Name: transaction or when Standard allows a choice of

Section: accounting policy.

REVISED CONCEPTUAL FRAMEWORK c. To assist all parties to understand and

interpret the Standards.
1. Which statement is true about the
Conceptual Framework? d. To assist regulatory agencies in issuing rules
and regulations for a particular industry.
a. The Conceptual Framework is not a standard.

b. The Conceptual Framework describes the

concepts for general purpose reporting. 4. Which statement is not true concerning the
Conceptual Framework?
c. In case of conflict, the requirements of IFRS
prevail over the Conceptual Framework. a. The Conceptual Framework should be a basis
for standard setting.
d. All of these statements are true about the
Conceptual Framework. b. The Conceptual Framework should allow
practical problems to be solved more quickly.

c. The Conceptual Framework should be based

2. The Conceptual Framework is intended to on fundamental truth derived from law.
establish
d. The Conceptual Framework should increase
a. Accounting standard in financial reporting users’ understanding and confidence in financial

b. The meaning of “present fairly in accordance reporting

with GAAP”

c. The objectives and concepts for use in

developing standards of financial reporting 5. The overall objective of financial reporting is
to provide information
d. The hierarchy of sources of GAAP
a. That is useful for decision making.

b. About assets, liabilities and equity of an

3. Which is not a purpose of the Revised equity.
Conceptual Framework?
c. About financial performance during the
a. To assist the IASB to develop IFRS based on period
consistent concepts.
d. About entity performance but not
b. To assist preparers to develop consistent management performance.
accounting policy when no standard applies to a
particular
6. The objectives of financial reporting are b. Stable monetary unit
based on
c. Time period
a. The need for conservatism
d. Economic entity
b. Reporting on management stewardship

c. Generally accepting accounting principles

10. The economic entity assumption
d. The needs of the users of information
a. Is inapplicable to unincorporated businesses

b. Recognizes the legal aspects of business

7. Which statement is not a specific objective of organizations
financial reporting?
c. Requires periodic income measurement
a. To provide information that is useful in
investment and credit decisions. d. Is applicable to all forms of business
organizations
b. To provide information about resources,
claims against resources and changes in
resources. 11. Consolidated financial statements are
c. To provide information on the liquidation prepared when a parent-subsidiary relationship
value of an entity. exists.

d. To provide information that is useful in a. Economic entity assumption

assessing cash flow prospects. b. Legal entity assumption

c. Consolidation standard
8. The assumption that an entity will not be sold d. Neutrality
or liquidated in the near future is known as

a. Economic entity assumption

12. During the lifetime of an entity, accountants
b. Monetary unit assumption produce financial statements at arbitrary or
c. Time period assumption artificial points

d. Going concern assumption in time in accordance with which basic

accounting concept?

a. Objectivity
9. Which assumption justifies the usage of
accruals and deferrals? b. Time period assumption

a. Going concern c. Materiality

d. Economic entity a. Relevance, faithful representation and
materiality

b. Comparability, understandability, timeliness

13. Inflation is ignored in accounting due to and verifiability
a. Economic entity assumption c. Faithful representation and timeliness
b. Going concern assumption d. Materiality and understandability
c. Monetary unit assumption

d. Periodicity assumption 17. Faithful representation includes

a. Predictive value and confirmatory value

14. What are the attributes that make b. Completeness, free from error and neutrality
information in the financial statements useful
to the readers? c. Comparability and understandability

a. Qualitative characteristics of financial d. Timeliness and verifiability

information

b. Quantitative characteristics of financial

information 18. The financial information is directed toward
the common needs of users and is independent
c. Elements of financial statements of

d. Objectives of financial reporting. presumptions about particular needs and

desires of specific users.

a. Comparability
15. Fundamental qualitative characteristics of
accounting information are b. Verifiability

a. Relevance and comparability c. Neutrality

b. Comparability and consistency d. Completeness

c. Faithful representation and relevance

d. Neutrality and verifiability 19. Neutrality is supported by the exercise of

prudence. Prudence is the exercise of care and
caution when
16. Enhancing qualitative characteristics of dealing with uncertainties in the measurement
accounting information include process such that

a. Assets and income are overstated

b. Liabilities and expenses are understated c. An item is material if omitting, misstating or
obscuring it could reasonably be expected to
c. Assets and income are not overstated and influence
liabilities and expenses are not understated.
the economic decision of primary users.
d. Assets, liabilities, income and expenses are
not overstated. d. Materiality is a subquality of relevance.

20. The qualitative characteristic of relevance 23. What is meant by comparability when
includes discussing financial accounting information?

a. Predictive value and confirmatory value a. Information has predictive and feedback
value.
b. Completeness and neutrality
b. Information is reasonably free from error.
c. Comparability and understandability
c. Information is measured and reported in a
d. Verifiability and timeliness similar fashion across entities.

d. Information is timely.
21. Accounting information is considered
relevant when it
24. What is meant by consistency when
a. Can be depended on to represent the discussing financial accounting information?
economic conditions that it is intended to
represent a. Information is measured and reported in a
similar fashion across points in time.
b. Is capable of making a difference in a decision
b. Information is timely.
c. Is understandable by reasonably informed
users of accounting information c. Information is measured similarly across the
industry.
d. Is verifiable and neutral
d. Information is verifiable.

