1. The joint FASB and IASB conceptual framework project is a. Comply with the need for conservatism.

intended to establish: b. Comply with generally accepted accounting principles.

a. A common set of objectives and concepts for use in c. Report on how effectively and efficiently management has
developing standards of financial accounting and reporting. used the entity’s resources.
b. A common set of generally accepted accounting principles. d. Provide financial information that is useful to primary users.
c. A comprehensive set of financial statement disclosures.
d. The structure of the FASB Codification. 9. According to the FASB and IASB conceptual frameworks, the
primary users of financial reports include all of the following,
2. The Conceptual Framework (choose the incorrect statement) except:
a. Is not a PFRS a. Lenders.
b. In the absence of a standard, shall be considered by b. Investors.
management when making its judgment in developing and c. Regulators.
applying accounting policy that result in information that is d. Creditors.
relevant and reliable.
c. Is concerned with general-purpose financial statements 10. According to the Conceptual Framework, the needs of primary
only. users that are met by financial statements are
d. Prevails over the PFRSs in cases of conflicts. a. All of their needs
b. All of their common needs only
3. Which of the following statements regarding the conceptual c. Majority of their common needs only
framework is incorrect? d. Substantially a majority of their common and specific needs
a. The framework is concerned with general-purpose financial only
statements
b. The framework applies to financial statements of business 11. According to the FASB and IASB conceptual frameworks, useful
reporting enterprises both in the private sector and in the information must exhibit the fundamental qualitative
public sector characteristics of:
c. In cases where there is conflict between the framework and a. Neutrality and verifiability
an PFRS, the requirement of the framework will prevail
b. Understandability and timeliness.
d. The framework deals with concepts of capital
c. Comparability and materiality.
d. Faithful representation and relevance.
4. Financial information provided in general purpose financial
reports does not include information about:
12. Users of financial statements frequently rely upon the data
a. How effectively and efficiently the entity’s governing board
has discharged its responsibility to use the entity’s displayed in the financial statements to predict future financial
resources. outcomes. Financial accounting concepts refer to the
b. How effectively and efficiently the entity’s shareholders’ characteristic of accounting information that provides predictive
have discharged their responsibility to use the entity’s value to users as the quality of:
resources. a. Comparability
c. The resources of the entity. b. Relevance.
d. The claims against the entity. c. Faithful representation.
d. Understandability.
5. The following are the components of the conceptual framework
of accounting except 13. According to the IASB Framework for the Preparation and
a. The objective of financial statements Presentation of Financial Statements, the fundamental
b. The definition of the elements of financial statements qualitative characteristics of relevance includes
c. The form of presentation of financial statements a. Predictive value and feedback value.
d. The qualitative characteristics of financial statements b. Verifiability, neutrality, and representational faithfulness.
c. Predictive value and confirmatory value.
6. The objective of general purpose financial reporting is d. Comparability and timeliness.
a. To provide information regarding the economic resources
of an entity. 14. According to the FASB and IASB conceptual frameworks, the
b. To provide users with relevant and reliable information quality of information that helps users forecast future outcomes
needed to oversee the day-to-day operations of an entity. is:
c. To provide financial information about the reporting entity a. Neutrality.
that is useful to existing and potential investors, lenders b. Representational faithfulness.
and other creditors in making decisions about providing c. Confirming value
resources to the entity. d. Predictive value.
d. All of these.
15. According to the FASB and IASB conceptual frameworks, to be
7. A secondary objective of financial statements relevant, information should have which of the following?
a. Is to show information regarding assets and liabilities of an a. Completeness.
entity. b. Neutrality.
b. Is to show information regarding an entity’s financial c. Verifiability
position, performance, and changes in financial position. d. Predictive value
c. Is to show the results of the stewardship of management.
d. b and c 16. According to the FASB and IASB conceptual frameworks, one of
the fundamental qualitative characteristics of useful financial
8. According to the FASB and IASB conceptual frameworks, the information is:
objective of general purpose financial reporting is to: a. Timeliness.

