FAR chap 1-2

Question 1

Procedural steps in the Accounting Cycle

Answer 1

1. journalizing or recording
2. posting
3. preparing the trial balance
4. adjusting entries
5. using worksheets
6. preparing financial statements
7. closing entries
8. preparing the post-closing trial balance
9. reserving entries

Question 2

Provider of Risk Capital and their adviser are concerned with the risk inherent in. Information to whether they should buy, hold or sell.

Answer 2

Investors

Question 3

Interested in information about the stability and profitability of their employees,

Answer 3

Employees

Question 4

Interested in information that enables them to determine whether loans. interest earned will be paid

Answer 4

Lenders

Question 5

Interested in information- determine wether amount owing to them will be paid when due

Answer 5

Suppliers and other trade creditors

Question 6

interested in continuance of an entity- especially long term involvement,

Answer 6

Customer

Question 7

interested in allocation of resources

Answer 7

Government and other agencies

Question 8

Entities affect members of the public in a variety of ways. “Substantial contribution to local economy” ”financial statements may assist of public development.”

Answer 8

Public

Question 9

interest in information contained in the financial statement- help carry out responsibility out its planning, decision making and control responsibilities.

Answer 9

Management

Question 10

• are resources controlled by the entity result of a past event – future economic events expect to flow

Answer 10

Asset

Question 11

• present obligation of an entity arising from past events

Answer 11

Liabilities

Question 12

the residual interest in the asset of the entity after deducting all its liabilities

Answer 12

Equity

Question 13

Ability of a Business entity to settle its currently maturing financial obligation

Answer 13

Liquidity

Question 14

Ability of a business to pay its long term financial obligation.

Answer 14

Solvency

Question 15

Amount of capital or resources financed by creditors and the amount provided by owners.

Answer 15

Financial Structure

Question 16

ability of a business to invest excess available resources or raise necessary funds through borrowings without exigency

Answer 16

Capacity for adaptation

Question 17

FRAMEWORK

sets out the concepts that underlie the preparation and presentation of financial statement for external users

Answer 17

The Framework

Question 18

SCOPE OF FRAMEWORK

Answer 18

• Objectives
• Qualitative Characteristics
• Recognition
• Disclosure
• Concepts of Capital
• Measurement

Question 19

PURPOSE OF FRAMEWORK

Answer 19

facilitate the consistent and logical formulation of Philippines Financial Reporting Standard

Question 20

means applying a new accounting policy to transactions as if that policy had always been applied.

Answer 20

Retrospective application

Question 21

is correcting the recognition, measurement, and disclosure of amounts of elements of financial statements as if a prior period error had never occurred

Answer 21

Retrospective restatement

Question 22

refers to the issuance of the complete set of financial statements to various users and the interpretation of data in the financial statements.

Answer 22

Communication

Question 23

Statement are based on rules, procedures, and standards. The set of accounting procedure, practices , and rules is technically called:

Answer 23

General Accepted Accounting Principle (GAAP)

Question 24

is the frequent used as measure of performance or as the basis of other measures like determination of ROI or EPS .

Answer 24

Profit

Question 25

are decrease in economic benefit during accounting period in the form of outflows

Answer 25

Expenses

Question 26

entity shall prepare FS except for cash flow information, using the accrual basis of accounting.

Answer 26

Accrual Basis

Question 27

Under this basis, the effects of transactions and other events are recognized when they occur and not as cash that is received or paid and they are recorded in the accounting records and reported in the financial statements of the periods to which they relate. - FS on an accrual basis inform users not only of past transactions involving the payment and receipt of cash but also of obligations to pay cash in the future and of resources that represent cash to be received in the future.

Answer 27

notes!

Question 28

QUALITATIVE CHARACTERISTIC An essential quality of the information provided in financial statements, it is readily understandable by users.

Answer 28

Understandability

Question 29

it influences the economic decision of users by helping them evaluate past, present, or future events or correcting their past.

Answer 29

Relevance

Question 30

it is free from material error and bias. Level of confidence users place on truthfulness of the information.

Answer 30

Reliability

Question 31

Under reliability! information must present faithfully the transaction and other events it either purports to represent

Answer 31

Faithful Representation

Question 32

If information is to represent faithfully the transaction and other events that it purports to represent, they are accounted in accordance substance and economic reality not legal forms.

Answer 32

substance over from

Question 33

Financial Statement must be neutral , that is free from bias

Answer 33

Neutrality

Question 34

is the inclusion of degree of caution in the exercise of judgement needed in making the estimates required undercertainty.

Answer 34

Prudence

Question 35

information in the financial statements must be complete without bounds of materiality and cost

Answer 35

Completeness

Question 36

Users are able to compare the financial statements of an entity through time in order to identify trends – financial position and performance.

Answer 36

Comparability

Question 37

increase in economic benefit during accounting period form of inflows

Answer 37

income

Question 38

Assets are recorded at the amount of cash or cash equivalent paid or the fair value of the consideration given.

Answer 38

Historical cost

Question 39

process of determining the monetary value amount elements of the financial statement

Answer 39

Measurement

Question 40

Are the specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements.

Answer 40

Accounting policies

Question 41

Complete set of Financial Statement

Answer 41

Statement of Financial Position Statement of Comprehensive Income Statement of changes in equity Statement of changes in cash flow Notes and disclosure of accounting policies.

Question 42

summary of financial balances or elements directly related to the measurement of financial position

Answer 42

Statement of financial position

Question 43

reflects the operating performance of the business

Answer 43

Statement of comprehensive income

Question 44

the movement and changes in the owners’ equity section of the balance sheet reflected in statement of changes in equity

Answer 44

Statement of changes in equity

Question 45

report cash flow during the period classified by operating investing and financing activities

Answer 45

Statement of cash flows

Question 46

report cash flow during the period classified by operating investing and financing activities

Answer 46

Statement of cash flows

Question 47

as far as practicable, are presented in systematic manner

Answer 47

Notes and disclosure of accounting policies

Question 48

are the final product of the accounting system

Answer 48

Financial Statements