FEU – MAKATI

INTEGRATED ACCOUNTING REVIEW – FAR TOA

TOA Quizzer 1 – Overview of Accounting Prof. F. H. Villamin

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Multiple Choice
1. Accounting is a service activity and its function is to provide quantitative information,
primarily financial in nature, about economic entities, that is intended to be useful in making
economic decision. This accounting definition is given by
a. Accounting Standards Council
b. AICPA Committee on Accounting Terminology
c. American Accounting Association
d. Board of Accountancy

2. The basic objective of accounting is

a. To provide the information that the managers of an economic entity need to control its
operations.
b. To provide information that the creditors of an economic entity can use in deciding
whether to make additional loans to the entity.
c. To measure the periodic income of the economic entity.
d. To provide quantitative financial information about an entity that is useful in making
rational economic decision.

3. These are the events that affect the entity and in which other entities participate.
a. Internal events
b. External events
c. Current events
d. Past events

4. The communicating process of accounting includes all of the following, except

a. Recording
b. Classifying
c. Summarizing
d. Interpreting

5. What is the law regulating the practice of accountancy in the Philippines?

a. R.A. No. 9298
b. R.A. No. 9198
c. R.A. No. 9928
d. R.A. No. 9892

6. It is the body authorized by law to promulgate rules and regulation affecting the practice of
the accountancy profession in the Philippines.
a. Board of Accountancy
b. Philippine Institute of Certified Public Accountants
c. Securities and Exchange Commission
d. Financial Reporting Standards Council
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7. Accountants employed in entities in various capacity as accounting staff, chief accountant or

controller are said to be engaged in
a. Public accounting
b. Private accounting

c. Government accounting
d. Financial accounting

8. It is the accounting standard setting body in the Philippines at the present time.
a. Accounting Standards Council
b. Auditing and Assurance Standards Council
c. Philippine Accounting Standards Board
d. Financial Reporting Standards Council

9. In the development of accounting standards, the FRSC employs a “due process” system
which
a. Is efficient for collecting dues from members.
b. Enables interested parties to express their views on accounting issues under
consideration.
c. Identifies the accounting issues that are the most important.
d. Requires that all CPAs must receive a copy of PFRS.

10. The Philippine Financial Reporting Standards collectively include

I. PFRS corresponding to IFRS.
II. PAS corresponding to IAS.
III. Philippine Interpretations corresponding to IFRIC and SIC Interpretations and
Interpretations developed by PIC.
a. I only
b. I and II only
c. I and III only
d. I, II and III

11. Financial accounting is concerned with

a. General-purpose reports on financial position and financial performance.
b. Specialized reports for inventory management and control.
c. Specialized reports for income tax computation and recognition.
d. General-purpose reports on changes in stock prices and future estimates o market
position.

12. Financial accounting can be broadly defined in the area of accounting that prepares
a. General purpose financial statements to be used by parties internal to the entity only.
b. Financial statements to be used by investors only.
c. General purpose financial statements to be used by parties both internal and external to
the entity.
d. Financial statements to be used primarily by management.

13. Financial accounting is the area of accounting that emphasizes reporting to

a. Management
b. Regulatory bodies
c. Internal auditors
d. Creditors and investors

14. Managerial accounting is the area of accounting that emphasizes

a. Reporting financial information to external users.
b. Reporting to the Securities and Exchange Commission.
c. Combining accounting knowledge with an expertise in data processing.
d. Developing accounting information for use within an entity.
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15. One of the basic features of financial accounting is

a. Direct measurement of economic resources and obligations and changes in them in
terms of money and sociological and psychological impact.
b. Direct measurement of economic resources and obligations and changes in them in
terms of money.
c. Direct measurement of economic resources and obligations and changes in them in
terms of money and sociological impact.
d. Direct measurement of economic resources and obligations and changes in them in
terms of money and psychological impact.

16. Generally accepted accounting principles

a. Are accounting adaptations based on the laws of economic science.
b. Derive their credibility and authority from legal rulings and court precedents.
c. Derive their credibility and authority from the national government through the Securities
and Exchange Commission.
d. Derive their credibility and authority from general recognition and acceptance by the
accountancy profession.

17. Which of the following statements best describes generally accepted accounting principles?
a. They have been formulated in the public sector.
b. They have been developed on the basis of such factors as usage and
practical necessity.
c. They are the same as laws within our legal system.
d. They do not apply to small entities.