22. Which of the following statements about

materiality is not correct? 25. Which statement is true in relation to the
enhancing quality of understandability?
a. An item must make a difference or it need
not be disclosed. a. Users have a reasonable knowledge of
business and economic activities.
b. Materiality is a matter of absolute size.
b. Users are expected to have significant
business knowledge.
c. Financial statements shall exclude complex 29. Which of the following best describes the
matters. cost-benefit constraint?

d. Financial statements shall be free from a. The benefit of the information must be
material error. greater than the cost of providing it.

b. Financial information should be free from

cost to users of the information.
26. According to the Revised Conceptual
Framework, verifiability implies c. Cost of providing financial information is not
always evident or measurable but must be
a. Legal evidence considered.
b. Logic d. All of the choices are correct.
c. Consensus

d. Legal verdict
30. A reporting entity

a. Is necessarily a legal entity

27. When an entity has started placing its b. Must be a corporate type of entity
quarterly financial statements on its website,
thereby reducing c. Is an entity that is required or chooses to
prepare financial statements
ample time to get information to users, the
qualitative concept involved is d. A regulatory government authority

a. Comparability

b. Understandability 31. A reporting entity

c. Verifiability a. Can be a single entity

d. Timeliness b. Can be a portion of a single entity

c. Can comprise more than one entity

28. The Conceptual Framework includes which d. All of these can be considered a reporting
constraint? entity

a. Prudence

b. Conservatism

c. Cost

d. All of the choices are constraints in the

conceptual framework
32. Which statement is true about financial d. A present economic resource controlled by
statements of a reporting entity? the entity as a result of past event and from
which future
a. If the reporting entity comprises both the
parent and its subsidiaries, the financial economic benefit is expected to flow to the
statements are entity.

referred to as consolidated financial

statements.
34. Which is not a characteristic of an asset
b. If the reporting entity is the parent alone, the under the Revised Conceptual Framework?
financial statements are referred to as
unconsolidated a. An asset is a present economic resource.

financial statements. b. The economic resource is a right that has the

potential to produce economic benefits.
c. If the reporting entity comprises two or more
entities that are not linked by a parent- c. The economic resource is controlled by the
subsidiary entity as a result of past event.

relationship, the financial statements are d. Future economic benefit is expected to flow
referred to as combined financial statements. to entity and must be probable or certain.

d. All of these statements are true about the

financial statements of a reporting entity. 35. What is the new definition of liability under
the Revised Conceptual Framework?

33. What is the new definition of an asset under a. A present obligation of the entity arising from
the Revised Conceptual Framework? past event the settlement of which is expected
to result
a. A resource controlled by the entity as a result
of past event and from which future economic in an outflow of economic benefit.
benefit b. A present obligation of the entity arising from
is expected to flow to the entity. present event.

b. A resource controlled by the entity and from c. A present obligation of the entity to transfer
which future economic benefit is expected to an economic resource as a result of past event.
flow to d. An obligation that the entity has practical
the entity. ability to avoid.

c. A present economic resource controlled by

the entity as a result of past event.
36. Which of the following criteria need not be financial performance an item that meets the
satisfied for a liability to exist? definition of an element of the financial
statements.
a. The entity has an obligation or a duty or
responsibility that it has no practical ability to a. Recognition
avoid.
b. Measurement
b. The obligation is to transfer an economic
c. Derecognition
resource and not the ultimate outflow of
economic benefit. d. Disclosure
c. The obligation is a present obligation that
exists as a result of a past event.
39. Under the Revised Conceptual Framework,
d. The settlement of the obligation is expected what is the recognition principle?
to result in an outflow of economic benefit.
a. It is probable that any future benefit
associated with the item will flow to or from the
37. Which statement is not true about income entity.
and expenses? b. The item has a cost or value that can be
measured with reliability.
a. Income is increase in asset or decrease in
liability that results in increase in equity other c. It is probable that any future economic
than that benefit will flow to or from the entity and the
relating to contribution from equity holders. element can

b. Expense is decrease in asset or increase in be measured reliably.

liability that results in decrease in equity other d. Only items that meet the definition of an
than that asset, liability, equity, income and expense are
relating to distribution to equity holders. recognized.

c. Income and expenses are the elements that

relate to financial position. 40. Derecognition is the removal of a
d. Income encompasses revenue and gain. recognized asset or liability from the statement
of financial position

and normally occurs when

38. It is the process of capturing for inclusion in
a. An item no longer meets the definition of an
the statement of financial position or the
statement of asset or a liability

b. The entity loses control of the asset.

c. The entity no longer has a present obligation c. Fulfillment value is the absolute amount of
for the liability cash expected for the payment of liability.

d. Under all of these circumstances d. Current cost is the cost of an equivalent asset
at reporting date comprising the consideration
paid and
41. Under the Revised Conceptual Framework, transaction cost.
the measurement bases include

a. Historical cost
44. The term “revenue recognition”
b. Current value
conventionally refers to
c. Assessed value a. The process of identifying transactions to be
d. Historical cost and current value recorded as revenue in an accounting period.

b. The process of measuring and relating

revenue and expenses of an entity for an
42. Current value includes accounting period.

a. Fair value c. The earning process which gives rise to

revenue realization.
b. Value in use
d. The process of identifying those transactions
c. Fulfillment value
that result in an inflow of assets from
d. Fair value, value in use, fulfillment value and customers.
current cost

45. Which of the following is not an acceptable

43. Which statement is not true about current basis for the recognition of expense?
value measurement?
a. Systematic and rational allocation
a. Fair value of an asset is the price that would
b. Cause and effect association
be received to sell an asset in an orderly
transaction c. Immediate recognition

between market participants at the d. Cash disbursement

measurement date.

b. Value in use is the present value of the cash

flows expected to be derived from the use and
ultimate

disposal of an asset.