OVERVIEW OF ACCOUNTING financial statements and other accounting reports, for

dissemination to users.
1. Standards and Interpretations adopted by the
Financial Reporting Standards Council (FRSC). They a. Identifying
comprise: b. Measuring
c. Communicating
a. Philippine Financial Reporting Standards
d. All of the above
(PFRSs);
b. Philippine Accounting Standards (PASs); and 7. _______________ the process of analyzing events
c. Interpretations and transactions to determine whether or notthey will
d. All of the above be recognized.

2. The term “generally acceptable” means that either: a. Identifying

b. Measuring
a. the standard has been established by an
c. Communicating
authoritative accounting rule-making body; or
d. All of the above
b. the principle has gained general acceptance due
to practice over time and has been proven tobe 8. Identify if the following statements are true or false
most useful.
• When measurement is affected by estimates, the
c. Both A and B
items measured are said to be valued by opinion.
d. None of the above
• When measurement is unaffected by estimates, the
3. ______________ refers to employment in the private
items measured are said to be valued by fact.
sector in a position which involves decision making
requiring professional knowledge in the science of a. Statement 1 is True and Statement 2 is false
accounting and such position requires that the holder b. Statement 1 is false and Statement 2 is true
thereof must be a CPA. c. Both statements are false
d. Both statements are true
a. Practice of Public Accountancy
b. Practice in Commerce and Industry 9. _________ the systematic recording and analysis of
c. Practice in Education/academe the costs of materials, labor, and overhead incident to
d. Practice in the Government production.
4. ______________ involves the rendering of audit or a. Financial Accounting
accounting related services to more than one client on a b. Management Accounting
fee basis. c. Cost Accounting
d. Auditing
a. Practice of Public Accountancy
b. Practice in Commerce and Industry 10. This theory is applicable where there are two classes
c. Practice in Education/academe of shares issued, ordinary and preferred. The equation
d. Practice in the Government is “Assets – Liabilities – Preferred Shareholders’ Equity =
Ordinary Shareholders’ Equity.”
5. Accounting is “the process of _____________,
______________, and ________________ economic a. Prudence
information to permit informed judgment and decisions b. Residual Equity Theory
by users of information.” c. Fund Theory
d. Realization
a. Measuring, identifying, and communicating
b. identifying, communicating, and measuring 11. Financial statements provide sufficient detail to
c. Identifying, measuring, and communicating disclose matters that make a difference to users, yet
d. Measuring, communicating, and identifying sufficient condensation to make the information
understandable, keeping in mind the costs of preparing
6. ___________ the process of transforming economic
and using it.
data into useful accounting information, such as
 a. Historical cost concept 17. The basic purpose of accounting is
b. Concept of Articulation
a. To provide the information that the managers
c. Full disclosure principle
of an economic entity need to control its
d. Consistency concept
operations.
12. _________ the process of converting non-cash b. To provide information that the creditors of an
assets into cash or claims for cash. economic entity can use in deciding whether to
make additional loans to the entity.
a. Prudence
c. To measure the periodic income of the
b. Residual Equity Theory
economic entity.
c. Fund Theory
d. To provide quantitative financial information
d. Realization
about an entity that is useful in making rational
13. The inclusion of a degree of caution in the exercise economic decision
of the judgments needed in making the estimates
18. These are the events that affect the entity and in
required under conditions of uncertainty, such that
which other entities participate.
assets or income are not overstated and liabilities or
expenses are not understated. a. Internal events
b. External events
a. Prudence
c. Current events
b. Residual Equity Theory
d. Past events
c. Fund Theory
d. Realization 19. The "communicating" process of accounting
includes all of the following, except
14. _________ is an unanticipated loss from disasters or
other similar events. a. Recording
b. Classifying
a. Exchange (reciprocal transfer)
c. Summarizing
b. Non-reciprocal transfer
d. Interpreting
c. Production
d. Casualty 20. What is the law regulating the practice of
accountancy in the Philippines?
15. _________ an event that involves changes in the
economic resources or obligations of an entity caused a. R.A. No. 9298
by an external party or external source but does not b. R.A. No. 9198
involve transfers of resources or obligations. c. R.A. No. 9928
d. R.A. No. 9892
a. Exchange (reciprocal transfer)
b. Non-reciprocal transfer 21. It is the body authorized by law to promulgate rules
c. Casualty and regulations affecting the practice of the
d. External event other than transfer accountancy profession in the Philippines.

