Framework of Accounting (TOA) - Valix.doc

October 29, 2018 | Author: Fatima Pasamonte | Category: Financial Statement, Accounting, Equity (Finance), Financial Accounting, Going Concern
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FRAMEWORK OF ACCOUNTING

I – ACCOUNTING AND ACCOUNTANCY PROFESSION 

1. Which Which accoun accountin ting g proces processs is the recogn recogniti ition on or nonrec nonrecogn ogniti ition on of busine business ss activi activitie tiess as accountable events? (a) identifying (c) communicating (b) measuring (d) summarizing A   2. These are events events that that affect the enterpri enterprise se and !nternal "#ternal (a) $es $es (c) (b) $es %o (d)

in hich other other entities entities participat participate. e. !nternal "#ternal %o %o %o $es

'. Whic Which h is an int inter erna nall even event? t? (a) asual asualty ty loss loss (b) (b) "#ch "#chan ange ge (c) %onreciprocal %onreciprocal transfer transfer beteen beteen the enterprise enterprise and its oners. (d) %onreciprocal transfer beteen the enterprise and other entities.

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. The basi basicc purpos purpose e of accoun accountin ting g is* (a) to measure periodi periodicc income of the economic economic entity. (b) to provide +uantitative +uantitative financial information about a business enterprise that is useful in ma,ing rational economic decision. (c) to provide provide informat information ion that the creditor creditorss of an econom economic ic entity entity can use in decidi deciding ng hether to ma,e additional loans to the entity. (d) to provid provide e inform informati ation on that that the managers managers of an econom economic ic entity entity need to contro controll its operations. . !t focuses on general general purpose purpose reports reports on financial financial positio position/ n/ performance performance and cash cash flos. (a) financial accounting (c) management advisory services (b) ma managerial accounting (d) auditing A  0. Which area of public public accounting accounting means means the e#aminatio e#amination n of financial financial statements statements by a A for the purpose of e#pressing as opinion as to the fairness of the statements? (a) e#ternal auditing (c) management advisory services (b) ta#ation (d) internal auditing A   . 3any accountan accountants ts are employed employed in business business enterprise enterprisess in various various capacity capacity as accounting accounting staff/ chief accountant or controller. These accountants are said to be engaged in* (a) pu p ublic accounting (c) government accounting (b) financial accounting (d) private accounting & 4. They They encom encompa pass ss the the conv conven enti tion ons/ s/ rules rules// and and proce procedu dure ress nece necess ssar ary y to defi define ne hat hat is accepted accounting practice. (a) genera generally lly accept accepted ed accoun accountin ting g princi principle pless (c) +uali +ualitat tative ive charac character terist istics ics (b) a acccounting assumptions (d) recognition principles A 

5. 6ne of the basic basic features features of financia financiall accountin accounting g is the* the* (a) direct direct measureme measurement nt of econom economic ic resour resources ces and obligati obligations ons terms of money and sociological and psychological impact. (b) direct direct measureme measurement nt of econom economic ic resour resources ces and obligati obligations ons terms of money. (c) direct direct measurem measurement ent of econom economic ic resour resources ces and obliga obligatio tions ns terms of money and sociological impact. (d) direct direct measureme measurement nt of econom economic ic resour resources ces and obligati obligations ons terms of money and psychological impact.

and changes changes in them them in and changes changes in them them in and changes changes in them them in and changes changes in them them in -

17. Which is not part of the accounting standard standard setting process in the hilippines? hilippines? (a) preparation and approval by a Tas, 8orce of a draft of the proposed 98A9 (b) distribution distribution of the e#posure draft draft for comment to !A members/ 8!%": members members and other interested parties (c) publication in the 6fficial ;azette or in a nespaper of general general circulation (d) approval by the rofessional e uses a van in the business. Which of the folloing is violated if Dohn 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 & . What is the traditional accounting period? (a) three months (b) si# months

(c) to years (d) telve months

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4. 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



