CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING
BATCH 94
VALIX/VALIX/SANTOS
OCTOBER 2023 CPALE
REVISED CONCEPTUAL FRAMEWORK
1. Which statement is true about the Conceptual Framework?
a. The Conceptual Framework is not a standard.
b. The Conceptual Framework describes the concepts for general purpose reporting.
c. In case of conflict, the requirements of IFRS prevail over the Conceptual Framework.
d. All of these statements are true about the Conceptual Framework.
2. The Conceptual Framework is intended to establish
a. Accounting standard in financial reporting
b. The meaning of “present fairly in accordance with GAAP”
c. The objectives and concepts for use in developing standards of financial reporting
d. The hierarchy of sources of GAAP
3. Which is not a purpose of the Revised Conceptual Framework?
a. To assist the IASB to develop IFRS based on consistent concepts.
b. 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.
c. To assist all parties to understand and interpret the Standards.
d. To assist regulatory agencies in issuing rules and regulations for a particular industry.
4. The objectives of financial reporting are based on
a. The need for conservatism
b. Reporting on management stewardship
c. Generally accepting accounting principles
d. The needs of the users of information
5. Which statement is not a specific objective of financial reporting?
a. To provide information that is useful in investment and credit decisions.
b. To provide information about resources, claims against resources and changes in resources.
c. To provide information on the liquidation value of an entity.
d. To provide information that is useful in assessing cash flow prospects.
6. The assumption that an entity will not be sold or liquidated in the near future is known as
a. Economic entity assumption
b. Monetary unit assumption
c. Time period assumption
d. Going concern assumption
7. Which assumption justifies the usage of accruals and deferrals?
a. Going concern
b. Stable monetary unit
c. Time period
d. Economic entity
8. The economic entity assumption
a. Is inapplicable to unincorporated businesses
b. Recognizes the legal aspects of business organizations
c. Requires periodic income measurement
d. Is applicable to all forms of business organizations
9. Consolidated financial statements are prepared when a parent-subsidiary relationship exists.
a. Economic entity assumption
b. Legal entity assumption
c. Consolidation standard
d. Neutrality
10. During the lifetime of an entity, accountants produce financial statements at arbitrary or artificial points
in time in accordance with which basic accounting concept?
a. Objectivity
b. Time period assumption
c. Materiality
d. Economic entity
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11. Inflation is ignored in accounting due to
a. Economic entity assumption
b. Going concern assumption
c. Monetary unit assumption
d. Periodicity assumption
12. What are the attributes that make information in the financial statements useful to the readers?
a. Qualitative characteristics of financial information
b. Quantitative characteristics of financial information
c. Elements of financial statements
d. Objectives of financial reporting.
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13. Fundamental qualitative characteristics of accounting information are
a. Relevance and comparability
b. Comparability and consistency
c. Faithful representation and relevance
d. Neutrality and verifiability
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14. Enhancing qualitative characteristics of accounting information include
a. Relevance, faithful representation and materiality
b. Comparability, understandability, timeliness and verifiability
c. Faithful representation and timeliness
d. Materiality and understandability
15. Faithful representation includes
a. Predictive value and confirmatory value
b. Completeness, free from error and neutrality
c. Comparability and understandability
d. Timeliness and verifiability
16. The financial information is directed toward the common needs of users and is independent of
presumptions about particular needs and desires of specific users.
a. Comparability
b. Verifiability
c. Neutrality
d. Completeness
17. The qualitative characteristic of relevance includes
a. Predictive value and confirmatory value
b. Completeness and neutrality
c. Comparability and understandability
d. Verifiability and timeliness
18. Accounting information is considered relevant when it
a. Can be depended on to represent the economic conditions that it is intended to represent
b. Is capable of making a difference in a decision
c. Is understandable by reasonably informed users of accounting information
d. Is verifiable and neutral
19. Which of the following statements about materiality is not correct?
a. An item must make a difference or it need not be disclosed.
b. Materiality is a matter of absolute size.
c. An item is material if omitting, misstating or obscuring it could reasonably be expected to influence
the economic decision of primary users.
d. Materiality is a subquality of relevance.
20. What is meant by comparability when discussing financial accounting information?
a. Information has predictive and feedback value.
b. Information is reasonably free from error.
c. Information is measured and reported in a similar fashion across entities.
d. Information is timely.