16. Accounting is a service activity and its function is to a. Board of Accountancy

provide quantitative information, primarily financial in b. Philippine Institute of Certified Public
nature, about economic entities, that is intended to be Accountants
useful in making economic decision. This accounting c. Securities and Exchange Commission
definition is given by d. Financial Reporting Standards Council

a. Accounting Standards Council 22. Accountants employed in entities in various capacity

b. AICPA Committee on Accounting as accounting staff, chief accountant or controller are
c. American Accounting Association said to be engaged in
d. Board of Accountancy
a. Public accounting
b. Private accounting
 c. Government accounting 3. These are resources controlled by the entity as a
d. Financial accounting result of post transactions or events and from which
future economic benefits are expected to flow to the
23. It is the accounting standard setting body created by
entity.
Professional Regulation Commission upon
recommendation of the Board of Accountancy to assist a. Assets
the Board of Accountancy in carrying out its powers and b. Liabilities
functions under R.A. No. 9298. c. Equity
d. Income
a. Accounting Standards Council
b. Auditing and Assurance Standards Council 4. Which of the following statements is incorrect
c. Philippine Accounting Standards Board concerning assets?
d. Financial Reporting Standards Council
a. Physical from is not essential in the existence of
24. Which is not required to be represented in the an assets.
FRSC? b. in determining existence of an asset, the right
of ownership is essential
a. BangkoSentral ng Pilipinas
c. An asset results from past event
b. Bureau of Internal Revenue
d. There is a close association between incurring
c. Commission on Audit
an expenditure and generating asset but the
d. Department of Budget and Management
two do not necessarily coincide
25. The Philippine Financial Reporting Standards
5. These are present obligation of an entity arising from
collectively include
past transactions or events the settlement of which
I. PFRS corresponding to IFRS. expected to result in an outflow from the entity of
II. PAS corresponding to IAS. resources embodying economic benefits.
III. Philippine Interpretations corresponding to
a. Assets
IFRIC and SIC Interpretations and
b. Liabilities
Interpretations developed by PIC.
c. Equity
a. I only
d. Expenses
b. I and II only
c. I and III only 6. It is the residual interest in the assets of the entity
d. I, II and II after deducting all of its liabilities.

CONCEPTIUAL FRAMEWORK, PRESENTATION OF FS a. Income

AND INVENTORIES b. Expense
c. Net Income
1. The elements directly related to the measurements
d. Equity
of financial position are
7. It is an increase in economic benefit during the
a. Assets, Liabilities, Equity, Income, and Expense
accounting period related to an increase in asset or a
b. Assets, Liabilities, and Equity
decrease in liability that results in increase in equity
c. Income and Expense
other than contribution from owners.
d. Assets and Liabilities
a. Asset
2. The elements directly related to the measurement of
b. Liabilities
financial performance are
c. Income
a. Assets, Liabilities, Equity, Income, and Expense d. Expense
b. Assets, Liabilities, and Equity
8. It is a decrease in economic benefit during the
c. Income and Expense
accounting period related to a decrease in asset or an
d. Sales & Cost of Sales
increase in liability that results in decrease in equity
other that distribution to owners.
 a. Asset 14. The cost of conversion of inventory includes all of
b. Liabilities the following. Except:
c. Income
a. Cost directly related to the unit of productions,
d. Expense
such as direct labor.
9. They arise in the course of ordinary regular activities b. Systematic allocation of fixed production
of the entity and is referred to by a variety of different overhead.
names including sales, fees, interest, dividends, c. Systematic allocation of variable production
royalties, and rent. overhead.
d. Systematic allocation of administrative
a. Income
overhead.
b. Revenue
c. Profit 15. Fixed production overheads include all of the
d. Gain following.

10. Which of the following statements in relation to a. Indirect materials and indirect labor
income is true? b. Depreciation of factory building
c. Maintenance of factory equipment
a. Income encompasses both revenue and gain.
d. Cost of factory management and administration
b. Revenue encompasses both income and gain.
c. Gain encompasses both income and revenue. 16. Which of the following should not be taken into
d. Income encompasses review only. account when determining the cost of inventories?

