DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department
Theory of Accounts – Reviewer
____________________________________________________________________________________________________________

COVERAGE:
PAS 18: Revenue
RA 9298: The Philippine Accountancy Act of 2004
Additional Topics:
Old Conceptual Framework for Presentation and Preparation of Financial Statements
New Conceptual Framework for Financial Reporting
Accounting Principles
Direction: Read and select the best answer for the following questions.

1. What is the definition of Accounting according to Accounting Standards Council?

a. It refers to a service activity with a function of providing quantitative information primarily financial in nature, about economic
entities, that is intended to be useful in making economic decision.
b. It is the examination of financial statements by independent certified public accountants for the purpose of expressing an opinion
as to the fairness with which the financial statements are prepared.
c. It includes the preparation of annual income tax returns and determination of tax consequences of certain proposed business
endeavors.
d. It refers to services to clients on matters of accounting, finance, business policies, organization procedures, product costs,
distribution and many other phases of business conduct and operations.
2. Accounting has three important activities which are identifying, measuring and communicating. Which statement pertains to identifying?
a. It refers to 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.
b. It refers to the recognition and nonrecognition of accountable events.
c. It refers to process of preparing and distributing accounting reports to potential users of accounting information.
d. It refers to lending credence to the financial information provided by responsible party.
3. Communicating, which is one of the three important activities of accounting, has four implied components. Which of the following
statements pertains to the classifying component?
a. It is the process of systematically maintaining a record of all economic business transactions after they have been identified and
measured and also known as journalizing.
b. It is the sorting and grouping of similar and interrelated economic transactions into their respective class and also known as
posting to the ledger.
c. It is the preparation of financial statements.
d. It is the analysis of liquidity, solvency, and financial structure of the company based on the financial statements.
4. External transactions are those economic events involving one entity and another entity. The following are examples of external
transactions or events, except
a. Borrowing of a money from a bank
b. Sale of merchandise to customer
c. Payment of salaries to employees
d. Production and casualty
5. The law that governs accountancy profession is known as the “Philippine Accountancy Act of 2004”. This statute is denominated as
a. Republic Act 9892
b. Republic Act 9298
c. Republic Act 9982
d. Republic Act 8992
6. It refers to the body authorized by law to promulgate rules and regulations affecting the practice of the accountancy profession in the
Philippines.
a. Board of Accountancy
b. Philippine Regulation Commission
c. Financial Reporting Standards Council
d. Philippine Institute of Certified Public Accountants

7. Which of the following statements pertains to “private Accounting”?

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 a. It refers to the rendering of independent and expert financial services to the public such as auditing, taxation and management
advisory services.
b. It encompasses the process of analyzing, classifying, summarizing and communicating all transactions involving the receipt and
disposition of government funds and property and interpreting the results thereof.
c. It means the CPAs are employed in business entities in various capacity as accounting staff, chief accountant, internal auditor
and controller.
d. It refers to the field in which CPAs work as professors, lecturers and researchers in various universities and colleges.
8. The following statements pertain to financial accounting, except
a. It is primarily concerned with the recording if business transactions and the eventual preparation of financial statements.
b. It must comply with the PAS and PFRS.
c. It normally focuses on historical financial information.
d. It is the accumulation and preparation of financial reports for internal users only.
9. With the enactment of “The Philippine Accountancy Act of 2004, this body was created by the Professional Regulation Commission as the
replacement to the Accounting Standards Council as the new accounting standard setting body in the country.
a. Board of Accountancy
b. Auditing and Assurance Standards Council
c. Financial Reporting Standards Council
d. Philippine Institute of Certified Public Accountants
10. The Financial Reporting Standards Council is composed of 15 members with a Chairman who has been or is presently a senior accounting
practitioner and 14 representative from the following, except
a. 1 from Board of Accountancy
b. 1 from Board of Customs
c. 1 from Securities and Exchange Commission
d. 1 from Bangko Sentral ng Pilipinas
e. 1 from Bureau of Internal Revenue
f. 1 from Commission on Audit
g. 1 from major organization of preparers and users of financial statements
h. 2 each from ACPACI, ACPAE, ACPAPP and GACPA.
11. It refers to a global phenomenon intended to bring about greater transparency and a higher degree of comparability in financial reporting,
both of which will benefit the investors and are essential to achieve the goal of one uniform and globally accepted financial reporting
standards.
a. Borderless Accounting
b. International Accounting Standards
c. International Financial Reporting Standards
d. Generally Accepted Accounting Standards
12. Under the old Framework, which of the following are the two mentioned underlying assumptions?
a. Monetary unit and accounting entity
b. Time period and accrual
c. Going concern and accounting entity
d. Accrual and going concern
13. Which of the following statements pertain to the assumption of going concern?
a. It means the income and expenses are recognized when earned and incurred regardless of when received and when paid.
b. The business enterprise is separate from the owners, manages and employees of the firm.
c. The indefinite life of an entity is subdivided into time periods which are usually of equal length for the purpose of preparing
financial statements.
d. It means that the elements of financial statements should be stated in terms of a unit of measure and that the purchasing power
of the peso is stable or constant.
e. The accounting entity is viewed as continuing in operation indefinitely in the absence of evidence to the contrary.
14. Under the going concern assumption, financial statements are normally recorded at
a. Present value
b. Market value
c. Historical cost
d. Current cost
15. The conceptual framework for the preparation and presentation of financial statements is concerned with
a. Special purpose financial statements
b. General purpose financial statements and separate financial statements only
c. General purpose financial statements including consolidated financial statements
d. Interim financial statements

