1. The ASC ASC framewo framework rk (Choose (Choose the the incorrect incorrect one) one) a. Sets Sets out out the the conc concep epts ts that that unde underl rlie ie the the prep prepar arat atio ion n and and pres presen enta tati tion on of fina financ ncia iall statements for external users. b. Is not a State Statemen mentt of Financi Financial al Accou Accounti ntin n Standa Standards rds and hence hence does does not defin define e standards for an! particular measurement or disclosure issue. c. Is concerned concerned with with special special purpose purpose reports" reports" for example" example" prospectu prospectuses ses and and computations computations prepared for taxation purposes. d. Applies Applies to the financial financial statemen statements ts of all commerci commercial" al" industria industriall and business business reportin reportin enterprises" whether in the public or pri#ate sector. $. Acco Accoun unti tin n is I. A ser#i ser#ice ce acti acti#it #it! ! and and its its fun funct ction ion is to to pro# pro#ide ide %uan %uantit titati ati#e #e info informa rmatio tion" n" prim primari aril! l! fin finan ancia ciall in nature" about economic entities" that is intended to be useful in makin economic decision. II. The art of reco recordi rdin n"" clas classif sif!in !in" " and and summ summari ari&in &in in a sin sinifi ifica cant nt man manne nerr and and in terms terms of of mone!" transactions and e#ents which are in part at least of a financial character and interpretin the results thereof. III. III. The The proc proces ess s of ident identif! if!in in" " measu measuri rin n and comm commun unic icat atin in econ econom omic ic infor informa mati tion on to permit informed 'udment and decision b! users of the information. a. I" II and III b. I onl! c. II onl! d. III onl! . Fina Financ ncia iall accou account ntin in a. Is the examinati examination on of financial financial statement statements s b! an indepen independen dentt CA for the purpose purpose of expressin an opinion as to the fairness of the financial statements. b. Fo Focus cuses es on the pre prepa parat ration ion and pr prese esenta ntatio tion n of e ene neral ral purpose purpose reports reports known known as financial statements. c. *as no precise precise co#era co#erae e but is used eneral enerall! l! to refer to ser#ice ser#ices s to clients clients on matters matters of account accountin" in" finance finance"" busines business s policies policies"" orani&a orani&ation tion procedu procedures" res" product product costs" costs" distribution and man! other phases of business conduct and operations. d. Is the preparatio preparation n of annual income income tax returns returns and determina determination tion of tax conse%u conse%uence ences s of certain proposed business #enture. +. ,hich is not not a purpos purpose e of the the ASC ASC framewo frameworkrka. To assist the ASC in de#elopin de#elopin accountin accountin standards standards that represent represent enerall! enerall! accepted accepted accountin principles in the hilippines. b. To assist assist the ASC ASC in its re#iew re#iew and and adop adoptio tion n of existi existin n Inter Interna natio tional nal Accou Account ntin in Standards. c. To assist assist auditors auditors in formin formin an opinion as to whether whether financial financial statemen statements ts conform conform with hilippine AA. d. To assi assist st the /oard of Accounta Accountanc! nc! in promulatin promulatin rules and reulation reulations s affectin affectin the practice of accountanc! in the hilippines. 0. The ASC ASC framewo framework rk deals deals with (choos (choose e the incorre incorrect ct one) one) a. b'ecti#e b'ecti#e of financia financiall state statement ments s b. 2uali 2ualita tati# ti#e e charac character terist istics ics c. 3efinition" 3efinition" reconition reconition and measurement measurement of the basic basic elements elements of financial financial statements statements d. en enerall erall! ! accept accepted ed accou accountin ntin princip principles les 4. ,hich is is incorrect incorrect concer concernin nin finan financial cial statem statement entss-
a. The ob'ecti#e of eneral purpose financial statements is to pro#ide information about the financial position" performance and cash flows of an enterprise that is useful to a wide rane of users in makin economic decisions. b. Financial statements also show the results of manaement5s stewardship of the resources entrusted to it. c. The manaement of an enterprise has the primar! responsibilit! for the preparation and presentation of financial statements. d. Financial statements are prepared and presented at least annuall! and are directed toward the specific needs of a wide rane of users. 6. The pro#iders of risk capital (in#estors) a. Are interested in information which enables them to assess the abilit! of the enterprise to pro#ide renumeration" retirement benefits and emplo!ment opportunities. b. Are interested in information that enables them to determine whether their loans and the interest attachin to them will be paid when due. c. *a#e an interest in information about the continuance of an enterprise especiall! when the! ha#e a lon7term in#ol#ement with or are dependent on the enterprise. d. Are concerned with the risk inherent in and return pro#ided b! their in#estments and need information to help them determine whether the! should bu! or sell the in#estments. 8. These users are interested in the allocation of resources and acti#ities of enterprises" and therefore re%uire information to reulate the acti#ities of enterprises" determine taxation policies and as a basis for national income and similar statistics. a. Suppliers and trade creditors c. ublic b. Customers d. o#ernments and their aencies
