FEU - MAKATI

Theory of Accounts
TOA – Quizzer 1 Prof. Francis H. Villamin

1. Accounting is often called the “language of business” because

a. it is easy to understand
b. it is fundamental to the communication of financial information
c. all business owners have a good understanding of accounting principles
d. accountants in many companies share financial information

2. Accounting as an art involves the considerate use of judgment. Accountants should exercise
creative and critical thinking in solving accounting problems. In solving accounting problems, this
involves the use of imagination and insight by finding new relationships (ideas) among items of
information. It is most important in identifying alternative solutions.
a. Creative thinking
b. Critical thinking
c. Professional Skepticism
d. Wishful thinking

3. Critical thinking is most important in which of the following problem-solving steps?

a. Recognizing a problem
b. Identifying alternative solutions
c. Evaluating the alternatives
d. Selecting a solution from among the alternatives

4. The law that regulates the practice of accounting in the Philippines is the Philippine Accountancy
Act of 2004 also known as
a. R.A. No. 9298
b. R.A. No. 9892
c. R.A. No. 8299
d. R.A. Blg. 69

5. The professional regulatory board created under Republic Act No. 9298 tasked with the supervision
of the registration, licensure and practice of accountancy in the Philippines.
a. PRC
b. BOA
c. PICPA
d. FRSC

6. The Board of Accountancy (BOA) shall be composed of

a. Six (6) members with a chairman for a total of six (6) individuals
b. Chairman and six (6) members for a total of seven (7) individuals
c. Chairman and fifteen (15) members
d. Chairman and seventeen (17) members

7. The Commission upon the recommendation of the Board shall within ninety (90) days from the
effectivity of the IRR, create an accounting standard setting body to be known as the
a. Financial Reporting Standards Council
b. Financial Reporting Standards Committee
c. Accounting Standards Committee
d. Financial Reporting Standards Board

8. FRSC shall be composed of

a. Fifteen members and a Chairman
b. Fourteen members with a Chairman
c. Fourteen members and a Chairman
d. Eight members and a Chairman

9. One of the following is not a member of the Financial Reporting Standards Council.
a. Philippine Institute of Certified Auditors
b. Commission on Audit
c. Bangko Sentral ng Pilipinas
d. Securities and Exchange Commission

10. The integrated national professional organization of Certified Public Accountants accredited by the
Board and the Commission.
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a. Accredited National Professional Organization of Certified Public Accountants or APO

b. Federation of Certified Public Accountants
c. Philippine Institute of Certified Public Auditors
d. Accredited National Professional Accountants

11. The Accredited National Professional Organization of Certified Public Accountants or APO in the
Philippines is
a. Philippine Institute of Certified Public Auditors
b. Association of Certified Public Accountants in Commerce and Industry
c. Philippine Institute of Certified Public Accountants
d. Association of Certified Public Accountants in Education

12. An accountant employed in a government agency is considered to be in the

a. Practice of Public Accountancy
b. Practice in Commerce and Industry
c. Practice in Education/Academe
d. Practice in the Government

13. The role of the Securities and Exchange Commission in the formulation of accounting principles
can best be described as
a. consistently primary
b. consistently secondary
c. sometimes primary and sometimes secondary
d. non-existent

14. Corporations are required to submit the financial statements to the

a. FRSC
b. BOA
c. COA
d. SEC

15. Which of the following is not among the Four Sectors in the practice of accountancy as
enumerated in R.A. 9298 also known as the “Philippine Accountancy Act of 2004”?
a. Practice in Commerce and Industry
b. Practice in Education/Academe
c. Practice in the Government
d. Practice in Private Accounting

16. Issuing of accounting standards is the responsibility of the

a. PICPA
b. FRSC
c. AASC
d. CPD Council

17. A common set of accounting standards and procedures are called

a. financial account standards
b. generally accepted accounting principles
c. objectives of financial reporting
d. statements of financial accounting concepts

18. Accounting principles are “generally accepted” only when

a. an authoritative accounting rule-making body has established it in an official pronouncement
b. it has been accepted as appropriate because of its universal application
c. both a and b
d. neither a nor b

19. Generally accepted accounting principles

a. include detailed practices and procedures as well as broad guidelines of general application
b. are influenced by pronouncements of the SEC and Regulatory Accounting Principles
c. change over time as the nature of the business environment changes
d. all of these

20. Choose the correct statement about generally accepted accounting principles (GAAP).
a. They are laws.
b. The Bureau of Internal Revenue enforces GAAP.
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c. Firms that do not comply with GAAP may suffer negative economic consequences.
d. GAAP in the Philippines is represented by PSAs.