16. The following are the basic purposes of the conceptual framework, except
a. It assists the FRSC in developing accounting standards that represent Philippine GAAP.

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 b. It assists the preparers of financial statements in applying accounting standards and in dealing with issues not yer covered by
present GAAP.
c. It assists in auditors in forming an opinion as to whether financial statements conform with Philippine GAAP.
d. It assists the Board of Accountancy in regulating the practice of Accountancy.
17. Which of the following statements concerning the authoritative status of conceptual framework is incorrect?
a. Conceptual framework is a Philippine Financial Reporting Standard.
b. In case where there is a conflict, the requirements of the PFRS shall prevail over the conceptual framework.
c. In the absence of a standard or an interpretation that specifically applies to a transaction, management shall consider the
applicability of the conceptual framework in developing and applying an accounting policy that results in information that is
relevant and reliable.
d. Conceptual framework serves as a guideline or foundation for the development of accounting standards and revision of
previously issued accounting standards.
18. The old conceptual framework deals with the following, except
a. Objective of financial statements
b. Definition, recognition and measurement of the elements of financial statements
c. Quantitative characteristics that determine the usefulness of information in the financial statements
d. Concepts of capital and capital maintenance
19. The following financial statements are covered by the conceptual framework, except
a. Separate financial statements of a private entity
b. Consolidated financial statements of a public entity
c. General purpose financial statements of a private and public entity
d. Special purpose financial reports
20. What is the objective of financial statements?
a. To provide information about the strategies of the company.
b. To provide information about the financial position, financial performance and cash flows of an entity.
c. To provide information about the products and operations of an entity.
d. To provide information about the employees and benefits provided by an entity.

21. The financial position of an entity comprises the following, except

a. Assets
b. Income and Expenses
c. Liabilities
d. Equity
22. Which of the following information pertains to financial structure?
a. It is the ability of the entity to use its available case for unexpected requirements and investment opportunities.
b. It indicates the source of financing for the assets of the entity and it is useful in predicting the future borrowing needs and how
profits and cash flows will be distributed between the creditors and owners.
c. It is the availability of cash over a long-term to meet financial commitments when they fall due.
d. It is the availability of cash in the near future to cover currently maturing obligations.
e. It refers to the assets owned by the entity.
23. The financial performance of an entity comprises the following, except
a. Revenue
b. Expenses
c. Net income or loss
d. Disclosures
24. Which of the following concepts in conjunction with the objective of financial statements pertains to proprietary theory?
a. It is geared toward proper income determination. (Assets = Liabilities+Capital)
b. It is directed toward proper valuation of assets. (Assets-Liabilities=Capital)
c. This is applicable where there are two classes of shareholders. (Assets-Liabilities-Preference Shareholder’s Equity=Ordinary
Shareholder’s Equity)
d. This accounting objective is neither proper income determination nor proper valuation of assets but the custody and
administration of funds.
25. These are the qualities or attributes that make financial accounting information useful to the users.
a. Qualitative characteristics
b. Quantitative characteristics
c. Qualitative and quantitative characteristics
d. Information characteristics
26. Under the Old Conceptual Framework, four principal qualitative characteristics are enumerated. Which of the following qualitative
characteristics are considered primary characteristics because they relate to the content of financial statements?
a. Understandability and Comparability
b. Relevance and Reliability

