Conceptual Framework

1. The elements directly related to the measurement of financial position are

a. Assets, liabilities, equity,income and expense
b. Assets, liabilities and equity.
c. Income and expense
d. Assets and liabilities

2. The elements directly related to the measurement of financial performance are

a. Assets, liabilities, equity, income and expense
b. Assets, liabilities and equity
c. Income and expense.
d. Sales and cost of sale

3. It is an increase in economic benefit during the accounting period related to an

increase in asset or a decrease liability that results in increase in equity other than
contribution from owners
a. Asset
b. Liability
c. Income.
d. Expense

4. It is an decrease in economic benefit during the accounting period related to an

increase in asset or a increase liability that results in decrease in equity other than
contribution from owners
a. Asset
b. Liability
c. Income
d. Expense.

5. Which of the following statements in relation to income is true?

a. Income encompasses both revenue and gain.
b. Revenue encompasses both income and gain
c. Gain encompasses both income and revenue
d. Income encompasses revenue only

6. It is the process of incorporating in the statement of financial position or statement

of comprehensive income an item that meets the definition of an element of the
financial statements
a. Recognition
b. Measurement
c. Realization
d. Allocation

7. An item that meets the definition of an element shall be recognized when

I. It is probable that future economic benefits associated with the item will flow to or
from the entity
II. The i0tem has a cost or value that can be measured with reliability

a. I only
b. II only
c. Either I or II
d. Both I and II.

8. An expense is recognized when

a. It is that decrease in future economic benefit has occurred
b. The decrease in future economic benefit can be measured reliably
c. It is probable that a decrease in future economic benefit has occurred and the
decrease in the future economic benefit can be measured reliably.
d. It is probable that a increase in future economic benefit has occurred and the
increase in the future economic benefit can be measured reliably
9. It is the process that involves the simultaneous or combined recognition of revenue
and expenses that result directly from the same transactions and other events
a. Matching of cost with revenue.
b. Matching of revenue with cost
c. Systematic and rational allocation
d. Immediate recognition

10. Which f the following measurement attributes is not currently used in practice?
a. Present value
b. Net realized value
c. Current replacement cost
d. Inflation-adjusted cost.

11. Which of the following attributes is the most relevant?

a. Present value.
b. Exit value
c. Current cost
d. Historical cost

12. It is the amount of cash that could currently be obtained by selling the asset in an
orderly disposal
a. Realizable value.
b. Fair value
c. Market value
d. Present value

13. Which is incorrect concerning recognition of revenue from rendering of service?

a. Installation fee are recognized over the period of installation by reference to the
stage of completion
b. Magazine subscriptions usually are recognized on a straight line basis over the
subscription period
c. Admission fees for a musical concert are recognized when received regardless of
when the event takes place.
d. Tuition fees are recognized as revenue over the period in which tuition is provided

14. The revenue principle states that revenue shall be recognized at a point when
a. An exchange transaction involving goods and services has occurred and the earning
process is essentially complete.
b. An order for shipment of a definite amount of merchandise has been received
c. A contract between buyer and seller has been signed by both parties
d. The seller has shipped merchandise to a costumer under the terms that the customer
need not to pay for the merchandise until it is sold

15. Revenue from an artistic performance is recognized once

a. The audience register for the concert are sold
b. The tickets for the concert are sold
c. Cash has been received from the ticket sales
d. The event takes place.

16. The installment method of recognizing revenue

a. Should be used only in cases in which no reasonable basis exists fro estimating the
collectibility of receivable.
b. Is not a generally accepted accounting principle under any circumstances
c. Should be used for book purposes only if it is used for tax purpose
d. Is an acceptable alternative accounting principle for an entity that makes
installment sales

17. Which of the following means the process of converting non-cash resources and
rights into cash claims to cash?
a. Allocation
b. Collection
c. Recognition
d. Realization.

18. Which of the following statements conforms to the realization concept?

a. Equipment depreciation was assigned to a production department and then to
product unit cost
b. Depreciated equipment was sold in exchange for a note receivable.
c. Cash was collected on accounts receivable
d. Product unit cost were assigned to cost of goods sold when the unit were sold

19. For financial statement purposes , the installment method of accounting may be
used if the
a. Collection period extends more than 12 months
b. Installments are due in different years
c. Ultimate amount collectible is indeterminate.
d. Percentage of completion method is inappropriate

20. Why are certain cost of doing business capitalized when incurred and then
depreciated or amortized over subsequent accounting cycles?
a. To reduce the income tax liability
b. To aid management in the decision-making process
c. To match the cost of production with revenue as earned.
d. To adhere to the accounting concept of conservation

21. An example of direct matching of an expense with expense would be

a. Depreciation expense
b. Office salaries expense
c. Direct labor cost incurred to produce inventory sold during a period.
d. Advertising expense

22. Which of the following principles best describes the rationale for matching
distribution cost and administrative expenses with revenue of the current period?
a. Direct matching
b. Systematic and rational allocation
c. Immediate recognition.
d. Partial recognition

23. Which of the following statements in relation to the concept of revenue is true?
I. Transactions like issuance of share capital and payment of dividends between the
entity and the owners cannot give rise to revenue
II. Deferred revenue is synonymous with unrealized revenue
a. I only.
b. II only
c. Both I and II
d. Neither I or II

24. The primary distinction between revenue and gain is

a. The materiality of the amount
b. The likelihood that the transaction will recur in the future
c. The nature of the activity that gives rise to the transaction.
d. The cost versus the benefit of the alternative method of disclosing the transaction

25. Which of the following statements in relation to the term expense is incorrect?
a. All expenses and loses are expired cost but not all expired costs are expenses or
loses
b. All expenses decrease owners equity but not all decrease in owners equity expenses
c. Expense is synonymous with expenditure.
d. Entities do not incur expenses per se but they initially acquire assets