CFAS I-ACCOUNTING AND ACCOUNTANCY PROFESSION

Question 1

1. Which accounting process is the recognition or nonrecognition of business activities as
   accountable events?

(a) identifying
(b) measuring
(c )communicating
(d) summarizing

Answer 1

(a) identifying

Question 2

3. Which is an internal event?

(a) Casualty loss
(b) Exchange
(c) Nonreciprocal transfer between the enterprise and its owners.
(d) Nonreciprocal transfer between the enterprise and other entities

Answer 2

(a) Casualty loss

Question 3

4. The basic purpose of accounting is:

(a) to measure periodic income of the economic entity.
(b) to provide quantitative financial information about a business enterprise that is useful in
making rational economic decision
(c) to provide information that the creditors of an economic entity can use in deciding
whether to make additional loans to the entity.
(d) to provide information that the managers of an economic entity need to control its
operatians.

Answer 3

(b) to provide quantitative financial information about a business enterprise that is useful in
making rational economic decision

Question 4

5. It focuses on general purpose reports on financial position, performance and cash flows.

(a) financial accounting (c)management advisory services
(b) managerial accounting
(d) auditing

Answer 4

(a) financial accounting

Question 5

6. Which area of public accounting means the examination of financial statements by a CPA for the purpose of expressing an opinion as to the fairness of the statements?

a) external auditing (c) management advisory services
(b) taxation (d) internal auditing

Answer 5

a) external auditing

Question 6

7. Many accountants are employed in business enterprises in various capacities as accounting staff, chief accountant or controller. These accountants are said to be engaged
   in:

(a) public accounting (c) government accounting
(b) financial accounting (d) private accounting

Answer 6

(d) private accounting

Question 7

8. They encompass the conventions, rules, and procedures necessary to define what is
   accepted accounting practice.

(a) generally accepted accounting principles (c) characteristics principles
(b) accounting assumptions
(d) recognition principles

Answer 7

(a) generally accepted accounting principles

Question 8

9. One of the basic features of financial accounting is the:
   (a) direct measurement of economic resources and obligations and changes in them in
   terms of money and sociological and psychological impact.
   (b) direct measurement of economic resources and obligations and changes in them in
   terms of money.
   (c) direct measurement of economic resources and obligations and changes in them in
   terms of money and sociological impact.
   (d) direct measurement of economic resources and obligations and changes in them in
   terms of money and psychological impact.

Answer 8

(b) direct measurement of economic resources and obligations and changes in them in
terms of money.

Question 9

10. Which is not part of the accounting standard setting process in the Philippines?
    (a) preparation and approval by a Task Force of a draft of the proposed SFASS
    (b) distribution of the exposure draft for comment to PICPA members, FINEX members and
    other interested parties
    (c) publication in the Official Gazette or in a newspaper of general circulation
    (d) approval by the Professional Regulation Commission

Answer 9

(c) publication in the Official Gazette or in a newspaper of general circulation

Question 10

11. It is an independent private sector body with the objective of achieving uniformity in
    the accounting principles which are used by business enterprises for financial reporting
    around the world.
    (a) International Accounting Standards Boards
    (b) International Federation of Accountants
    (c) Financial Accounting Standards Council
    (d) Securities and Exchange Commission

Answer 10

(a) International Accounting Standards Boards

Question 11

12. The ASC decided to move totally to International Accounting Standards by reason of
    (choose the incorrect one):
    (a) support of IASC standards by Philippine organizations such as SEC, Board of
    Accountancy and PICPA
    (b) increasing internationalization of business which has heightened interest in a common
    language for financial reporting
    (c) increasing recognition of IASC standards by the World Bank, Asian Development Bank
    and World Trade Organization
    (d) extreme pressure from the International Monetary Fund

Answer 11

(d) extreme pressure from the International Monetary Fund

Question 12

13. 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
    international accounting standards will decrease.
    (d) Since difference countries use financial statements for different purposes, some
    countries will likely not adopt the international accounting standards.

