1.

Which is the accounting standard setting body in the recognized and carried in the balance sheet and income
Philippines at the present time? statement.
a. Accounting Standard Council c. The removal of a previously recognized asset or liability
b. Auditing and Assurance Standard Council from an entity’s statement of financial position.
c. Philippine Accounting Standards Board d. The process of incorporation in the balance sheet or
d. Financial Reporting Standards Council income statement an item that meets the definition of an
elements and satisfies the criteria for recognition.
2. Which of the following terms best describes the removal
of an asset from an entity’s statement of financial 9. Which statements is false concerning users and their
position? information needs?
a. Derecognition c. Write-off a. Lenders are interest in information that enables them to
b. Impairment d. Depreciation determine whether their loans and the interest on these
loans will be paid when due.
3. Which of the following is not within the scope of the b. The providers of risk capital and their advisers are
Conceptual Framework? concerned with the risk of inherent in return provided by
a. the objective of financial reporting their investment,
b. the quantitative characteristics of useful financial c. Government and its agencies have an interest in
information information about the continuance of an enterprise
c. the definition, recognition and measurement of the especially when they have long-term involvement or are
elements from which financial statements are constructed dependent on the enterprise.
d. concepts of capital and capital maintenance. d. Employees and their representative groups are interest in
information about the stability and profitability of the
4. Which of the following statements is not true? entity.
a. Accounting assumptions are the basic notions or
fundamental premises on which the accounting process is 10. Which of the following statement(s) regarding the
based. conceptual framework is (are) incorrect?
b. Accrual used to be an underlying assumption in the old a. The framework applies to financial statements of business
framework reporting enterprises both in the private sector and in the
c. Going concern is the sole underlying assumption in the public sector.
new framework. b. In cases where there is conflict between the framework
d. The use of historical cost is not supported by going and PFRS, the requirement of the framework will prevail.
concern assumption. c. Both A and B
d. Neither A nor B
5. The following statements are true except,
a. General purpose financial statements are based on 11. Which is not a specific purpose of the conceptual
estimates and judgments rather than exact depictions. framework?
b. General purpose financial reports are not designed to a. To assist preparers of financial statement in applying the
show the value of an entity. accounting standards.
c. The target users of general purpose financial reports are b. To assist FRSC in the development of future Philippine
investors, creditors and lenders. Financial Reporting Standards (PFRSs) and in its review of
d. General purpose financial reports all the information existing PFRSs.
needed by existing and potential investors, lenders and c. To assist users of financial statements in interpreting the
other creditors needed. information contained in financial statements.
d. To assist the Board of Accountancy in promulgating rules
6. Historical cost and regulations affecting the practice of accountancy in
a. The amount of cash or cash equivalent paid or the the Philippines.
consideration to acquire an asset.
b. The amount of cash or cash equivalent that would have to 12. What is the basic purpose of accounting?
be paid of the same or an equivalent asset is acquired a. To provide quantitative financial information about
currently. economic activities.
c. The amount of cash and cash equivalent that could b. To provide all information that users need in making
currently be obtained by selling the asset in an orderly economic decisions.
disposal. c. To provide qualitative financial information about
d. The discounted value of the future net cash inflow that an economic activities intended to be useful in making
asset is expected to generate I the normal course of economic decisions.
business. d. To provide quantitative financial information about
economic activities intended to be useful in making
7. Under this concept, capital is regarded as the net assets or economic decisions.
equity of the enterprise
a. Financial concept c. All-financial resource concept 13. To meet the probability criterion, in relation to recognition
b. Physical concept d. All-inclusive concept of assets and liabilities, the expectation that future
economic benefits will flow to or from an entity must be
8. “Recognition” is defined in the Conceptual Framework as a. Certain c. Sufficiently certain
a. The grouping, into broad classes, of the financial effects of b. Virtually certain d. Not certain
transactions and other events according to economic
characteristics. 14. General purpose financial statements are
b. The process of determining the monetary amounts at a. Those statements that cater to the common and specific
which the elements of the financial statements are to be needs of an wide range of external users.
b. Those statements that cater to the common needs of a a. Analyzing c. Classifying
wide range of external users and internal users. b. Measuring d. Interpreting