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 b. Relevance. d. It meets the requirements of comparability and consistency.
c. Verifiability.
d. Comparability. 25. What is the underlying concept governing the recording of gain
contingencies?
17. Which of the following characteristics of accounting information a. Conservatism.
primarily allows users of financial statements to generate b. Reliability.
predictions about an organization? c. Relevance.
a. Reliability. d. Consistency.
b. Relevance.
c. Neutrality. 26. Accounting to the FASB conceptual framework, which of the
d. Timeliness. following attributes would not be used to measure inventory?
a. Replacement cost.
18. According to the FASB and IASB conceptual frameworks, b. Net realizable value.
completeness is an ingredient of: c. Historical cost.
a. Relevance. d. Present value of future cash flows.
b. Faithful Representation.
c. Both a and b. 27. What is the underlying concept that supports the immediate
d. Neither a nor b. recognition of a contingent loss?
a. Substance over form.
19. According to the FASB and IASB conceptual frameworks, b. Conservatism.
neutrality is an ingredient of: c. Matching.
a. Comparability. d. Consistency.
b. Relevance.
c. Timeliness. 28. According to the FASB conceptual framework, the process of
d. Faithful representation. reporting an item in the financial statements of an entity is:
a. Matching.
20. According to the FASB and IASB conceptual frameworks, which b. Realization.
of the following correctly pairs a fundamental qualitative c. Recognition.
characteristic of useful information with one of its components? d. Allocation.
a. Faithful representation and predictive value.
b. Faithful representation and verifiability. 29. According to the FASB conceptual framework, which of the
c. Relevance and timeliness. following statements conforms to the realization concept?
d. Relevance and materiality. a. Equipment depreciation was assigned to a production
department and then to product unit costs.
21. According to the FASB and IASB conceptual frameworks, which b. Product unit costs were assigned to cost of goods sold when
of the following is an enhancing qualitative characteristic? the units were sold.
a. Materiality. c. Depreciated equipment was sold in exchange for a note
b. Timeliness. receivable.
c. Neutrality. d. Cash was collected on accounts receivable.
d. Completeness.
30. Which of the following assumptions means that money is the
22. Which of the following characteristics enhances relevance and common denominator of economic activity and provides an
faithful representation? appropriate basis for accounting measurement and analysis?
a. Materiality. a. Periodicity.
b. Timeliness. b. Monetary unit.
c. Predictive value. c. Going concern.
d. Neutrality. d. Economic entity.

23. According to the IASB Framework, the financial statement
element that is defined as increases in economic benefits during
the accounting period in the form of inflows or enhancements of
assets or decreases of liabilities that result in increase in equity,
other than those relating to contributions from equity
participants, is
a. Revenue.
b. Income.
c. Profits.
d. Gains.
24. According to the IASB Framework, the two criteria required for
incorporating items into income statement or statement of
financial position are that
a. It meets the definition of relevance and faithful
representation.
b. It meets the definition of an element and can be measured
reliably.
c. It satisfies the criteria of capital maintenance.
31. Which of the following is a generally accepted accounting
principle that illustrate the practice of conservatism during a
particular reporting period?
a. Reporting investments with appreciated market values at
market value.
b. Capitalization of research and development costs.
c. Reporting inventory at the lower of cost or net realizable
value.
d. Accrual of a contingency deemed to be reasonably possible.
32. According to the FASB conceptual framework, certain assets
are reported in financial statements at the amount of cash or its
equivalent that would have to be paid if the same or equivalent
assets were acquired currently. What is the name of the
reporting concept?
a. Historical cost.
b. Replacement cost.
c. Current market value.
d. Net realizable value.