9. Information about economic resources controlled b! the enterprise and its capacit! to modif! these resources is useful in predictin the a. Abilit! of the enterprise to meet its financial commitments in the near term. b. Abilit! of the enterprise to meet its financial commitments o#er a loner term. c. Future borrowin needs and how future profits and cash flows will be distributed amon interested users. d. Abilit! of the enterprise to enerate cash and cash e%ui#alents in the future. 1:. Information about the performance of an enterprise is re%uired in order to assess potential chanes in the economic resources that it is likel! to control in the future. This information is primaril! pictured in the a. Cash flow statement c. /alance sheet b. Statement of retained earnins d. Income statement 11. The accrual basis means that a. The effects of transactions and other e#ents are reconi&ed when the! occur and not as cash or its e%ui#alent is recei#ed or paid and the! are recorded in the accountin records and reported in the financial statements of the periods to which the! relate. b. The financial statements are normall! prepared on the assumption that an enterprise will continue in operation for the foreseeable future. c. ,here parent and subsidiar! relationship exists" consolidated statements for the affiliates are prepared because the parent and the subsidiar! are a ;sinle economic entit!<.
d. The financial statements should be stated in terms of a common financial denominator. 1$. 2ualitati#e characteristics a. Are the attributes that make the information pro#ided in financial statements useful to users. b. Are the enerall! accepted accountin principles. c. Are the basic notions and fundamental premises on which the accountin process is based. d. =efer to the definition" reconition and measurement of the elements from which financial statements are constructed. 1. ,hat are the primar! %ualities of financial accountin information that pertain to the content rather than to the presentation of financial informationa. =ele#ance and reliabilit! c. =ele#ance and comparabilit! b. >nderstandabilit! and comparabilit! d. =eliabilit! and understandabilit! 1+. Information has the %ualit! of rele#ance when a. It influences the economic decisions of users b! helpin them e#aluate past" present or future e#ents or confirmin or correctin their past e#aluations. b. It is free from bias and error and can be depended upon b! users to represent faithfull! that which it either purports to represent or could reasonabl! be expected to represent. c. >sers are assumed to ha#e a reasonable knowlede of business and economic acti#ities and accountin and a willinness to stud! the information with reasonable dilience. d. >sers are informed of the accountin policies emplo!ed" an! chanes in those policies and the effects of such chanes. 10. ,hich statement is incorrect concernin reliabilit! of informationa. The information must be neutral" meanin free from bias. b. The information should reflect the economic substance of the transactions rather than their mere leal form. c. The information must be complete within the bounds of materialit! and cost. d. rudence is the inclusion of a deree of caution in the exercise of 'udment needed in makin an estimate re%uired under conditions of uncertaint!" such that assets or income are o#erstated and liabilities or expenses are understated. 14. ,hich is incorrect concernin the %ualit! of rele#ancea. The rele#ance of information is affected b! its nature and materialit!. b. The information must be rele#ant to the decision7makin needs of the users in order to be useful. c. Information about financial position and past performance is fre%uentl! used as a basis for predictin future financial position and performance and other matters such as di#idend and wae pa!ments" securit! price mo#ements and the abilit! of the enterprise to meet its commitments when the! fall due. d. The predicti#e and confirmator! roles of information are not interrelated. 16. ,hich is incorrect concernin the %ualitati#e characteristic of comparabilit!a. *ori&ontal comparabilit! is the %ualit! of information that allows comparisons within a sinle enterprise throuh time or from one accountin period to the next. b. 3imensional comparabilit! is the %ualit! of information that allows comparisons between two or more enterprises enaed in the same industr!.