21. Accounting concepts are not derived from

a. Inductive reasoning
b. Experience
c. Pragmatism
d. Laws of Nature

22. Generally accepted accounting principles in the Philippines are represented by

a. PASs
b. PSAs
c. PFRSs
d. SFASs

23. The Philippine Financial Reporting Standards (PFRSs) are standards adopted by the
a. Accounting Standards Council (ASC)
b. Financial Reporting Standards Committee (FRSC)
c. Philippine Institute of Certified Public Accountants (PICPA)
d. Financial Reporting Standards Council (FRSC)

24. Application and implementation Guidance included in PFRSs

a. forms part of the standards and are in themselves standards
b. does not form part of the standards
c. may or may not be integral part of the standards
d. are useless if the accountants is a CPA

25. The argument that practicing accountants are familiar with the significance of various accounting
problems and the feasibility of alternative solutions is an argument for establishing generally accepted
accounting principles through
a. a free-market approach
b. a deductive approach
c. government regulation
d. private sector regulation

26. Generally accepted accounting principles in the Philippines are based on

a. IFRSs issued by IASB
b. SFAS issued by FASB
c. partly (a) and (b)
d. GAAP in the Philippines are originally formulated by the FRSC and are not based on standards
issued by other standard setting bodies.

27. The International Accounting Standards (IASB)

a. directly influences governmental legislation regarding accounting standards
b. develops binding pronouncements for its members
c. is composed of members from national standard setting bodies
d. establishes uniform accounting standards to eliminate reporting differences among nations

28. Approval of International Financial Reporting Standards (IFRSs) and related documents, such as the
Conceptual Framework for Financial Reporting, exposure drafts, and other discussion documents, is
the responsibility of the
a. International Accounting Standards Board
b. International Accounting Standards Committee
c. International Accounting Standards Council
d. Financial Reporting Standards Council

29. In the event of conflict between the International Financial Reporting Standards and the local
standards, which among the following will prevail?
a. The provisions of the Corporation Code and Tax Code will prevail
b. The rule of the Philippine Securities and Exchange Commission prevails
c. The rule of the international Accounting Standards prevails
d. The rule of local standards, laws and regulations shall prevail

30. Which of the following bodies is responsible for reviewing accounting issues that are likely to receive
divergent or unacceptable treatment in the absence of authoritative guidance, with a view to reaching
consensus as to the appropriate accounting treatment?
a. International Financial Reporting Interpretations Committee (IFRIC)
b. Standards Advisory Council (SAC)
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c. International Accounting Standards Board (ASB)

d. International Accounting Standards Committee Foundation (IASC Foundation)

31. The purpose of the International Accounting Standards Board is to

a. issue enforceable standards which regulate the financial accounting and reporting of multinational
corporations.
b. develop a uniform currency in which the financial transactions of companies throughout the world
would be measured.
c. promote uniform accounting standards among countries of the world.
d. arbitrate accounting disputes between auditors and international companies.

32. Which of the following is the incorrect statement?

a. Theory can be defined as a coherent set of hypothetical, conceptual and pragmatic principles
forming a general frame of reference for a field of inquiry.
b. Accounting theory has developed in response to government regulations.
c. Concepts are components of theory.
d. Accounting concepts are human-made.

33. The purpose of the International Financial Reporting Standards is to

a. Issue standards to be applied by all countries in the world.
b. To eliminate all the differences in financial reporting between countries in the world.
c. Promote a uniform basis of financial reporting among countries of the world.
d. Issue enforceable standards to be applied by all international standards.

34 If accounting information is to be useful, it must be expressed in terms of:

a. non-monetary units
b. monetary and non-monetary units
c. units of consumer demand
d. a common denominator

35. Generally accepted accounting principles

a. are fundamental truths or axioms that can be derived from laws of nature
b. derive their authority from legal court proceedings
c. derive their credibility and authority from general recognition and acceptance by the accounting
profession
d. have been specified in detail in the FRSC framework

36. The principles, which constitute the ground rules for financial reporting, are termed “generally accepted
accounting principles”. To qualify as “generally accepted”, an accounting principle must
a. Usually guide corporate managers in preparing financial statements, which will be understood by
widely scattered stockholders.
b. Guide corporate managers in preparing financial statements which will be useful for collective
bargaining agreements with trade unions.
c. Guide an entrepreneur of the choice of an accounting entity like single proprietorship, partnership
or corporation.
d. Receive substantial authoritative support.

