CONCEPTUAL FRAMEWORK AND ACCOUNTING 5.

The overall objective of financial reporting is to provide

information
STANDARDS
a. That is useful for decision making
CHAPTER 1-TRUE OR FALSE b. About assets, liabilities and equity of an entity
c. About financial performance during a period
1. The International Accounting Standard Committee d. That allows owners to assess management
(IASC) was formed as a not-for profit government performance
corporation.
2. International Accounting Standard Board (IASB) is the 6. The conceptual framework provides the foundation for
predecessor of International Financial Reporting standards that
Standard (IFRS) Foundation. a. Contribute to transparency by enhancing
3. IASB 5 responsible for the development and publication international comparability and quality of financial
information.
of IFRSs, including the IFRS for SMEs.
b. Strengthen accountability of the people entrusted
4. Accounting Standards are authoritative statements of
with the economic resources of the entity.
how particular types of transaction and c. Contribute to economic efficiency by helping
other events should be reflected in financial statements. investors to identify opportunities and risks across
5. IASB is required to be complied by international users. the world.
6. The new conceptual framework comprises of d. All of these are the result of Standards developed
introduction, eighteen chapters and a glossary. based on consistent concepts.
7. The accountability of management for the resources 7. Qualitative characteristics
entrusted to by the owner(s) refers to stewardship of a. Are considered either fundamental or enhancing
management. b. Contribute to the decision-usefulness of financial
8. Government and their agencies are interested party in reporting information
the activities of business within their jurisdiction. c. Distinguish better information from inferior information
9. Owners, shareholders and employees are internal users for decision-making purposes
of financial information. d. All of the choices are correct.
10. Financial information's' predictive and confirmatory value
need not to be related. 8. Which of the following best describes faithful
11. Information is material if omission or its misstatement representation in relation to
may influence primary users decision. information in financial statements?
12. Financial information represents economic phenomena in
a. Influence on the economic decisions of users
numbers.
b. Inclusion of a degree of caution
13. Complete, bias and free from error information 'made it c. Freedom from material error
perfectly faithful representation. d. Comprehensibility to users
14. To enhance a qualitative characteristic it should be
verifiable, understandable and consistent.
9. In the event of conflict between the economic substance
15. Reporting Information justify cost effectiveness.
of a transaction and the legal form, the economic
CHAPTER 1- MULTIPLE CHOICE substance shall prevail

1. The lASB Conceptual framework identifies user groups. a. Form over substance
Which of the following is not an information need for the b. Substance over form
'investor group’? c. Relevance
d. Completeness
a. Assessment of repayment ability of an entity
b. Measuring performance, risk and return
10. Which term best describes information in financial
c. Taking decisions regarding holding investments
statements that is neutral?
d. Taking buy/sell decisions.
a. Understandable
2. The standards published by IASB are called b. Comparable
c. Relevant
a. International Accounting Standards d. Unbiased
b. Financial Reporting Standards
c. International Financial Reporting Standards CHAPTER 1B- TRUE OR FALSE
d. Statement of Financial Accounting Standards 1. Financial statements objective is to provide financial
information about the reporting entity’s financial position
3. IFRIC interpretations issued by IASB and performance. TRUE
a. Are considered authoritative and must be followed 2. The statement of financial position comprises the entity's
b. Cover newly identified financial reporting issues not economic resources, economic obligations and equity.
specifically addressed. TRUE
c. Cover issues where unsatisfactory or conflicting 3. Income and expenses were reported through the entity's
interpretations have developed. financial performance. TRUE
d. All of these are true about IFRIC interpretations. 4. A reporting entity may be single, a portion of or more than
4. The primary users of financial information include one entity. A reporting entity must be a legal entity. FALSE
5. A consolidated financial statement was prepared inclusive
a. Existing and potential investors of parent entity only. FALSE
b. Existing and potential lenders and other creditors 6. An economic resource is a right that has the potential to
c. Under group such as employees, customers, produce economic obligation. FALSE
government and their agencies,the public 7. Liabilities are claims against the entity. Equity is not a
d. Existing and potential investors, lenders and other claim. FALSE
creditors
 8. Payment settlements are for shareholders. Dividends are c. Managers
for entity's creditors. FALSE d. Public
9. The initial recognition of assets or liabilities arising from
transactions or other events may result in the simultaneous
recognition of both income and related expenses. TRUE
10. For an asset or liability to be recognized, it must be 8. Which of the following stakeholders is an internal
measured. TRUE stakeholder?
11. Elements recognized in financial statements are quantified a. Customers
in monetary value. TRUE b. Managers
12. Presentation and disclosures are concepts that hinder c. Creditors
communication of reporting entity's information. FALSE d. Suppliers
13. A L+E. Deducting total liabilities from total assets will result
to residual claims of creditors. FALSE 9. To which of the following user groups are general purpose
14. A =L+ E. Deducting total equity from total assets will result financial statements the least useful?
to residual claims of holders. FALSE a. Suppliers, for the purpose of assessing the solvency of
15. A =L+E. Changes in total equity of an entity may resulted their customer
from its financial performance. TRUE b. Investors, for the purpose of deciding whether to buy
more shares in a company
CHAPTER 1B- MULTIPLE CHOICE c. The public, for the purpose of assessing the impact on
the local community
1. The IASB's conceptual framework for financial reporting gives d. A bank, for assessing the customers' ability to repay
four enhancing qualitative characteristics, such? loans
a. Consistency, understandability, faithful representation,
substance over form 10. Which one of the following is the main aim of accounting?
b. Accrual basis, going concern concept, consistency, true a. To maintain ledger accounts for every asset and liability
and fair view b. To provide financial information to users of such
c. Faithful representation, comparability, understandability, information
relevance c. To produce a trial balance
d. Comparability, timeliness, understandability, verifiability d. To record every financial transaction individually