11. Inventories are assets (choose the incorrect one) a. Storage costs of part-finished goods
b. Trade discounts
a. Held for sale in the ordinary course of business.
c. Recoverable purchase taxes
b. In the process of production for sale.
d. Import duties on shipping of inventories inward
c. In the form of materials or supplies to be
consumed in the production process or in the 17. The cost of inventories does not include
rendering of services.
a. Salaries of factory staff
d. Held for use in the production or supply of
b. Storage cost necessary in the production
goods or services.
process before a further production stage
12. The cost of the inventory is the sum of c. Abnormal amount of wasted materials and
distribution costs
a. Cost of purchase and cost of conversion
d. Irrecoverable purchase taxes
b. Direct cost, indirect cost, and other costs
c. Cost of purchase, cost of conversion and other 18. An entity shall classify an asset as current when:
cost incurred in bringing the inventory to (Choose incorrect one)
present location and condition
a. it expects to realize the asset or intends to sell
d. Cost of conversion and other cost incurred in
or consume it, in its normal operating cycle;
bringing the inventory to present location and
b. it holds the asset primarily for the purpose of
condition
trading;
13. The cost of purchase of inventory does not include c. it expects to realize the asset within more than
twelve months after the reporting period; or
a. Purchase price
d. the asset is cash or a cash equivalent unless the
b. Import duties and other irrecoverable taxes
asset is restricted from being exchanged or
c. Freight, handling and other cost directly
usedto settle a liability for at least twelve
attributable to the acquisition of goods
months after the reporting period.
d. Trade discount, rebates and other similar items
19. An entity shall classify a liability as current when:
(Choose incorrect one)
 a. it expects to settle the liability in its normal a. The consignor but not the consignee
operating cycle; b. The consignee but not the consignor
b. it holds the liability primarily for the purpose of c. Both the consignor and the consignee
trading; d. Neither the consignor nor the consignee
c. the liability is due to be settled within more 4. How should the following costs affect the retailer's
than twelve months after the reporting period; inventory?
or
d. the entity does not have an unconditional right Freight CostsInterest on loan
to defer settlement of the liability for at least a. Increase No Effect
twelve months after the reporting period. b. Increase Increase
c. No Effect Increase
20. An entity shall present all items of income and d. No Effect No Effect
expense recognized in a period:
5. Given the financial manager's preference for faster
A. in a single statement of profit or loss and other receipts of cash flows
comprehensive income; or
a. longer depreciation life is preferred to a shorter
B. in two statements: (1) a statement displaying the one.
profit or loss section only (separate ‘statement of profit b. shorter depreciation life is preferred to a longer
or loss’ or ‘income statement’) and (2) a second one
statement beginning with profit or loss and displaying c. The manager is not concerned with depreciable
components of other comprehensive income. lives, because depreciation is a non-cash
expense.
a. Statement A is correct and Statement B is d. The manager is not concerned with depreciable
incorrect lives, because once purchased, depreciation is
b. Statement A is incorrect and Statement B is considered a sunk cost.
correct
Test II. TRUE OR FALSE
c. Both Statement A & B is incorrect
d. Both Statement A & B is correct 1. The depreciable life of an asset can significantly
affect the pattern of cash flows. The shorter the
Quiz No. 3 depreciable life of an asset, the more quickly
1. Which of the following would not be reported as the cash flow created by the depreciation write-
inventory? off will be received.TRUE
2. Non-cash charges are expense that involve an
a. Land acquired for resale by a real estate firm actual outlay of cash during the period but are
b. Agricultural produced held by a farm not deducted on the income statement. FALSE
c. Partially completed goods held by a 3. Under the basic Modified Accelerated Cost
manufacturing company Recovery System (MACRS) procedures, the
d. Machinery required by a manufacturing depreciable value of an asset is its full cost,
company for us in the production process. including outlays for installation. TRUE
4. Business firms are permitted to systematically
2. The following are excluded from the cost of
charge a portion of the market value of fixed
inventories, except;
assets, as depreciation, against annual
a. Selling costs revenues. FALSE
b. Freight Charges on goods acquired on FOB 5. Given the financial manager's preference for
Destination faster receipt of cash flows, a long depreciable
c. Abnormal amount of wasted materials, labor or life is preferred to a shorter one. FALSE
other productions costs 6. For tax purposes, using MACRS recovery
d. Storage costs necessary to further the periods, assets in the first four property classes
production process. are depreciated by double-declining balance
(200 percent) method using the half year
3. Goods on consignment should be included in the convention and switching to straight line when
inventory of: advantageous. TRUE
7. The MACRS depreciation method requires use the cash budget is not necessarily adequate for