5. o should a loss contingency that is reasonably possible and for hich the amount can be reasonably estimated be reported? (a) accrues and disclosed (c) disclosed only (b) accrued only (d) neither accrued nor disclosed  ''. o li,ely is the loss? (a) remote (c) probable (b) reasonably possible (d) certain '. A lasuit in connection ith a safety hazard e#ists for a manufactured product. 6ccurrence of a loss is probable and reasonably estimable. The loss contingency s hould* (a) be accrued and disclosed. (c) be disclosed. (b) be accrued only. (d) neither be accrued nor disclosed. A   '4. An e#propriation of assets hich is imminent and for hich the amount of loss can be reasonably estimated should be* (a) accrued only. (c) accrued and disclosed. (b) disclosed only. (d) neither accrued and disclosed.  '5. 3anagement can estimate the amount of loss that ill occur if a foreign government e#propriates some company assets. !f the appropriation is reasonably possible/ hat is the treatment of the loss contingency? (a) disclosed but not accrued as a liability (c) accrued as a liability but not disclosed (b) disclosed and accrued as a liability (d) neither accrued as a liability not disclosed A   7. A company has a probable loss that can only be reasonably estimated ithin a range of  outcomes. >oever/ no single amount ithin the range is a better estimate than any other amount. The amount of the loss accrual should be* (a) zero. (c) minimum of the range. (b) ma#imum of the range (d) mean of the range.  1. A# ompany is being used for illness caused to local residents as a result of negligence on the company@s part in permitting local residents to be e#posed to highly to#ic chemicals from its plant. A#@s layer states that it is probable that A# ill loss the suit and be found liable for a =udgment costing anyhere from 77/777 to 2/77/777. >oever/ the layer states that the most probable costs is 1/777/777. As a result of the above facts/ A# should accrue* (a) a loss contingency of 77/777 and disclose a additional contingency of up to 2/777/777.

(b) a loss contingency of 1/777/777 and disclose as additional contingency of up to 1/77/777 (c) a loss contingency of 1/777/777 but not disclose any additional contingency. (d) no loss contingency but disclose a contingency of 77/777 to 2/777/777. 2. "ver ompany has consigned that mortgage note on the home of its president/ guaranteeing the indebtedness in the event that the president should default. "ver considers the li,elihood of default to be remote. >o should the guarantee be treated in "ver@s financial statements? (a) disclosed only (c) accrued and disclosed (b) accrued only (d) neither accrued and disclosed A  '. The li,elihood that the future event ill or ill nor occur can be e#pressed by a range of  outcome. Which range means that the future event occurring is very slight? (a) probable (c) certain (b) reasonably possible (d) remote & . ;ain contingency is usually recognized hen* (a) realized. (b) occurrence is reasonably possible and the amount is reasonably estimable. (c) occurrence is probable and the amount is reasonably estimable. (d) the amount is reasonably estimable. A  . Which of the folloing is the proper accounting treatment of a gain contingency? (a) an accrued account. (b) deferred earnings. (c) an account receivable ith an additional disclosure e#plaining the nature of the transaction. (d) a disclosure only. & 0. When the occurrence of a gain contingency is probable and its amount can be reasonably estimated/ the gain contingency should be* (a) recognized in the income statement and disclosed. (b) classified as an appropriation of retained earnings. (c) disclosed/ but not recognized in the income statement. (d) neither recognized in the income statement not disclosed.  . ;reat ompany operated a plant in a foreign country. !t is probable that the plant ill be e#propriated. >oever/ the foreign government has indicated that ;reat ill receive a definite amount of compensation for the plant. The amount of compensation is less than the fair mar,et value but e#ceeds the carrying amount of the plant. The contingency should be reported* (a) as a valuation alloance as a part of stoc,holdersJ e+uity. (b) as a fi#ed asset valuation alloance account. (c) in the notes to the financial statements. (d) in the income statement. 