c. The need for comparabilit! should not be confused with mere uniformit! and should not be allowed to become an impediment to the introduction of impro#ed accountin standards. d. It is appropriate for an enterprise to lea#e its accountin policies unchaned when more rele#ant and reliable alternati#es exist. 18. ,hich is incorrect concernin the accountin constraints on rele#ant and reliable informationa. It ma! often be necessar! to report before all aspects of a transaction or other e#ent are known" thus impairin reliabilit!. b. The benefits deri#ed from the information should exceed the cost of pro#idin it. c. In achie#in a balance between rele#ance and reliabilit!" the o#erridin consideration is how best to satisf! the economic decision7makin needs of users. d. If there is undue dela! in the reportin of information it ma! lose its rele#ance and reliabilit!.
a.
19. A continent liabilit! is a I. ossible obliation arisin from past e#ents that will be confirmed onl! b! the occurrence or nonoccurrence of one or more uncertain future e#ents not wholl! within the control of the enterprise. II. resent obliation that arises from past e#ents and it is not probable that an outflow of resources will be re%uired to settle the obliation and the obliation can be measured reliabl!. I onl! b. II onl! c. /oth I and II d. ?either I nor II $:. A continent liabilit! is (choose the incorrect one) 3isclosed onl! c. 3isclosed e#en if remote @ither probable or measurable but not both d. ?ot reconi&ed in the financial statements $1. It is a possible asset that arises from past e#ent and whose existence will be confirmed onl! b! the occurrence or nonoccurrence of one or more uncertain future e#ents not wholl! within the control of the enterprise. a. Continent asset c. oodwill b. Intanible asset d. ther asset $$. A continent asset (choose the incorrect one) a. 3isclosed where an inflow of economic benefits if probable. b. 3isclosed where an inflow of economic benefits is remote. c. ?ot reconi&ed in the financial statement. d. ?o loner continent if the reali&ation of income is #irtuall! certain. $. These are the e#ents" both fa#orable and unfa#orable" that occur between the balance sheet date and the date when financial statements are authori&ed for issue. a. @#ents after the balance sheet date c. Fundamental errors b. Continencies d. Current e#ents $+. @#ents after the balance sheet date are a. Ad'ustin e#ents onl!
c. /oth ad'ustin and nonad'ustin e#ents
b. ?onad'ustin e#ents onl! e#ents
d.
?either ad'ustin nor nonad'ustin
$0. Ad'ustin e#ents after balance sheet date include all of the followin" except a. The resolution after the balance sheet date of a court case. b. The bankruptc! of a customer which occurs after the balance sheet date resultin to a loss on a trade recei#able account. c. The disco#er! of fraud or errors that show that the financial statements were incorrect. d. 3i#idends to holders of e%uit! instruments proposed or declared after balance sheet date $4. Financial statements portra! the financial effects of transactions and other e#ents b! roupin them into broad classes accordin to their economic characteristics. These broad classes are termed as the a. @lements of financial statements c. Accountin constraints b. Features of accountin d. Concepts of capital and capital maintenance $6. The elements directl! related to the measurement of financial position are a. Assets" liabilities" e%uit!" re#enue and expenses b. Assets" liabilities" e%uit! and re#enue c. Assets" liabilities and e%uit! d. =e#enue and expenses $8. Asset is a. A resource controlled b! the enterprise as a result of past e#ents and from which future economic benefits are expected to flow to the enterprise. b. A present obliation of the enterprise arisin from past e#ents the settlement of which is expected to result in an outflow from the enterprise of resources embod!in economic benefits. c. The residual interest in the assets of the enterprise after deductin all its liabilities. d. @%ui#alent to all financial resources of the enterprise. $9. It is the process of incorporatin in the balance sheet or income statement an item that meets the definition of an element of financial statements. a. =econition b. Allocation c. =eali&ation d. Summari&ation :. It is the process of determinin the monetar! amounts at which the elements are to be reconi&ed and carried in the balance sheet and income statement. a. easurement b. =econition c. =eportin d. Interpretin 1. *istorical cost is the measurement basis most commonl! adopted b! enterprises in preparin the financial statements. This means the a. Amount of cash or cash e%ui#alent paid or the fair #alue of the consideration i#en. b. Amount of cash or cash e%ui#alent that would ha#e to be paid if the same or an e%ui#alent asset was ac%uired currentl!. c. Amount of cash or cash e%ui#alent that could currentl! be obtained b! sellin the asset in an orderl! disposal. d. 3iscounted #alue of the future net cash inflows that an item is expected to enerate in the normal course of business. $. ,hich statement is incorrect concernin the reconition principles-