37. Financial accounting is shaped to a significant extent, by the environment, and in particular all of the
following, except
a. The many uses and users which it serves
b. The overall organization of economic activity in society
c. The characteristics and limitations of financial accounting and financial statements
d. The means of measuring economic activity

38. Proper application of accounting principles is most dependent upon the

a. existence of specific guidelines
b. oversight of regulatory bodies
c. external audit function
d. professional judgment of the accountant

39. Which of the following is most likely to prepare the most accurate financial forecast for a
corporate entity based on empirical evidence?
a. Investors using statistical models to generate forecasts
b. Corporate management
c. Financial analysts
d. Independent CPAs

40. Proper application of accounting principles is most dependent upon the

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a. existence of specific guidelines.

b. oversight of regulatory bodies.
c. external audit function.
d. professional judgment of the accountant.

41. The process of establishing financial accounting standards is

a. a democratic process in that a majority of practicing accountants must agree with a
standard before it becomes implemented.
b. a legislative process based on rules promulgated by government agencies.
c. based solely on economic analysis of the effects each standard will have if it is
implemented.
d. a social process which incorporates political actions of various interested user groups as
well as professional research and logic.

42. Accounting standards help accountants meet the information demands of interested parties by providing:
a. legislation introduction pertaining to financial reporting
b. limits and guidance for financial reporting
c. improved operating plans to the Board
d. reports to the Media

43. The information provided by financial reporting pertains to

a. Individual business enterprises, rather than to industries or an economy as a whole or to
members of society as consumers.
b. Individual business enterprises and industries, rather than to an economy as a whole or to
members of society as consumers.
c. Individual business enterprises and an economy as a whole, rather than to industries or to
members of society as consumers.
d. Individual business enterprises, industries and an economy as a whole, rather than to
members of society as consumers.

44. Which of the following statements about the basic purpose of financial reporting is true?
a. The primary focus of financial reporting is information about an enterprise’s resources.
b. The best indication of an enterprise’s ability to generate favorable cash flows is information
based on previous cash receipts and payments.
c. Financial accounting is expressly designed to measure directly the value of a business
enterprise.
d. Investment and credit decisions often are based, at least in part, on evaluations of the past
performance of an enterprise.

45. The name that is presently used for standards issued by the International Accounting Standards Board
A. International Accounting Standards (IAS).
B. International Financial Reporting Standards (IFRS)
C. International Financial Accounting Interpretations (FAI)
D. International Generally Accepted Accounting Principles (IGAAP)

46. Which of the following organizations is responsible for setting International Financial Reporting
Standards?
A. Financial Accounting Committee
B. Financial Accounting Standards Board
C. International Accounting Standards Board.
D. International Accounting Standards Committee.

47. Which of the following is not directly involved in the accounting standard-setting “due process” in the
Philippines?
A. Board of Accountancy.
B. Bureau of Internal Revenue.
C. Professional Regulations Commission.
D. Financial Reporting Standards Council.

48. The process of establishing financial accounting standards

A. is a legislative process based on rules promulgated by government agencies.
B. is based solely on economic analysis of the effect each standard will have if it is implemented.
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C. is a democratic process in that a majority of practicing accountants must agree with a standard
before it becomes implemented.
D. is a social process which incorporates political actions of various interested user groups as well
as professional research and logic.

49. Which is not part of the financial reporting standard setting process in the Philippines?
A. Publication in the PRC Official Gazette and in a newspaper of general circulation.
B. Distribution of the exposure draft for comment to CPA professionals and other interested parties.
C. Creation of a task force by the standard setting body to study the proposed accounting standard.
D. Approval by Financial Reporting Standards Council (FRSC) and eventually by Professional
Regulations Commission (PRC).

50. Which of the following is not a description or a function of the Financial Reporting Standards Council
(FRSC)?
A. It establishes generally accepted accounting principles in the Philippines.
B. It receives financial support principally from the Professional Regulations Commission (PRC).
C. It is the successor of Accounting Standards Council (ASC) and the creator of Philippine
Interpretations Committee (PIC).
D. It assists the Professional Regulatory Board of Accountancy (BOA) in carrying out its power and
function to promulgate accounting standards in the Philippines.

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