Answer 12

(c) As international trade and ownership barriers are removed, the need for harmonization
international accounting standards will decrease.

Question 13

14. The purpose of International Accounting Standards 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 inter national companies.

Answer 13

(c) promote uniform accounting standards among countries of the world.

Question 14

15. Financial accounting is concerned with:
    (a) general-purpose reports on financial position and results of operations
    (b) specialized reports for inventory management and control
    (c) specialized reports for income tax computation and recognition
    (d) general purpose reports on changes in stock prices and future estimates of market
    position

Answer 14

(a) general-purpose reports on financial position and results of operations

Question 15

16. Which of the following is not an important characteristic or limitation of the financial
    statements that accountants currently prepare?
    (a) the information in financial statements is expressed in units of money adjusted for
    changing purchasing power
    (b) financial statements articulate with one another because measuring financial position is
    related to measuring changes in financial position
    (c) the information in financial statements is summarized and classified to held meet users needs
    (d) financial statements can be justified only if the benefits they provide exceed the costs

Answer 15

(a) the information in financial statements is expressed in units of money adjusted for
changing purchasing power

Question 16

17. The branch of accounting that is concerned primarily with providing information for
    internal users is called:
    (a) auditing (c) financial accounting
    (b) managerial accounting (d) income tax accounting

Answer 16

(b) managerial accounting

Question 17

19. The primary focus of financial accounting has been on meeting the needs of which of
    the following groups?
    (a) managers of an enterprise
    (b) present and potential creditors of an enterprise
    (c) national, and local taxing authorities

Answer 17

(b) present and potential creditors of an enterprise

Question 18

20. The most appropriate equation for portraying the relationship of assets, liabilities, and
    owners’ equity of a corporation is:
    (a) assets-liabilities = owners’ equity (c) assets=restriction of assets
    (b) assets= liabilities + owners’ equity (d) liabilities= assets-owners equity

Answer 18

(b) assets= liabilities + owners’ equity

Question 19

21. Which of the following statements regarding the economic entity assumption is most
    accurate?
    (a) the economic entity assumption applies only to corporations and not to sole
    proprietorships and partnerships
    (b) the economic entity assumption does not apply to a segment of a firm (such as a
    division)
    (c) the economic entity assumption recognizes the fiduciary responsibility of management to
    stockholders
    (d) the economic entity assumption is irrelevant to decisions regarding the consolidation of
    several interrelated firms

Answer 19

(c) the economic entity assumption recognizes the fiduciary responsibility of management to
stockholders

Question 20

22. The financial statements prepared under GAAP:
    (a) do not articulate with one another
    (b) reflect a single measurement basis which is historical cost
    (c) are not highly precise because many estimates and judgments must be made
    (d) contain a limited number of future projects, such as projected sale

Answer 20

(c) are not highly precise because many estimates and judgments must be made

Question 21

23. The primary measurement basis currently used to value assets in general purpose
    financial statements of an enterprise is:
    (a) the current market price if the assets currently held by an enterprise were sold on the open
    market
    (b) the current market price if the assets currently held by an enterprise were purchased on the
    open market
    (c) the present value of the cash flows assets are expected to general over their remaining useful
    lives
    (d) the market price of the assets at the date the assets were acquired

Answer 21

(d) the market price of the assets at the date the assets were acquired

Question 22

24. Asset measurements in conventional financial statements:
    (a) are confined to historical cost
    (b) are confined to historical cost and current cost
    (c) reflect several financial attributes
    (d) do not reflect output values

Answer 22

(c) reflect several financial attributes

Question 23

25. The GAAP also apply to:
    (a) The Board of Accountancy
    (c) The Philippine Institute of CPAs
    (b) The Bureau of Internal Revenue
    (d) The Professional Regulation Commission

Answer 23

(d) The Professional Regulation Commission