a. An asset is reconi&ed when it is probable that future economic benefits will flow to the enterprise and the asset has a cost or #alue that can be measured reliabl!. b. A liabilit! is reconi&ed when it is probable that an outflow of resources embod!in economic benefits will result from the settlement of a present obliation that can measured reliabl!. c. Income is reconi&ed when an increase in future economic benefits related to an increase in asset or a decrease in liabilit! has arisen that can be measured reliabl!. d. @xpenses are reconi&ed when a decrease in future economic benefits related to an increase in asset or a decrease in liabilit! has arisen that can be measured reliabl!. . ,hich is incorrect concernin the reconition of a liabilit!a. bliations ma! be leall! enforceable as a conse%uence of a bindin contract or statutor! re%uirement. b. If an enterprise decides as a matter of polic! to rectif! faults in its products e#en when these become apparent after the warrant! period has expired" the amounts that are expected to be expended in respect of oods sold are liabilities. c. An obliation normall! arises onl! when the asset is deli#ered or the enterprise enters into an irre#ocable areement to ac%uire the asset. d. A decision b! the manaement of an enterprise to ac%uire assets in the future" in itself" i#es rise to a present obliation. +. Technicall!" this arises in the course of the ordinar! acti#ities of an enterprise and is referred to b! a #ariet! of different names includin sales" interest" di#idends" ro!alties and rent. a. Income b. ain c. rofit d. =e#enue 0. This process in#ol#es the simultaneous or combined reconition of re#enues and expenses that result directl! and 'ointl! from the same transactions or other e#ents on the basis of direct association between the costs incurred and the earnin of specific items of income. a. atchin of re#enues with costs c. S!stematic and rational allocation b. atchin of costs with re#enues d. Immediate reconition 4. The followin statements pertain to the concept of income and expenses. ,hich statement is incorrecta. The definition of expenses encompasses losses as well as those expenses that arise in the course of the ordinar! acti#ities of the enterprise. b. Bosses represent other items that meet the definition of expenses and ma! or ma! not arise in the course of the ordinar! acti#ities of the enterprise. c. The definition of re#enue encompasses both income and ains. d. ains represent other items that meet the definition of income and ma! or ma! not arise in the course of the ordinar! acti#ities of an enterprise. 6. ,hich of the followin is not rearded as constitutin a separate element in the ASC Frameworka. Income b. @xpense c. ain d. @%uit! 8. ,hich capital maintenance concept is applied to currentl! reported net income and comprehensi#e incomeCurrentl! reported net income Comprehensi#e income a. Financial capital h!sical capital b. h!sical capital h!sical capital c. Financial capital Financial capital d. h!sical capital Financial capital
9. ,hich statement is correct concernin the two concepts of capitalI. >nder a financial capital concept" such as in#ested mone! or in#ested purchasin power" capital is s!non!mous with the net assets or e%uit! of the enterprise. II. >nder a ph!sical capital concept" such as operatin capabilit!" capital is rearded as the producti#e capacit! of the enterprise. a. /oth I and II b. ?either I nor II c. I onl! d. II onl! +:. ,hich statement is correct concernin the concepts of capitalI. >nder a financial capital concept" a profit is earned onl! if the financial amount of the net assets at the end of the period exceeds the financial amount of the net assets at the beinnin of the period" after excludin an! distributions to and contributions from owners durin the period. II. >nder a ph!sical capital concept" a profit is earned onl! if the ph!sical producti#e capacit! at the end of the period exceeds the ph!sical producti#e capacit! at the beinnin of the period" after excludin distributions to and contributions from owners durin the period. a. /oth I and II b. ?either I nor II c. I onl! d. II onl!
