THEORY OF ACCOUNTS Comprehensive Exam
STANDARD SETTING PROCESS Introduction
Securities & Exchange Commission Purpose & Status (Para. 1-4)
2. The role of the Securities and Exchange Commission in the 1. This represents the concepts that underlie the prep
formulation of accounting principles can be best described as and presentation of financial statements.
I. Consistently primary. A. Statement of Financial Accounting Standards
II. Consistently secondary. B. Statement of Auditing Standards
III. Sometimes primary and sometimes secondary. C. Note to financial statements
A. I only C. II and III only D. Conceptual framework
B. I and II only D. I, II and III
CONCEPTUAL FRAMEWORK
Preface
1. The purpose of the International Accounting Standards
Committee is to
A. Issue enforceable standards which regulate the financial
accounting and reporting of multinational corporations.
B. Develop a uniform currency in which the financial
transactions of companies throughout the world would be
measured.
C. Promote uniform accounting standards among countries
of the world.
D. Arbitrate accounting disputes between auditors and
international companies.
1. Which of the following statements regarding international
accounting standards is not true?
A. The purpose of IASC is to reduce the diversity of practices
in financial reporting among countries.
B. Harmonization of international accounting standards will
provide benefits to both preparers and users of financial
statements.
C. As international trade and ownership barriers are
removed, the need for harmonization of international
accounting standards will decrease.
D. Since different countries use financial statements for
different purposes, some countries will likely not adopt
the international accounting standards.
Chiang Kai Shek College Page 1
,THEORY OF ACCOUNTS Comprehensive Exam
1. The ASC Framework financial statements including consolidated fi
A. Sets out the concepts that underlie the preparation and statements.
presentation of financial statements for external users. D. The framework applies to the financial statements
B. Provides information about the financial position, commercial, industrial and business enterprises, w
performance and changes in financial position of an in the public or private sector
enterprise that is useful to a wide range of users in
making economic decisions. 8. Which statement is incorrect concerning the ASC frame
C. Represents the attributes that make the information A. Nothing in the framework overrides any s
provided in financial statements useful to users. Statement of Financial Accounting Standards.
D. Is directly related to the measurement of financial position B. The framework deals with the objectives of the fi
and performance of an enterprise statements, the qualitative characteristics that det
the usefulness of the information in financial state
3. The ASC Framework is intended to establish the definition, recognition and measurement
A. Generally accepted accounting principles in financial elements of the financial statements arid conce
reporting by business enterprises. capital and capital maintenance.
B. The meaning of “present fairly in accordance with GAAP” C. The framework sets out the concepts that under
C. The objectives and concepts for use in developing preparation and presentation of financial stateme
standards of financial accounting and reporting internal and external users.
D. The hierarchy of sources of GAAP D. The framework is concerned with general p
financial statements including consolidated fi
2. The purposes of the ASC Framework do not include statements.
I. To assist the ASC in its review and adoption of existing
IAS.
II. To assist preparers of FS in applying ASC SFAS and in
dealing with topics that have yet to form the subject of
ASC statement.
III. To assist the Board of Accountancy in promulgating rules
and regulations affecting the practice of the accountancy
profession.
A. I only C. III only
B. II only D. II and III only
1. Which is incorrect concerning the ASC Framework?
A. The framework sets out the concepts that underlie the
preparation and presentation of financial statements.
B. The framework is a Statement of Financial Accounting
Standards
C. The framework is concerned with general-purpose
Chiang Kai Shek College Page 2
,THEORY OF ACCOUNTS Comprehensive Exam
Scope (Para. 5 to 8) II. The framework is not a Statement of Financial Acco
2. Financial statements (choose the statement that is not valid) Standards and hence does not define standards f
A. Provide information about the financial position, financial particular measurement or disclosure issue.
performance and cash flows of an enterprise that is useful III. The framework is concerned with general-p
to a wide range of users in making economic decisions. financial statements excluding consolidated fi
B. Are the primary responsibility of the management of the statements.
enterprise. A. I only C. I and III
C. Also show the results of the stewardship of management B. I and II D. I, II and III
for the resources entrusted to it.
