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CONCEPTUAL FRAMEWORK
Accountancy (Western Philippines University)
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1. Which among the following is not purpose of the IASB’s Conceptual Framework for
Financial Reporting?
A. To assist the local standard setting bodies, such as the Financial Reporting
Standards Council, in the adoption of the IFRS.
B. To assist the Board of Accountancy in the regulation of the accounting profession in
the Philippines.
C. To assist the auditors in forming an opinion as to the fairness of the presentation of
the financial statements.
D. To assist the users in interpreting the information presented on the financial
statements.
2. Which of the following is a valid statement regarding the status of the Conceptual
Framework?
A. The Conceptual Framework is an IFRS.
B. The Conceptual Framework is a PFRS.
C. In case of conflict between the IFRS, the IFRS shall prevail.
D. In case of conflict between the IFRS and Conceptual Framework, the Conceptual
Framework shall prevail.
3. The IASB’s Conceptual Framework deals with the
I. Objectives of the financial statements.
II. Qualitative characteristics that make the financial statement useful to users.
III. Concepts of capital and capital maintenance
IV. Generally accepted accounting principles
A. I and II
B. II and III
C. I, II and III
D. I, II, III and IV
4. The objectives of financial reporting are based on the need
A. to comply with prudence.
B. of the users for accounting information.
C. to report management’s stewardship.
D. for compliance to generally accepted accounting principles.
5. Under the Conceptual Framework for Financial Reporting, who are considered as the
primary users of financial reporting?
A. Internal and external users.
B. Existing investors, lenders and other creditors.
C. Potential investors, lenders and other creditors.
D. Existing and potential investors, lenders and other creditors
6. Which of the following is not an objective of financial statements?
A. To provide information about the financial position of an enterprise.
B. To provide information about the performance of an enterprise.
C. To provide information about the economic decisions of the enterprise.
D. To provide information about the changes in the financial position of an enterprise.
7. Making the financial information available when a decision is to be made achieves the
characteristics of
A. Timeliness
B. Neutrality
C. Completeness
D. Comparability
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8. Adequate disclosure in financial statements to meet the needs and purposes of their
users is a means of attaining the quality of
A. Verifiability
B. Faithful representation
C. Understandability
D. Neutrality
9. What is the underlying concept that supports the immediate recognition of a loss?
A. Matching
B. Substance over form
C. Prudence
D. Consistency
10. Which of the following is a pervasive constraint on the information that can be provided
by financial reporting?
A. Timeliness
B. Neutrality
C. Cost
D. Materiality
11. Neutrality means that the financial accounting information should
A. Not influence or affect the decisions of users
B. Not be biased or prejudiced
C. Not have undesirable or negative consequences
D. All of the above
12. Continuation of an enterprise in the absence of evidence to the contrary is an example of
the concept of
A. Accounting entity
B. Consistency
C. Going concern
D. Substance over form
13. Information about enterprise earnings and its components measured under accrual basis
provides a better measure of an enterprise’s performance than information about cash
receipts and payments because
A. Accrual basis recognizes that events affecting enterprise operations during a period
often do not coincide with cash receipts and payments.
B. Accrual basis relates accomplishments and efforts in measuring and reporting
enterprise’s earnings and its components.
C. Accrual basis provides estimates of future earnings.
D. Cash receipts and cash payments information cannot adequately indicate whether or
not an enterprise’s performance is successful.
14. Under a lease where the lessee acquires the benefits of ownership of an asset, the
lessee often recognizes the present value of future rental payments as an asset even
though legal title to the property is not acquired. This is an example of the application of
A. Form over substance
B. Prudence
C. Substance over form
D. Consistency
15. The going concern concept assumes that
A. Market values of assets are relevant.
B. Long-lived assets are adjusted to current prices.
C. Business firms shall continue to operate indefinitely.
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D. Enterprises will curtail their operations in the succeeding period.
16. What concept justifies the use of accruals and deferrals?
A. Going concern
B. Consistency
C. Materiality
D. Timeliness
17. Under the accrual basis of accounting, the effects of transactions and other events are
recorded in the accounting records.
A. When they occur but reported in the financial statements when cash is received or
paid.
B. When cash is received or paid but reported in the financial statements when they
occur.
C. And reported in the financial statements when cash is paid or received.
D. And reported in the financial statements when they occur.
18. Which users of financial statements are interested in information that enables them to
determine whether their loans and interest attaching to them will be paid when due.
A. Suppliers
B. Investors
C. Lenders
D. Trade creditors
19. The process of determining the monetary amounts at which the elements of the financial
statements are to be recognized and carried in the financial statements is known as:
A. Measurement
B. Recognition
C. Presentation
D. Maintenance
20. Under the 2018 Conceptual Framework, this is defined as the present value of the cash
inflows or other economic benefits that an entity expects to derive from the use and
eventual disposal of an asset.
A. Present value
B. Realizable value
C. Current cost
D. Value in use
