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CONCEPTUAL FRAMEWORK AND ACCOUNTING
STANDARDS
understanding of business principles.1.4. Preparing for Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application.
Students are encouraged
Long quiz (80 points)
1. Accounting has been given various definitions, which of the following is not one of those
definitions
a. Accounting is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in making economic
decisions.
b. Accounting is 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, of a financial
character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the
results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
2. Which of the following statements is true?
a. The basic purpose of accounting is to provide information about economic activities
intended to be useful in making economic decisions .
b. All events and transactions of an entity are recognized the books of accounts.
c. General purpose financial statements are those statements that cater to the common and
specific needs of a wide range of external users.
d. The accounting process of assigning numbers, commonly in monetary terms, to the
economic transactions and events is referred to as classifying.
3. The accounting standards used in the Philippines are adapted from the standards issued by the
a. Federal Accounting Standards Board (FASB).
b. International Accounting Standards Board (IASB).
c. Philippine Institute of Certified Public Accountants (PICPA).
d. Democratic People's Republic of Korea Accounting Standards Committee (DPKRASC).
4. Which of the following statements is incorrect regarding the basic accounting concepts?
a. One of ABC Co.’s delivery trucks was involved in an accident. Although no lawsuits have
yet been filed against ABC, ABC recognized a liability for the probable loss on the event.
This is an application of the prudence or conservatism concept.
b. Under the consistency concept, the financial statements should be prepared on the basis of
accounting principles which are followed consistently.
c. Under the entity theory, the business is viewed as a separate entity. Therefore, the personal
transactions of the business owners are not recorded in the business’ accounting records.
d. The time period concept means that financial statements are prepared only at the end of the
life of a business.
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5. Entity A appropriates ₱1M to fund employee benefits for the last quarter of the following year.
Entity A deposits the ₱1M fund in a payroll account. This economic activity is most
appropriately referred to as
a. production.
b. savings.
c. exchange.
d. investment.
6. It is the branch of accounting that focuses on the general purpose reports of financial position
and operating results known as financial statements.
a. Financial accounting
b. Auditing
c. Managerial accounting
d. Taxation
understanding of business principles.1.4. Preparing for Business ExamsPreparing for business exams involves mastering both conceptual understanding and
practical application. Students are encouraged
7. These are events that do not involve an external party.
a. external events
b. nonreciprocal
c. internal events
d. special event
8. Entity A computes for its profit or loss periodically instead of waiting until the end of the life of
the business before doing so. This is an application of which of the following accounting
concepts?
a. historical cost
b. stable monetary unit
c. accrual basis
d. time period
9. This refers to the use of caution in the exercise of judgments needed in making estimates
required under conditions of uncertainty , such that assets or income are not overstated and
liabilities or expenses are not understated.
a. faithful representation
b. prudence
c. consistency
d. relevance
10. The bottom part of each of Entity A’s financial statements states the following “This statement
should be read in conjunction with the accompanying notes.” This is most likely an application of
which of the following accounting concepts?
a. articulation
b. consistency
c. accrual basis
d. time period
11. Entity A’s asset has a carrying amount of ₱1M. At year end, Entity A obtains information that
the asset became obsolete, and therefore its usefulness has declined. Entity A estimates that the
, Page |3
asset has a recoverable amount of only ₱800K. Entity A recognizes a loss of ₱200K for the
difference. Although this accounting treatment is required, it violates which of the following
concepts?
a. historical cost
b. stable monetary unit
c. accrual basis
d. time period
12. Which of the following events is considered as an internal event?
a. sale of inventory on account
b. provision of capital by owners
c. borrowing of money
d. conversion of raw materials into finished goods
e. payment of liabilities
understanding of business principles.1.4. Preparing for Business ExamsPreparing for business exams involves mastering both conceptual understanding and
practical application. Students are encouraged
13. Which of the following events is considered as an external event?
a. production
b. payment of taxes
c. gifts and charitable contributions
d. provision of capital by owners
e. b, c and d
14. Financial statements are said to be a mixture of fact and opinion. Which of the following items is
factual?
a. cost of goods sold
b. discount on capital stock
c. retained earnings
d. patent amortization expense
15. The most common form of business organization is a
a. corporation
b. sole proprietorship
c. partnership
d. cell phone stand
16. This concept defines the area of interest of the accountant. It determines which transactions are
recognized in the books of accounts and which are not.
a. Articulation
b. Matching
c. Separate entity
d. Full disclosure
17. A CPA employed as an accountant in a government agency is considered to be in
a. private practice.
b. public practice.
c. academe.
d. service.