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33. According to the IASB conceptual framework, which of the Investment in associate 900,000
following is an underlying assumption of financial statement Buildings and equipment 1,200,000
preparation and presentation? Accumulated depreciation 300,000
a. Monetary unit. Accounts payable 800,000
b. Historical cost. Bonds payable (520,000)
c. Going concern. Discount on bonds payable (120,000)
Common stock 600,000
d. Periodicity.
Additional paid-in capital 100,000
Revaluation surplus 300,000
34. Under this concept, a profit is earned only if the financial (or Dividends declared during 2017 were ₱800,000. No other
money) amount of the net assets at the end of the period transactions affected retained earnings during the year.
exceeds the financial (or money) amount of net assets at the Calculate the amount of net income to be reported in 2017.
beginning of the period, after excluding any distributions to, and a. ₱2,460,000
contributions from, owners during the period. It can be b. ₱3,100,000
measured in either nominal monetary units or units of constant c. ₱3,500,000
purchasing power. d. ₱4,460,000
a. Concept of capital
b. Concept of capital maintenance 39. For a given year, beginning and ending total liabilities were
c. Financial capital maintenance concept ₱8,400 and ₱10,000, respectively. At year-end, owners’ equity
d. Physical capital maintenance concept was ₱26,000 and total assets were ₱2,000 larger than at the
beginning of the year. If new capital stock issued exceeded
35. The following information was obtained from a review of ABC dividends by ₱2,400, profit (loss) for the year was apparently
Co.’s accounting records: a. ₱2,000
Net Assets, Jan. 1, 2017 ₱500,500 b. ₱2,400
Net Assets, Dec. 31, 2017 480,600
c. ₱(2,000)
Share capital issued in 2017 80,000
d. ₱(2,400)
Dividends declared in 2017 160,000
Using the capital maintenance approach, the amount of net
income or loss for 2017 is 40. Changes in the account balances of Victor Wooten Corp. during
a. ₱60,010 the current year are shown below:
b. (₱60,010) Increase/(Decrease)
Cash ₱270,000
c. ₱2,100
Accounts receivable, net 760,000
d. ₱60,100
Financial assets at FVPL 65,000
Inventory 1,780,000
36. The following information was obtained from a review of ABC Investment in associate (50,000)
Co.’s accounting records: Accounts payable (360,000)
Net Assets, Jan. 1, 2017 ₱503,500 Bonds payable 1,200,000
Net Assets, Dec. 31, 2017 508,600 Premium on bonds payable (25,000)
Share capital issued in 2017 69,300
Dividends declared in 2017 61,350 Additional information:
Using the capital maintenance approach, the amount of net The company issued 10,000 shares with par value of ₱100 per
income or loss for 2017 is share for ₱160 per share. Stock issuance costs incurred
a. ₱(13,050) amounted to ₱15,000. Cash dividends declared and paid
b. ₱(2,850) amounted to ₱230,000. Unrealized gains recognized in profit or
c. ₱2,850 loss amounted to ₱10,000. Using the net assets approach,
d. ₱13,050 Victor Wooten’s profit for the year is
a. ₱630,000
37. The following are the changes in Cliff Burton Co.’s account b. ₱590,000
balances during 2017: c. ₱640,000
Increase/(Decrease) d. ₱655,000
Assets ₱560,000
Liabilities 390,000
41. The following information shows the changes in the account
Capital stock 160,000
balances of Jaco Pastorious Co. during 2017:
Additional paid-in capital 8,000
There were no changes in retained earnings for 2017 other than Increase/(Decrease)
Cash ₱100,000
for a cash dividend payment of ₱34,000. Using the capital
Accounts receivable (880,000)
maintenance approach, compute for the profit of Burton in 2017.
Allowance for bad debts (120,000)
a. ₱360,000 Inventory 800,000
b. ₱816,000 Investment in associate 700,000
c. ₱304,000 Buildings and equipment 1,100,000
d. ₱36,000 Accumulated depreciation 400,000
Accounts payable (900,000)
38. Changes in the account balances of ABC Co. during 2017 are Bonds payable 700,000
shown below: Discount on bonds payable 150,000
Increase/(Decrease) Capital stock 900,000
Cash ₱1,200,000 Additional paid-in capital 100,000
Accounts receivable (640,000) Revaluation surplus 900,000
Allowance for bad debts (100,000) Dividends declared during 2017 were ₱100,000 and
Inventory 600,000 appropriations for the retirement of bonds amounted to

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 ₱50,000. Calculate the amount of net income to be reported in
2017.
a. ₱40,000
b. ₱90,000
c. ₱170,000
d. ₱140,000

42. Changes in the Ytse Jam Co.’s account balances are shown
below:
Assets ₱1,870,000 Increase
Liabilities 370,000 Increase
Common stock 470,000 Decrease
Share premium 60,000 Increase
Revaluation surplus 40,000 Decrease
Unrealized gain-FVPL 60,000 Increase
Treasury stock 30,000 decrease
No other changes in the retained earnings account other than
for a cash dividend declaration of ₱35,000 and an appropriation
of ₱360,000. Ytse Jam Co.’s profit amounted to
a. ₱2,000,000
b. ₱1,960,000
c. ₱1,840,000
d. ₱1,955,000

43. The following information was obtained from a review of ABC

Co.’s accounting records:
Increase in Net assets during the period ₱120,000
Share capital issued during the period 80,000
Profit for the year 75,000
How much are the dividends declared during the period?
a. ₱65,000
b. ₱15,000
c. ₱21,000
d. ₱35,000

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