of the half-year convention. Assets are assumed ensuring solvency. TRUE
to be acquired in the middle of the year and
only one-half of the first year's depreciation is
recovered in the first year. TRUE Quiz no. 4 PPE
8. Free cash flow (FCF) is the cash flow a firm
generate from its normal operations; calculated 1. Property, plant and equipment are tangible items
EBIT-taxes + depreciation. FALSE that;
9. The finance definition of operating cash flow I. Are held for use in production or supply of
excludes interest as an operating flow, whereas goods and services, for rental to others or for
the accounting definition includes it as an administrative purposes.
operating flow. TRUE II. Il. Are expected to be used during more than
10. The net fixed assets investment is defined as one period
change in net fixed assets plus depreciation. a. I only
TRUE b. Il only
11. The net current assets investment is defined as c. Both I & II
the change in current assets minus the change d. Neither nor II
in sum of the accounts payable and accruals.
TRUE 2. Major spare parts and standby equipment which are
12. In the statement of cash flows the financing expected to be used over a period of more than one
flows are cash flows that results from debt and year shall be classified as
equity financing transactions, including a. Property, Plant and equipment
incurrence and repayment of debt, cash flow b. Inventory
from sale of stock, and cash out flows to c. Non-current Investment
repurchase stock or pay cash dividends. TRUE d. Expense
13. Cash flow from operations is equal to firm's net
profits after taxes minus all noncash charges. 3. Cost that are expense immediately include all of the
TRUE following. Except
14. In statement of cash flows the operating flows a. Cost of opening a new facility
are cash flows directly related to purchase and b. Cost of introducing a new product or service
sale of fixed assets. FALSE including cost of advertising and promotional
15. An increase in the firm's cash balance is an activities.
inflow of cash flow. FALSE c. Cost of conducting business in a new location,
16. Depreciation is considered to be an outflow of including cost of staff training.
cash since the cash must be drawn from d. Cost of testing whether the asset is functioning
somewhere. FALSE properly.
17. The statement of cash flows allows the financial 4. The cost of an item of property, plant and equipment
manager and other interested parties to analyze that is acquired in exchange for combination of
the firm's past and possibly future profitability. monetary and non-monetary asset is measured at the
FALSE
18. To assess whether any developments have a. Fair value of the asset given up plus the amount
occurred that are contrary to the company's of any cash or cash equivalent transferred.
financial policies, the financial manager should b. Fair value of the asset received plus the amount
pay special attention to both the major of any cash or cash equivalent transferred.
categories of cash flow and the individual items c. Carrying amount of the asset given up plus the
of cash inflow and outflow. TRUE amount of any cash or cash equivalent
19. Because depreciation is treated as a separate transferred.
source of cash, only net rather than gross d. Carrying amount of the asset received plus the
changes in fixed assets appear on the statement amount of any cash or cash equivalent
of cash flows. FALSE transferred.
20. Because the cash budget shows cash flows only
on a monthly basis, the information provided by 5. The cost of an item of property, plant and
equipment that is acquired in exchange for
 nonmonetary asset and the exchanged lacks b. Fair value and directly attributable cost incurred
commercial substance, the cost of the acquired c. Carrying amount and directly attributable cost
asset is measured at incurred
a. Fair value of the asset given up d. Carrying amount
b. Fair value of the asset received
c. Carrying amount of the asset given up
d. Carrying amount of the asset received

6. Which of the following best describes the removal

of an asset from an entity's statement of financial
position?
a. Derecognition
b. Impairment
c. Write-off
d. Depreciation

7. Entities are encouraged to disclose all of the

following information in relation to property, plant
and equipment, except
a. The carrying amount of the idle property, plant
and equipment.
b. The gross carrying amount of fully depreciated
property, plant and equipment still in use.
c. The carry amount of property, plant and
equipment classified as held for sale.
d. The fair value of property, plant and equipment
that is not materially different from carrying
amount when the cost model is used.
8. Which of the following items shall not be capitalized
into cost of property, plant and equipment?
a. Cost of excess materials resulting from a
purchasing error
b. Cost of testing whether the assets work
correctly
c. Initial delivery and handling cost
d. Cost of preparing the site for installation

9. If the present value of a note issued in exchange for

a plant asset is less than its face amount, the
difference shall be
a. Included in the cost of the asset
b. Amortized as interest expense over the life of
the note
c. Amortized as interest expense over the life of
the asset
d. Included in interest expense in the year of
issuance

10. A donated plant asset for which the fair value has
been determined, and for which directly
attributable costs were incurred, shall be recorded
at an amount equal to
a. Directly attributable cost incurred