CONCEPTUAL FRAMEWORK AND ACCOUNTING
STANDARDS
understanding of business principles.1.4. Preparing for Business ExamsPreparing for business exams involves mastering both conceptual understanding and practical application.
Students are encouraged
Long quiz (80 points)
1. Accounting has been given various definitions, which of the following is not one of those
definitions
a. Accounting is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in making economic
decisions.
b. Accounting is 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, of a financial
character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the
results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
2. Which of the following statements is true?
a. The basic purpose of accounting is to provide information about economic activities
intended to be useful in making economic decisions .
b. All events and transactions of an entity are recognized the books of accounts.
c. General purpose financial statements are those statements that cater to the common and
specific needs of a wide range of external users.
d. The accounting process of assigning numbers, commonly in monetary terms, to the
economic transactions and events is referred to as classifying.
3. The accounting standards used in the Philippines are adapted from the standards issued by the
a. Federal Accounting Standards Board (FASB).
b. International Accounting Standards Board (IASB).
c. Philippine Institute of Certified Public Accountants (PICPA).
d. Democratic People's Republic of Korea Accounting Standards Committee (DPKRASC).
4. Which of the following statements is incorrect regarding the basic accounting concepts?
a. One of ABC Co.’s delivery trucks was involved in an accident. Although no lawsuits have
yet been filed against ABC, ABC recognized a liability for the probable loss on the event.
This is an application of the prudence or conservatism concept.
b. Under the consistency concept, the financial statements should be prepared on the basis of
accounting principles which are followed consistently.
c. Under the entity theory, the business is viewed as a separate entity. Therefore, the personal
transactions of the business owners are not recorded in the business’ accounting records.
d. The time period concept means that financial statements are prepared only at the end of the
life of a business.
, Page |2
5. Entity A appropriates ₱1M to fund employee benefits for the last quarter of the following year.
Entity A deposits the ₱1M fund in a payroll account. This economic activity is most
appropriately referred to as
a. production.
b. savings.
c. exchange.
d. investment.
6. It is the branch of accounting that focuses on the general purpose reports of financial position
and operating results known as financial statements.
a. Financial accounting
b. Auditing
c. Managerial accounting
d. Taxation
understanding of business principles.1.4. Preparing for Business ExamsPreparing for business exams involves mastering both conceptual understanding and
practical application. Students are encouraged
7. These are events that do not involve an external party.
a. external events
b. nonreciprocal
c. internal events
d. special event
8. Entity A computes for its profit or loss periodically instead of waiting until the end of the life of
the business before doing so. This is an application of which of the following accounting
concepts?
a. historical cost
b. stable monetary unit
c. accrual basis
d. time period
9. This refers to the use of caution in the exercise of judgments needed in making estimates
required under conditions of uncertainty , such that assets or income are not overstated and
liabilities or expenses are not understated.
a. faithful representation
b. prudence
c. consistency
d. relevance
10. The bottom part of each of Entity A’s financial statements states the following “This statement
should be read in conjunction with the accompanying notes.” This is most likely an application of
which of the following accounting concepts?
a. articulation
b. consistency
c. accrual basis
d. time period
11. Entity A’s asset has a carrying amount of ₱1M. At year end, Entity A obtains information that
the asset became obsolete, and therefore its usefulness has declined. Entity A estimates that the
, Page |3
asset has a recoverable amount of only ₱800K. Entity A recognizes a loss of ₱200K for the
difference. Although this accounting treatment is required, it violates which of the following
concepts?
a. historical cost
b. stable monetary unit
c. accrual basis
d. time period
12. Which of the following events is considered as an internal event?
a. sale of inventory on account
b. provision of capital by owners
c. borrowing of money
d. conversion of raw materials into finished goods
e. payment of liabilities
understanding of business principles.1.4. Preparing for Business ExamsPreparing for business exams involves mastering both conceptual understanding and
practical application. Students are encouraged
13. Which of the following events is considered as an external event?
a. production
b. payment of taxes
c. gifts and charitable contributions
d. provision of capital by owners
e. b, c and d
14. Financial statements are said to be a mixture of fact and opinion. Which of the following items is
factual?
a. cost of goods sold
b. discount on capital stock
c. retained earnings
d. patent amortization expense
15. The most common form of business organization is a
a. corporation
b. sole proprietorship
c. partnership
d. cell phone stand
16. This concept defines the area of interest of the accountant. It determines which transactions are
recognized in the books of accounts and which are not.
a. Articulation
b. Matching
c. Separate entity
d. Full disclosure
17. A CPA employed as an accountant in a government agency is considered to be in
a. private practice.
b. public practice.
c. academe.
d. service.