4. At &ecember '1/ 2772/ ream ompany as suing a competitor for patent infringement. The aard from the probable favorable outcome could be reasonably estimated. ream@s 2772 financial statements should report the e#pected aard as a * (a) receivable and revenue. (c) receivable and deferred revenue. (b) receivable and reduction of patent. (d) disclosure only & 5. %eutrality is an ingredient of* (a) relevance (b) reliability

(c) understandability (d) comparability

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7. Which of the folloing relates to both relevance and reliability? (a) comparability (c) verifiability (b) feedbac, value (d) timeliness

A  

1. Inder the A9 frameor,/ the +ualitative characteristics are* (a) understandability/ relevance/ reliability and comparability (b) accrual and going concern (c) timelines/ cost and benefit and materiality (d) entity/ proprietary/ residual e+uity and fund theory



2. The characteristic that is demonstrated hen a high degree of consensus can be secured among independent measurers the same measurement methods is* (a) relevance (c) verifiability (b) reliability (d) neutrality  '. Which of the folloing are considered pervasive constraints? (a) materiality and conservatism (c) conservatism and timeliness (b) timeliness and predictive value (d) costbenefit and materiality

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D – DEFINITION, RECOGNITION AND MEASUREMENT OF ELEMENTS FROM WHICH FINANCIAL STATEMENTS ARE CONSTRUCTED

1. These are related to the economic resources (assets)/ economic obligations (liabilities)/ residual interest (e+uity) and changes in them (revenue and e#pense). (a) basic elements (c) basic ob=ectives (b) basic principles (d) basic concepts A   2. The basic elements directly related to the measurement of financial position are* (a) assets/ liabilities/ e+uity/ revenue and e#penses (b) assets/ liabilities/ and e+uity (c) revenue and e#pense (d) assets and liabilities

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'. The basic elements directly related to the measurement performance or results of  operations are* (a) assets/ liabilities/ e+uity/ revenue and e#penses (b) assets/ liabilities and e+uity (c) revenue and e#pense (d) sales and cost of sales  . These are resources controlled by the enterprise as a result of past transactions or events and from hich future economic benefits are e#pected to flo to the enterprise. (a) assets (c) e+uity (b) liabilities (d) revenue A   . These are present obligations of an enterprise arising from past transactions or events the settlement of hich is e#pected to result in an outflo from the enterprise of resources embodying economic benefits. (a) assets (c) e+uity (b) liabilities (d) revenue 0. !t is the residual interest in the assets of the enterprise after deducting all its liabilities. (a) revenue (c) net income (b) e#penses (d) e+uity & . !t represents the gross inflos of economic benefits during the period arising in the course of ordinary activities of an enterprise hen these inflos result in increases in e+uity/ other than those relating to contributions from oners. (a) assets (c) e#pense (b) liabilities (d) revenue &

4. !t represents the gross outflos of economic benefits during the period arising in the course of ordinary activities of an enterprise hen these outflos result in decreases in e+uity/ other than those relating to distributions to oners. (a) assets (c) e#pense (b) liabilities (d) revenue  5. According to A9 conceptual frameor,/ the process of reporting an item in the financial statements of an enterprise is* (a) allocation (c) realization (b) matching (d) recognition & 17. The term ErecognizedF is synonymous ith the term* (a) recorded (c) matched (b) realized (d) allocated

A

 

