Chapter 1 to Chapter 4

Question 1

What is accounting according to AICPA?

Answer 1

Accounting is the art of recording, classifying, summarizing in a significant manner and in terms of money, transactions, and events which are in part of or at least a financial character, and interpreting the results thereof.

Question 2

What are the 3 components of accounting?

Answer 2

Identifying (Analytical component)
Measuring (Technical component)
Communicating (Formal component)

Question 3

When can a business activity be considered as accountable or worth recognizing?

Answer 3

When it is for a sum of money or if it has an effect in assets, liabilities, and equity.

Question 4

What is the very purpose/main objective of accounting?

Answer 4

To provide quantitative information that will be useful for making economic decisions.

Question 5

These are economic activities of an entity.

Answer 5

Transactions

Question 6

Differentiate external transactions from internal transactions.

Answer 6

External transactions are business activities involving itself and another entity, while internal transactions involve only one entity.

Question 7

This is the process by which resources are transformed into products.

Answer 7

Production

Question 8

This is any sudden and anticipated loss from fire, flood, earthquake, and other event ordinarily termed as an act of God.

Answer 8

Casualty

Question 9

This is the accounting process that recognizes accountable events from non-accountable events.

Answer 9

Identifying

Question 10

This is the accounting process of assigning of peso amounts to the accountable economic transactions and events.

Answer 10

Measuring

Question 11

What are the measurement bases of monetary amounts?

Answer 11

Historical cost
current value

Question 12

Differentiate historical cost from current value.

Answer 12

Historical cost is the original acquisition cost and the most common measure of financial transactions while current value includes fair value, value in use, fulfillment value and current cost.

Question 12

This is the process of preparing and distributing accounting reports to potential users.

Answer 12

Communicating

Question 12

This is the process of systemically maintaining a record of all economic business transactions after they have been identified and measured.

Answer 12

Recording or journalizing

Question 13

This is the sorting or grouping of similar and interrelated economic transactions into their respective classes.

Answer 13

Classifying

Question 14

How is the classifying stage accomplished?

Answer 14

by posting to the ledger

Question 15

This is a group of accounts which are systemically categories into asset accounts, liability accounts, equity accounts, expense accounts, and revenue accounts.

Answer 15

Ledger

Question 16

This is the preparation of financial statements.

Answer 16

Summarizing

Question 17

What law regulates the practice of accountancy in the Philippines.

Answer 17

RA 9298 or the Philippine Accountancy Act of 2004

Question 18

This is the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the Philippines.

Answer 18

Board of Accountancy

Question 19

When is the Philippine CPA examination offered?

Answer 19

Twice a year, once in May and once in October

Question 20

Who are the primary users of accounting information?

Answer 20

Investors and creditors

Question 21

What are the main fields of practice of accountancy?

Answer 21

Private practice
Public practice
Government
Education

Question 22

This field of accounting renders independent and expert financial services to the public.

Answer 22

Public accounting

Question 23

What are the services offered in public accounting?

Answer 23

Auditing, taxation, and management advisory services

Question 24

This is the examination of financial statements by independent CPAs for the purpose of expressing an opinion as to the fairness with which the financial statements are prepared.

Answer 24

Auditing

Question 25

This service includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business endeavors.

Answer 25

Taxation service

Question 26

This service includes maintaining the records, producing the financial reports, preparing the budgets and controlling and allocating the resources of the entity.

Answer 26

Private accounting

Question 27

This service encompasses transactions involving the receipt and disposition of government funds and property.

Answer 27

Government accounting

Question 28

This is the acquisition of advanced knowledge, skill, and proficiency.

Answer 28

Continuing Professional Development

Question 29

What are CPD credit units?

Answer 29

These are CPD credit hours required for the renewal of CPA license every 3 years.

Question 30

How many CPD credits units are required for the renewal of CPA license?

Answer 30

15

Question 31

How many CPD credit units are needed for the accreditation of a CPA to practice the accountancy profession.

Answer 31

120

Question 32

Differentiate the work of an accountant and an auditor.

Answer 32

The accountant analyzes the economic transactions and summarizes them into financial statements that the auditor will examine.

Question 33

What is bookkeeping?

Answer 33

It is the maintaining and keeping of accounting records.

Question 34

Explain: Accounting vs Accountancy

Answer 34

Accounting is the field of accountancy while accountancy is the profession.

Question 35

Explain: Financial accounting vs managerial accounting

Answer 35

Financial accounting focus on financial statements while managerial accounting is the preparation of financial reports for internal users only.

Question 36

These represent the rules and standards followed in the preparation and presentation of financial statements.

Answer 36

GAAP

Question 37

How many members are there in the FRSC?

Answer 37

15 members with a chairman and 14 representatives.

Question 38

This is a summary of the terms and concepts that underlie the preparation and presentation of financial statements for external users.

Answer 38

Conceptual Framework

Question 39

Who are the others users of accounting information?