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 c. Relevant and Understandability
d. Reliability and Comparability
27. Which of the following statements pertains to the qualitative characteristic of relevance?
a. It is the quality of information that assures users that the information is free from bias and error and faithfully represents what it
purports to represent.
b. It means the ability to bring together for the purpose of noting points of likeness and difference.
c. It requires that the financial information must be comprehensible or intelligible and is assumes that users have a reasonable
knowledge of the economic activities and accounting and a willingness to study the information with reasonable diligence.
d. It means the capacity of information to influence a decision.
28. Under the Old Conceptual Framework, the following are major ingredients of relevance, except
a. Predictive value
b. Neutrality
c. Feedback value
d. Timeliness
29. Under the Old Conceptual Framework, which of the following statements concerning relevance is incorrect?
a. Information has predictive value when it can help users increase the likelihood of correctly predicting or forecasting outcome of
events.
b. Information has feedback value when it enables users confirm or correct earlier expectations.
c. Timeliness is an important ingredient of relevance because relevant information furnished after a decision is made is useless or
of no value.
d. The predictive and confirmatory roles of information are not interrelated.
30. Under the Old Conceptual Framework, the following factors enhance the reliability of financial information, except
a. Faithful representation
b. Consistence
c. Completeness
d. Neutrality
e. Conservatism or prudence
f. Substance over form
31. Under the Old Conceptual Framework, which of the following statements pertains to prudence?
a. It means that the actual effects of the transaction should be accounted and reported in the financial statements and it means that
verifiable financial accounting information provides results that would be substantially duplicated by independent measure using
the same measurement method.
b. It means that a transaction should be accounted on its substance rather than its legal form.
c. It means that the financial statements must be free from bias or must not favor one party to the detriment of another party.
d. It means choosing the alternative which has the least effect on equity.
e. It requires that relevant information should be presented in a way that facilitates understanding and avoids erroneous implication
and it is the result of the adequate disclosure standard.
32. Under the Old Conceptual Framework, this principle is implicit in the qualitative characteristic of comparability.
a. Consistency
b. Neutrality
c. Objectivity
d. Timeliness
33. Which of the following statements concerning the two types of comparability is correct?
I. Comparability within an entity is the quality of information that allows comparisons within a single entity through time or from one
accounting period to the next. It is also known as horizontal comparability or intracomparability.
II. Comparability across entites is the quality of information that allows comparisons between two or more entities engaged in the same
industry. It is also known as intercomparability or dimensional comparability.
a. I only
b. II only
c. Neither I nor II
d. Both I and II

34. Which of the following statements concerning comparability is incorrect?

a. The need for comparability should not be confused with mere uniformity and should not be allowed to impediment to the
introduction of an improved accounting standard.
b. It is appropriate for an entity to leave its accounting policies unchanged when more relevant and reliable alternatives exist.