18. Proper application of accounting principles is most dependent upon

a. Existence of specific guidelines
b. Oversight of regulatory bodies
c. External audit function
d. Professional judgment of the accountant

19. Financial accounting standard-setting

a. Is a democratic process in that a majority of practicing accountants must agree with a
standard before it becomes enforceable.
b. Is a legislative process based on rules promulgated by government agencies.
c. Is based solely on research.
d. Is a social process which incorporates political actions of various interested user groups
as well as professional research and logic.

20. Once an accounting standard has been established

a. The standard is continually reviewed to see if modification is necessary.
b. The standard is not reviewed unless the Securities and Exchange Commission makes a
complaint.
c. The task of reviewing the standard to see if modification is necessary is given to the
PICPA.
d. The principle of consistency requires that no revisions ever be made to the standard.

21. As independent or external auditors, CPAs are primarily responsible for

a. Preparing financial statements in conformity with GAAP.
b. Certifying the accuracy of financial statements.
c. Expressing an opinion as to the fairness of financial statements.
d. Filing financial statements with the SEC.

22. The singularly unique function performed by Certified Public Accountants is

a. Tax preparation
b. Management advisory services
c. The attest function
d. The preparation of financial statements
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23. The purpose of the International Financial Reporting Standards is to

a. Issue enforceable standards which regulate the financial accounting and reporting of
multinational entities.
b. Develop a uniform currency in which the financial transactions of entities throughout the
world would be measured.
c. Promote uniform accounting standards among countries of the world.
d. Arbitrate accounting disputes between auditors and international entities.

24. The International Accounting Standards Board was formed to

a. Enforce IFRS in foreign countries.
b. Develop a single set of high quality IFRS.
c. Establish accounting standards for multinational entities.
d. Develop accounting standards for countries that do not have standard-setting body.

25. It is a “global phenomenon” intended to bring about transparency and a higher degree of
comparability in financial reporting in order to achieve the goal of one uniform and globally
accepted financial reporting standards.
a. IFRS
b. Borderless accounting
c. World trade
d. Information technology

26. What is the only underlying assumption mentioned in the Conceptual Framework for
Financial Reporting?
a. Going concern
b. Accounting entity
c. Time period
d. Monetary unit

27. Which of the following statement best describes the term “going concern”?
a. When current liabilities of an entity exceed current assets.
b. The ability of the entity to continue in operation for the foreseeable future.
c. The potential to contribute to the flow of cash and cash equivalents to the entity.
d. The expenses of an entity exceed its income.

28. Which of the following is not 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 and noncurrent classification of assets and liabilities is justifiable and
significant.
d. Amortizing research and development costs over several periods is justifiable and
appropriate.

29. The relatively stable economic, political and social environment supports
a. Conservatism
b. Materiality
c. Timeliness
d. Going Concern

30. Which basic assumption may not be followed when an entity in bankruptcy reports financial
results?
a. Economic entity assumption
b. Going concern assumption
c. Periodicity assumption
d. Monetary unit assumption
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31. The financial statements that are prepared for the business are separate and distinct from
the financial statements of the owners.
a. Going concern assumption
b. Matching principle
c. Economic entity assumption
d. Accounting period assumption

32. 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.

33. Which underlying assumption serves as the basis for preparing financial statements at
regular artificial points in time?
a. Accounting entity
b. Going concern
c. Accounting period
d. Stable monetary unit

34. Which basic accounting assumption is threatened by the existence of severe inflation in an
economy?
a. Monetary unit assumption
b. Periodicity assumption
c. Going Concern assumption
d. Economic entity assumption

35. Which of the following is not an important characteristic of the financial statements that
accountants currently prepare?
a. The information in financial statements is expressed in units of money adjusted for
changing purchasing power.
b. Financial statements articulate with one another because measuring financial position is
related to measuring changes in financial position.
c. The information in financial statements is summarized and classified to help meet users’
needs.
d. Financial statements can be justified only if the benefits they provide exceed the costs.

36. The concept of accounting entity is applicable

a. Only to the legal aspects of business organizations.
b. Only to the economic aspects of business organizations.
c. Only to business organizations.
d. Whenever accounting is involved.

