1.

THE PURPOSE OF THE CONCEPTUAL • Provide financial information about the

FRAMEWORK
reporting entity that is useful to existing and
IS:
potential investors, lenders, and other
• To assist the International Accounting
creditors in making decisions relating to
Standards Board to develop IFRS Standards
providing resources to the entity
• To assist preparers of IFRS financial
8. Which of the following does the
statements to develop consistent Conceptual Framework identify as the
accounting primary users of general-purpose financial
reports?
policies when no IFRS Standard applies to a
• Existing and potential investors, lenders,
particular transaction or other event, or
and other creditors
when a Standard allows a choice of
9. Information needed to assess
accounting policy management's stewardship is always
different from information needed to
• To assist all parties to understand and assess the prospects for future net cash
interpret IFRS Standards inflows to the entity.

2. THE CONCEPTUAL FRAMEWORK CAN • False

OVERRIDE REQUIREMENTS IN A 10. How does the Conceptual Framework
STANDARD. explain the role of stewardship?
• False • Decisions relating to providing resources
3. Revision of the Conceptual Framework to the entity depend on users' assessment
will automatically lead to changes in of the amount, timing, and uncertainty of
Standards that are inconsistent with the the prospects for future net cash inflows to
revised concepts. the entity and on their assessment of
management's stewardship
• False
11. The fundamental qualitative
4. When developing requirements for IFRS characteristics of useful financial
Standards, can the International information are:
Accounting Standards Board depart from
the Conceptual Framework? • Relevance and faithful representation

• Yes, but only from aspects of the 12. For information to be relevant, it has to
Conceptual Framework and only if doing so possess:
is needed to meet the objective of financial • Either predictive or confirmatory value,
reporting or both
5. If an IFRS Standard sets out 13. A trade-off between the fundamental
requirements that are qualitative characteristics of relevance and
inconsistent with the Conceptual faithful representation may need to be
Framework, preparers have to apply the made to meet the objective of financial
Conceptual Framework for affected reporting.
transactions. • True
• False 14. Consolidated financial statements
6. Entities have to apply the revised provide information about the assets,
Conceptual Framework: liabilities, equity, income, and expenses
of both the parent and its subsidiaries
• For annual reporting periods beginning on as:
or after 1 January 2020, with early
application permitted • A single reporting entity

