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Test_Bank_Theory_of_Accounts_Volume_2.pdf
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1TEST BANK THEORY
OF ACCOUNTS
Professional Regulation
1. RA 9298 is officially known as
A. The Revised Accountancy Act
B. The Revised Accountancy Law
C. The Philippine Accountancy Act of 2004
D. The Accountancy Law of the Philippines, 2007
2. Under Section 5 of RA 9298, who shall appoint the members of the Professional Regulatory Board of Accountancy?
A. The chairman of the Board of Accountancy
B. The president of the Republic of the Philippines
C. The chairperson of Professional Regulations Commission
D. The president of Philippine Institute of Certified Public Accountants
Basic Accounting Concepts
3. Financial Accounting can be broadly defined as the area of accounting that prepares
A. Financial statements to be used by investors only
B. Financial statements to be used primarily by management
C. General purpose financial statements to be used by parties internal to the business enterprise only
D. General purpose financial statements to be used by parties both internal and external to the business enterprise
4. The economic entity assumption
A. Requires periodic income measurement
B. Is applicable to unincorporated businesses
C. Recognizes the legal aspects of business entities
D. Is applicable to all forms of business organization
5. Preparation of consolidated FS when a parent-subsidiary relationship exists is an example of the
A. Comparability characteristic
B. Economic entity assumption
C. Neutrality characteristic
D. Relevance characteristics
6. Which of the following is not an economic entity?
A. SM Group of Companies
B. Lions Club International, a civic organization
C. ABS-CBN Foundation, a charitable institution
D. Chris James, a Quezon City resident who owns a chain of beauty salons
7. This accounting objective emphasizes the importance of the Income Statement as it is geared toward proper income or
performance determination of the enterprise.
A. Entity theory C. Proprietary theory
B. Fund theory D. Residual equity theory
8. Which among the following equations best exemplifies the ENTITY theory of accounting?
A. Assets = Liabilities + Capital
B. Assets – Liabilities = Capital
C. Assets + Liabilities = Capital
D. Assets – Liabilities – Preferred SHE = Common SHE
9. Which among the following equations best exemplifies the PROPRIETARY theory of accounting?
A. Assets = Liabilities + Capital
B. Assets – Liabilities = Capital
C. Assets + Liabilities = Capital
D. Assets – Liabilities – Preferred SHE = Common SHE
10. An accountant uses creative skills and judgment when he or she
A. Applies the rules of debit and credit
B. Attest to the fairness of presentation of financial condition and performance of an entity
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C. Interprets the information presented in the financial statements through ratios and trend analysis
D. Performs the function described in (B) and (C) above but not function (A)
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,3 Standard Setting
11. Which of the following statements regarding accounting theory is incorrect?
A. Accounting concepts are human-made
B. Accounting concepts are components of accounting theory
C. Accounting theory has developed primarily in response to government regulations
D. Accounting theory can be defined as a coherent set of hypothetical, conceptual and pragmatic principles that form a
general frame of reference for a field of inquiry.
12. It is a memorandum agreement made between IASB and FASB (US) and signed in Norwalk Connecticut, USA with the goal
of achieving comparability in financial reporting standards by eliminating or minimizing differences between IFRS and US
GAAP.