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21. What is meant by consistency when discussing financial accounting information?
a. Information is measured and reported in a similar fashion across points in time.
b. Information is timely.
c. Information is measured similarly across the industry.
d. Information is verifiable.
22. Which statement is true in relation to the enhancing quality of understandability?
a. Users have a reasonable knowledge of business and economic activities.
b. Users are expected to have significant business knowledge.
c. Financial statements shall exclude complex matters.
d. Financial statements shall be free from material error.
23. According to the Revised Conceptual Framework, verifiability implies
a. Legal evidence
b. Logic
c. Consensus
d. Legal verdict
24. When an entity has started placing its quarterly financial statements on its website, thereby reducing
ample time to get information to users, the qualitative concept involved is
a. Comparability
b. Understandability
c. Verifiability
d. Timeliness
25. The Conceptual Framework includes which constraint?
a. Prudence
b. Conservatism
c. Cost
d. All of the choices are constraints in the conceptual framework
26. Which of the following best describes the cost-benefit constraint?
a. The benefit of the information must be greater than the cost of providing it.
b. Financial information should be free from cost to users of the information.
c. Cost of providing financial information is not always evident or measurable but must be considered.
d. All of the choices are correct.
27. A reporting entity
a. Is necessarily a legal entity
b. Must be a corporate type of entity
c. Is an entity that is required or chooses to prepare financial statements
d. A regulatory government authority
28. A reporting entity
a. Can be a single entity
b. Can be a portion of a single entity
c. Can comprise more than one entity
d. All of these can be considered a reporting entity
29. If the reporting entity comprises both parent and its subsidiaries, the financial statements are referred to
as
a. Consolidated financial statements
b. Unconsolidated financial statements
c. Combined financial statements
d. Separate financial statements
30. What is the new definition of an asset under the Revised Conceptual Framework?
a. A resource controlled by the entity as a result of past event and from which future economic benefit
is expected to flow to the entity.
b. A resource controlled by the entity and from which future economic benefit is expected to flow.
c. A present economic resource controlled by the entity as a result of past event.
d. A present economic resource controlled by the entity as a result of past and present events.
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31. What is the new definition of liability under the Revised Conceptual Framework?
a. A present obligation of the entity arising from past event the settlement of which is expected to result
in an outflow of economic benefit.
b. A present obligation of the entity arising from present event.
c. A present obligation of the entity to transfer an economic resource as a result of past event.
d. An obligation that the entity has practical ability to avoid.
32. Which statement is not true about income and expenses?
a. Income is increase in asset or decrease in liability that results in increase in equity other than that
relating to contribution from equity holders.
b. Expense is decrease in asset or increase in liability that results in decrease in equity other than that
relating to distribution to equity holders.
c. Income and expenses are the elements that relate to financial position.
d. Income encompasses revenue and gain.
33. It is the process of capturing for inclusion in the statement of financial position or the statement of
financial performance an item that meets the definition of an element of the financial statements.
a. Recognition
b. Measurement
c. Derecognition
d. Disclosure
34. Under the Revised Conceptual Framework, what is the recognition principle?
a. It is probable that any future benefit associated with the item will flow to or from the entity.
b. The item has a cost or value that can be measured with reliability.
c. It is probable that any future economic benefit will flow to or from the entity and the element can
be measured reliably.
d. Only items that meet the definition of an asset, liability, equity, income and expense are recognized.
35. Derecognition is the removal of a recognized asset or liability from the statement of financial position
and 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
36. Under the Revised Conceptual Framework, the measurement bases include
a. Historical cost
b. Current value
c. Assessed value
d. Historical cost and current value
37. Current value includes
a. Fair value
b. Value in use
c. Fulfillment value
d. Fair value, value in use, fulfillment value and current cost
38. Which statement is not true about current value measurement?
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. Fulfillment value is the absolute amount of cash expected for the payment of liability.
d. Current cost is the cost of an equivalent asset comprising the consideration paid and transaction cost.
39. The term “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 of an entity for an accounting 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 from customers.
40. Which of the following is not an acceptable basis for the recognition of expense?
a. Systematic and rational allocation
b. Cause and effect association
c. Immediate recognition
d. Cash disbursement
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