7. The objective of general-purpose 15. When a reporting entity is not a legal

financial reporting as described in the entity and does not comprise only legal
Conceptual Framework is to: entities all linked by a parent-subsidiary
relationship, the boundary of the reporting provide relevant information? Uncertainty
entity can contain an incomplete set of about whether an asset or liability exists
economic activities if that entity describes
• Low probability of an inflow or outflow
how the boundary was determined.
of economic benefits
• False
• Other factors
16. The Conceptual Framework defines a
23. What does the Conceptual Framework
liability as:
state about derecognition?
• A present obligation of the entity to
• For an asset, derecognition normally
transfer an economic resource as a result
occurs when the entity loses control of all or
of past events
part of the recognized asset
17. For a right to meet the definition of an
• For a liability, derecognition normally
asset, it needs to be likely that the right
occurs when the entity no longer has a
will produce economic benefits for the
present obligation for all or part of the
entity.
recognized liability
• False
• Derecognition is the removal of all or part
18. In explaining the meaning of the of a recognized asset or liability from an
term 'obligation' in the definition of a entity's statement of financial position
liability, The conceptual Framework states:
24. Financial reports need to provide
• That an obligation is a duty or information useful in making decisions
responsibility that an entity has no practical relating to providing resources to the
ability to avoid entity. Those decisions include decisions
about exercising rights to vote on, or
• That an obligation can arise from a duty or
otherwise influence, management's
responsibility conditional on a future action
actions that affect the use of the entity's
that the entity itself may take if the entity
economic resources.
has no practical ability to avoid taking
that action • True
• That an obligation can arise from an 25. The Conceptual Framework describes
entity’s customary practices, published prudence as:
policies, or specific statements if the entity
• The exercise of caution when making
has no practical ability to avoid those
practices, policies, or statements judgments under conditions of uncertainty
19. The residual interest in the assets of 26. Which statement is included in the
an entity after deducting all its liabilities is: Conceptual Framework?
• Equity • Relevance is a fundamental qualitative
characteristic of useful financial information
20. Recognition is the process of:
• Financial information without both
• Capturing, for inclusion in the statement
relevance and faithful representation is not
of financial position or the statement(s)
useful
of financial performance, an item that
meets the definition of one of the elements • Enhancing qualitative characteristics
of the financial statements—an asset, a cannot make information useful if that
liability, equity, income, or expenses information is irrelevant or does not
provide a faithful representation of what
21. Some items that do NOT meet the
it purports to represent
definition of an asset, a liability, or equity
may be recognized in the statement of 27. Only a legal entity can be a reporting
financial position. entity.
• False • False
22. Which factors may indicate that 28. What drives the determination of the
recognition of an item meeting the boundary of a reporting entity that is not a
definition of an asset or a liability may not legal entity and does not comprise only
legal entities all linked by a parent- position.
subsidiary relationship?
• False
• Information needs of the primary users
36. The Conceptual Framework identifies
of the reporting entity
a preferred measurement basis for all
29. A reporting entity can be: assets and liabilities.
• A portion of an entity • False
• A single entity 37. In principle, all income and expenses
are included in the statement of profit or
• More than one entity
loss.
30. The Conceptual Framework defines an
• True
asset as:
38. An entity may decide to include
• A present economic resource controlled
income or expenses in other
by the entity as a result of past events
comprehensive income when doing so
31. If an entity has legal ownership of a would result in the statement of profit or
physical object, its asset is: loss providing more relevant information,
or providing a more faithful
• The set of rights arising from legal representation of the entity's performance
ownership of the physical object for the period.
32. A high level of measurement • False
uncertainty associated with an asset
always results in the asset not being 39. An analysis of income and expenses
recognized. recognized in the statement of profit or
loss is sufficient to understand an entity's
• False financial performance for the period.
33. Which measurement bases are • False
categorized as current value measurement
based on the Conceptual Framework? 40. Income and expenses included in
other comprehensive income:
• Value in use
• Are recycled into the statement of profit
• Fulfilment value or loss if the International Accounting
• Fair value Standards Board decides that doing so
results in the statement of profit or loss
• Current cost providing more relevant information, or
34. Which of the following factors is (or providing a more faithful representation
are) considered in selecting a of the entity’s financial performance for
measurement basis? that period

• Variability of cash flows of the asset or 41. What does the Conceptual Framework
say about profit or loss?
liability
• In principle, all income and expenses
• How does the asset or liability are included in the statement of profit or
contribute to future cash flows, which loss
depends in part on the nature of an entity's
business activities 42. Information that is capable of making a
difference in the decisions made by users is
• The level of measurement uncertainty this qualitative characteristic.
associated with a particular measurement
basis • Relevance

