CFAS 1

QUIZ
1. It refers to the process of incorporating the effects of an accountable event in the statement of
financial position or the statement of profit or loss and other comprehensive income through a
journal entry.
a. realization
b. derecognition
c. recognition
d. posting

2. All of the following are events considered as exchange or reciprocal transfer, except
a. purchase of investment in equity securities
b. sale of equipment for non-interest bearing note
c. subscription of the entity’s own equity instrument (i.e., contributions by owners)
d. exchange of a note payable for an account payable
e. borrowing of money from a bank

3. All of the following are events considered nonreciprocal transfers, except

a. declaration of cash dividends
b. declaration of stock dividends
c. payment of accounts payable
d. imposition of fines
e. theft

4. These are events involving an entity and another external party.

a. external events
b. internal events
c. transactions
d. life events

5. It is the accounting process of assigning numbers, commonly in monetary terms, to the economic
transactions and events.
a. analyzing c. classifying
b. measuring d. interpreting

6. What is the basic purpose of accounting?

a. To provide quantitative financial information about economic activities.
b. To provide all information that users need in making economic decisions.
c. To provide qualitative financial information about economic activities intended to be useful
in making economic decisions.
d. To provide quantitative financial information about economic activities intended to be useful
in making economic decisions.

7. Accounting provides which type of information?

a. quantitative
b. financial information
c. qualitative
d. all of these

8. General purpose financial statements are

a. those statements that cater to the common and specific needs of a wide range of external
users.
b. those statements that cater to the common needs of a wide range of external users and
internal users.
c. those statements that cater to the common needs of a limited range of external users.
d. those statements that cater to the common needs of a wide range of external users.

9. External users are those

a. who do have the authority to demand financial reports tailored to their specific needs.
b. who do not have the authority to demand financial reports tailored to their common needs.
c. who do not have the authority to demand financial reports tailored to their specific needs.
d. who belong to countries other than the domicile country of the reporting entity

10. The primary objective of financial reporting is to provide

a. information about economic resources, claims to these resources, and changes in them.
b. information useful for investment and credit decisions.
c. information useful in predicting future cash flows.
d. all of these

11. Which of the following statements is false?

a. Accountable events are those that have an effect in an entity's assets, liabilities, equity,
income or expenses.
b. The term “recognition” as used in accounting refers to the process of incorporating the
effects of an accountable event in the statement of financial position or the statement of profit
or loss and other comprehensive income through a memo entry.
c. External events are those that involve the reporting entity and an external party.
d. The Board of Accountancy consists of achairperson and six members.

12. Which of the following statements is true?

a. In current practice, accounting provides only quantitative information that is useful in
making economic decisions.
b. External users are those who do not have the authority to demand financial reports tailored
to their specific needs.
c. Under the stable monetary unit assumption, the owners of the business and the business are
viewed as a single reporting entity.Therefore, the personal transactions of the owners are
recorded in the books of accounts.
d. The practice of accountancy in the Philippines is regulated under R.A. 9892.

13. Which of the following statements correctly refer to the accounting process?
I. Measuring is the accounting process of analyzing business activities as to whether or not
they will be recognized in the books.
II. Recognitionrefers to the process of including the effects of an event in the totals of the
statement of financial position or the statement of profit or loss and other comprehensive
income through memo entries.
III. Disclosure of events in the notes to financial statement without including their effect in the
totals of the statement of financial position or statement of profit or loss and other
comprehensive income is not an application of the recognition principle.
IV. An accountable eventis an event that has an effect on the assets, liabilities or equity of an
entity and its effect can be measured reliably.
V. Sociological and psychological matters are within the scope of accounting.
a. I, II, III, IV and V
b. I, II, III and IV
c. IV
d. III and IV

14. Which of the following statements is true?

I. Loss from theft is classified as a nonreciprocal transfer.
II. Internal events are changes in economic resources by actions of other entities that do not
involve transfers of resources and obligations.
III. Nonreciprocal transfers involve the transfer of resources in only one direction, either from an
entity to other entities or from other entities to the entity.
IV. Internal events are sudden, substantial, unanticipated reductions in resources not caused by
other entities.
V. Fire, earthquake and flood are examples of accountable events classified as internal events.
a. I, II, III and V
b. I, III and V
c. II, III, IV and V
d. I, III, IV and V

15. Asset measurements in conventional financial statements

a. are confined to historical cost.
b. are confined to historical cost and current cost.
c. reflect several financial attributes.
d. do not reflect output values.

16. During the lifetime of an entity, accountants produce financial statements at arbitrary points in
time in accordance with which basic accounting concept?
a. Cost/benefit constraint
b. Periodicity assumption
c. Conservatism constraint
d. Matching principle

17. What accounting concept justifies the use of accruals and deferrals?
a. Going concern assumption
b. Materiality constraint
c. Consistency characteristic
d. Monetary unit assumption

18. The assumption that a business enterprise will not be sold or liquidated in the near future is
known as the
a. economic entity assumption.
b. monetary unit assumption.
c. conservatism assumption.
d. going concern.

