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Which of the following elements of financial statements is not a component

of comprehensive income?

J. Revenues
P. Expenses
I. Losses
A. Distribution to owners
Ans: A. Distribution to owners
2. When there is much variability, the operating cycle is measured at
J. The mean value
P. The median value
I. Twelve months
A. Three years
Ans: I. twelve months
3. According to the conceptual framework, the process of reporting an
item in the financial statements of an entity is

J. Realization
P. Recognition
I. Matching
A. Allocation
Ans: P. Recognition
4. How would proceeds received in advance from the sale of
nonrefundable tickets for the Super
Bowl be reported in the seller’s financial statements published before
the Super Bowl?

J. Revenues for the entire proceeds


P. Revenue less related costs
I. Unearned revenue less related cost
A. Unearned revenue for the entire proceeds
Ans: A. Unearned revenue for the entire
proceeds
• 5. What is the only underlying assumption mentioned in the
Conceptual Framework for Financial
Reporting?
J. Going concern
P. Accounting entity
I. Time period
A. Monetary unit
Ans: J. Going Concern
6. Which of the following should not be considered “cash” ?
J. Change fund
P. Certified check
I. Postdated check
A. Personal check
Ans: I. Postdated check
7. Which of the following would not be reported for capital stock in the
contributed capital section of a classified balance sheet?
J. Dividends per share
P. Shares authorized
I. Shares issued
A. Shares outstanding
Ans: J. Dividends per share
8. What is the effect of the collection of accounts receivable on the
current ratio and net working capital, respectively?
J. Current ratio (No effect), Net working capital (No effect)
P. Current ratio (increase), Net working capital (increase)
I. Current ratio (increase), Net working capital (No effect)
A. Current ratio (No effect), Net working capital ( Increase)
Ans: J
9. Failure to record depreciation expense at the end of an accounting
period results in

J. Understated income
P. Understated assets
I. Overstated expenses
A. Overstated assets
Ans: A. overstated assets
10. A change in reporting entity is actually a change in:
J. Accounting policy
P. Accounting estimate
I. Accounting method
A. Accounting concept
Ans: J Accounting policy
11. Financial statements issued for the use of parties external to the
enterprise are the primary responsibility of the
J. Management enterprise
P. Stockholders of the enterprise
I. Independent auditors of the enterprise
A. Creditors of the enterprise
Ans: J. Management of t he enterprise
12. Conservatism is best described as selecting an accounting
alternative that

J. Understates assets and/or net income


P. Has the least favorable impact on owner’s equity
I. Overstates, as opposed to understates, liabilities
A. Is least likely to mislead users of financial information
Ans: P. has the least favorable impact on
owner’s equity
13. Historical cost has been the valuation basis most commonly used in
accounting because of its
J. timelessness
P. Conservatism
I. Reliability
A. Accuracy
Ans: I. Reliability
14. Which of the following is not a qualitative characteristic of financial
statements according to the Framework?

J. Comparability
P. Understandability
I. Materiality

A. Relevance
Ans: I. Materiality
• 15. The passage of time as a mode of acquiring or losing a right
including the extinguishment of an obligation is called?
J. Remission
P. Novation
I. Prescription
A. Merger
Ans: I. prescription
16. Which of the following is not a purpose of the conceptual
framework of accounting?

J. To provide definitions of key terms and fundamental concepts


P. To provide specific guidelines for resolving situations not covered by
existing accounting standards
I. To assist accountants and others in selecting among alternative
accounting and reporting methods
A. To assist the accounting body in the standard-setting process
Ans: P. To provide specific guidelines for resolving
situations not covered by existing accounting
standards
17. It is a wrong committed without any pre existing relations between
parties.
J. Natural obligation
P. Quasi-delict
I. Quasi-contract
A. Crime
Ans: P. Quasi-delict
18. Which of the following is not an implication of the going-concern
assumption?

J. The historical cost principle is credible.

P. Depreciation and amortization policies are justifiable and appropriate.

I. The current/noncurrent classification of assets and liabilities is justifiable and significant.

A. Amortizing research and development costs over multiple periods is justifiable and appropriate.
Ans: A. Amortizing research and development
costs over multiple periods is justifiable and
appropriate.
19. Revenue from an artistic performance is recognized once

J. Cash has been received from the ticket sales,


P. The event takes place.
I. The tickets for the concert are sold
A The audience register for the event online
.
Ans: P.
The event takes place.
20. An entity issues bonds that pay interest each March 1 and
September 1, The entity's December 31 adjusting entry may include

J. Credit to discount on bonds payable


P. Debit to cash
I. Debit to interest payable

A. Credit to interest expense


Ans: J. Credit to discount on bonds payable
21. Which depreciation method provides higher depreciation expense
during the early years of asset life?

J. Units of production method


P. Sum of years digits method
I. Straight line method

A. Service hours method


Ans: P. Sum of years digits method
22. Which of the following statements best describes owner-occupied
property?
J. Property held for sale in the ordinary course of business
P. Property held for use in the production and supply of goods or
services and property held for administrative purposes
I. Property held to earn rentals
A. Property held for capital appreciation
Ans: P. Property held for use in the production and
supply of goods or services and property held for
administrative purposes
23. The legal portion of state is reserved by the law to the heirs, except.
J. Children
P. Parents
I. Devisee
A. Widow or widower
Ans: I. Devisee
24. This concept requires that assets acquired must be verifiable and
substantiated by documents such as invoices, vouchers, or official
receipts.

J. Objectivity Principle
P. Reliability Principle
I. Going concern
A. Accrual assumption
Ans:
J. Objectivity Principle
25. Who is the current BIR Commissioner?
J. Celay Dulay
P. Caesar Dulay
I. Cesar Dulay
A. Cilay Dulay
Ans: I. Cesar Dulay
26. Which one of the following items would fall under the definition of
a liability?

J. Cash
P. Debtors
I. Owner’s equity
A. Tax owed
Ans: A. Tax owed
27.Accounting entries involve a minimum of how many accounts?
J. One
P. Two
I. Three
A. Four
Ans: P. Two
28. The personal assets of the owner of a company will not appear on
the company's balance sheet
because of which principle/guideline?
J. Cost
P. Economic Entity
I. Monetary Unit
A. Going Concern
Ans: P. Economic Entity
29. Which principle/guideline allows a company to ignore the change in
the purchasing power
of the dollar over time?
J. Cost
P. Economic Entity
I. Monetary Unit
A. Going Concern
Ans: I. Monetary Unit
30. Which principle/guideline requires the company's financial
statements to have footnotes containing information that is important
to users of the financial statements?
J. Conservatism
P. Economic Entity
I. Full Disclosure
A. Reliability
Ans: I. Full Disclosure
31. Which principle/guideline is associated with the assumption that
the company will continue on long enough to carry out its objectives
and commitments?
J. Economic Entity
P. Going Concern
I. Time Period
A. Monetary Unit
Ans: P. Going Concern
32. A very large corporation's financial statements have the dollar
amounts rounded to the nearest $1,000. Which accounting
principle/guideline justifies not reporting the amounts to the penny?
J. Full Disclosure
P. Materiality
I. Monetary Unit
A. Time period
Ans: P. Materiality

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