37. When a parent and subsidiary relationship exists, consolidated financial statements are
prepared in recognition of
a. Legal entity
b. Economic entity
c. Stable monetary unit
d. Time period

38. The valuation of a promise to receive cash in the future at present value is valid because of
the accounting concept of
a. Entity
b. Time period
c. Going concern
d. Monetary unit
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39. What is the accounting concept that justifies the usage of accruals and deferrals?
a. Going concern
b. Materiality
c. Consistency
d. Stable monetary unit

40. During the lifetime of an entity, accountants produce financial statements at arbitrary points
in time in accordance with what basic accounting concept?
a. Accrual
b. Periodicity
c. Unit of measure
d. Continuity

41. The “primary users” of financial information include

I. Existing and potential investors.
II. Existing and potential lenders and other creditors.
III. User group such as employees, customers, governments and their agencies, and the
public.
a. I only
b. I and II only
c. I and III only
d. I, II and III

42. Users of financial reports include which of the following?

I. Creditors
II. Government agencies
III. Unions
a. I only
b. I and II only
c. I and III only
d. I, II and III

43. Which of the following is an internal user of financial information?

a. Board of Directors
b. Shareholder in the entity
c. Holder of the entity’s bonds
d. Creditor with long-term contract with the entity

44. These users require information on risk and return on investment.

a. Investors
b. Employees
c. Lenders
d. Customers

45. These users are interested in information about the profitability and stability of an entity in
order to assess the ability of the entity to provide remuneration, retirement benefits and
employment opportunities.
a. Customers
b. The public
c. Governments and their agencies
d. Employees

46. These users are interested in information that enables them to assess whether their loans,
the related interest thereon, and other amounts owing to them will be paid when due.
a. Lenders and other creditors
b. Borrowers
c. Trade creditors
d. Owners
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47. These users are interested in information about the continuance of an entity when they have
a long-term involvement with or are dependent on the entity.
a. Customers
b. Employees
c. Trade unions
d. Suppliers

48. These users are interested in information in order to regulate the activities of an entity,
determine taxation policies and provide a basis for national statistics.
a. Governments and their agencies
b. Major organization of users
c. Bureau of Internal Revenue
d. Department of Finance

49. These users need information on trends and recent developments where an entity makes a
substantial contribution to the local economy providing employment and using local
suppliers.
a. The public
b. Governments and their agencies
c. Finance entities
d. Private entities

50. Which of the following statements in relation to information needs is true?

I. Information that meets the needs of specified primary users is likely to meet the needs of
other users, such as employees, customers, governments and their agencies and the
public.
II. The management is also interested in financial information but it need not rely on
general purpose financial reports because it can access additional information internally.
a. I only
b. II only
c. Both I and II
d. Neither I nor II

51. The accounting equation “assets = liabilities + equity” is

a. Entity theory
b. Fund theory
c. Proprietary theory
d. Residual equity theory

52. The equation “assets minus liabilities minus preference equity equals ordinary equity” is
a. Fund
b. Entity
c. Proprietary
d. Residual equity

53. Classifying preference dividends as expense is an application of what concept?

a. Entity
b. Proprietary
c. Residual equity
d. Fund

54. The primary accounting objective is fair presentation of the performance of the entity
. a. Entity
b. Proprietary
c. Residual equity
d. Fund

55. Fiduciary accounting is an application of

a. Entity theory
b. Proprietary theory
c. Residual equity theory
d. Fund theory
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56. What is the objective of financial reporting?

a. To provide information about the financial position, financial performance and changes in
financial position of an entity.
b. To prepare and present a statement of financial position, an income statement, a
statement of comprehensive income, a statement of cash flows and a statement of
changes in equity.
c. To provide financial information about an entity that is useful to existing and potential
investors , lenders and other creditors in making decisions about providing resources to
the entity.
d. To prepare financial statements in accordance with all applicable standards and
interpretations.

57. The primary focus of financial reporting has been on meeting the needs of which of the
following groups?
a. Managers of an entity
b. Existing and potential investors, lenders and other creditors
c. National and local taxing authorities
d. Independent CPAs

58. The overall objective of financial reporting is to provide information

a. That is useful for decision making
b. About an entity’s assets, liabilities and owners’ equity
c. About an entity’s financial performance during a period
d. That allows owners to assess management’s performance

59. Which is an objective of financial reporting?

a. To provide information that is useful to those making investing and credit decisions.
b. To provide information that is useful to management.
c. To provide information about those investing in the entity.
d. To provide information about ways to solve internal and external conflicts about the
entity.

60. What is a major objective of financial reporting?

a. To provide information that is useful to management in making decisions.
b. To provide information that clearly portrays nonfinancial transactions.
c. To provide information that is useful to assess the amounts, timing, and uncertainty of
prospective cash receipts.
d. To provide information that excludes claims against the resources.

