QUIZ#1 KEY Answers PDF

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1. These are the basic notions or fundamental premises on which the accounting process is based. (a) accounting assumptions (c) generally accepted accounting principles (b) accounting standards (d) accounting concepts A 2. The ASC conceptual framework specifically mentions two underlying assumption. These are: (a) accrual and going concern (c) going concern and time period (b) accrual and accounting entity (d) time period and monetary unit A 3. The effects of transactions and other events are recognized when they occur and not as cash or its equivalent is received or paid, and they are recorded and reported in the financial statements of the period to which they relate. (a) accrual (c) time period (b) going concern (d) monetary unit A 4. Which of the following statements is incorrect? (a) The accrual method, which builds directly on the revenue and matching principles, ignores the timing of cash receipts or payments when determining when to recognize revenue or expenses. (b) Expenses are matched with revenue, not the reverse. (c) In accordance with the unit of measure assumption, accountants normally revise the amounts to reflects the changing purchasing power of money due to inflation or deflation. (d) In accordance with the going concern assumption, the life of a business is presumed to be indefinite. C 5. If a business is not being sold or closed, the amounts reported in the accounts for assets used in the business operations are based on the cost of the assets. This practice is justified by: (a) accrual (c) continuity assumption (b) time period (d) accounting entity C 6. John Frivs is the sole owner and manager of Ace Services. John purchased a car for personal use. He uses a van in the business. Which of the following is violated if John recorded the cost of the car as an asset of the business? (a) conservatism (c) full disclosure (b) going concern assumption (d) separate entity assumption D 7. What is the traditional accounting period? (a) three months (b) six months

(c) two years (d) twelve months

D

8. Which underlying concept serves as the basis for preparing financial statements at regular intervals? (a) accounting entity (c) accounting period (b) going concern (d) stable monetary unit C

9. Revenue is expressed as the number of pesos received or the peso equivalent of the commodities of services received. Cost is expressed as the number of pesos paid out of the peso equivalent of the items given up. Fluctuations in value of the peso are ignored. The above describes what accounting assumption? (a) going concern (c) historical cost (b) unit of measure (d) realization B 10. The financial statements should be stated in terms of a common financial denominator. (a) accrual (c) time period (b) going concern (d) monetary unit D 11. The concept of accounting entity is applicable: (a) only to be legal aspects of business organizations. (b) only to the economic aspects of business organizations. (c) only to business organizations. (d) whenever accounting is involved.

D

12. When a parent and subsidiary relationship exists, consolidated financial statements are prepared in recognition of: (a) legal entity (c) stable monetary unit (b) economic entity (d) time period B 13. The valuation of a promise to receive cash in the future at present value on the financial statement of a business entity is valid because of the accounting concept of: (a) entity (c) going concern (b) time period (d) monetary unit C 14. Continuation of an accounting entity in the absence of evidence to the contrary is an example of the basic concept of: (a) accounting entity (c) going concern (b) time period (d) accrual C 15. This accounting concept justifies the usage of accruals and deferrals. (a) going concern (c) consistency (b) materiality (d) stable monetary unit

A

16. During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concepts? (a) accrual (c) unit of measure (b) periodicity (d) continuity B 17. The relatively stable economic, political and social environment supports: (a) conservatism (c) timeliness (b) materiality (d) going concern

18.

A conceptual framework is:

D

(a) a statements of financial accounting standard. (b) an underlying accounting assumption. (c) a theoretical foundation which guides the ASC, preparers and users of financial accounting information. (d) a financial statement. C 19. Which is not a basic purpose of a conceptual framework? (a) to assist ASC in developing accounting standards. (b) to assist preparers of financial statements in applying ASC accounting standards. (c) to assist ASC in reviewing and adopting International Accounting Standards. (d) to assist the Board of Accountancy in promulgating rules and regulations affecting the practice of accountancy in the Philippines. D 20. The ASC conceptual framework is intended to establish: (a) generally accepted accounting principles in financial reporting by business enterprises. (b) the meaning of “present fairly in accordance with generally accepted accounting principles.” (c) the objectives and concepts for use in developing standards of financial accounting and reporting. (d) the hierarchy of sources of generally accepted accounting principles. C...