35. In selecting a measurement basis for an 43. Under the stable monetary unit
asset or liability, it is more important to consumption, the owners of the business
consider the nature of the information that and the business are viewed as a single
the measurement basis will produce in reporting entity. Therefore, the personal
the statement(s) of financial performance transactions of the owners are recorded in
than in the statement of financial the books of accounts.
• False Change in fair value on Dec. 31, 2018, due
to growth and price fluctuation = 400,000
44. Free from bias toward a predetermined
result is Decrease in fair value due to harvest =
100,000
• Neutrality
What amount should be reported as a
45. Which of the following is considered a
defined benefit cost for the current year?
pervasive constraint by the Conceptual
Framework? • 1, 800, 000
• Cost constraint 51. The law regulating the practice of
accountancy in the Philippines
46. Financial reporting standards
continuously change primarily in response • RA 9298
to
52. It is the body authorized by law to
• Users’ needs promulgate rules and regulations
47. Which of the following events is • Board of Accountancy
considered an internal event?
53. Three main areas in the practice of the
• Conversion of raw materials into accountancy profession
finished goods
• Public, Private, Government Accounting
48. The cost of inventory is recognized as
54. The primary service of CPAs in public
an expense
practice
• Using the matching concept
• Auditing
49. In 2019, Brown Company was involved
55. Accountants employed in entities in
in a tax dispute with the BIR. On December
various capacities as accounting staff, chief
31, 2019, the tax advisor believed that an
accountant, or controller
avoidable outcome was a probable and
reasonable estimate of additional taxes • Private Accounting
was P500,000. After the 2019 financial
statements were issued, the entity 56. It is the area of the accountancy
received and accepted a BIR settlement profession that encompasses the process
offer of P550,000. What amount of accrued of Analyzing, Classifying, Summarizing,
liability should have been reported on and Communicating all transactions
December 31, 2019? • Government Accounting
• P500, 000 57. The accounting standard-setting body
50. Jewel Company provided the in the Philippines at present.
following information relating to a defined • Financial Reporting Standard Council
benefit plan for the current year:
58. The IASB declared that the merits
•1, 800, 000 of proposed standards are assessed
Current service cost 1,600,000 • From a position of neutrality
Actual return on 350,000
plan assets 59. The Chronological order in the
Interest income on 400,000 evaluation of a typical standard
plan assets • Discussion paper, Exposure draft, and
Past service cost 50,000
during the year Standard
Annual interest on 500,000 60. Developing accounting information for
pension liability use within an entity
Value of biological asset at acquisition cost
on Dec. 31, 2017 = 5,000,000 • Managerial Accounting

Fair Valuation surplus on initial recognition 61. Financial accounting can be broadly
at fair value on Dec. 31, 2017 = 500,000 defined as the area of accounting that
prepares general-purpose financial
statements for use by parties.
• Both internal and external to the entity 73. Is intended to establish; the objectives
and concepts for use in developing
62. Derive their credibility and authority
standards of financial accounting and
from recognition and acceptance by the
reporting.
accountancy profession.
• Conceptual Framework
• Generally Accepted Accounting
Principles (GAAP) 74. In the Conceptual Framework for
Financial Reporting provides the "why" of
63. The accounting principles have been
accounting.
developed based on such factors as usage
and practical necessity • Objective of financial reporting
• Best describes GAAP 75. The underlying theme of the
Conceptual Framework is
64. Best describes; The ability of the entity
to continue in operation for the • Decision usefulness
foreseeable future.
76. The primary focus of financial reporting
• Going Concerned is on meeting the needs of which of the
following groups?
65. Which basic assumption may not be
followed when the entity in bankruptcy • Existing and potential investors, lenders
prepares financial statements? and creditors
• Going Concern Assumption 77. Pertains to individual business entities,
rather than to industries or an economy as
66. The financial statements that are
a whole or members of society as
prepared for the business are separate
consumers
and distinct
• Financial Reporting
• Economic Entity Assumption
78. Are the attributes that make the
67. Applies to all forms of business
information provided in financial
organizations.
statements useful to users?
• Economic Entity Assumption
• Qualitative characteristics
68. Which assumption serves as the basis
79. Are considered either fundamentals or
for preparing financial statements at
enhancing
regular artificial points in time?
• Qualitative
• Accounting period
80. Contribute to the decision-making of
69. Which basic accounting assumption is
financial reporting information
threatened by the existence of severe
inflation in an economy? • Qualitative
• Monetary unit assumption 81. Distinguish better information from
inferior information for decision-making
70. When a parent and subsidiary
purposes
relationship exists, consolidated financial
statements are prepared in recognition of • Qualitative
• Economic entity 82. The fundamental qualitative
characteristic of Accounting information
71. The valuation of a promise to receive
cash in the future at present value is valid • Relevance and Faithful representation
because of the accounting concept of
83. Is considered relevant when it is
• Going concern capable of making a difference in a
decision.
72. What is the accounting concept that
justifies the usage of accruals and • Accounting information
deferrals?
84. The ingredients of relevant financial
• Going concern information is
• Predictive value, and confirmatory value
85. the quality of information that gives 96. The quality of information that enables
assurance that is reasonably free from users to better forecast future operations
error and bias?
• Relevance
• Faithful Representation
97. Term best describes information in
86. The best description of a faithful financial neutral statements
representation of information in financial
• Unbiased
statements
98. For information to be useful, the
• Freedom from Error
linkage between the users and the decision
87. The ingredients of faithful made is?
representations are Comparability,
• Understandability
understandability, verifiability, and
timeliness 99. Information is measured and reported
in a similar fashion
• Completeness, neutrality, and free from
error • Comparability
88. qualitative characteristics of financial 100. The conceptual framework includes
information which of the following constraints?
• Comparability, understandability, • Cost
verifiability and timeliness
101. The ability through consensus among
89. Information about two different measures to ensure that information
entities engaged in the same industry has represents what it purports to represent
been prepared and presented in a similar
manner • Verifiability

