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J. Revenues
P. Expenses
I. Losses
A. Distribution to owners
ANS: A. DISTRIBUTION TO OWNERS
2. When there is much variability, the operating cycle is measured at
J. The mean value
P. The median value
I. Twelve months
A. Three years
ANS: I. TWELVE MONTHS
3. According to the conceptual framework, the process of reporting an item in the financial
statements of an entity is
J. Realization
P. Recognition
I. Matching
A. Allocation
ANS: P. RECOGNITION
4. How would proceeds received in advance from the sale of nonrefundable tickets for the Super
Bowl be reported in the sellers financial statements published before the Super Bowl?
J. Understated income
P. Understated assets
I. Overstated expenses
A. Overstated assets
ANS: A. OVERSTATED ASSETS
10. A change in reporting entity is actually a change in:
J. Accounting policy
P. Accounting estimate
I. Accounting method
A. Accounting concept
ANS: J ACCOUNTING POLICY
11. Financial statements issued for the use of parties external to the enterprise are the
primary responsibility of the
J. Management enterprise
P. Stockholders of the enterprise
I. Independent auditors of the enterprise
A. Creditors of the enterprise
ANS: J. MANAGEMENT OF T HE ENTERPRISE
12. Conservatism is best described as selecting an accounting alternative that
J. Comparability
P. Understandability
I. Materiality
A. Relevance
ANS: I. MATERIALITY
15. The passage of time as a mode of acquiring or losing a right including the
extinguishment of an obligation is called?
J. Remission
P. Novation
I. Prescription
A. Merger
ANS: I. PRESCRIPTION
16. Which of the following is not a purpose of the conceptual framework of accounting?
A.Amortizing research and development costs over multiple periods is justifiable and appropriate.
ANS: A. AMORTIZING RESEARCH AND DEVELOPMENT
COSTS OVER MULTIPLE PERIODS IS JUSTIFIABLE AND
APPROPRIATE.
19. Revenue from an artistic performance is recognized once
J. Objectivity Principle
P. Reliability Principle
I. Going concern
A. Accrual assumption
ANS:
J. OBJECTIVITY PRINCIPLE
25. Who is the current BIR Commissioner?
J. Celay Dulay
P. Caesar Dulay
I. Cesar Dulay
A. Cilay Dulay
ANS: I. CESAR DULAY
26. Which one of the following items would fall under the definition of a liability?
J. Cash
P. Debtors
I. Owners equity
A. Tax owed
ANS: A. TAX OWED
27.Accounting entries involve a minimum of how many accounts?
J. One
P. Two
I. Three
A. Four
ANS: P. TWO
28. The personal assets of the owner of a company will not appear on the company's
balance sheet
because of which principle/guideline?
J. Cost
P. Economic Entity
I. Monetary Unit
A. Going Concern
ANS: P. ECONOMIC ENTITY
29. Which principle/guideline allows a company to ignore the change in the purchasing
power
of the dollar over time?
J. Cost
P. Economic Entity
I. Monetary Unit
A. Going Concern
ANS: I. MONETARY UNIT
30. Which principle/guideline requires the company's financial statements to have footnotes
containing information that is important to users of the financial statements?
J. Conservatism
P. Economic Entity
I. Full Disclosure
A. Reliability
ANS: I. FULL DISCLOSURE
31. Which principle/guideline is associated with the assumption that the company will
continue on long enough to carry out its objectives and commitments?
J. Economic Entity
P. Going Concern
I. Time Period
A. Monetary Unit
ANS: P. GOING CONCERN
32. A very large corporation's financial statements have the dollar amounts rounded to the
nearest $1,000. Which accounting principle/guideline justifies not reporting the amounts to
the penny?
J. Full Disclosure
P. Materiality
I. Monetary Unit
A. Time period
ANS: P. MATERIALITY
33. Accountants might recognize losses but not gains in certain situations. For example, the
company might write-down the cost of inventory, but will not write-up the cost of
inventory. Which principle/guideline is associated with this action?
J. Conservatism
P. Materiality
I. Monetary Unit
A. Going Concern
ANS: J. CONSERVATISM
34. Which principle/guideline directs a company to show all the expenses related to its
revenues of a specified period even if the expenses were not paid in that period?
