PHINMA UNIVERSITY OF PANGASINAN

CONCEPTUAL FRAMEWORK and ACCOUNTING STANDARDS

Name: _____________________________________ Section: _________ Date: _____

Instructions: Pray first. Relax your mind. Inhale and exhale. Write the letter of the correct answer.
No erasures and alterations allowed. Erased and altered answers are considered wrong.   

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

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

2. 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

3. 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.

4. Accounting provides which type of information?

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

5. 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

6. 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
7. 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 a chairperson and six members.

8. 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

9. 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.

10. 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.
11. 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.
12. The overall objective of financial reporting is to provide information
a. about an entity's assets, liabilities, and owners' equity.
b. about an entity's financial performance during a period.
c. that is useful in making economic decisions.
d. that allows owners to assess management's performance.

13. 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.

14. 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.

15. Which of the following does not provide evidence of future economic benefits from a resource?
a. The resource cannot be used in the entity’s operations but has a resale value.
b. The resource has no use for the entity but it can be swapped for other resources.
c. The entity does not intend to sell or use the resource but instead distribute it to the owners
as dividends.
d. The resource is expected to be used only in the current period and that’s it.

16. Which of the following would most likely result to 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.

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

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

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

19. 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.
20. Accounting information is considered to be 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.
21. 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.
22. A decrease in net assets arising from peripheral or incidental transactions is called a(n)
a. capital expenditure.
b. cost.
c. loss.
d. expense.

23. 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

24. This type of presentation of statement of financial position does not show distinctions between
current and noncurrent items.
a. Classified presentation
b. Unclassified presentation
c. Non-discriminating presentation
d. Awesome presentation

25. In making an economic decision, an investor needs information on the amounts of an entity’s
economic resources and claims to those resources. That investor would most likely refer to
which of the following financial statements?
a. Statement of financial position
b. Statement of comprehensive income
c. Statement of cash flows
d. Statement of changes in equity

26. Which of the following financial statements would be dated as at a certain date?
a. Statement of financial position
b. Statement of profit or loss and other comprehensive income
c. Statement of cash flows
d. All of these
27. According to PAS 8, these are the specific principles, bases, conventions, rules and practices
applied by an entity in preparing and presenting financial statements.
a. Accounting policies c. Accounting standards
b. Accounting estimates d. Accounting assumptions

28. A change in the pattern of consumption of economic benefits from an asset is most likely a
a. change in accounting policy. c. error.
b. change in accounting estimate. d. any of these

29. PAS 8 permits a change in accounting policy only if the change

a. is required by a PFRS
b. results in reliable and more relevant information
c. a or b
d. PAS 8 does not permit a change in accounting policy

30. These arise from misapplication of accounting policies, mathematical mistakes, oversights or
misinterpretations of facts, or fraud.
a. Error
b. Change in accounting estimate
c. Change in accounting policy
d. Impracticable application

31. How should the following changes be treated, according to PAS 8?

I. A change is to be made in the method of calculating the provision for uncollectible
receivables.
II. Investment properties are now measured at fair value, having previously been measured at
cost.
Change (1) Change (2)
a. Change of accounting policy Change of accounting policy
b. Change of accounting policy Change of accounting estimate
c. Change of accounting estimate Change of accounting policy
d. Change of accounting estimate Change of accounting estimate

32. These are those which do not give rise to a right to receive (or an obligation to deliver) a fixed
or determinable amount of money.
a. Monetary items
b. Non-monetary items
c. Financial items
d. Non-financial items

33. What is the role of the IASB?

a. Oversee the standard setting and regulatory process
b. Formulate international financial reporting standards
c. Review defective accounts
d. Control the accountancy profession
34. Who issues International Financial Reporting Standards?
a. The IFRS Advisory Committee
b. The Stock Exchange
c. The International Accounting Standards Board
d. The Government

35. The IASB Conceptual Framework identifies user groups. Which of the following is not an
information need for the ‘investor’ group?
a. Assessment of repayment ability of an entity
b. Measuring performance, risk and return
c. Taking decisions regarding holding investments
d. Taking buy/sell decisions

36. Which one of the following can be recognized as an asset in the financial statements in
accordance with the Conceptual Framework?
a. Php2,000.00 paid to train staff members
b. Php70,000.00 research costs that may result in the development of a new product
c. A Php100,000.00 contract with a customer to deliver goods at a specified date in the
future
d. The Php2,000,000.00 transfer fee paid by a basketball team to acquire a player on
contract from another team.

