Direct matching
b. Immediate recognition
c. Systematic and rational allocation
d. Critical event recognition
3. What is the general approach as to when product costs are recognized as expenses?
a. In the period when the expenses are paid
b. In the period when the expenses are incurred
c. In the period when the vendor invoice is received
d. In the period when the related revenue is recognized
4. When should an expenditure be recorded as an asset rather than an expense?
a. Never
b. Always
c. If the amount is material
5.
6.
7.
8.
9.
10.
11.
12.
d. When there is a right that has the potential to produce economic benefit
Which accounting principle is being observed when an accountant charges to expense a cost
that contributed to revenue during a period
a. Revenue realization
b. Matching
c. Monetary unit
d. Conservatism
Which is not an acceptable basis for the recognition of expense?
a. Systematic and rational allocation
b. Direct matching
c. Immediate recognition
d. Cash disbursement
A cause and effect relationship is implicit in the
a. Realization principle
b. Historical cost principle
c. Matching principle
d. Going concern assumption
An example of direct matching of an expense with revenue would be
a. Depreciation expense
b. Office salaries expense
c. Direct labor costs incurred to produce inventory sold during a period
d. Advertising expense
Which category of expenses is subject to immediate recognition in the income statement?
a. Utilities expense for the production line of a manufacturer
b. Repairs and maintenance expense incurred on production equipment of a manufacturer
c. The salary of the production foreman
d. The salary of the entity president
Which principle best describes the rationale for matching distribution costs and administrative
expenses with revenue of the current period?
a. Direct matching
b. Systematic and rational allocation
c. Immediate recognition
d. Partial recognition
Which statement is true about current value?
a. Fair value of an asset is the price that would be received to sell an asset in an orderly
transaction between market participants at the measurement date.
b. Value in use is the present value of the cash flows expected to be derived from the use
and ultimate disposal of an asset.
c. Fulfilment value is the present value of the cash expected to be transferred for the
payment of liability
d. All of these statements are true about current value.
The measurement bases include
13.
14.
15.
16.
17.
18.
19.
20.
a. Historical cost
b. Current value
c. Assessed value
d. Historical cost and current value.
Current value includes
a. Fair value and present value
b. Fair value and current cost
c. Current cost, and present value
d. Fair value, present value and current cost
Which measurement attribute is not currently used in practice?
a. Present value
b. Fair value
c. Current cost
d. Inflation adjusted cost
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
a. Historical cost
b. Current cost
c. Realizable value
d. Present value
The presentation and disclosure requirement achieves all of the following, except
a. An effective communication tool
b. More relevant and faithfully represented financial information
c. Understandability and comparability of information
d. Financial position, financial performance and cash flows
It is the sorting of assets, liabilities, equity, income and expenses with similar characteristics.
a. Classification
b. Summarization
c. Interpretation
d. Recognition
All of the following an considered appropriate classification, except
a. Current and noncurrent assets
b. Current and noncurrent liabilities
c. Ordinary share capital and preference share capital
d. Offsetting asset and liability
Income and expenses are classified as
a. Profit or loss and other comprehensive income
b. Profit loss and retained earnings
c. Retained earnings and other comprehensive income
d. Ordinary and extraordinary
What is the new term to describe the statement of profit or loss together with the statement
showing other comprehensive income
21.
22.
23.
24.
25.
1.
2.
3.
4.
5.
a. Income statement
b. Statement of profit or loss
c. Statement of other comprehensive income
d. Statement of financial performance
Financial capital is defined as
a. Net assets in monetary terms
b. Net assets in terms of physical productive capacity
c. Legal capital
d. Share capital issued and outstanding
The physical capital maintenance concept requires the adoption of which measurement basis?
a. Historical cost
b. Current cost
c. Fair value
d. Present value
Which concept is applied to net income and other comprehensive income?
a. Financial capital
b. Physical capital
c. Legal capital
d. Borrowed capital
Which statement regarding the term profit is true?
a. Profit is any amount over and above that required to maintain the capital at the
beginning of the period
b. Profit is equal to income minus expenses.
c. Profit is the equivalent of net income under IFRS
d. All of these statements are true about the term profit
Under the financial capital concept, net income occurs when
a. The nominal amount of net assets at year-end increased
b. The physical productive capital at year- end increased after excluding any distributions
to and contributions from owners
c. The nominal amount of net assets at year-end increased after excluding distributions to
an contributions from owners.
d. The physical productive capital at year-end increased.
Answer key:
B
A
D
D
B
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
D
C
C
D
C
D
D
D
D
B
D
A
D
A
D
A
B
A
D
C