11. Which condition is necessary for the recognition of an asset? (a) !t is probable that future economic benefits ill flo to the enterprise. (b) The cost of the asset can be measured reliably. (c) The asset is paid for. (d) !t is probable that future economic benefits ill flo to the enterprise and the cost of  the asset can be measured reliably. & 12. !nternally generated goodill is* (a) recognized as an asset because the inflo of future economic benefits is highly probable and the cost of the goodill can be measured reliably. (b) not recognized as an asset because the cost cannot be measured reliably although the inflo of future economic benefits is highly probable. (c) recognized as e#pense. (d) recognized as revenue. 1'. A company needed a ne arehouse and a contractor +uoted a /777/777 price to construct it. A believed that is could build the arehouse for /'77/777 and decided to use company employees to build it. The final construction cost incurred by A company as /477/777 but the asset as recorded at /777/777. What principle is this violation of? (a) cost principle (c) matching principle (b) separate entity (d) conservatism A   1. According to ;AA/ at hat value should a company sho its assets on the balance sheet? (a) mar,et value at all times (b) cash e+uivalent of asset given up or the asset received/ hichever is more clearly evident (c) best estimate of an internal auditor (d) cash outlay only/ even if part of the consideration given as something other than cash. 1. Which of the folloing statements is not consistent ith generally accepted accounting principles as they relate to asset valuation? (a) assets are generally recorded in the accounting records at cost to the enterprise.

(b) accountants assume that assets such as supplies/ buildings and e+uipment ill be used in the business operations rather sold. (c) subtracting total liabilities from total assets results in the current mar,et value or e+uity. (d) accountants base asset valuation upon ob=ective/ verifiable evidence rather than on personal opinion.  10. The valuation basis used in conventional financial statement is* (a) replacement cost (c) original cost (b) mar,et value (d) a mi#ture of cost and value

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1. !mputing interest for certain assets and liabilities is primarily based on the concept of* (a) valuation (c) consistency (b) conservatism (d) stable monetary unit A   14. !n an arm@slength transaction/ ompany A and ompany - e#changed nonmonetary assets ith no monetary consideration involved. The e#change did not culminate an earning process for both ompany A and ompany -/ and the fair values of the nonmonetary assets ere both clearly evident. The accounting for the e#change should be based on the* (a) fair value of the asset surrendered (c) recorded amount of the asset surrendered (b) fair value of the asset received (d) recorded amount of the asset received A  15. ompany A and ompany - e#changed nonmonetary assets ith no monetary consideration involved and no impairment of value. The e#change did not culminate an earning process for either ompany A or ompany -. The accounting for the e#change should be based on the* (a) recorded amount of the asset received (c) fair value of the asset received (b) recorded amount of the asset relin+uished (d) fair value of the asset relin+uished 27. istorical cost is a measurement base currently used in financial accounting. Which of the folloing measurement bases is also currently used in financial accounting? urrent selling price &iscounted cash flo o should a present obligation that is not probable and for hich the amount can be reasonably estimated be reported? (a) accrued and disclosed (c) disclosed only (b) accrued only (d) neither accrued nor disclosed  01. A present obligation that is probable and for hich the amount can be reasonably estimated should* (a) not be accrued but should be disclosed in the notes to the financial statements (b) be accrued by debiting an appropriated retained earnings account and crediting a liability account (c) be accrued by debiting an e#pense account and crediting an appropriated retained earnings account (d) be accrued by debiting an e#pense account and crediting a liability account & 02. Abe ompany is being sued for illness caused to local residents as a result of negligence on the company@s part in permitting the local residents to be e#posed to highly to#ic chemicals from its plant. Abe@s layer states that it is probable that Abe ill lose the suit and be found liable for a =udgment costing anyhere from 77/777 to 2/77/777. >oever/ the layer states that the most probable cost is 1/777/777. As a result of the above facts/  Abe should accrue* (a) a loss of 77/777 and disclose an additional contingency of up to 2/777/777 (b) a loss of 1/777/777 and disclose an additional contingency of up to 1/77/777 (c) a loss of 1/777 but not disclose any additional contingency (d) no loss but disclose a contingency of 77/777 to 2/77/777 0'. ontingent assets are usually recognized hen* (a) realized (b) occurrence is reasonably possible and the amount can be reasonably estimated (c) occurrence is probable and the amount can be reasonably estimated (d) the amount can be reasonably estimated A   0. Which of the folloing is the proper accounting treatment of a contingent asset? (a) an accrued amount (b) deferred earnings (c) an account receivable ith an additional disclosure e#plaining the nature of the transaction (d) a disclosure only & 0. When the occurrence of a contingent asset is probable and its amount can be reasonably estimated/ the gain contingency should be* (a) recognized in the income statement and disclosed. (b) classified as an appropriation of retained earnings. (c) disclosed/ but not recognized in the income statement. (d) neither recognized in the income statement not disclosed. 

