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Jaypaul Ocampo Acidera, CPA 2016

CPA REVIEW SCHOOL OF THE PHILIPPINES


Mani la
FINANCIAL ACCOUNTING AND REPORTING VALIX Sly VALIX FERRER LACO
CONCEPTUAL FRAMEWORK
I. Which statement is true concerning the Conceptual Framework for Financial Reporting?
a. The Conceptual Framework is not a reporting standard and does not define standard for any
particular measurement or disclosure issue.
b. The Conceptual Framework is concerned with general purpose financial statements including
consolidated financial statements.
C . In cases of conflict, the requirements of the relevant IFRS prevail over those of the Conceptual
Framework.
d. All of these tatements are true about the Conceptual Framework.
2. What is a purpose of having a conceptual framework?
a. To enable the profession to more quickly solve emerging practical problems.
b. To provide a foundation from which to build more useful standards.
c. To enable the standard setting body to issue more useful and consistent pronouncements over
time.
All of these can be considered a purpose of a conceptual framework
3. The Conceptual Framework for Financial Reporting includes all of the following, except
a. Objective of financial reporting
b. Qualitative characteristics of useful financial information
c. Definition, recognition and measurement of elements of financial statements
d. Supplementary information
4. What provides "the why" or the goal and purpose of accounting?
a. Measurement and recognition concept
b. Qualitative characteristic of accounting information
C. Element of financial statements
d. Objective of financial reporting
5. Which of the following statements is not an objective of financial reporting?
. a. To provide information that is useful in investment and credit decisions.
b. To provide information about entity resources, claims against those resources, and changes in
those 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. Which of the following is an implication of the going concern assumption?
a. The historical cost principle is credible.
b. Depreciation and amortization policies are justifiable and appropriate.
C. The current-noncurrent classification of assets and liabilities is justifiable and significant.
d. All of these imply the going concern assumption.
7. 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
8. Consolidated financial statements are prepared when a parent-subsidiary relationship exists.
a. Economic entity assumption
b. Relevance characteristic
c. Comparability characteristic
d. Neutrality characteristic
9. 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. Periodicity assumption
C. Materiality
d. Economic entity
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10. Inflation is ignored in accounting due to
a. Economic entity assumption
b. Going concern assumption
C . Monetary unit assumption
d. Periodicity assumption

11. In the Conceptual Framework, qualitative characteristics


a. Are considered either fundamental or enhancing.
b. Contribute to the decision-usefulness of financial reporting information.
C . Distinguish better information fr ol m inferior information for decision-making pifirposes.
d. All of the choices are correct.

12. To achieve faithful representation, the financial statements


a. Must have predictive and confirmatory value
b. Must be complete, neutral and reasonably five from error
C. Are understandable, comparable, verifiable and timely.
d. All of these achieve faithful representation

13. Which of the following statements is not true about relevance?


a. Accounting information is relevant when it is capable of making a difference in a decision.
b. The overriding criterion by which relevant informatdirean beludged4sAat-of usefulne.gs_for
decision making.
c. The relevance of an accounting information is not affected by its nature and materiality.
d. Financial information is capable of a making difference in decision if it has predictive value or
confirmatory value or both.

14. Which of the following statements about materiality is correct?


a. An item must make a difference or it need not be disclosed.
b. Materiality is a matter of relative size or importance.
C . An item is material if the inclusion or omission would influence or change the judgment of a
reasonable person.
d. All of these are correct statements about materiality.

15. 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.

16. What is meant by consistency when discussing financial accounting information?


a. Information is measured and reported in a similar-fitaltac-ross-pointsjiLtime,„
b. Information is timely.
c. Information is measured similarly across the industry.
d. Information is verifiable.

17. What is an enhancing quality described in the Conceptual Framework?


a. Information must be decision-useful to all potential users of financial reporting.
b. General-purpose financial reporting is the primary source of information for users of financial
reporting.
c. Users need reasonable knowledge of business and financial accounting matters to understand
the information contained in financial statements.
d. All of the choices are correct.

18. Which of the following statements about verifiability is true?


a. Verifiable financial information provides results that would be substantially duplicated by
independent measurers using the same measurement method.
b. Verifiability implies consensus.
C. J. O. A.
Proponents of historical cost maintain that statements prepared using historical cost are
verifiable.
d. All of these statements are true about verifiability.
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19. An entity issuing the annual financial reports within one month after the end of the year is an
example of which enhancing quality of accounting information?
a. Neutrality
b. Timeliness
C, Predictive value
d. Representational faithfulness

20. The Conceptual Framework includes which of the following constraints?


a. Prudence
b. Conservatism
C, Cost
d. All of the choices are constraints in the conceptual framework

21. 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.
cl. All of the choices are correct.

22. An item that meets the definition of an element should be recognized when

a. It is probable that any future benefit associated with the item will flow to or from the entity.
b. The cost of the item can be measured reliably.
C. It is possible that any future economic benefit associated with the item will flow to or from the
entity and the cost of the item can be measured reliably.
d. It is probable that any future economic benefit associated with the item will flow to or from the
entity and the cost of the item can be measured reliably.

23. Which of the following statements 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

24. An expense is recognized immediately

a. When an expenditure produces no future economic benefit


b. When cost icic ,rred 6eases to qualify as an asset.
C. When an exptm:litwe produces future economic benefit.
d. When an expenri!lre produces no future economic benefit and when cost incurred ceases to
qualify as a sst.

25. Which is an example of :T;xpensf, recognition principle of associating cause and effect?
a. Allocation of insurance cost
b. Sales commission
c. Depreciation
d. Officers saiecrifs

26. Which is all appiicaiion of the principle of systematic and rational allocation?
a. AmortizAion of ic:itangibie asset
b. Cost of g oods sold
c. Research and deveioprnelt cost
d. Salesmen's salaries

J. O. A.
EN D
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