ACCOUNTING 5 QUIZ

1.) 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. Completeness
b. Verifiability
c. Relevance
d. Neutrality

2.) It is the result of the standard of adequate disclosure.

a. Substance over form
b. Completeness
c. Faithful Representation
d. Neutrality

3.) It is the ability to bring together to note similarities and dissimilarities.

a. Understandability
b. Comparability
c. Reliability
d. Relevance

4.) 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. Accrual
b. Going Concern
c. Time Period
d. Monetary Unit
5.) Which of the following is incorrect?
a. 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.
b. Expenses are matched with revenues, not the reverse.
c. By the going concern assumption, the life of a business is presumed to be indefinite.
d. 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.

6.) It is the capacity of information to make a difference in decisions by helping users

evaluate past, present or future events, or confirming, or correcting, their past
evaluations.
a. Understandability
b. Comparability
c. Reliability
d. Relevance

7.) 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. Prudence
b. Neutrality
c. Completeness
d. Faithful Representation

8.) 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. Accounting entity
b. Going concern
c. Time period
d. Accrual
9.) Financial reports communicated after an accounting decision has been made defeat
the primary purpose which characteristic?
a. Timeliness
b. Materiality
c. Conservatism
d. Adequate Disclosure

10.) 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. Approximation
b. Materiality
c. Conservatism
d. Application of judgment

11.) Financial reporting is concerned only with information that is significant enough to
affect evaluation decisions.
a. Cost and benefit
b. Comparability
c. Materiality
d. Timeliness

12.) This accounting concept justifies the usage of accruals and deferrals.
a. Stable monetary unit
b. Going concern
c. Materiality
d. Consistency

13.) The financial information must be comprehensible or intelligible if it is to be useful.

a. Reliability
b. Comparability
c. Relevance
d. Understandability
14.) In the event of a conflict between the economic substance of a transaction and its
legal form, the economic substance shall prevail. This concept is known as
a. Faithful Representation
b. Completeness
c. Substance over form
d. Form over substance

15.) Which accounting process is the recognition or non-recognition of business

activities as accountable events?
a. Recording
b. Identifying
c. Communicating
d. Measuring

16.) Accountants do not recognize that the value of the peso changes over time. This
concept is called the
a. Entity concept
b. Cost principle
c. Stable monetary unit concept
d. Going concern concept

17.) The consistency standard of reporting requires that

a. The accounting procedures be adopted which give a consistent rate of return
b. Expenses be reported as charges against the period in which they are incurred
c. The effect of changes in accounting upon income be properly disclosed
d. Extraordinary gains and losses should not appear on the income statement
18.) The periodicity concept
a. Requires that all companies prepare monthly, quarterly, and annual financial
statements
b. Results from the Bureau of Internal Revenue requirement that taxable income be
reported on an annual basis
c. Requires all companies to use a fiscal year ending December 31
d. Involves dividing the life of a business entity into accounting periods of equal length
enabling the financial users to periodically evaluate the results of business operations

19.) Which area of public accounting means the examination of financial statements by
a CPA to express an opinion on the fairness of the statements?
a. External auditing
b. Internal auditing
c. Taxation
d. Management Advisory Services

20.) The measurement phase of accounting is accomplished by

a. Storing data
b. Reporting to decision-makers
c. Recording data
d. Processing data

21.) The consistency concept means that

a. Firms in the same industry must account for similar items in the same way
b. Firms may never change how they prepare their accounts
c. When preparing the accounts of a firm, one should normally account for similar items
in the same way from one accounting period to the next
d. None of the above
22.) Which of the following accounting concepts states that an accounting transaction
should be supported by sufficient evidence to allow two or more qualified individuals to
arrive at essentially similar conclusions?
a. Periodicity
b. Matching
c. Stable monetary unit
d. Objectivity

23.) The financial accounting process provides information about the economic
activities of an enterprise for a specified accounting period that is shorter than the life
of the enterprise.
a. Going concern
b. Measurement in terms of money
c. Time period
d. Measurement of economic resources and obligations

24.) Accounting changes are often made and the monetary impact is reflected in the
financial statements of a company even though, in theory, this may be a violation of
the accounting concept of
a. Materiality
b. Consistency
c. Objectivity
d. Conservatism

25.) Stating assets and liabilities and changes in them in terms of a common financial
denominator is a prerequisite in measuring financial position and periodic net income.
a. Measurement of economic resources and obligations
b. Exchange price
c. Accrual
d. Unit of measure
26.) The basic purpose of accounting is
a. To provide quantitative financial information about a business enterprise that is useful
in making rational economic decisions.
b. To measure the periodic income of the economic entity
c. To provide the information that the managers of an economic entity needed to control
its operations
d. To provide information that the creditors of an economic entity can use in deciding
whether to make additional loans to the entity

27.) The entity concept means that

a. The financial affairs of a firm and its owner are always kept separate to prepare
accounts
b. Accounts must be prepared for every firm
c. Because a firm is separate and distinct from its owners, those owners cannot have
access to its assets unless the firm ceases to trade
d. None of the above

28.) They encompass the conventions, rules, and procedures necessary to define what
is accepted accounting practice
a. Generally accepted accounting principles
b. Accounting assumptions
c. Conceptual framework
d. Accounting concepts

29.) The main function is to establish and improve accounting standards that will be
generally accepted in the Philippines.
a. Philippine Institute of CPAs
b. Professional Regulation Commission
c. Board of Accountancy
d. Financial Reporting Standards Council
30.) Accountants employed by a particular business firm or not-for-profit organization,
perhaps as chief accountant, controller, or financial vice president, are said to be
engaged in
a. Practice in commerce and industry
b. Independent accounting
c. General Accounting
d. Public Accounting

