MODULE #1
TRUE/FALSE
True Consistency is desirable and essential to achieve comparability of financial
statements.
True The management of an entity has the primary responsibility for the
preparation and presentation of financial statements.
True The overall objective of financial reporting is to provide information that is
useful for decision making.
False An entity is permitted to depart from a standard when the management
concludes that compliance with standard would not be misleading.
False The overall objective of financial reporting is to provide information to the
entity’s management that is useful for their decision making.
False An item is immaterial if knowledge of it would not affect the decision of the
informed users of the financial statements.
False Financial statements do not show the results of the stewardship of
management or the accountability of management for the resources
entrusted to it.
False The objective of financial statements is to provide and present financial
statements in accordance with all applicable PFRS and Interpretations.
False Technically, offsetting in financial statements is accomplished when the
allowance for doubtful accounts is deducted from accounts receivable.
False The primary users include, the existing and potential investors, lenders,
other creditors, government and their agencies.
MULTIPLE CHOICE
1. The presentation and classification of items in the financial statements shall
be retained from one accounting period to the next.
Consistency of presentation
Fair presentation
Comparability
Materiality
2. It means that income is recognized when earned regardless of when
received and expenses is recognized when incurred regardless of when
paid. This refers to –
Going concern
Materiality
Consistency
Accrual accounting
3. Which statement in relation to financial statements is incorrect?
Financial statements are largely based on estimate and judgment
rather than exact depiction.
General purpose financial statements are designed to show the
value of the reporting entity.
General purpose financial statements do not and cannot provide
all of the information that primary users need.
General purpose financial statements are intended to provide
common information to users.
4. Materiality depends on
The absolute size of the omission, misstatement or obscured
information.
The relative size and nature of the omission, misstatement or
obscured information.
The judgment of management
The nature of the omission, misstatement or obscured
information.
5. Which is an objective of financing reporting?
To provide information to those investing in the entity.
To provide that is useful to management.
To provide information that is useful in making investing and
credit decision.
To provide information about ways to solve internal and external
conflicts about the entity.
6. An entity is permitted to depart from a particular standard if all of the
following conditions are satisfied, except
When management concludes that compliance with the standard
would be misleading.
When the Conceptual Framework for Financial Reporting
prohibits such a departure.
When the departure from the standard is necessary to achieve
fair presentation.
In extremely rare circumstances
7. The primary focus of financial reporting has been on meeting the needs
of which of the following groups?
Management
Existing and potential investors, lenders and other creditors.
Independent CPAS
National taxing authorities
8. Which of the following refers to the level of income earned by the entity
through the efficient and effective use of its resources?
Financial reporting
Financial performance
Financial position
Financial statements
9. Which statement includes a going concern?
Management normally recorded assets at original acquisition
cost.
Management intends to cease the operations of the entity.
Management has no realistic alternative but to cease the
operations of the entity.
Management intends to liquidate the entity
10.Which of the following is an internal user of financial information?
Creditor with long-term contact
Bondholder
Shareholders
Board of Directors