c. Those statements that cater to the common needs of a
limited range of external users. 21. When should an item that meets the definition of an
d. Those statements that cater to the common needs of a element be recognized, according to the Framework?
wide range of external users. a. When it is probable that any future economic benefit
associated with the item will flow to or from the entity.
15. Accounting has been given various definition, which of the b. When the element has a cost or value that can be
following is not one of those definitions? measured with reliability.
a. Accounting is a service activity. Its function is to provide c. When the entity obtains control of the right or obligations
quantitative information, primarily financial in nature, associated with the item.
about economic entities that is intended to be useful in d. When it is probable that any future economic benefits
making economic decisions. associated with the item will flow to or from the entity and
b. Accounting is an art of recording, classifying, and the item has ac sot or value that can be measured with
summarizing in a significant manner and in terms of reliability.
money, transactions and events which are, in part of at
least, of a financial character and interpreting the result 22. What is the only underlying assumption mentioned in the
thereof new Conceptual Framework for Financial Reporting?
c. Accounting is a systematic process of objectively obtaining a. Going concern c. Accounting entity
and evaluating events to ascertain the degree of b. Time period d. Monetary unit
correspondence between these assertions and established
criteria and communicating the results to interested users. 23. Which statement relates to comparability?
d. Accounting is the process of identifying, measuring, and a. Information is available to decision-makers in time to be
communicating economic information to permit informed capable of influencing their decisions.
judgment and decisions by users of information. b. Different knowledgeable and independent observers could
reach consensus, although not necessarily complete
16. The users of financial statements who are interest in agreement, that a particular depiction is a faith
information that enables them to determine whether the representation.
amounts owing to them will be paid when due c. Financial reports are prepared for users who have a
a. Lenders c. Investors reasonable knowledge of business and economic activities
b. Customers d. Suppliers and other trade creditors and who review and analyze the information with
diligence.
17. The Conceptual Framework includes all of the following d. Enable users to identify and understand similarities in, and
except: differences amount items.
a. Objective of financial reporting
b. Qualitative characteristics of accounting information 24. The enhancing qualitative characteristics of financial
c. Elements of financial statements information are
d. Supplementary information a. Comparability and understandability
b. Verifiability and timeliness
18. Which statement is incorrect regarding the Conceptual c. Comparability, understandability and verifiability
Framework? d. Comparability, understandability, verifiability and
a. The objective of general-purpose financial reporting is the timeliness
foundation of the Conceptual Framework?
b. The conceptual Framework is useful to auditors by 25. Accounting information is considered to be relevant when
assisting them in forming an opinion as to whether it
financial statements conform to PFRSs. a. Can be depended on to represent the economic conditions
c. The Conceptual Framework may override a specific PFRS. and events that it is intended to represent.
d. The conceptual framework includes a cost-benefit b. Is capable of making a difference in a decision.
constraint, which means that the benefits of the c. In understandable by reasonably informed users of
information must be greater than the costs of providing it. accounting information,
d. Is verifiable and neutral.
19. Which statement relates to verifiability?
a. Enables users to identify and understand similarities in, 26. The “Primary users” of financial information include
and difference among, items. I. Existing and potential investors
b. Information is available to decision-makers in time to be II. Existing and potential lenders and other
capable of influencing their decisions. creditors
c. Different knowledgeable and independent observers could III. User group such as employees, customers,
reach consensus, although not necessarily complete government and their agencies, and public.
agreement, that a particular depiction is a faithful a. I only c. I and III only
representation. b. I and II only d. I, II and III
d. Financial reports are prepared for users who have a
reasonable knowledge of business and economic activities 27. The ingredients of faithful representation are
and who review and analyze the information with a. Completeness and neutrality
diligence. b. Completeness and free from errors
c. Completeness, neutrality and free from errors
20. It is the accounting process of assigning numbers, d. Completeness, neutrality, free from errors and
commonly in monetary terms, to the economic conservatism
transactions and events.
28. Which is not a financial asset?
a. Cash c. Inventory
b. Equity investment d. Receivables

29. Physical concept of capital required the use of

30. Which of the following does not interact with both