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 c. An important implication of comparability is that users are informed of the accounting policies employed, any changes in those
policies and the effects of such change.
d. Comparability is complemented by adequate disclosure principle.
35. Accounting constraints are the factors that may affect the relevance and reliability of financial accounting information. They include the
following, except
a. Timeliness
b. Cost-benefit
c. Conservatism
d. Materiality
e. Balance between qualitative characteristics
36. The following statements pertain to materiality, except
a. Materiality is a quantitative threshold linked closely to relevance.
b. Materiality is a qualitative characteristic of information.
c. An item is material if knowledge of it would affect or influence the decision of the informed users of the financial statements.
d. Materiality is affected by the relative size of the item and the nature of the item.
37. There is tradeoff between reporting relevant information in a timely manner and
a. Comparability of information
b. Reliability of information
c. Understandability of information
d. Materiality of information
38. These pertain to the quantitative information shown in the statement of financial position and income statement.
a. Qualitative Characteristics
b. Elements of Financial Statements
c. Accounting constraints
d. Capital concept
39. The following elements are directly related to the measurement of financial position, except
a. Resources controlled by the entity as a result of past transaction or events and from whicn future economic benefits are
expected to flow to the entity.
b. Increase in economic benefit during the accounting period in the form of inflow or increase in asset or decrease in liability that
results in increase in equity, other than contribution from equity participants.
c. Residual interest in the assets of the entity after deducting all of its liabilities.
d. Present obligations of the entity arising from past transactions or events the settlement of which is expected to result in an
outflow from the entity of resources embodying economic benefits.
40. It is a term which means the reporting of an asset, liability, income or expenses on the face of the financial statement of an entity.
a. Recognition
b. Measurement
c. Presentation
d. Derecognition
41. This principle provides that an asset is recognized when it is probable that future economic benefits will flow to the entity and the asset has
a cost or value that can be measured reliably.
a. Liability recognition principle
b. Cost principle
c. Asset recognition principle
d. Matching principle
42. This principle provides that asset should be recorded initially at cash or cash equivalent or fair value of asset given up at the date of
acquisition.
a. Liability recognition principle
b. Cost principle
c. Asset recognition principle
d. Matching principle
43. This principle provides that a liability is recognized when it is probable that an outflow of resources embodying economic benefits will be
required for the settlement of a present obligation and the amount of the obligation can be measured reliably.
a. Liability recognition principle
b. Cost principle
c. Asset recognition principle
d. Matching principle
44. This principle provides that an income is recognized when it is probable that future economic benefits will flow to the entity as a result of an
increase in an asset or a decrease in a liability and the economic benefits can be measured reliably.
a. Liability recognition principle
b. Cost principle
c. Income recognition principle

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 d. Matching principle
45. Which of the following statements concerning income is incorrect?
a. Income encompasses both revenue and gains.
b. Revenue encompasses both income and gains.
c. Revenue arises in the course of ordinary regular activities of an entity.
d. Gains represent other items that meet the definition of income and do not arise in the course of ordinary regular activities of an
entity.
46. PAS 18 provides the following conditions for the recognition of revenue from sale of goods, except
a. The entity has transferred to the buyer the significant risks and rewards of ownership of the goods.
b. The entity has transferred the title of the goods to the buyer.
c. The entity retains neither continuing managerial involvement nor effective control over the goods sold.
d. The amount of revenue can be measured reliably.
e. It is probable the economic benefits associated with the transaction will flow to the entity.
f. The costs incurred or to be incurred in respect of the transaction can be measured reliably.
47. PAS 18 provides the following conditions for the recognition of revenue from rendering of services, except
a. The amount of revenue can be measured reliably.
b. The entity has transferred to the buyer the significant risks and rewards of ownership of the goods.
c. It is probable that the economic benefits associated with the transaction will flow to the entity.
d. The stage of completion of the transaction at the end of reporting period can be measured reliably.
e. The costs incurred for the transaction and the costs to complete can be measured reliably.
48. As a general rule, revenue is recognized at the point of sale. Which of the following methods pertains to cost recovery method?
a. Revenue is recognized at the point of collection wherein the revenue is determined by multiplying the gross profit rate by the
amount of collections. The reason for this approach is the uncertainty of collection.
b. It is also known as sunk cost wherein all collections are first applied to the cost of the merchandise sold then all subsequent
collections are considered revenue.
c. Revenue is recognized when received regardless of when earned.
d. Revenue is recognized by reference to the stage of completion of the contract activity.
e. This method is recognized at the point of production and it is applicable to agricultural, forest and mineral products when a sale is
assured under a forward contract or a government guarantee or when a homogeneous market exist and there is a negligible risk
of failure to sell.
49. The following statements are proper income recognition under PAS 18, except
a. Interest revenue shall be recognized on a time basis that takes into account the effective yield on the asset.
b. Royalties shall be recognized on an accrual basis in accordance with the substance of the relevant agreement.
c. Dividends shall be recognized as revenue when the shareholder’s right to receive payment is established, meaning, when the
dividends are declared.
d. Installation fees are recognized as revenue over the period of installation by reference to the stage of completion.
e. Subscription revenue should be recognized on a straight line basis over the subscription period.
f. Admission fees are recognized as revenue when the tickets are sold.
g. Tuition fees are recognized as revenue over the period in which tuition is provided.
50. It pertains to item that meets the definition of expenses and do not arise in the course of ordinary regular activities of the entity.
a. Expense
b. Loss
c. Gain
d. Revenue
51. This principle means that those costs and expenses incurred in earning a revenue shall be reported in the same period the revenue is
recognized.
a. Expense recognition principle
b. Revenue recognition principle
c. Matching principle
d. Asset recognition principle