 V. FINANCIAL REPORTING

1. What is the ob=ective of financial reporting? (a) to provide the necessary information for the management of an enterprise to managers of that enterprise. (b) to provide information that the creditors of an enterprise can use in deciding hether to ma,e additional loans to the enterprise. (c) to measure the periodic net income of an enterprise. (d) to provide e#ternal users ith financial information that is useful in ma,ing rational investment/ credit and similar decisions. & 2. These include not only financial statements but also other information such as financial highlights/ analysis of financial statements/ description of ma=or products and list of  directors and officers. (a) audit reports (c) note to financial statements (b) financial reports (d) financial statements '. Which uses need financial information to enable them to asses the ability of the enterprise to provide renumeration/ retirement benefits and employment opportunities? (a) customers (c) public/ in general (b) government and its agencies (d) employees & . The ob=ectives of financial reporting for business enterprise are based on* (a) the need for conservatism. (b) reporting on management@s steardship. (c) generally accepted accounting principles. (d) the needs of the users of the information.

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. The information provided by financial reporting pertains to* (a) individual business enterprises/ rather than to industries or an economy as a hole or to members of society as consumers. (b) individual business enterprises and an economy as a hole or to members of society as consumers. (c) individual business enterprises and n economy as a hole/ rather than to industries or to members of society as consumers.

(d) individual business enterprises/ industries and an economy as a hole/ rather than to members of society as consumers. A  0. &uring a period hen an enterprise is under the direction of a particular management/ financial reporting ill directly provide information about* (a) both enterprise performance and management performance. (b) management performance but not enterprise performance. (c) enterprise performance but not management performance. (d) neither enterprise performance nor management performance.  . What is the ob=ective of financial reporting? (a) assist investor in analyzing the economy. (b) assist inventor in predicting future cash flos. (c) assist supplier in determining an appropriate discount to offer a particular company. (d) enable ban,s to determine an appropriate interest rate on their guaranteed investment certificates. 4. The overall ob=ective of financial reporting is to* (a) provide information that is useful for decision ma,ing by e#ternal users (b) provide information for income ta# preparation and payment (c) provide information only for stoc,holders (d) provide information for management to ma,e decisions for controlling the operations A  5. Which one of the folloing items is not listed as a ma=or ob=ective of financial reporting? (a) financial reporting should provide information about enterprise resources/ claims to those resources/ and changes in them (b) financial reporting should provide information useful in evaluating management@s steardship (c) financial reporting should provide information useful in investment/ credit/ and similar decisions (d) financial reporting should provide information useful in assessing cash flo pro=ects 17. 8inancial reporting is concerned only ith information that is significant enough to affect evaluation or decision. (a) timeliness (c) materiality (b) cost and benefit (d) comparability  . roponents of historical costs maintain that in comparison ith all other valuation alternatives for generalpurpose financial reporting/ statements prepared using historical costs are more* (a) ob=ective (c) indicative of the entity@s purchasing poer (b) relevant (d) conservative A   . !t is the +uality of information that allos comparisons ithin a single enterprise through time or from one accounting period to the ne#t.

(a) horizontal comparability (b) dimensional comparability

(c) reliability (d) uniformity

A  

0. When information about to different enterprises engaged in the same industry has been prepared and presented in similar manner/ the information e#hibits the +ualitative characteristic of* (a) relevance (c) consistency (b) reliability (d) comparability &

SOURCES & REFERENCES: 

 Hali#/ onrado T./ T>"6
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