19. Valuing assets at their liquidation values rather than their cost is inconsistent with the
a. periodicity assumption.
b. matching principle.
c. materiality constraint.
d. historical cost principle.

20. When products or other assets are exchanged for cash or claims for cash, they are said to be
a. allocated.
b. realized.
c. recognized.
d. earned.

21. A soundly developed conceptual framework of concepts and objectives should

a. increase financial statement users' understanding of and confidence in financial reporting.
b. enhance comparability among companies' financial statements.
c. allow new and emerging practical problems to be more quickly soluble.
d. all of these.

22. AStandard sometimes contains requirements that depart from the Conceptual Framework. In such
cases,
a. the requirements of the Conceptual Framework will prevail over those of the Standard.
b. the departure is explained in the ‘Basis for Conclusions’ on that Standard.
c. the entity’s management shall formulate its own accounting policy and disregards both the
requirements of the Conceptual Framework and the Standard.
d. A Standard should never depart from the Conceptual Framework.

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

a. about an entity's assets, liabilities, and equity.
b. about an entity's financial performance during a period.
c. that is useful to primary users in making economic decisionsabout providing resources to
the entity.
d. that allows owners to assess management's performance.

24. The two primary qualities that make accounting information useful for decision making are
a. comparability and consistency.
b. materiality and timeliness.
c. relevance and reliability.
d. faithful representation and relevance.

25. According to the Conceptual Framework, predictive value relates to

Relevance Faithful representation
a. Yes Yes
b. No Yes
c. Yes No
d. No No

26. Which of the following is considered a qualitative factor in making materiality judgments?
a. the context of an item in relation to the current economic state of the environment where the
entity operates.
b. 10% of profit or loss, in absolute terms
c. 5% of total revenues
d. 1% of total assets

27. Which of the following statements about materiality is not correct?

a. An item must make a difference; otherwise, it need not be reported.
b. Materiality is affected by an item’s relative size and/or importance.
c. An item is material if its inclusion or omission would influence or change the judgment of a
reasonable person.
d. All of these are correct statements about materiality.

28. The Filipino adage “Aanhin mo pa ang damo pag patay na ang kabayo” relates to which of the
following qualitative characteristics?
a. Relevance
b. Timeliness
c. Faithful representation
d. Comparability

29. When information about two different entities has been prepared and presented in a similar
manner, the information exhibits the characteristic of
a. relevance.
b. reliability.
c. consistency.
d. comparability.

30. According to the Conceptual Framework, physical count of inventory is an example of

a. direct verification.
b. indirect verification.
c. timeliness.
d. relevance.
31. 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.

32. The quality of information that gives assurance that it is reasonably free of error and bias and
provides a true, correct and complete depiction of what it purports to represent is
a. relevance.
b. faithful representation.
c. verifiability.
d. neutrality.

33. Information is neutral if it

a. provides benefits which are at least equal to the costs of its preparation.
b. can be compared with similar information.
c. has no impact on a decision maker.
d. is free from bias toward a predetermined result.

34. Decision makers vary widely in the types of decisions they make, the methods of decision
making they employ, the information they already possess or can obtain from other sources, and
their ability to process information. Consequently, for information to be useful there must be a
linkage between these users and the decisions they make. This link is
a. relevance.
b. reliability.
c. understandability.
d. materiality.

35. Which of the following is considered a pervasive constraint by the Conceptual Framework?
a. Cost constraint
b. Verifiability
c. Conservatism
d. Cost restraint

36. Which of the following is not an element that is directly related to the measurement of an
entity’s financial position?
a. assets
b. liabilities
c. equity
d. income

37. The revised Conceptual Framework defines an asset as

a. a resource controlled by the entity as a result of past events and from which future economic
benefits are expected to flow to the entity.
b. a present economic resource controlled by the entity as a result of past events. An economic
resource is a right that has the potential to produce economic benefits.
c. a physical object that can produce economic benefits for the entity.
d. All of these.

38. Which of the following is most likely to result in the recognition of a liability?
a. Customers become entitled to rebates for their past purchases.
b. Intention to acquire inventories in a future period.
c. Entering into a purchase contract for future delivery.
d. Agreeing on an irrevocable future commitment that is not burdensome at present.

39. Which of the following is not an indication of an economic resource’s potential to produce
economic benefits for the entity?
a. The resource cannot be used in the entity’s operations but has a resale value.
b. The resource has no use to the entity but it can be exchanged for another resource with
another party.
c. The entity does not intend to sell or use the resource but instead distribute it to the owners as
dividends.
d. The economic benefits from the resource were already consumed by the entity.

40. Which of the following correctly reflects the Conceptual Framework definitions of income and
expenses?
Income Expenses
a. Increase in assets Increase in liabilities
b. Decrease in assets Decrease in liabilities
c. Owner contributions Owner distributions
d. Decrease in equity Increase in equity

END OF QUIZ