52. The matching principle has three applications. Which of the following pertains to systematic and rational allocation?
a. Expense is recognized when the revenue is already recognized.
b. Some costs are expensed by simply allocating them over the periods benefited.
c. The cost is incurred is expensed outright because of uncertainty of future economic benefits or difficulty of reliably associating
certain costs with future revenues.
d. This method pertains to direct write off method.

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 53. The following expenses are matched using cause and effect association, except
a. Bad debts expense
b. Warranty expense
c. Sales commission
d. Impairment loss
54. The following expenses are matched using systematic and rational allocation, except
a. Depreciation expense
b. Amortization expense
c. Cost of sales
d. Allocation of prepaid rent
55. The following expenses are matched using immediate recognition, except
a. Administrative and selling department salaries
b. Loss on disposal of building
c. Allocation of insurance expense
d. Loss from lawsuit
56. It is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in
the statement of financial position and income statement.
a. Recognition
b. Measurement
c. Realization
d. Classification
57. Which of the following statements pertains to current cost?
a. It is the amount of cash or cash equivalent paid or fair value of asset given up to acquire at asset at the date of acquisition.
b. It is the amount of cash or cash equivalent that would have to be paid if the same or equivalent asset was acquired currently.
c. It is the amount of cash or cash equivalent that could currently be obtained by selling the asset in an orderly disposal.
d. It is the discounted value of the future net cash inflows that the item is expected to generate in the normal course of business.
58. Present value is based on
a. Past purchase exchange price
b. Current purchase exchange price
c. Current sale exchange price
d. Future exchange price
59. The old framework provides for the two approaches in computing financial performance which are
I. Transaction approach which is the traditional preparation of an income statement.
II. Capital maintenance approach means that net income occurs only after the capital used from the beginning of the period is
maintained.
a. I only
b. II only
c. Both I and II
d. Neither I nor II
60. Which of the following combinations of capital maintenance is proper?
a. Financial capital – current cost and physical capital – historical cost
b. Physical capital – current cost and financial capital – current cost
c. Financial capital – historical cost and physical capital – current cost
d. Physical capital - historical cost and financial capital – historical cost

61. What is the proper order of the following steps in the accounting cycle?
I. Preparing the reversing entries
II. Preparing adjusting entries
III. Posting
IV. Analyzing business transactions
V. Preparing closing entries
VI. Preparing unadjusted trial balance

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 VII. Preparing financial statements
VIII. Preparing post-closing trial balance
IX. Journalizing
a. IV-IX-III-VI-II-VII-V-VIII-I
b. IV-IX-III-VI-II-V-VIII-VII-I
c. IV-IX-III-VI-II-VII-V-I-VIII
d. IV-IX-III-VI-II-VII-I-V-VIII
62. It is an optional step in the accounting cycle and may be made to facilitate the preparation of the financial statements.
a. Preparing trial balance
b. Worksheet
c. Financial statement analysis
d. Preparing reversing entries
63. These pertain to the original source materials evidencing a transaction.
a. Journal
b. Ledger
c. Source documents
d. Audit trail
64. The following are examples of business or source documents, except
a. Sales invoice
b. Debit and credit memorandum
c. Purchase requisition form
d. Check stubs and minutes book
65. This pertains to the book of original entry.
a. Journal
a. Ledger
b. Source documents
c. Audit trail
66. This pertains to the book of final entry.
a. Journal
b. Ledger
c. Source documents
d. Audit trail
67. This type of journal entry consists of one debit and one credit.
a. Simple journal entry
b. Complex journal entry
c. Basic journal entry
d. Compound journal entry
68. What is a compound journal entry?
a. A journal entry with at least one debit and one credit.
b. A journal entry with at least one nominal and one real account.
c. A journal entry with at least two real accounts.
d. A journal entry consisting of two or more debits or two or more credits.
69. The following statements pertaining to special journals are correct, except
a. Only sales of merchandise on account are recorded in the sales journal.
b. Receipts of cash from any source are recorded in the cash receipts journal.
c. All payments of cash for any purpose are recorded in cash disbursements journal.
d. Only purchases of merchandise on account are recorded in the purchases journal.
70. Adjusting entries, closing entries and reversing entries are recorded in the
a. Sales journal
b. Cash receipts journal
c. General journal
d. Purchases journal