D. Are prepared and presented at least annually and are 1. Which statement is incorrect concerning the ASC frame
directed toward the specific information needs of a wide A. Nothing in the framework overrides any s
range of users. Statement of Financial Accounting Standards
B. The framework deals with the objective of fi
5. A complete set of financial statements include the following statements, the qualitative characteristics that det
components, except the usefulness of information in financial statemen
A. Balance sheet, income statement and cash flow definition, recognition and measurement of the ele
statement. of the financial statements, and the concept of capi
B. A statement showing either all changes in equity or capital maintenance
changes in equity other than those arising from capital C. The framework is concerned with general-p
transactions with owners and distributions to owners. financial statements including consolidated fi
C. Additional statements such as environmental reports and statements
value added statements. D. The framework sets out the concepts that under
D. Accounting policies and explanatory notes. preparation and presentation of financial stateme
internal and external users
2. Which statement is correct concerning the ASC framework?
I. The framework applies to the financial statements of all 1. Which is incorrect concerning the ASC framework?
commercial, industrial and business reporting enterprises, A. Nothing in the framework overrides any s
whether in the public and private sector Statement of Financial Accounting Standards.
II. Special purpose financial reports, for example, B. The framework deals with the objective of fi
prospectuses and computations prepared for taxation statements, the qualitative characteristics, the defi
purposes, are beyond the scope of the framework recognition and measurement of the financial stat
A. Both I and II C. I only elements, and the concepts of capital and
B. Neither I nor II D. II only maintenance.
C. The framework is concerned with special-p
3. Which is true concerning the ASC framework? financial statements including consolidated fi
I. The framework sets out the concepts that underlie the statements.
preparation and presentation of financial statements for D. The framework applies the financial statements
external users. commercial, industrial and business reporting enter
Chiang Kai Shek College Page 3
, THEORY OF ACCOUNTS Comprehensive Exam
whether in the public or the private sector. B. Employees
C. Lenders
1. The following statements relate to the ASC Framework. D. Customers
Which statement is incorrect?
A. The framework is not a Statement of Financial Accounting 2. The providers of risk capital and their advisers
Standards and hence does not define standards for any A. Are concerned with the risk inherent in and
particular measurement or disclosure issue. provided by their investments and need informa
B. The framework is concerned with general-purpose help determine whether they should buy or sell.
financial statements including consolidated financial B. Are interested in information about the stabilit
statements. profitability of the employers.
C. Special purpose financial reports, for example, C. Are interested in information that enables th
prospectuses and computations prepared for taxation determine whether their moans and the interest att
purposes are within the scope of the framework. to them will be aid when due.
D. The framework applies to the financial statements of all D. Have an interest in information about the continua
commercial, industrial and business reporting enterprises, an enterprise, especially when they have a lon
whether in the public and private sector. involvement with or are dependent on the enterpris
2. Which is an incorrect statement concerning the ASC 4. Investors (providers of risk capital)
Framework? A. Have an interest in information about the continua
A. The framework deals with the objective of financial an enterprise, especially when they have a lon
statements, qualitative characteristics, definition, involvement with or are dependent on the enterpris
recognition and measurement of elements of financial B. Require financial information in order to regula
statements and concepts of capital activities of an enterprise, determine taxation polici
B. Special purpose financial reports, for example, as a basis for national income and similar statistics
prospectuses and computations prepared for taxation C. Are interested in information about the stabilit
purposes are within the scope of the ASC Framework profitability of the enterprise to assess the ability
C. In case of conflict between the framework and Statement enterprise to provide renumeration, retirement b
of Financial Accounting Standards, the SFAS shall prevail and employment opportunities.
over the framework D. Are concerned with risk inherent in and return provi
D. The framework applies to the financial statements of all their investments and need information to help
commercial, industrial and business reporting enterprises, determine whether they should buy, hold or sell.
whether in the public or private sector
5. The primary focus of financial accounting has be
Users and their Information Needs (Para. 9 to 11) meeting the needs of which of the following groups?
