The relatively stable economic stable economic, political and social environment supports

1. The conceptual framework specifically mentions two underlying assumptions, namely

a. accrual and going concern
b. accrual and accounting entity
c. going concern and time period
d. time period and monetary unit

2. Which of the following terms best describes financial statements whose basis of accounting recognizes transactions and other events when they occur?

a. accrual basis of accounting
b. going concern basis of accounting
c. cash basis of accounting
d. invoice basis of accounting

3. The accrual basis of accounting is based primarily on

a. conservatism and revenue realization
b. conservatism and matching
c. consistency and matching
d. revenue realization and matching

4. Which of the following statements best describes the term going concern?

a. when current liabilities of an entity exceed current assets
b. the ability of the entity to continue in operation for the foreseeable future
c. the potential to contribute to the flow of cash and cash equivalents to the entity
d. the expenses of an entity exceed its income

5. Which of the following is not an implication of the going concern assumption?

a. the historical cost principle is credible
b. depreciation and amortization policies are justifiable and appropriate
c. the current and noncurrent classification of assets and liabilities is justifiable and significant
d. amortizing research and development costs over several periods is justifiable and appropriate

6.The relatively stable economic, political and social environment supports

a. conservatism
b. materiality
c. timeliness
d. going concern

7. The financial statements that are prepared for the entity are separate and distinct from the owners according to the

a. going concern principle
b. matching principle
c. economic entity assumption
d. accounting period assumption

8. Which underlying concept serves as the basis for preparing financial statements at regular intervals?

a. accounting entity
b. going concern
c. accounting period
d. stable monetary unit

9. Which of the following is not an important characteristic of the financial statements that accountants currently prepare?

a. the information in financial statements is expressed in units of money adjusted for changing purchasing power
b. financial statements articulate with one another because measuring financial position is related to measuring changes in financial position
c. the information in financial statements is summarized and classified to help meet users' needs
d. financial statements can be justified only if the benefits they provide exceed the costs

10. 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 in determining when to recognize revenue or expenses
b. in accordance with the unit of measure assumption, accountants normally revise the amounts to reflect the changing purchasing power of money due to inflation or deflation
c. in accordance with the going concern assumption, the life of an entity is presumed to be indefinite
d. accountants prepare financial statements at arbitrary points in time during and entity's lifetime in accordance with the accounting concept of accounting period

Answer:
1. a
2. a
3. d
4. b
5. d
6. d
7. c
8. c
9. a
10. b

"Questions are lifted from the following sources:

PHICPA, AICPA, AA,ACP,PAS, PFRS, IAS, IFRS

46. The relatively stable economic, political and socialenvironment supportsa.Conservatismb.Going Concernc.Materialityd.Timeliness

47. Proper allocation of accounting principles is mostdependent upon the

48. In the Conceptual Framework for Financial Reporting,what provides the “why” of accounting?

49. The objectives of financial reporting are based on

50. Which of the following is the best description of“faithful representation” in relation to information infinancial statements?a.Influence on the economic decision of usersb.Freedom from material errorc.Inclusion of a degree of cautiond.Comprehensibility to users

TEST 2:PRACTICAL ACCOUNTING. Encircle the letter of your answer. Support your answers with solutions. 5 points each.NO ERASURES ALLOWED1.On January 1, 2012, Downright Company received a grantof P1,500,000 from the government to subsidize tuition feesfor a period of 5 years. On January 1, 2014, the entityviolated certain conditions attached to the grant andtherefore had to repay P1,200,000 to the government. Whatamount should be recognized as loss resulting from therepayment of the grant in 2014?The configuration of cash flows from the asset received isnot expected to be significantly different from theconfiguration of the cash flows of the asset exchanged. Onthe date of exchange, cost and market value of the oil wereas follows:YolaZaroCost1,000,0001,250,000Market Value1,200,0001,500,000What is the initial measurement of the oil inventory receivedin exchange by Yola Company?

2.Yola Company and Zaro Company are fuel oil distributors.To facilitate the delivery of oil to their customers, YolaCompany and Zaro Company exchanged ownership of1,200 barrels of oil without physically moving the oil. YolaCompany paid Zaro Company P300,000 to compensate for

a difference in the grade of oil.

Which underlying assumptions serves as the basis for preparing financial statements at regular arbitrary or artificial points in time?

Which underlying concepts serves as the basis of preparing financial statements at regular intervals?

What is stable monetary unit concept?

What is the three essential elements of accounting?