CFAS Chapter 1: The Foundation of Accounting Standards
Accounting Standard Council - correct answer ✔✔Define accounting as service activity
American Institute of Certified Public Accountants - correct answer ✔✔Define accounting as an art of
recording, classifying, summarizing, interpreting/communicating
American Accounting Association - correct answer ✔✔Define accounting as process of identifying,
measuring, and communicating the financial information’s to users
To provide quantitative information that are financial nature to be useful in making economic decision -
correct answer ✔✔Main Objective/ Purpose of Accounting
Analytical, Technical, Formal - correct answer ✔✔Three components of accounting
Identifying - correct answer ✔✔Analytical component
Measuring - correct answer ✔✔Technical component
Communicating - correct answer ✔✔Formal component
Identifying - correct answer ✔✔Process of recognition and non recognition of accountable events
Accountable event - correct answer ✔✔Event has an effect on assets, liabilities, and equity
Economic activities - correct answer ✔✔Only emphasized and recognized in accounting
External, internal - correct answer ✔✔Economic activities or transactions have two classification
, External Transactions - correct answer ✔✔Economic events involving one entity and another entity
PBSPP: Purchase of goods from supplier, borrowing money from bank, sale of goods to customer,
payment of salaries to employees, payment of taxes to government - correct answer ✔✔Examples of
external transactions
Internal transactions - correct answer ✔✔Economic events invilving the entity only
Production, casualty loss - correct answer ✔✔Examples of internal transactions
Production - correct answer ✔✔Process by which resources are transformed into products
Casualty - correct answer ✔✔Any sudden and unanticipated loss from fire, flood, earthquake, or any
other act of God
Measuring - correct answer ✔✔Assigning of peso amounts to accountable economic transactions and
events
Historical cost, current value - correct answer ✔✔Two measurement bases of accounting
Historical cost - correct answer ✔✔Original acquisition cost and most common measure of financial
transactions
Current value - correct answer ✔✔Includes fair value, value in use, fulfillment value and current cost
Fair value - correct answer ✔✔Market value
Value in use - correct answer ✔✔How much value na sa present
Current cost fulfillment value - correct answer ✔✔Liability
Accounting Standard Council - correct answer ✔✔Define accounting as service activity
American Institute of Certified Public Accountants - correct answer ✔✔Define accounting as an art of
recording, classifying, summarizing, interpreting/communicating
American Accounting Association - correct answer ✔✔Define accounting as process of identifying,
measuring, and communicating the financial information’s to users
To provide quantitative information that are financial nature to be useful in making economic decision -
correct answer ✔✔Main Objective/ Purpose of Accounting
Analytical, Technical, Formal - correct answer ✔✔Three components of accounting
Identifying - correct answer ✔✔Analytical component
Measuring - correct answer ✔✔Technical component
Communicating - correct answer ✔✔Formal component
Identifying - correct answer ✔✔Process of recognition and non recognition of accountable events
Accountable event - correct answer ✔✔Event has an effect on assets, liabilities, and equity
Economic activities - correct answer ✔✔Only emphasized and recognized in accounting
External, internal - correct answer ✔✔Economic activities or transactions have two classification
, External Transactions - correct answer ✔✔Economic events involving one entity and another entity
PBSPP: Purchase of goods from supplier, borrowing money from bank, sale of goods to customer,
payment of salaries to employees, payment of taxes to government - correct answer ✔✔Examples of
external transactions
Internal transactions - correct answer ✔✔Economic events invilving the entity only
Production, casualty loss - correct answer ✔✔Examples of internal transactions
Production - correct answer ✔✔Process by which resources are transformed into products
Casualty - correct answer ✔✔Any sudden and unanticipated loss from fire, flood, earthquake, or any
other act of God
Measuring - correct answer ✔✔Assigning of peso amounts to accountable economic transactions and
events
Historical cost, current value - correct answer ✔✔Two measurement bases of accounting
Historical cost - correct answer ✔✔Original acquisition cost and most common measure of financial
transactions
Current value - correct answer ✔✔Includes fair value, value in use, fulfillment value and current cost
Fair value - correct answer ✔✔Market value
Value in use - correct answer ✔✔How much value na sa present
Current cost fulfillment value - correct answer ✔✔Liability