2. What is the role of the IASB? CHAPTER 3-TRUE OR FALSE

a. Oversee the standard setting and regulatory process 1. Accounting policy changes are deemed rare by the
b. Formulate international financial reporting standards standard. TRUE
c. Review defective accounts 2. If the accounting policy change is required by the lFRS,
d. Control the accountancy profession preparers need not to apply the same. FALSE
3. Change in accounting estimates in the current period
3. The primary objective of financial reporting is to provide useful should also concede effects on prior period, therefore
information to: adjust the same. FALSE
a. Management 4. When restatement of changes in comparative figures is
b. Capital providers immaterial and impracticable to do so, preparer shall
c. Government disclose the reasons and assess its impact. TRUE
d. Regulatory body 5. Estimates arise in relation to business activities because
of the uncertainties inherent within them. TRUE
6. IFRS 3 require assets 'held for sale' to be presented
4. When an entity applies the same accounting treatment to separately in the statement of financial position. FALSE
similar events from period to period, the entity is exhibiting 7. Foreign currency is a functional currency. FALSE
quality of? 8. Presentation currency may use both foreign and
a. Verifiability functional currency of an entity. TRUE
b. Consistency 9. Exchange rate refers to the ratio of two or more
c. Predictive value currencies. FALSE
d. All of the choices are correct 10. Foreign currency have three distinct types of transaction:
Conversion and transition. FALSE
5. Which best describes the term going concern? CHAPTER 3- MULTIPLE CHOICES
a. When current liabilities exceed current assets
b. The ability of the entity to continue in operation for the 1. Which is the first step within the hierarchy of guidance when
foreseeable future selecting accounting policies?
c. The potential to contribute to the flow of cash and cash a. Apply a standard from IFRS if it specifically relates to
equivalents to the entity the transaction.
d. The expenses exceed income b. Apply the requirements in IFRS dealing with similar
and related issue
6. A person who does not own a business but is given the c. Consider the applicability of the definitions, recognition
responsibility to manage its resources, known as: criteria and measurement concepts in the Conceptual
a. Customer Framework
b. Investor d. Consider the most recent pronouncements of other
c. Steward standard setting bodies.
d. Supplier 2. In the absence of an accounting standard that applies
specifically to a transaction, what is the most authoritative
7. Which of the following stakeholders is interested in all source in developing and applying as accounting policy?
financial information of a business?
a. Banks
b. Customers
 a. The requirement and guidance in the standard or 9. Which of the following should be treated as change in
interpretation dealing with similar and related issue accounting policy?
a. A change is made in the method of calculating the
b. The definition, recognition criteria and measurement of provision for uncollectible accounts receivable.
asset, liability, income and expense in the Conceptual
b. A change from cost model to fair value model in
c. Most recent pronouncement of other standard-setting
measuring investment property.
body
d. Accounting literature and accepted industry practice c. An entity engaging in construction contract for the first
time needs on accounting policy to deal with this.
3. A change in accounting policy shall be made when d. All of this quality as change in accounting policy.
10. When it is difficult to distinguish between a change in
I. Required by law.
accounting estimate and a change in accounting policy, the
II.Required an accounting standard.
change is treated as
III.The change will result in more relevant or reliable
a. Change in accounting estimate with appropriate
information about the financial position, financial performance
disclosure
and cash flows of the entity
b. Change in accounting policy
a. I and llI only c. Correction of an error
b. Il and llI only d. Change in accounting estimate with no appropriate
c. I and II only disclosure
d. I, ll, and Il only
11. IAS 1: Presentation of accounting policies, changes in
4. Why is an entity permitted to change an accounting policy?
accounting estimates and errors
a. The change would allow the entity to present a move IAS 8: Preparation of Financial Statements
favorable profit picture.
b. The change would result in the financial statements a. Both statements are correct
providing more reliable and relevant information about b. Both statements are incorrect
financial c. Only statement 2 is correct
position, financial performance and cash flows.
c. The change is made by the internal auditor. 12. An entity shall present an analysis of expenses based on
d. The change is made by the CPA. a. Nature of expense
b. Function of expense
c. Either the nature of expense or the function of
5. A change in accounting policy requires what kind of
expense
adjustment to the financial statements?
d. Neither the nature of expense or the function of
a. Current period adjustment expense
b. Prospective adjustment
13. Which term cannot be used to describe a line item in the
c. Retrospective adjustment
statement of comprehensive income?
d. Current and prospective adjustment
a. Revenue
6. A change in accounting policy requires that the cumulative
b. Gross income
effect of the change for prior periods should be reported as an
c. Income before tax
adjustment to
d. Extraordinary item
a. Beginning retained earnings for the earliest period
14. At what amount should an asset classified as 'held for sale' be
presented.
measured?
b. Net income for the period in which the change
a. Lower of carrying amount and fair value less cost of
occurred.
disposal
c. Comprehensive income for the earliest period
b. Lower of carrying amount and value in use
presented.
c. Higher of value in use and fair value less cost of
d. Shareholders equity for the period in which the
disposal
change occurred
d. Higher of carrying amount and receivable amount
15. IAS 21 sets out how entities that carry out transactions in a
7. Which of the following is accounted for as a change in
foreign currency should measure the results of these ar end.
accounting policy?
At what exchange rate should non-monetary items carried at
a. A change in the estimated useful life of property, historical cost be measured?
plant and equipment
b. A change from cash basis to accrual basis of
a. The closing rate
accounting
b. Transaction date rate
c. A change from expensing immaterial expenditures
c. Average rate for the year
to deferring and amortizing thein when material
d. Rate at Beginning of the year
d. A change in inventory valuation from FIFO to
average method
CHAPTER 4: TRUE OR FALSE

