Name Student Number

Professor Name Date of Examination

Section Schedule (Time/Day)

I. True or False 7. On June 1, Lucy & Bros received

1. Prudence or conservatism means an order for 500 cupcakes. Lucy
when in doubt, choose the solution delivered the cupcakes to the
that will be least likely to overstate client on June 25. A $50 deposit
liabilities or expenses. F was received on June 5 and the
2. Relevance and faithful remaining $450 was paid on June
representation are the two 30. Lucy likely would recognize
primary qualities that make revenue on June 30. F
accounting information useful for 8. Accrued liabilities result from
decision making. T payment before services are
3. Users of financial statements are received. F
assumed to need no knowledge 9. Gains are increases in equity from
of business and financial peripheral transactions of an
accounting matters to understand entity. T
information contained in financial 10. Financial accounting emphasizes
statements. F special purpose information
4. Financial statements are the based on presumption that
principal means through which a significant numbers of users need
company communicates its similar information F
financial information to those
outside it. T II. Multiple Choice: Shade the circle
5. The objective of financial of the letter of your
reporting is to provide financial corresponding answer
information about the reporting 11. The communicating process of
entity that is useful to present accounting includes all of the
and potential equity investors, following except
but not to users who are not a. Recording
investors. F b. Classifying
6. The primary function of financial c. Summarizing
accounting is to provide relevant d. Interpreting
financial information to parties 12. The underlying theme of the
external to business enterprises. conceptual framework is
T a. decision usefulness.
b. understandability.
 c. faithful representation. 16. These users are interested in
d. comparability. information about the
13. Which of the following is not an continuance of an entity,
objective of financial reporting? especially when they have a long
a. To provide information term involvement with or are
about economic resources, dependent on the entity
the claims to those a. Customers
resources, and the changes b. Employee
in them. c. Trade union
b. To provide information that d. Suppliers
is helpful to investors and 17. These users are interested in
creditors and other users in information in order to regulate
assessing the amounts, the activities of an entity,
timing, and uncertainty of determine taxation polocies and
future cash flows. provide a basis for national
c. To provide information that statistics
is useful to those making a. Government and their
investment and credit agencies
decisions. b. Major organization of users
d. All of these are objectives c. Bureau of Internal Revenue
of financial reporting. d. Department of Finance
14. The two fundamental qualities 18. Which of the following is an
that make accounting information internal user of financial
useful for decision making are information
a. comparability and a. Board of directors
timeliness. b. Shareholder
b. materiality and neutrality. c. Holder of bond
c. relevance and faithful d. Creditor with long term
representation. contract
d. faithful representation and 19. What is meant by comparability
comparability. when discussing financial
15. The characteristic that is accounting information
demonstrated when a high a. Information has predictive
degree of consensus can be and confirmatory value
secured among independent b. Information is reasonably
measurers using the same free from error
measurement methods is c. Information is measured
a. relevance. and reported in a similar
b. faithful representation. fashion across entities
c. verifiability. d. Information is timely
d. neutrality.
20. The relatively stable economic, b. Eliminate alternative
political and social environment accounting principles
supports c. Guiding multinational
a. Conservatism entities in developing
b. Materiality generally accepted auditing
c. Timeliness standards
d. Going Concern d. Define the basic objectives,
21. Which underlying assumption terms and concepts of
serves as the basis for preparing accounting
financial statements at regular 26. Which of the following is not a benefit
artificial points in time associated with the Conceptual
a. Accounting entity Framework
b. Going concern a. A conceptual framework should
c. Accounting period increase users understanding and
d. Stable monetary unit confidence in financial reporting
22. All of the following are b. Practical problems should be more
represented in FRSC, excepts quickly solvable
a. Board of Accountancy c. A coherent set of accounting
b. Securities and Exchange standards should result
Commission d. Business entities will need far less
c. Commission on Audit assistance from accountants
d. Department of Budget and
Management 27. Inflation is ignored in accounting due to
23. Which basic accounting a. Economic entity assumption
assumption is threatened by the b. Going concern assumption
existence of severe inflation in c. Monetary unit assumption
the economy d. Time period assumption
a. Monetary unit assumption 28. Accountants employed in entities in
b. Periodicity assumption various capacity as accounting staff,
c. Going concern assumption chief accountant or controller are said
d. Economic entity to be engaged in
assumption a. Public Accounting
24. These users requires information b. Private accounting
on risk and return provided by c. Government accounting
their investment d. Financial accounting
a. Investors 29. The underlying theme of the
b. Employee conceptual framework is
c. Lenders a. decision usefulness.
d. Customers b. understandability.
25. A conceptual framework should c. faithful representation.
a. Lead to uniformity of d. Comparability
financial statements
30. Which underlying assumption and other users in assessing the
serves as the basis for preparing amounts, timing, and uncertainty
financial statements at regular of future cash flows.
artificial points in time c. To provide information that is
a. Accounting entity useful to those making
b. Going concern investment and credit
c. Accounting period decisions.
d. Stable monetary unit d. All of these are objectives of
31. A conceptual framework should financial reporting.
a. Lead to uniformity of 35. Enhancing qualitative
financial statements characteristics of accounting
b. Eliminate alternative information include
accounting principles a. Relevance and
c. Guiding multinational comparability
entities in developing b. Comparability and
generally accepted timeliness
auditing standards c. Understandability and
d. Define the basic relevance
objectives, terms and d. Neutrality and
concepts of accounting comparability
32. The qualitative characteristics of 36. Recognizing expected losses
faithful representation includes immediately but deferring
a. Predicative value expected gains is an example of
b. Neutrality a. Materiality
c. Confirmatory value b. Conservatism
d. Timeliness c. Cost effectiveness
33. Enhancing qualitative d. Timeliness
characteristics of accounting 37. When an entity changed the
information include all of the inventory valuation method
following, except which characteristic is
a. Timeliness jeopardized by this change
b. Materiality a. Comparability
c. Comparability b. Representation
d. Verifiability faithfulness
34. Which of the following is not an c. Consistency
objective of financial reporting? d. Feedback value
a. To provide information about 38. The primary responsibility for properly applying
economic resources, the GAAP
claims to those resources, a. External Auditor
and the changes in them. b. Internal Auditor
b. To provide information that is c. Management
helpful to investors and creditors d. National accounting organization
39. Which statement is true concerning the
Conceptual Framework for financial reporting
a. The conceptual framework is not a
reporting standards\ and does not define
standards for any particular
measurement or disclosure issue.
b. The conceptual framework is concerned
with general purpose financial
statements including consolidated
financial statements
c. Nothing in the conceptual framework
overrides any specific Philippine financial
Reporting Standards.
d. All of these statements are true
about conceptual framework
40. 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. Suppliers