FINANCIAL ACCOUNTING 1 (Chapter 1-3)

Name: ________________________________

Date: _____________

TEST 1: MULTIPLE CHOICE. Encircle the letter of your

answer.

10. Allowing entities to estimate rather than physically

count inventory at interim periods is an example of a
tradeoff between

1. The overall objective of financial reporting is to provide

information
a.
b.
c.
d.

that allows owners to assess management

performance
that is useful for decision making
about an entitys financial performance during a period
about an entitys assets, liabilities and equity

a.
b.
c.
d.

Yr. & Sec._________

Timeliness and Consistency

Timeliness and Neutrality
Verifiability and Timeliness
Comparability and Consistency

11. According to the Conceptual Framework, the

usefulness of providing information in financial
statements is subject to the constraint of

2. The underlying theme of the Conceptual Framework is

a.
b.
c.
d.

Timeliness
Understandability
Wide Acceptance
Decision Usefulness

3. When a parent and subsidiary relationship exists,

consolidated financial statements are prepared in
recognition of
a.
b.
c.
d.

Tine Period
Legal Entity
Stable Monetary Unit
Economic Entity

4. The relatively stable economic, political and social

environment supports
a.
b.
c.
d.

Conservatism
Going Concern
Materiality
Timeliness

5. Proper allocation of accounting principles is most

dependent upon the
a.
b.
c.
d.

Existence of specific guidelines

The Conceptual Framework
Professional judgment of the CPA
Oversight of Regulatory Bodies

6. In the Conceptual Framework for Financial Reporting,

what provides the why of accounting?
a.
b.
c.
d.

Measurement and recognition concept

Qualitative characteristic of accounting information
Objective of Financial Reporting
Element of financial statement

7. The objectives of financial reporting are based on

a.
b.
c.
d.

The need for conservatism

Reporting on managements stewardship
Generally accepted accounting principles
The needs of the users of the information

8. Which of the following is the best description of faithful

representation in relation to information in financial
statements?
a.
b.
c.
d.

Influence on the economic decision of users

Freedom from material error
Inclusion of a degree of caution
Comprehensibility to users

9. What concept of accounting holds that, to the maximum

extent possible, financial statements shall be based on
arms length transactions?
a.
b.
c.
d.

Decision-Usefulness
Verifiability
Matching
Monetary Unit

a.
b.
c.
d.

Consistency
Cost-Benefit
Timeliness
Materiality

12. The most useful information to existing and potential

investors, lenders and other creditors in predicting future
cash flows is
a.
b.
c.
d.

Information about current cash flows

Current Earnings based on accrual accounting
Information regarding the accounting policies used by
management
Information regarding the results obtained by using a
wide variety of accounting policies

13. The accrual basis of accounting is most useful for

a.
b.
c.
d.

Predicting the short-term financial performance of an

entity
Confirming the long-term financial position of an entity
Predicting the long-term financial performance of an
entity.
Determining the amount of dividends an enity should
pay.

14. What is meant by consistency when discussing

financial accounting information?
a.
b.
c.
d.

Information is measured and reported in a similar

fashion across entities
Information is timely
Information is measured similarly across the industry
Information is measured and reported in a similar
fashion across points in time.

15. Gains on assets unsold are identified, in a precise

sense by the term
a.
b.
c.
d.

Unrecorded
Unrealized
Unrecognized
Unallocated

16. The term recognized is synonymous with the term

a.
b.
c.
d.

Recorded
Realized
Matched
Allocated

17. The petty cash fund account under the imprest fund
system is debited
a.
b.
c.
d.

Only when the fund is created

When the fund is created and everytime it is
replenished
When the fund is created and when the size of the
fund is increased
When the fund is created and when the fund is
decreased

18. PAS 7 is entitled as

a.

Cash and Cash Equivalents

b.
c.
d.

Statement of Cash Flows

Presentation of FS
Property, Plant & Equipment

19. The internal control feature that is specific to petty

cash is
a.
b.
c.
d.