71. It is an accounting device used in summarizing the effects of transactions on each asset, liability, equity, revenue and expense.
a. Journal
b. Account
c. Ledger
d. Trial balance
72. It refers to a listing of all the entity’s general ledger accounts in a systematic form. The accounts are usually numbered to permit easy
identification and cross-referencing with the journals.
a. Trial balance

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 b. Chart of accounts
c. General ledger
d. General journal
73. It is a device used in storing the details or breakdown of certain general ledger accounts.
a. Subsidiary ledger
b. Special journals
c. General ledger
d. General journal
74. What is the controlling account of customer’s subsidiary ledger?
a. Accounts payable
b. Accounts receivable
c. Common stock
d. Cash account
75. What is a real account?
a. It represents assets, liabilities and equity account and it is also known as permanent or statement of financial position account. It
is normally carried from one accounting period to another and remains in the post-closing trial balance.
b. It is offset account and it is deducted from the related account.
c. It is added to the related account.
d. It represents revenue and expense account and it is also known as temporary or income statement accounts. It is closed at the
end of every accounting period and has zero balance in the post-closing trial balance.
76. Which of the following is an example of real-adjunct account?
a. Allowance for bad debts
b. Freight In
c. Sales discount
d. Premium on Bonds Payable
77. This is a system of internal control over all cash disbursements wherein a voucher must be prepared for every cash disbursement that is to
be made.
a. Imprest system
b. Voucher system
c. Check register system
d. Cash register system
78. What is a voucher?
a. It is the business document or written authorization for every cash disbursement.
b. It is the journal where all vouchers are recorded in numerical sequence.
c. It is the journal where all checks issued for payments are recorded.
d. It is the subsidiary where all unpaid vouchers are filed after the vouchers are entered in the voucher register.
79. It is a list of general ledger accounts with their respective debit or credit balance.
a. Worksheet
b. Chart of accounts
c. Trial balance
d. Financial statements
80. Which of the following statements pertaining to a trial balance is incorrect?
a. It is a control device that helps to minimize accounting errors.
b. It is normally prepared at the end of every accounting period after all transactions for the period have been recorded and posted
to the general ledger.
c. It provides evidence that the total debits equal the total credits.
d. If it is in balance it signifies the absence of errors in the journalizing and posting of transactions.
81. What is transposition error?
a. It is an error in placing the decimal point and also known as slide error.
b. It is an error of nonrecording a transaction.
c. It is an error which if not detected is automatically counterbalanced or corrected in the following accounting period.
d. It is an error wherein the figures are interchanged.
82. What is the purpose of adjusting entries?
a. To simplify the accounting process and make a fresh accounting start.
b. To apply the realization concept to transactions which affect at least two accounting periods.
c. To close the nominal accounts for preparation of post-closing trial balance.
d. To initially record transactions or events.
83. Which of the following is a proper combination for an adjusting entry?
a. Debit asset and credit liability
b. Debit liability and credit revenue
c. Debit liability and credit equity