61. One element of the objective of financial reporting is to provide

a. Information about the investors in the entity.
b. Information about the liquidation value of the resources held by the entity.
c. Information that is useful in assessing cash flow prospects.
d. Information that will attract new investors.

62. Which of the following statements best describe the term “financial position”?
a. The net income and expenses of an entity.
b. The net of financial assets less liabilities of an entity.
c. The potential to contribute to the flow of cash and cash equivalents to the entity.
d. The assets, liabilities and equity of an entity.

63. Which of the following best describes “financial performance” of an entity?

a. The revenue, expenses and net income or loss for a period of an entity.
b. The assets, liabilities and equity of an entity.
c. The total assets minus total liabilities.
d. The total cash inflows minus cash outflows.
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64. As part of the objective of general purpose financial reporting, there is an emphasis on “
assessing cash flow prospects.” This is interpreted to mean
a. Cash basis accounting is preferred over accrual basis accounting.
b. Information about the financial effects of cash receipts and cash payments is generally
considered the best indicator of an entity ’s present and continuing ability to generate
favorable cash flows.
c. Over the long run, trends in revenue and expenses are generally more meaningful than
trends in cash receipts and disbursements.
d. All of the choices are correct regarding “assessing cash flow prospects.”

65. Which of the following statements in relation to financial reporting is incorrect?

a. General purpose financial reports do not and cannot provide all of the information that
primary users need.
b. General purpose financial reports are designed to show the value of the reporting entity.
c. General purpose financial reports are intended to provide common information to users.
d. Financial reports are largely based on estimate and judgment rather than
exact
depiction.

66. The objective of financial reporting are based on

a. The need for conservatism
b. Reporting on management’s stewardship
c. Generally accepted accounting principles
d. The needs of the users of the information

67. The information provided by financial reporting pertains to

a. Individual business entities, rather than to industries or an economy as a whole or to
members of society as consumers.
b. Individual business entities and an economy as a whole or to members of society as
consumers.
c. Individual business entities and an economy as a whole, rather than to industries or to
members of society as consumers.
d. Individual business entities, industries and an economy as a whole, rather than to
members of society as consumers.

68. During a period when an entity is under the direction of a particular management, financial
reporting will directly provide information about
a. Both entity performance and management performance
b. Management performance but not entity performance
c. Entity performance but not management performance
d. Neither entity performance nor management performance

69. Which of the following is not listed as a major objective of financial reporting?
a. Financial reporting shall provide information about entity resources, claims to those
resources and changes in them.
b. Financial reporting shall provide information useful in evaluating management’
s stewardship.
c. Financial reporting shall provide information useful in investment, credit and similar
decisions.
d. Financial reporting shall provide information useful in assessing cash flow prospects.

70. Which of the following statements is not normally an objective of financial reporting?
a. To provide information about an entity’s assets and claims against those assets.
b. To provide information that is useful in assessing an entity’s sources and uses of cash.
c. To provide information that is useful in lending and investing decisions.
d. To provide information about an entity’s liquidation value.
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71. The principles which constitute the ground rules for financial reporting are termed “generally
accepted accounting principles”. To qualify as “generally accepted”, an accounting principle
must
a. Usually guide corporate managers in preparing financial statements which will be
understood by widely scattered shareholders.
b. Guide corporate managers in preparing financial statements, which will be used, for
collective bargaining agreement with trade unions.
c. Guide an entrepreneur of the choice of an accounting entity like single proprietorship,
partnership or corporation.
d. Receive substantial authoritative support.

72. Under generally accepted accounting principles

a. Income and expenses, assets and liabilities are measured based on the concurrence of
changes in the economic resources and obligations.
b. Assets and liabilities are measured on the basis of their liquidation value.
c. Income and expenses are recognized on the basis of cash receipts and payments,
including depreciation of property, plant and equipment.
d. Financial position and financial performance are measured on the basis of cash received
and cash paid.

73. The four phases of accounting are recording, classifying, summarizing and interpreting. The
phase whereby the liquidity, solvency, and profitability of an entity are significantly portrayed
is known as
a. Summarizing
b. Classifying
c. Recording
d. Interpreting

74. Four types of money prices are used in measuring resources in financial accounting. The
measurement which uses such concepts as present value, discounted cash flow and value
in use is known as
a. Price in a current purchase exchange
b. Price in past purchase exchange
c. Price based on future exchange
d. Price in a current sale exchange

75. External events include all of the following, except

a. Sale of merchandise
b. Borrowing from bank
c. Donation received from shareholder
d. Casualty loss caused by flood, earthquake or other natural disaster

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