GARCIA COLLEGE OF TECHNOLOGY

Kalibo, Aklan
Review on Fundamentals of Accounting AY: 2012 - 2013
Evaluation # 1 1st semester
CDCAA AABBA DADBC AACDA CDA
1. The effects of transactions and other events are recognized when they occur and not as cash or its
equivalent is received or paid, and they are recorded and reported in the financial statements of the
periods to which they relate.
a. Time period
b. Monetary unit
c. Accrual
d. Going concern
2. Which of the following statements is incorrect?
a. The accrual method, which builds directly on the revenue and matching principles, ignores the
timing of cash receipts or payments when determining when to recognize revenue or expenses.
b. In accordance with the going concern assumption, the life of a business is presumed to be indefinite.
c. Expenses are matched with revenues, not the reverse.
d. In accordance with the unit of measure assumption, accountants normally revise the amounts to
reflect the changing purchasing power of money due to inflation or deflation.
3. If a business is not being sold or closed, the amounts reported in the accounts for assets used in the
business operations are based on the cost of the assets. This practice is justified by
a. Accrual
b. Time period
c. Going concern
d. Accounting entity
4. The effect of the prudence concept is that
a. Losses should be provided for as soon as they are foreseen and profit should not be recorded
prematurely.
b. Profit is the difference between revenues and expenses rather than the difference between receipts
and payments.
c. Similar items should be treated in a consistent way from one accounting period to the next.
d. None of the above.
5. This accounting concept justifies the usage of accruals and deferrals.
a. Materiality
b. Consistency
c. Stable monetary unit
d. Going concern
6. It is the capacity of information to make a difference in decision by helping users evaluate past, present
or future events, or confirming, or correcting, their past evaluations.
a. Relevance
b. Reliability
c. Understandability
d. Comparability
7. The attributes of relevance include all except
a. Neutrality
b. Materiality
c. Predictive value
d. Feedback value
8. It is the quality of information that assures readers that the information is free from bias or error and
faithfully represents what it purports to show.
a. Relevance
b. Reliability
c. Understandability
d. Comparability
9. In the event of conflict between the economic substance of a transaction and its legal form, the economic
substance shall prevail. This concept is known as
a. Completeness
b. Substance over form
c. Form over substance
d. Faithful representation
10. The financial accounting information is directed toward the common needs of users and is independent
of presumptions about particular needs and desires of specific users.
a. Neutrality
b. Relevance
c. Completeness
d. Verifiability
11. It is the exercise of care and caution in dealing with uncertainties in measurement so as not to overstate
assets and income and not understate liabilities and expenses.
a. Faithful representation
b. Completeness
c. Neutrality
d. Prudence
12. It is the result of the standard of adequate disclosure.
a. Completeness
b. Neutrality
c. Faithful representation
d. Substance over form
13. The conceptual framework of accounting sets out certain essential characteristics of accounting
information. Which of the following is not an essential characteristic?
a. Understandability
b. Reliability
c. Comparability
d. Profit-oriented
14. The financial information must be comprehensible or intelligible if it is to be useful.
a. Comparability
b. Understandability
c. Relevance
d. Reliability
15. It is the ability to bring together for the purpose of noting similarities and dissimilarities.
a. Relevance
b. Reliability
c. Comparability
d. Understandability
16. According to the conceptual framework, the usefulness of providing information in financial statements
is subject to the constraint of
a. Cost-benefit
b. Reliability
c. Consistency
d. Representational faithfulness
17. Financial reporting is concerned only with information that is significant enough to affect evaluation or
decision.
a. Materiality
b. Timeliness
c. Comparability
d. Cost and benefit
18. Which users need financial information to enable them to determine whether their loans and the related
interest will be paid when due?
a. Customers
b. Investors
c. Lenders
d. Suppliers
19. The underlying assumption which suggests the continuation of an accounting entity in the absence of
evidence to the contrary is
a. Accounting entity
b. Substance over form
c. Consistency
d. Going concern
20. Historically, managers, investors and accountants have generally preferred that possible errors in
measurement be in the direction of understatement of net income and net assets.
a. Conservatism
b. Approximation
c. Materiality
d. Application of judgment
21. Financial reports communicated after an accounting decision has been made defeat the primary purpose
of which characteristic?
a. Conservatism
b. Materiality
c. Timeliness
d. Adequate disclosure
22. What is the quality of reliability that supports the immediate recognition of a loss?
a. Neutrality
b. Consistency
c. Completeness
d. Conservatism
23. A professional accountant should be straightforward and honest in all professional and business
relationships. This is in consonance with the fundamental principle of
a. Integrity
b. Objectivity
c. Confidentiality
d. Professional competence and due care