31.) The communication process of accounting includes all of the following, except
a. Recording
b. Classifying
c. Summarizing
d. Interpreting

32.) Accountants employed in entities in various capacities 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

33.) 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 share prices and future estimates of market
position

34.) Financial Accounting is the area of accounting that emphasizes reporting to

a. Management
b. Regulatory bodies
c. Internal auditors
d. Creditors and investors
35.) Managerial accounting is the area of accounting that emphasizes
a. Reporting financial information to external users
b. Reporting to the SEC
c. Combining accounting knowledge with expertise in data processing
d. Developing accounting information for use within an entity

36.) General purpose financial statements are the product of

a. Financial Accounting
b. Managerial accounting
c. Both financial accounting and managerial accounting
d. Neither financial nor managerial accounting

37.) 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
financial reporting section of the SEC
d. Derive their credibility and authority from general recognition and acceptance by the
accountancy profession

38.) Which of the following statements best describes generally accepted accounting
principles?
a. They have been formulated in the public sector
b. They have been developing based on 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

39.) The International Accounting Standards Board was formed to

a. Enforce IFRS in foreign countries
b. Develop worldwide accounting standards
c. Establish accounting standards for multinational entities
d. Develop accounting standards for countries that do not have their standard-setting
bodies
40.) The International Accounting Standards Board publishes its standards in a series
of pronouncements called
a. International Accounting Standards
b. Financial Reporting Standards
c. International Financial Reporting Standards
d. Statement of Financial Accounting Standards

41.) It is a global phenomenon intended to bring about transparency and a higher

degree of comparability in financial reporting, both of which will benefit the investors
and are essential to achieving the goal of uniform and globally accepted financial
reporting standards.
a. IFRS
b. Borderless Accounting
c. World Trade
d. Information Technology

42.) What is the authoritative status of the Conceptual Framework?

a. The Conceptual Framework has the highest level of authority.
b. In the absence of a standard or an interpretation that specifically applies to a
transaction, the conceptual Framework shall be followed.
c. In the absence of a standard or interpretation that specifically applies to a
transaction, management shall consider the applicability of the Conceptual Framework
in developing and applying an accounting policy that results in information that is
relevant and faithfully represented.
d. The Conceptual Framework applies only when the FRSC develops new or revised
standards.

43.) Which of the following is not a purpose of the Conceptual Framework?

a. To assist the FRSC in developing accounting standards that will represent GAAP in
the Philippines
b. To assist the FRSC in its review and adoption of existing international accounting
standards
c. To assist auditors in forming an opinion as to whether financial statements conform
with Philippine GAAP
d. To assist the Board of Accountancy in promulgating rules and regulations affecting
the practice of public accountancy
44.) These users are interested in information about the continuance of an entity,
especially when they have long-term involvement with or are dependent on the entity.
a. Customers
b. employees
c. trade unions
d. suppliers

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

46.) Accounting information is considered relevant when it

a. Can be depended on to represent the economic conditions and events that it is
intended to represent
b. Is capable of making a difference in a decision
c. Is understandable by reasonably informed users of accounting information
d. Is verifiable and neutral

47.) When information about two different entities engaged in the same industry has
been prepared and presented similarly, the information exhibits the enhancing
qualitative characteristic of
a. Relevance
b. Faithful representation
c. Consistency
d. Comparability
48.) The characteristic that is demonstrated when a high degree of consensus can be
secured among independent measurers using the same measurement method is
a. Relevance
b. Understandability
c. Verifiability
d. Neutrality

49.) What is the quality of information that enables users to better forecast future
operations?
a. Faithful representation
b. Materiality
c. Comparability
d. Relevance

50.) It is an increase in economic benefit during the accounting period related to an

increase in asset or increase in liability that increases equity other than the contribution
from owners.
a. Asset
b. Liability
c. Income
d. Expenses

51.) An asset is recognized when

a. It is probable that future economic benefits will flow to the entity
b. The cost or the value of the asset can be measured reliably
c. The entity obtains control of the rights associated with the asset
d. It is probable that future economic benefit will flow to the entity and the cost or value
of the asset can be measured reliably
52.) It is the amount of cash or cash equivalent that would have to be paid if the same
or an equivalent asset was acquired currently.
a. Historical cost
b. Current cost
c. Realizable value
d. Present value

53.) Which of the following terms best describes the amount of cash or cash equivalents
that could currently be obtained by selling an asset in an orderly disposal?
a. Fair value
b. Realizable value
c. Residual value
d. Value in use

54.) The revenue principle states that revenue shall be recognized at a point when
a. An exchange transaction involving goods and services has occurred and the earnings
process is essentially complete
b. An order for shipment of a definite amount of merchandise has been received
c. A contract between buyer and seller has been signed by both parties
d. The seller has shipped merchandise to a customer under the terms that the customer
need not pay for the merchandise until it is sold

55.) Which of the following is expensed under the principle of systematic and rational
allocation?
a. Salesmen’s monthly salaries
b. Insurance premiums
c. Transportation to customers
d. Electricity to light office building
II. IDENTIFY THE PRINCIPLE, CONCEPT, OR ASSUMPTION THAT IS MOST CLEARLY
VIOLATED BY THE ACCOUNTING PRACTICE DESCRIBED IN EACH STATEMENT BELOW.

1.) An electronics entity owned by Kyle Francis reports the cost of Kyle Francis’
swimming pool as an asset in the statement of financial position.

2.) An entity changes from the weighted average method to FIFO when accounting for
inventory.

3.) Expenses are reported whenever the accountant records them rather than when
related revenues are earned

4.) The owners of a five-star hotel base their accounting records on the assumption
that the hotel might close at any time.

5.) After starting a business, a mining entity keeps no accounting records. The entity
is waiting until the mine is exhausted to determine the success or failure of the
business.