A. The Convergence Covenant C. The Norwalk Agreement
B. The IASB-FASB Pact D. The Reporting Standard Treaty
13. The name that is presently used for standards issued by the International Accounting Standards Board is
A. International Accounting Standards (IAS)
B. International Financial Reporting Standards (IFRS)
C. International Financial Accounting Interpretations (FAI)
D. International Generally Accepted Accounting Principles (IGAAP)
14. Which of the following organizations is responsible for setting international Financial Reporting Standards?
A. Financial Accounting Committee
B. Financial Accounting Standards Board
C. International Accounting Standards Board
D. International Accounting Standards Committee
15. Which of the following is not directly involved in the accounting standard-setting “due process” in the Philippines?
A. Board of Accountancy
B. Bureau of Internal Revenue
C. Professional Regulations Commission
D. Financial Reporting Standards Council
16. The process of establishing financial accounting standards?
A. Is a legislative process based on rules and promulgated by government agencies
B. Is based solely on economic analysis of the effect each standard will have if it is implemented
C. Is a democratic process is that a majority of practicing accountants must agree with a standard before it becomes
implemented
D. Is a social process which incorporates political actions of various interested user groups as well as professional
research and logic S&S 19e
17. Which is not part of the financial reporting standard setting process in the Philippines?
A. Publication in the PRC Official Gazette and in a newspaper of general circulation
B. Distribution of the exposure draft for comment to CPA professionals and other interested parties
C. Creation of a task force by the standard setting body to study the proposed accounting standard
D. Approval by Financial Reporting Standards Council (FRSC) and eventually by Professional Regulations Commission
(PRC)
18. Which of the following is not a description of a function of the Financial Reporting Standards Council (FRSC)
A. It establishes generally accepted accounting principles in the Philippines
B. It receives financial support principally from the Professional Regulations Commission (PRC)
C. It is the successor of Accounting Standards Council (ASC) and the creator of Philippine Interpretations Committee
(PIC)
D. It assists the Professional Regulatory Board of Accountancy (BOA) in carrying out its power and function to
promulgate accounting standards in the Philippines
19. The International Accounting Standards (IAS) are
A. Focused on quantitative rules
B. Based on regulations not concepts
C. Principles-based rather than rules-based
D. Rules-based rather than principles-based
20. The purpose of the International Financial Reporting Standards (IFRS) is to
A. Promote uniform accounting standards among the countries of the world
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, 4 B. Arbitrate accounting disputes between auditors and international entities
C. Issue enforceable standards which regulate the financial reporting of multinational entities
D. Develop a uniform currency in which the financial transactions of entities throughout the world would be measured
21. Determine the true statement regarding IFRS when referred collectively
A. The term “IAS” generally covers “IFRS”
B. The term “IAS” generally covers “IFRIC”
C. The term “IFRS” generally covers “IAS”
D. The term “IFRIC” generally covers “IFRS”
22. International Financial Reporting Standards are applicable to the following entities:
A. Not-for-profit entities C. Government business enterprises
B. Government activities D. Public sector non-profit organizations
23. Generally accepted accounting principles
A. Rarely change
B. Define accounting practice at a point in time
C. Are not affected by changes in the ways business operate
D. Are similar in nature to the principles of chemistry or physics
24. Generally accepted accounting principles
A. Derive their authority from legal court procedures
B. Have been specified in detail in the FRSC Conceptual Framework
C. Are fundamentally truths or axioms that can be derived from laws of nature
D. Derived their credibility and authority from general recognition and acceptance by the accounting profession
K,W&W
25. To qualify as generally accepted accounting principle must
A. Received substantial authoritative support
B. Guide entrepreneur of the choice of an accounting entity like a sole proprietorship, partnership or corporation
C. Usually guide corporate managers in preparing financial statements, which will be understood by widely scattered
stockholders
D. Guide corporate managers in preparing financial statements, which will be used for collective bargaining agreements
with trade unions. RPCPA 1079
26. Once accounting standard is established
A. The standard is continually reviewed to see if modification is necessary
B. The task of reviewing the standard to see if modification is necessary is given to PICPA
C. The principle of consistency states that no revisions should even be made to the standard
D. The standard is not reviewed, unless Securities and Exchange Commission (SEC) makes a complaint
27. Which of the following is not a source of generally accepted accounting principles in the Philippines?
A. Existing practices in the Philippines
B. Available literature on the topic or subject under study
C. Pronouncements by the Association of CPAs in Public Practice
D. Statements, recommendations, studies, or standards issued by standard-setting bodies such as the International
Accounting Standards Board and Financial Accounting Standards Board.
Conceptual Framework (old)
28. Under the Conceptual Framework of Financial Reporting, users of financial information may be classified into
A. Heavy users (management) and slight users (public, government)
B. Primary users (existing and potential investors and creditors) and other users
C. Internal users (employees, customers) and external users (investors, creditors)
D. Main users (existing investors, creditors) and incidental users (potential investors, creditors)
29. Which of the following is listed in the Framework as underlying assumption regarding financial information?
A. The financial statements are reliable
B. Any changes of accounting policy are neutral
C. The entity can be viewed as a liquidating concern
D. The financial statements are prepared under the accrual basis
30. Which of the following is not considered a primary characteristic of financial information?
A. Comparability C. Neutrality
B. Completeness D. Timeliness
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