37. Which of the following would not necessarily lead to a liability being classified as a current
liability?
a. The liability is expected to be settled in the course of the entity’s normal operating
cycle.
b. The liability has arisen during the current accounting period.
c. The liability is held primarily for the purpose of trading.
d. The liability is due to be settled within 12 months after the end of the reporting period.

38. How does IAS 1 define the ‘operating cycle’ of an entity?

a. The time between acquisition of assets for processing and delivery of finished goods to
customers.
b. The time between delivery of finished goods and receipt of cash from customers.
c. The time between acquisition of assets for processing and payment of cash to suppliers.
d. The time between acquisition of assets for processing and receipt of cash from
customers.

39. Where are equity dividends paid presented in the financial statements?
a. As a deduction from retained earnings in the statement of changes in equity.
b. As a liability in the statement of financial position
c. As an expense in profit or loss
d. As a loss in ‘other comprehensive income’
40. In accordance with IAS 1 Presentation of Financial Statements, which of the following
statements is correct?
a. All financial statements must be prepared on an accrual basis
b. Inappropriate accounting policies can be rectified by disclosure
c. Financial statements must always be prepared on a going concern basis
d. Assets and liabilities should not be offset unless required or permitted by an IFRS.

41. The basic objective of accounting is

a. To provide the information that the managers of an economic entity need to control its
operations.
b. To provide information that the creditors of an economic entity can use in deciding
whether to make additional loans to the entity.
c. To measure the periodic income of the economic entity
d. To provide quantitative financial information about an entity that is useful in making
rational economic decision.

42. Financial Accounting is concerned with

a. General-purpose reports on financial position and financial performance.
b. Specialized reports for inventory management and control
c. Specialized reports for income tax computation and recognition
d. General-purpose reports on changes in stock prices and future estimates of market
position.

43. The relatively stable economic, political and social environment supports
a. Conservatism c. Timeliness
b. Materiality d. Going concern

44. In the Conceptual Framework for financial reporting, what provides the “why” of accounting?
a. Measurement and recognition concept
b. Qualitative characteristics of accounting information
c. Element of financial statements
d. Objective of financial reporting

45. Noncurrent asset classified as held for sale shall be presented in the statement of financial
position as
a. Current asset
b. Other noncurrent asset
c. Noncurrent investment
d. Property, plant and equipment
46. It comprises operations and cash flows that can be clearly distinguished, operationally. It
comprises operations and cash flows that can be clearly distinguished, operationally and for
financial reporting purposes from the rest of the entity
a. Component of an entity
b. Disposal group
 c. Business segment
d. Corporate asset
47. A discontinued operation is a component of an entity that either has been disposed of or is
classified as held for sale and
I. Represents a separate major line of business or geographical area of operations
II. Is a part of a single coordinated plan to dispose of a separate major line of business or
geographical area of operation.
III. Is a subsidiary acquired exclusively with a view to resale

a. I only
b. I and II only
c. I and III only
d. I, II, and III only
48. Which of the following is not one of the primary users listed in the Conceptual Framework?
a. Investors c. Creditors
b. Lenders d. Debtors
49. Which of the following is least relevant in determining an entity’s functional currency?
a. The currency that influences the entity’s sales prices and costs
b. The currency in which the entity generates financing cash flows
c. The currency in which cash flows from operating activities are retained.
d. The currency of the country in which the entity is located.
50. Changes to reporting standards are primarily made in response to
a. Government regulations
b. Users’ needs
c. Global modernization
d. All of these

“The discerning heart seeks knowledge, but the mouth of a fool feeds on
folly.” (Proverbs 15:14)