Separation of Duties
Assignment of Responsibility
Proper Authorization
Imprest System

20. What is the major purpose of an imprest petty cash

fund?
a.
b.
c.
d.

To effectively plan cash inflows and outflows

To ease the payment of cash to vendors
To determine the honesty of the petty cashier
To effectively control cash disbursements

21. Which of the following is usually considered cash?

a.
b.
c.
d.

Certificates of deposit
Checking accounts
Money market savings certificate
Postdated checks

22. Which of the following shall not be considered cash for

financial reporting purposes?
a.
b.
c.
d.

Petty cash funds

Money orders
Personal checks
IOUs

23. A Cash Over and Short Account

a.
b.
c.
d.

c.
d.

Be written off as an extraordinary loss

As part of cash and cash equivalents

28. Which of the following must be included on the face of

an entitys statement of financial position?
a.
b.
c.
d.

Investment Property
Number of shares authorized
Contingent Liability
Shares in an entity owned by that entity

29. Which of the following items is usually classified as a

noncurrent asset?
a.
b.
c.
d.

Prepaid Rent
Time Deposit
Plant Expansion Fund
Goods that are in the process of being completed for
another entity

30. It is a practice used for concealing a cash shortage. It

consists of misappropriating a collection from one
customer and concealing this defalcation by applying a
subsequent collection made from another customer.
a.
b.
c.
d.

Window Dressing
Kiting
Lapping
Defying

TEST 2:
Write your answers starting at the back of Page 1 and then
continued at the back of page 2.

Is not generally accepted

Is debited when the petty cash fund proves out over
Is debited when the petty cash fund proves out short
Is a contra account to cash

1.

Give the composition of FRSC (15 pts)

2.

Give the three definitions of accounting and indicate

who gave that definition. (9 pts)

24. Which item should be excluded from cash and cash

equivalents in the current year-end statement of financial
position of an entity?

3.

Enumerate the 8 steps in the accounting cycle. (8 pts)

4.

What are the fundamental qualitative characteristics

mentioned in the Conceptual Framework for Financial
Reporting. Enumerate the ingredients of each.(10 pts)

5.

Enumerate the 4 enhancing qualitative characteristics

mentioned in the conceptual framework (4 pts)

6.

Give the complete set of financial statements (12 pts)

7.

Minimum Line Items in the Statement of Financial

Position. (18 pts)

8.

Minimum Line Items in the income statement and

statement of comprehensive income. (9 pts)

9.

What is the authoritative status of the Conceptual

Framework? (5 pts)

a.

b.
c.
d.

The minimum cash balance in the entitys current

account I the current year-end statement of financial
position of an entity
A check issued by the entity on Dec 27 of the current
year but dated Jan 15 of next year
Time Deposit which matures in one year
A customers check denominated in a foreign
currency

25. Cash equivalents are

a.
b.

c.

d.

Short-term and highly liquid investment that are

readily convertible into cash
Short-term and highly liquid investments that are
readily convertible into cash with remaining maturity
of three months
Short-term and highly liquid investments that are
readily convertible into cash and acquired three
months before maturity
Short-term and highly liquid marketable equity
securities

26. In which account are customers postdated checks

received classified?
a.
b.
c.
d.

Accounts Receivable
Prepaid Expenses
Cash
Accounts Payable

27. If material, deposits in foreign bank which are subject

to foreign exchange restriction shall be classified
a.
b.

Separately as current asset with appropriate

disclosure
Separately as noncurrent asset with appropriate
disclosure

10. Given the following data, calculate the Cost of Goods

Sold of JPIA Manufacturing Company. Present in a
good form (10 pts)
Net Purchases
Ending Raw Materials
Direct Labor
Beginning Raw Materials
Beginning Goods in Process
Beginning Finished Goods
Ending Goods in Process
Ending Finished Goods
Factory Overhead

2,000,000
300,000
3,000,000
500,000
900,000
1,600,000
1,000,000
1,500,000
1,300,000