Answer 39

Employees, customers, government, agencies, and the public

Question 40

This is information about the entity's economic resources and the claims against the reporting entity.

Answer 40

Financial report

Question 41

The financial position can help users to assess an entity's performance including

Answer 41

Liquidity, solvency, financial structure, and financial flexibility

Question 42

This is the availability of cash in the near future to cover currently maturing obligations.

Answer 42

Liquidity

Question 43

This is the availability of cash over a long term to meet financial commitments when they fall due.

Answer 43

Solvency

Question 44

This means that income is recognized when earned regardless when received and expense is recognized when incurred regardless of when paid.

Answer 44

Accrual accounting

Question 45

These are the qualities or attributes that make financial accounting information useful to the users.

Answer 45

Qualitative characteristics

Question 46

What are the two fundamental qualitative characteristics?

Answer 46

Relevance and Faithful representation

Question 47

What are the two types of qualitative characteristics?

Answer 47

Fundamental characteristics and enhancing characteristics

Question 48

This is the capacity of the information to influence a decision.

Answer 48

Relevance

Question 49

When does a financial information have a predictive value?

Answer 49

If it can be used as an input to processes employed by uses to predict future outcome.

Question 50

When does a financial information have confirmatory value?

Answer 50

If it provides feedback about previous evaluations/If it can be used by users to confirm or correct earlier expectations.

Question 51

What are the 3 characteristics under relevance?

Answer 51

Materiality Predictive Value Confirmatory or Feedback Value

Question 52

What is materiality also known as?

Answer 52

Doctrine of convenience

Question 53

This dictates that strict adherence to GAAP is not required when the items are not significant enough to affect the evaluation, decision and fairness of the financial statements.

Answer 53

Materiality

Question 54

This means that the presentation of financial information not readily understood or not clearly expressed.

Answer 54

Obscuring information

Question 55

This means that financial reports represent economic phenomena or transactions in words and numbers.

Answer 55

Faithful representation

Question 56

What are the ingredients of faithful representation?

Answer 56

Free from error Completeness Neutrality

Question 57

This characteristic requires that relevant information should be presented in a way that facilitates understanding and avoids erroneous implication.

Answer 57

Completeness

Question 58

In order for financial statements to be complete, what should they be accompanied with?

Answer 58

Notes to financial statements

Question 59

This standard means that all significant and relevant information leading to the preparation of financial statements shall be clearly reported.

Answer 59

Standard of adequate disclosure

Question 60

This means depicting without bias in the preparation and presentation o financial information.

Answer 60

Neutrality

Question 61

This is the exercise of care and caution when dealing with the uncertainties in the measurement process such that assets or income are not overstated and liabilities are not understated

Answer 61

Prudence

Question 62

This means "in case of doubt, record any loss and do not record any gain."

Answer 62

Conservatism

Question 63

This is recognized as a provision if the loss is probable and the amount can be reliably measured.

Answer 63

Contingent loss

Question 64

This is not recognized but disclosed only.

Answer 64

Contingent gain

Question 65

This means that there are no errors or omissions in the description of the phenomenon or transaction.

Answer 65

Free from error

Question 66

This arises when monetary amounts in financial reports cannot be observed directly and must be estimated.

Answer 66

Measurement uncertainty

Question 67

This type of qualitative characteristics relate to the presentation or form of the financial information.

Answer 67

Enhancing qualitative characteristics

Question 68

What are the characteristics under enhancing qualitative characteristics?

Answer 68

Verifiability Comparability Understandability Timeliness

Question 69

This means the ability to bring together for purpose of noting points of likeness and difference.

Answer 69

Comparability

Question 70

This is comparability within an entity.

Answer 70

Intracomparability or horizon comparability

Question 71

This is comparability across entities.

Answer 71

Intercomparability or dimensional comparability.

Question 72

This is the use of the same method between and across entities within an entity.

Answer 72

Consistency

Question 73

This is the use of the same method between and across entities in the same industry.

Answer 73

Comparability

Question 74

This requires that financial informations must be comprehensible or intelligible if it is to be most useful.

Answer 74

Understandability

Question 75

This means that different knowledgeable and independent observers could reach consensus, although now necessarily complete agreement, that a particular depiction is a faithful representation.

Answer 75

Verifiability

Question 76

Financial information must be supported by this to be verifiable.

Answer 76

Evidence

Question 77

This means verifying an amount or other representation through direct observation.

Answer 77

Direct verification

Question 78

This means checking the inputs to a model, formula or other technique and recalculating the inputs using the same methodology.

Answer 78

Indirect verification

Question 79

This means that financial information must be available or communicated early enough when a decision is to be made.

Answer 79

Timeliness

Question 80

These are the basic notions or fundamental premises on which the accounting process is based.

Answer 80

Accounting assumptions

Question 81

This assumption means that in the absence of evidence to the contrary, the accounting entity is viewed as continuing in operation indefinitely.

Answer 81

Going concern