8. Which is a change in accounting policy?

a. The initial adoption of an accounting policy to carry 1. IFRS 7 Statement of Cash Flows FALSE
asset at revalued amount. 2. The objective of IFRS 7 is to provide users information about
b. The change from. cost model to revaluation model in entity's ability to generate cash and cash equivalents. FALSE
measuring property, plant and equipment.
3. Cash flow information let users gain appreciation of
c. A change in the measurement basis.
entity's liquidity and solidarity ability. FALSE
d. All of these are considered change in accounting
policy. 4. Operating activities components includes items which
determine the net profit or loss of an entity. TRUE
5. Investing activities shows the extent of new d. Component of cash and cash equivalents
investment in assets which will generate future 10. Cash advances and loans made by a financial institution are
profit and cash outflows. FALSE usually classified as
6. Financing activities is the section of information which shows a. Operating activities
entity's capital providers claimed during the period. TRUE b. Investing activities
7. Reporting cash flows from financing activities may use indirect c. Financing activities.
or direct method FALSE d. Component of cash and cash equivalents
8. Direct method is the preferred method in showing entity's
investment activities FALSE
9. Interest and dividends shall be disclosed separately and
classified in a consistent manner from period to period. TRUE
10. If taxes on income can be specifically identified with financing
and investing activities, no disclosure is required. FALSE

CHAPTER 4: MULTIPLE CHOICES

1. The primary purpose of a statement of cash flows is to
provide relevant information about
a. Differences between net income and associated cash
receipts and disbursements
b. An entity's ability to generate positive net cash flows
c. The cash receipts and cash disbursements of an entity
during a period
d. An entity's ability to meet cash operating needs
2. Cash receipts from royalties and commissions are
a. Cash outflows for operating activities
b. Cash inflows from operating activities
c. Cash inflows from investing activities
d. Cash outflows for financing activities

3. Cash flows arising from trading securities are

a. Classified as operating activities
b. Classified as investing activities
c. Classified as financing activities
d. Not reported in the cash flow statement
4. Cash payments to acquire equity investments are
a. Cash outflows for financing activities
b. Cash inflows from operating activities
c. Cash outflows for investing activities
d. Cash inflows from financing activities
5. Cash receipts from issuing shares are

a. Cash inflows from investing activities

b. Cash Outflows for investing activities
c. Cash inflows from financing activities
d. Cash outflows for financing activities
6. Interest payments to lenders are classified as
a. Operating activities
b. Borrowing activities
c. Lending activities
d. Financing activities
7. Dividend payments to shareholders are classified as
a. Cash outflows for operating activities
b. Cash inflows from operating activities
c. Cash inflows from investing activities
d. Cash outflows for financing activities
8. Interest received is classified as cash flow from
a. Operating activities
b. Investing activities
c. Financing activities
d. Revenue activities
9. Back overdrafts that are repayable on demand and the bank
balance often fluctuates from positive to overdrawn shall be
classified as
a. Operating activities
b. Investing activities
c. Financing activities.