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 d. Credit equity and debit asset
84. In preparing a worksheet, which of the following statements is true?
a. If the total credits in the Income Statement Column exceed the total debits in the Income Statement Column, there is a net loss.
b. If the total debits in the Balance Sheet Column exceed the total credits in the Balance Sheet Column, there is a net income.
c. If the total credits in the Income Statement Column exceed the total debits in the Balance Sheet Column, there is a net income.
d. If the total debits in the Balance Sheet Column exceed the total credits in the Income Statement Column, there is a net loss.
85. After the closing entries have been prepared, which of the following will have zero balance?
a. Purchase discount
b. Allowance for bad debts
c. Share premium
d. Discount on bonds payable
86. In closing the income summary account of a corporation that is profitable, which of the following statements is true?
a. Share premium account is debited.
b. Retained earnings account is debited
c. Retained earnings account is credited
d. Income summary account is credited
87. It is a listing of general ledger accounts and their balances and it consists only of real or permanent accounts.
a. Unadjusted trial balance
b. Adjusted trial balance
c. Income statement
d. Post-closing trial balance
88. These entries are made at the beginning of the new accounting period in order to simplify recording of certain kinds of recurring
transactions.
a. Closing entries
b. Reversing entries
c. Journal entries
d. Realization entries
89. The following adjusting entries will require reversing entries, except
a. Accrued expenses
b. Accrued income
c. Prepaid expense using expense method
d. Unearned income using liability method
90. Which of the following statements concerning debit and credit sides of an account are true?
a. Debit represents the increase of an account.
b. Credit represents the increase of an account.
c. Credit is the normal balance of asset and expense accounts while debit is the normal balance of liability, equity and income
accounts.
d. Normal balance of an account represents the increase side of an account.
91. In preparing the worksheet, which of the following statements concerning merchandise inventory account is proper?
a. Merchandise inventory, end is extended to debit column in the income statement column.
b. Merchandise inventory, end is extended to debit column in the balance sheet column.
c. Merchandise inventory, beg. is extended to credit column in the income statement column.
d. Merchandise inventory, beg. is extended to credit column in the balance sheet column.
92. The following are the purposes of worksheet, except
a. It provides a place where adjusting entries can be made informally before they are journalized and posted.
b. It ensures the elimination of errors in the journalizing and posting of transactions.
c. It provides an orderly means whereby each account can be classified according to the financial statement in which it will appear.
d. It provides a balancing mechanism that helps to uncover accounting errors.

93. What is the title of the new accounting conceptual framework issued by the International Accounting
Standard Board?
a. The Conceptual Framework for Preparation and Presentation of Financial Statements
b. The Conceptual Framework for Financial Accounting
c. The Conceptual Framework for Financial Reporting
d. The Conceptual Framework for Financial Presentation
94. The New Conceptual Framework issued by IASB is divided into the following chapters, except
a. The Objective of General Purpose of Financial Reporting
b. The Reporting Entity
c. Qualitative Characteristics of Useful Financial Information

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 d. The 1989 Framework: Remaining Text
e. Auditing Standards
95. The following are the purposes of the New Conceptual Framework, except
a. To assist IASB in the development of future IFRSs and its review of existing IFRSs.
b. To assist national standard-setting bodies in developing national auditing standards.
c. To assist the IASB in promoting harmonization of regulations, accounting standards and procedures
relating to the presentation of financial statements.
d. To assist preparers of financial statements in applying IFRS.
e. To assist auditors in forming an opinion as to whether financial statements comply with IFRSs.
f. To assist users of financial statements in interpreting the information contained in financial
statements prepared in compliance with IFRSs.
g. To provide those who are interested in the work of the IASB with information about its approach
to the formulation of IFRSs.
96. The New Conceptual Framework deals with the following, except
a. The objective of financial statements.
b. Quantitative characteristics that determine the usefulness of information in financial statements.
c. Definition, recognition, and measurement of the elements of financial statements.
d. Concepts of capital and capital maintenance.
97. Under the New Conceptual Framework, the following statements concerning the objective of general
purpose financial reporting are true, except
a. Financial reporting has the primary purpose of providing financial information about an entity to
internal users.
b. The information provided by financial reporting helps users in making economic decisions and
assess the effectiveness of management’s performance.
c. Financial statements are directed toward the common information needs of the users.
d. General purpose financial reports are intended to meet the needs of the users who are not in a
position to demand reports tailored to meet their particular information needs.
98. Under the New Conceptual Framework, which of the following persons are considered primary users
of financial reporting?
I. Existing and Potential Investors
II. Lenders
III. Other Creditors
IV. Employees
V. Government and its Agencies
VI. Public
a. I, II, III and IV
b. II, III, IV and V
c. I, II, and III
d. I, II, III, IV, V, and VI
99. Under the New Conceptual Framework, the users of financial statements have common information
needs: to evaluate the following information about an entity. Which of the following information refers
to profitability?
a. It refers to the availability of the cash in the near future after taking account of financial
commitments over the current period.
b. It is the availability of cash over the long term to meet financial commitments as they fall due.
c. It is the company’s ability to adjust to unexpected downturns in the economic environment in which
it operates or to take advantage of profitable investment opportunities as they arise.
d. It is the ability of the enterprise to generate cash flows from its existing resource base.