J.Cost
P. Matching
I. Monetary Unit
A. Conservatism
ANS: P. MATCHING
35. A large company purchases a $250 digital camera and expenses it immediately instead of
recording it as an asset and depreciating it over its useful life. This practice may be
acceptable because of which principle/guideline?
J. Cost
P. Matching
I. Materiality
A. Comparability
ANS: I. MATERIALITY
36. Accrual accounting is based on this principle/guideline.
J. Cost
P. Full Disclosure
I. Matching
A. Timeliness
ANS: I. MATCHING
37. The creative chief executive of a corporation who is personally responsible for
numerous inventions and innovations is not reported as an asset on the corporation's
balance sheet. The accounting principle/guideline that prevents the corporation for
reporting this person as an asset is
J. Conservatism
P. Cost
I. Going Concerns
A. Time Period
ANS: P. COST
38. A retailer wishes to report its merchandise inventory on its balance sheet at its retail
value. This would violate which accounting principle/guideline?
J. Cost
P. Full Disclosure
I. Monetary Unit
A. Going Concern
ANS: J. COST
39. In the annual report, where would a financial statement reader find out if the companys
financial statements give a fair
depiction of its financial position and operating results?
J. Notes to the financial statements
P. Management discussion and analysis section
I. Balance sheet
A. Auditors report
ANS: A. AUDITORS REPORT
40. The deferred income tax liability:
J. Represents income tax payments that are deferred until future years because of temporary
differences between GAAP rules and tax accounting rules.
P. Is a contingent liability.
I. Can result in a deferred income tax asset.
A. Is recorded whether or not the difference between taxable income and financial accounting
income is permanent or temporary.
ANS: J. REPRESENTS INCOME TAX PAYMENTS THAT ARE
DEFERRED UNTIL FUTURE YEARS BECAUSE OF TEMPORARY
DIFFERENCES BETWEEN GAAP RULES AND TAX ACCOUNTING
RULES.
41. A measure of profitability is the
J. current ratio.
P. debt to total assets ratio
I. return on assets ratio
A. working capital.
ANS: I. RETURN ON ASSETS RATIO
42. Working capital is a measure of
J. consistency.
P. liquidity.
I. profitability.
A. solvency.
ANS: P. LIQUIDITY.
43. The difference between the balance of a plant asset account and the related
accumulated depreciation account is termed
J. market value.
P. contra asset.
I. book value.
A. liability.
ANS: I. BOOK VALUE.
44. Which of the following is not an activity listed in the statement of cash flows?
J. Investing Activities
P. Funding Activities
I. Operating Activities
A. Financing Activities
ANS: P. FUNDING ACTIVITIES
45. Net present value is negative when
J. the present value of cash inflows is greater than the present value of cash outflows.
P. the present value of cash outflows is greater than the present value of cash inflows.
I. the future value of cash inflows is greater than the present value of cash outflows.
A. the present value of cash outflows is greater than the future value of cash outflows.
ANS: P. THE PRESENT VALUE OF CASH OUTFLOWS IS GREATER
THAN THE PRESENT VALUE OF CASH INFLOWS.
46. Deciding whether to record a sale when the order for services is received or when the
services are performed is an example of a:
J. classification issue.
P. valuation issue.
I. recognition issue.
A. communication issue.
ANS: I. RECOGNITION ISSUE.
47. A corporation pays its annual property tax bill of approximately $12,000 in one payment
each December 28. During the year, the corporation's monthly income statements report
Property Tax Expense of $1,000. This is an example of which accounting principle/guideline?
J. Conservatism
P. Matching
I. Monetary Unit
A. Time Period
ANS: P. MATCHING
48. A company sold merchandise of $8,000 to a customer in December. The company's
sales terms require the customer to pay the company in 30 days. The company's income
statement reported the sale in December. This is proper under which accounting
principle/guideline?
a. Full Disclosure
b. Monetary Unit
c. Revenue Recognition
d. Comparability
ANS: C. REVENUE RECOGNITION
49. Proprietary educational institutions and hospitals which are nonprofit shall pay a taxable
income at what percent?
J. 30%
P. 10%
I. 15%
A. 25%
ANS: P. 10%
50. Which of the following affects the total shareholders' equity?