Investors A. Managers of an enterprise
2. These users are concerned with the risk inherent in and B. Present and potential creditors of an enterprise
return provided by their investments. C. National, and local taxing authorities
A. Providers of risk capital and their advisers (Investors) D. Independent auditors
Chiang Kai Shek College Page 4
STANDARD SETTING PROCESS Introduction
Securities & Exchange Commission Purpose & Status (Para. 1-4)
2. The role of the Securities and Exchange Commission in the 1. This represents the concepts that underlie the prep
formulation of accounting principles can be best described as and presentation of financial statements.
I. Consistently primary. A. Statement of Financial Accounting Standards
II. Consistently secondary. B. Statement of Auditing Standards
III. Sometimes primary and sometimes secondary. C. Note to financial statements
A. I only C. II and III only D. Conceptual framework
B. I and II only D. I, II and III
CONCEPTUAL FRAMEWORK
Preface
1. The purpose of the International Accounting Standards
Committee is to
A. Issue enforceable standards which regulate the financial
accounting and reporting of multinational corporations.
B. Develop a uniform currency in which the financial
transactions of companies throughout the world would be
measured.
C. Promote uniform accounting standards among countries
of the world.
D. Arbitrate accounting disputes between auditors and
international companies.
1. Which of the following statements regarding international
accounting standards is not true?
A. The purpose of IASC is to reduce the diversity of practices
in financial reporting among countries.
B. Harmonization of international accounting standards will
provide benefits to both preparers and users of financial
statements.
C. As international trade and ownership barriers are
removed, the need for harmonization of international
accounting standards will decrease.
D. Since different countries use financial statements for
different purposes, some countries will likely not adopt
the international accounting standards.
Chiang Kai Shek College Page 1
,THEORY OF ACCOUNTS Comprehensive Exam
1. The ASC Framework financial statements including consolidated fi
A. Sets out the concepts that underlie the preparation and statements.
presentation of financial statements for external users. D. The framework applies to the financial statements
B. Provides information about the financial position, commercial, industrial and business enterprises, w
performance and changes in financial position of an in the public or private sector
enterprise that is useful to a wide range of users in
making economic decisions. 8. Which statement is incorrect concerning the ASC frame
C. Represents the attributes that make the information A. Nothing in the framework overrides any s
provided in financial statements useful to users. Statement of Financial Accounting Standards.
D. Is directly related to the measurement of financial position B. The framework deals with the objectives of the fi
and performance of an enterprise statements, the qualitative characteristics that det
the usefulness of the information in financial state
3. The ASC Framework is intended to establish the definition, recognition and measurement
A. Generally accepted accounting principles in financial elements of the financial statements arid conce
reporting by business enterprises. capital and capital maintenance.
B. The meaning of “present fairly in accordance with GAAP” C. The framework sets out the concepts that under
C. The objectives and concepts for use in developing preparation and presentation of financial stateme
standards of financial accounting and reporting internal and external users.
D. The hierarchy of sources of GAAP D. The framework is concerned with general p
financial statements including consolidated fi
2. The purposes of the ASC Framework do not include statements.
I. To assist the ASC in its review and adoption of existing
IAS.
II. To assist preparers of FS in applying ASC SFAS and in
dealing with topics that have yet to form the subject of
ASC statement.
III. To assist the Board of Accountancy in promulgating rules
and regulations affecting the practice of the accountancy
profession.
A. I only C. III only
B. II only D. II and III only
1. Which is incorrect concerning the ASC Framework?
A. The framework sets out the concepts that underlie the
preparation and presentation of financial statements.
B. The framework is a Statement of Financial Accounting
Standards
C. The framework is concerned with general-purpose
Chiang Kai Shek College Page 2
,THEORY OF ACCOUNTS Comprehensive Exam
Scope (Para. 5 to 8) II. The framework is not a Statement of Financial Acco
2. Financial statements (choose the statement that is not valid) Standards and hence does not define standards f
A. Provide information about the financial position, financial particular measurement or disclosure issue.
performance and cash flows of an enterprise that is useful III. The framework is concerned with general-p
to a wide range of users in making economic decisions. financial statements excluding consolidated fi
B. Are the primary responsibility of the management of the statements.
enterprise. A. I only C. I and III
C. Also show the results of the stewardship of management B. I and II D. I, II and III
for the resources entrusted to it.