• Comparability 102. The accounting concept states that an

accounting transaction shall be supported
90. The characteristic that is demonstrated by sufficient evidence to allow two or more
when a high degree of consensus can be qualified individuals to arrive at essentially
secured among independent measures similar conclusions.
using the same measurement method
• Objectivity
• Verifiability
103. Is assumed to be achieved when an
91. The concept of accounting holds that accounting transaction, Involves an arm’s
financial statements shall be based on length transaction between two
arm's length transactions independent parties
• Verifiability • Objectivity
92. An entity issuing the annual financial 104. The underlying concept governing the
reports within one month at the end of the GAAP about recording gain contingencies
reporting period
• Conservatism
• Timeliness
105. The usefulness of providing
93. Allowing entities to estimate rather information in financial statements is
than physically count inventory at an subject to the constraint of?
interim period
• Cost benefit
• Timeliness and verifiability
106. It is a resource controlled by the entity
94. The overriding qualitative characteristic as a result of past event
of accounting information
• Asset
• Decision usefulness
107. It is a present obligation of an entity
95. Best describes the information that arising from past events the settlement of
influences the economic decisions of users which is expected to result in an outflow
from the entity of resources embodying
• Relevant
economic benefits
• Liability 118. Best describes assets recorded at the
amount that represents the immediate
108. It is the residual interest in the assets
purchase cost of an equivalent asset
of the entity after deducting all of the
liabilities • Current cost
• Equity 119. The amount of cash that could
currently be obtained by selling the asset
109. It is an increase in economic benefit
in an orderly disposal
during the accounting period related to an
increase in assets or a decrease in liability • Realizable value
that increases equity other than the
120. Future economic benefits will
contribution from owners.
probably be to the entity and the amount
• Income can be measured reliably
110. It is a decrease in economic benefits • Revenue recognition principle
during the accounting period related to a
121. States that revenue shall recognized at
decrease in assets or an increase in liability
a point when an exchange transaction has
that results in a decrease in equity other
occurred and the yearning process is
than distributions to owners.
essentially complete
• Expense
• Revenue principle
111. This arises in the course of ordinary
122. Generally, Revenue is recognized
regular activities and is referred to by a
variety of different names including sales, • At the point of sale
fees, interest, dividends, royalties, and rent
123. Normally, Revenue from the sale of
• Revenue goods is recognized
112. Process of incorporating the • When the title of the goods changes
statement of financial position or
statement of comprehensive income an 124. The process of identifying transactions
item that meets the definition of an to be recorded as revenue
element of the financial statements. • Revenue recognition
• Recognition 125. The process of converting noncash
113. The process involves the simultaneous resources and rights into cash or claims to
or combined recognition of revenue and cash
expenses that result directly from the same • Realization
transactions and other events.
126. Gains on assets unsold are identified
• Matching of cost with revenue in a precise sense by the term
114. When economic benefits are expected • Unrealized
to arise over several accounting periods.
127. The term recognized is synonymous
• Systematic and rational allocations with
115. It is a process of determining the • Recorded
monetary amounts at which the elements
of the financial statements are recognized 128. This is best demonstrated by
associating effort with accomplishment
• Measurement
• Matching principle
116. Measurement attributes; the most
relevant 129. Increase assets and expenses;
decrease liabilities, revenue, and equity
• Present value
• Debits
117. Amount of cash or cash equivalent
that would have to be paid if the same or 130. This means the dual effect of each
an equivalent asset was acquired currently. transaction is recorded with a debit and a
credit
• Current cost
• Double entry accounting system
131. It is useful in preparing the statement 145. It depends on the relative size and
of financial position nature of the omission as misstatement
judged in the surrounding circumstances
• Trial balance
• Materiality
132. Provides information that is helpful
when making adjusting entries 146. Omits many items that are of financial
value
• Unadjusted trial balance
• Statement of financial position
133. Can be used to uncover errors in
journalizing and posting 147. Section of the statement of financial
the position should be cash that is
• The trial balances
restricted for the settlement of liability due
134. Adjusting entries involve 18 months after the reporting period be
presented?
• One real and one nominal account
• Noncurrent assets
135. The adjusting entry for depreciation
has the same effect as? 148. Section of the statement of financial
position should employment taxes that are
• Prepaid expense due for settlement in 15 months be
136. Adjusting entries where revenue or presented?
expense recognition precedes cash flow • Current liabilities
• Accrual 149. An entity has a loan due for
137. Remove the balances from the repayment in six months but the entity has
temporary accounts the option to refinance for repayment two
years later.
• Closing entries
• Noncurrent liabilities
138. Does not include nominal accounts
150. Must be included on the face of the
• Post-closing trial balance statement of financial position
139. Are desirable to exercise consistency • Investment property
and establish standardized procedures
151. Must be included as a line item in the
• Reversing entries statement of financial position
140. Impact the statement of financial • Deferred tax
position and the income statement
152. A potential investor primarily uses to
• Reversing entries assess liquidity and financial flexibility
141. Reversing entries apply to? • Statement of financial position
• All accruals 153. Are neither assets nor liabilities
142. Financial statements must be • Asset valuation accounts
prepared at least
154. Current assets less current liabilities
• Annually
• Working capital
143. It is the presentation and classification
of financial statement items on a uniform 155. Represents total assets less total
basis from one accounting period to the liabilities
next • Net assets
• Consistency of presentation 156. Permits some assets to be classified as
144. An entity shall prepare how many current even though these are more than
statements of financial position? one year removed from becoming cash