100. Which of the following statements pertains to the “information on cash flows?
a. It relates to the financial structure, liquidity, solvency, and economic resources of an entity.
b. It is required in order to asses potential changes in the economic resources that he enterprise is
likely to control in the future and with this information, the decision maker is able to predict the
capacity of the enterprise to generate cash flows from its existing resource base.
c. It is useful in order to assess the investing, financing, and operating activities of the entity during
the reporting period and it is useful in assessing the ability of the enterprise to generate cash and
and cash equivalents and the needs of the enterprise to utilize those cash flows.
d. It identifies the changes in the asset and liability balances arising from transactions with equity
participants and it presents among others, the effect on the equity balances arising from operations,
and from contributions from and distributions to owners.

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 101. Under the New Conceptual Framework, the qualitative characteristics of financial information are
divided into:
a. Primary and Secondary Qualitative Characteristics
b. Fundamental and Enhancing Qualitative Characteristics
c. Principal and Supporting Qualitative Characteristics
d. Basic and Complex Qualitative Characteristics
102. Under the New Conceptual Framework, the fundamental qualitative characteristics are
a. Relevance and Reliability
b. Comparability and Understandability
c. Reliability and Understandability
d. Relevance and Faithful Representation
103. The following statements pertaining to the fundamental qualitative characteristic of relevance are
correct, except
a. An information is considered relevant if knowledge of such information would affect the decision or
evaluation of the user.
b. A relevant financial information has confirmatory value and/or predictive value.
c. Confirmatory value enables the users to confirm earlier expectations about the enterprise, thus al-
lowing the users to better understand how past economic activities have affected the enterprise.
d. Feedback value means that financial information about the enterprise’s financial position and past
performance helps users formulate more intelligible predictions about the future.
104. Materiality provides a threshold or cutoff point in deciding whether the item is to be recognized or it
pertains to information that is significant enough to influence the economic decisions of users.
Materiality depends on the following, except
a. Nature of the item
b. Professional judgment
c. Magnitude of the items to which the information relates
d. Error judged in particular circumstances of omission or misstatement of information
e. Provisions of PAS or PFRS
105. The fundamental qualitative characteristic of faithful representation requires that the amounts and
descriptions of information presented on the financial statements reflect the actual results of the
transactions completed by the enterprise. To be representationally faithful, the information must be,
except
a. Understandable
b. Complete
c. Neutral
d. Free from error
106. The following statements pertaining to the fundamental qualitative characteristic of faithful
representation are true, except
a. A complete depiction of an account presented on the face of the financial statements is necessary to
achieve faithful representation.
b. A neutral information is impartial and is not biased towards the particular needs or desires of
specific users.
c. An information is free from error if there are no errors or omissions in its description and that there
no error committed in the process of producing the information.
d. Faithful representation of financial information always results to useful information.

107. Under the New Conceptual Framework, the following are the enhancing qualitative characteristics of
financial information, except
a. Comparability
b. Prudence
c. Verifiability
d. Timeliness
e. Understandability
108. Which of the following statements pertains to the enhancing qualitative characteristic of
comparability?
a. It is the quality of information that enables users to identify similarities and differences between
at least two sets of economic circumstances.
b. It is the quality of information which allows information to be replicated if the same measurement

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 methods and same process are applied.
c. It is the availability of information to users early enough to be used for the economic decisions
which the information might influence.
d. It is the linkage between the information and the economic decision to be made by the user and it
depends on two factors: the quality of the information and the quality of the user.
109. A constraint is a practical exception to the application of sound accounting theory. What accounting
constraint is specifically mentioned in the New Conceptual Framework?
a. Timeliness
b. Materiality
c. Balance between relevance and reliability
d. Cost-benefit consideration
110. What is/are the underlying assumptions mentioned in the New Conceptual Framework?
a. Going Concern only
b. Going Concern and Accrual
c. Periodicity and Monetary Unit
d. Accrual and Accounting Entity

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