D. Are prepared and presented at least annually and are 1. Which statement is incorrect concerning the ASC frame
directed toward the specific information needs of a wide A. Nothing in the framework overrides any s
range of users. Statement of Financial Accounting Standards
B. The framework deals with the objective of fi
5. A complete set of financial statements include the following statements, the qualitative characteristics that det
components, except the usefulness of information in financial statemen
A. Balance sheet, income statement and cash flow definition, recognition and measurement of the ele
statement. of the financial statements, and the concept of capi
B. A statement showing either all changes in equity or capital maintenance
changes in equity other than those arising from capital C. The framework is concerned with general-p
transactions with owners and distributions to owners. financial statements including consolidated fi
C. Additional statements such as environmental reports and statements
value added statements. D. The framework sets out the concepts that under
D. Accounting policies and explanatory notes. preparation and presentation of financial stateme
internal and external users
2. Which statement is correct concerning the ASC framework?
I. The framework applies to the financial statements of all 1. Which is incorrect concerning the ASC framework?
commercial, industrial and business reporting enterprises, A. Nothing in the framework overrides any s
whether in the public and private sector Statement of Financial Accounting Standards.
II. Special purpose financial reports, for example, B. The framework deals with the objective of fi
prospectuses and computations prepared for taxation statements, the qualitative characteristics, the defi
purposes, are beyond the scope of the framework recognition and measurement of the financial stat
A. Both I and II C. I only elements, and the concepts of capital and
B. Neither I nor II D. II only maintenance.
C. The framework is concerned with special-p
3. Which is true concerning the ASC framework? financial statements including consolidated fi
I. The framework sets out the concepts that underlie the statements.
preparation and presentation of financial statements for D. The framework applies the financial statements
external users. commercial, industrial and business reporting enter
Chiang Kai Shek College Page 3
, THEORY OF ACCOUNTS Comprehensive Exam
whether in the public or the private sector. B. Employees
C. Lenders
1. The following statements relate to the ASC Framework. D. Customers
Which statement is incorrect?
A. The framework is not a Statement of Financial Accounting 2. The providers of risk capital and their advisers
Standards and hence does not define standards for any A. Are concerned with the risk inherent in and
particular measurement or disclosure issue. provided by their investments and need informa
B. The framework is concerned with general-purpose help determine whether they should buy or sell.
financial statements including consolidated financial B. Are interested in information about the stabilit
statements. profitability of the employers.
C. Special purpose financial reports, for example, C. Are interested in information that enables th
prospectuses and computations prepared for taxation determine whether their moans and the interest att
purposes are within the scope of the framework. to them will be aid when due.
D. The framework applies to the financial statements of all D. Have an interest in information about the continua
commercial, industrial and business reporting enterprises, an enterprise, especially when they have a lon
whether in the public and private sector. involvement with or are dependent on the enterpris
2. Which is an incorrect statement concerning the ASC 4. Investors (providers of risk capital)
Framework? A. Have an interest in information about the continua
A. The framework deals with the objective of financial an enterprise, especially when they have a lon
statements, qualitative characteristics, definition, involvement with or are dependent on the enterpris
recognition and measurement of elements of financial B. Require financial information in order to regula
statements and concepts of capital activities of an enterprise, determine taxation polici
B. Special purpose financial reports, for example, as a basis for national income and similar statistics
prospectuses and computations prepared for taxation C. Are interested in information about the stabilit
purposes are within the scope of the ASC Framework profitability of the enterprise to assess the ability
C. In case of conflict between the framework and Statement enterprise to provide renumeration, retirement b
of Financial Accounting Standards, the SFAS shall prevail and employment opportunities.
over the framework D. Are concerned with risk inherent in and return provi
D. The framework applies to the financial statements of all their investments and need information to help
commercial, industrial and business reporting enterprises, determine whether they should buy, hold or sell.
whether in the public or private sector
5. The primary focus of financial accounting has be
Users and their Information Needs (Para. 9 to 11) meeting the needs of which of the following groups?
Investors A. Managers of an enterprise
2. These users are concerned with the risk inherent in and B. Present and potential creditors of an enterprise
return provided by their investments. C. National, and local taxing authorities
A. Providers of risk capital and their advisers (Investors) D. Independent auditors
Chiang Kai Shek College Page 4