• Three • Operating cycle concept

157. Trade installment accounts receivable
are normally collectible in 18 months
• Current asset • Prior period error
158. Equity investments held to finance the 171. The financial capital concept requires
construction of additional plants should be that net assets shall be measured at?
classified as?
• Historical cost
• Noncurrent investments
172. The physical capital concept requires
159. Accrued revenue would normally the adoption of which measurement basis?
appear under
• Current cost
• Current asset
160. Plant expansion fund
• Noncurrent asset
161. A debit balance in retained earnings
• Deficit
162. Prepare the most accurate financial
forecast for a corporate entity based on
empirical evidence
• Corporate management
163. Most useful information in predicting
future cash flows
• Current earnings
164. Is most useful for predicting the long-
term financial performance
• Accrual basis
165. Amplify or explain items presented in
the body of financial statements
• Notes to financial statements
166. Are events that provide evidence of
conditions that existed at the end of the
reporting period
• Adjusting entries
167. Are authorized for issue when the
board of directors reviews the financial
statements
• Financial statements
168. It is a change in equity during a period
resulting from transactions and other
events, other than changes resulting from
transactions with owners in their capacity
as owners
• Comprehensive income
169. It is the total income less expense,
excluding the components of other
comprehensive income
• Profit or loss
170. Appear first in a statement of retained
earnings