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FRSC Framework

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 1. 

Accounting
I. 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.
II. The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are in part of at least a financial character and interpreting the results thereof.
III.The process of identifying, measuring, and communicating economic information to permit informed judgment and decision by users of the information.
a.
I, II, and III
c.
II only
b.
I only
d.
III only
 

 2. 

Financial accounting is concerned with
a.
General purpose reports on financial position and results of operations.
b.
Specialized reports for inventory management and control.
c.
Specialized reports for income tax computations and recognition.
d.
General purpose reports on changes in stock prices and future estimates of market position.
 

 3. 

Financial accounting can be broadly defined as the area of accounting that prepares
a.
General purpose financial statements to be used by parties internal to the business enterprise 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 business enterprise.
d.
Financial statements to be used primarily by management.
 

 4. 

Which is not a purpose of the FRSC framework?
a.
To assist the FRSC in developing accounting standards that represent generally accepted accounting principles in the Philippines.
b.
To assist the FRSC in its review and adoption of existing International Financial Reporting Standards.
c.
To assist auditors in forming an opinion as to whether the financial statements conform with Philippine GAAP.
d.
To assist the Board of Accountancy in promulgating rules and regulations affecting the practice of accountancy in the Philippines.
 

 5. 

Generally accepted accounting principles
a.
Are fundamental truth or axioms that can be derived from laws of nature.
b.
Derive their authority from legal court proceedings.
c.
Derive their credibility and authority from general recognition and acceptance by the accountancy profession.
d.
Have been specified in detail in the FRSC conceptual framework.
 

 6. 

These users are interested in the allocation of resources and activities of enterprises, and therefore require information to regulate the activities of enterprises, determine taxation policies and as a basis for national income and similar statistics.
a.
Suppliers and trade creditors
c.
Public
b.
Customers
d.
Governments and their agencies
 

 7. 

Information about economic resources controlled by the enterprise and its capacity of modify these resources is useful in predicting the
a.
Ability of the enterprise to meet its financial commitments in the near term.
b.
Ability of the enterprise to meet its financial commitments over a longer term.
c.
Future borrowing needs and how future profits and cash flows will be distributed among interested users.
d.
Ability of the enterprise to generate cash and cash equivalents in the future.
 

 8. 

The overriding criterion by which accounting information can be judged is
a.
Usefulness for decision making
c.
Timeliness
b.
Freedom from bias
d.
Comparability
 

 9. 

Which is incorrect concerning the quality of relevance?
a.
The relevance of information is affected by its nature and materiality.
b.
The information must be relevant to the decision-making needs of the users in order to be useful.
c.
Information about financial and past performance is frequently used as a basis for predicting future financial position and performance and other matters such as dividend and wage payments, security price movements and the enterprise to meet its commitments when they fall due.
d.
The predictive and confirmatory roles of information are not interrelated.
 

 10. 

Which is incorrect concerning the qualitative characteristic of comparability?
a.
Horizontal comparability is the quality of information that allows comparisons within a single enterprise through time or from one accounting period to the next.
b.
Dimensional comparability is the quality of information that allows comparisons between two or more enterprises engaged in the same industry.
c.
The need for comparability should not be confused with mere uniformity and should not be allowed to become an impediment to the introduction of improved accounting standards.
d.
It is appropriate for an enterprise to leave its accounting policies unchanged when more relevant and reliable alternatives exist.
 

 11. 

Financial information exhibits the characteristic of consistency when
a.
Expenses are reported as charges against revenue in the period in which they are paid.
b.
Accounting entities give accountable events the same accounting treatment from period to period.
c.
Gains and losses are not included in the income statement.
d.
Accounting procedures are adopted which give a consistent rate of net income.
 

 12. 

A contingent liability is a
I.       Possible obligation arising from past events that will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the enterprise.
II.      Present obligation that arises from past events but it is not recognized because it is not probable that an outflow of resources will be required to settle the obligation or the obligation cannot be measured reliably.
a.
I only
c.
Both I and II
b.
II only
d.
Neither I nor II
 

 13. 

Adjusting events after balance sheet date include all of the following except
a.
The resolution after the balance sheet date of a court case
b.
The bankruptcy of a customer which occurs after the balance sheet date resulting to a loss on a trade receivable account.
c.
The discovery of fraud or errors that show that the financial statements were incorrect.
d.
Dividends to holders of equity instruments proposed or declared after balance sheet date.
 

 14. 

The elements directly related to the measurement of financial position are
a.
Asssets, liabilities, equity, revenue, and expenses
b.
Assets, liabilities, equity, and revenue
c.
Assets, liabilities, and equity
d.
Revenue and expenses
 

 15. 

Asset is
a.
A resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.
b.
A present obligation of the enterprise arising from past events the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.
c.
The residual interest in the assets of the enterprise after deducting all its liabilities.
d.
Equivalent to all financial resources of the enterprise.
 

 16. 

It is the process of incorporating in the balance sheet or income statement an item that meets the definition of an element of financial statements.
a.
Recognition
c.
Realization
b.
Allocation
d.
Summarization
 

 17. 

Historical cost is the measurement basis most commonly adopted by enterprise in preparing the financial statements. This means the
a.
Amount of cash or cash equivalents paid or the fair value of the consideration given.
b.
Amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently.
c.
Amount of cash or cash equivalent that could currently be obtained by selling the asset in an orderly disposal.
d.
Discounted value of the future net cash inflows that an item is expected to generate in the normal course of business.
 

 18. 

Which statement is incorrect concerning the recognition principles?
a.
An asset is recognized when it is probable that future economic benefits will flow to the enterprise and the asset has a cost or value that can be measured reliably.
b.
A liability is recognized when it is probable that an outflow of resources embodying economic benefits will result from the settlement of a present obligation that can be measured reliably.
c.
Income is recognized when an increase in future economic benefits related to an increase in asset or a decrease in liability has arisen that can be measured reliably.
d.
Expenses are recognized when a decrease in future economic benefits related to an increase in asset or a decrease in liability has arisen that can be measured reliably.
 

 19. 

Which is incorrect concerning the recognition of liability?
a.
Obligations may be legally enforceable as a consequence of a binding contract or statutory requirement.
b.
If an enterprise decides as a matter of policy to rectify faults in its products even when these become apparent after the warranty period has expired, the amounts that are expected to be expended in respect of goods sold are liabilities.
c.
An obligation normally arises only when the asset is delivered or the enterprise enters into an irrevocable agreement to acquire the asset.
d.
A decision by the management of an enterprise to acquire assets in the future, in itself, gives rise to a present obligation.
 

 20. 

This process involves the simultaneous or combined recognition of revenues and expenses that result directly and jointly from the same transactions or other events on the basis of direct association between the costs incurred and the earning of specific items of income.
a.
Matching of revenues with costs
c.
Systematic and rational allocation
b.
Matching of costs with revenues
d.
Immediate recognition
 



 
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