Questions and Answers
What is a core area of knowledge required for CPAs in the Philippine Accountancy Profession?
Which skill is NOT mentioned as part of the Core Competence Framework for Entry to the Philippine Accountancy Profession?
What fundamental principle requires a professional accountant to be honest in all business relationships?
Which of the following values is emphasized for professional accountants in the context of ethics?
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What does the principle of objectivity require from a professional accountant?
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Which core competency focuses on maintaining professional knowledge and skills?
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Confidentiality in accounting profession refers to the obligation to:
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Which of the following is NOT a recognized management practice covered by the Core Competence Framework?
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What concept states that an entity is separate from other entities and individuals?
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Which principle recognizes revenue in the accounting period when goods or services are earned?
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What concept requires that financial statements disclose all relevant information for user understanding?
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Which principle ensures that assets are recorded at their original acquisition cost?
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What does the Periodicity Concept imply about financial reporting?
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Which principle indicates that a firm should use the same accounting method consistently from period to period?
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A professional accountant must hold which degree?
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What is the main role of the Professional Regulation Commission (PRC) regarding accountants?
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Which of the following is NOT classified as a branch of accounting?
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What is the fundamental purpose of GAAP?
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Which accounting principle emphasizes the profession's recognition of its public interest responsibility?
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Which of the following types of business activities is NOT included in typical classifications of business transactions?
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What should a professional accountant avoid to maintain professionalism?
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Study Notes
Fundamental Concepts in Accounting
- Entity Concept: Recognizes that an entity is separate from other entities and individuals, crucial for accurate financial reporting.
- Periodicity Concept: Divides the entity's life into equal time periods, facilitating timely financial reporting.
- Stable Monetary Unit Concept: Financial statements are measured in a stable currency, specifically the Philippine Peso.
- Going Concern: Assumes that the entity will continue operations for the foreseeable future.
Basic Principles of Accounting
- Objectivity Principle: Financial statements rely on the most reliable data available, ensuring accuracy.
- Historical Cost Principle: Assets are recorded based on their original acquisition cost, promoting objectivity.
- Revenue Recognition Principle: Revenue is recognized in the period goods and services are earned, not when cash is received.
- Expense Recognition Principle: Expenses are recognized in the period they are incurred, matching them to the revenues they generate.
Generally Accepted Accounting Principles (GAAP)
- Adequate Disclosure: Requires that all relevant information affecting user understanding is disclosed in financial statements.
- Materiality: Focuses on information significant enough to influence evaluations and decisions made by users.
- Consistency Principle: Ensures the same accounting methods are used across periods for comparability.
Professional Accountants
- Individuals must hold a Bachelor of Science in Accountancy and pass the Certified Public Accountants (CPA) licensure examination to carry the title “CPA.”
- CPAs practice under the supervision of the Professional Regulation Commission (PRC).
- Professional accountants must adhere to laws and regulations to maintain the integrity of the profession.
Branches of Accounting
- Includes Auditing, Bookkeeping, Financial Accounting, Financial Management, Management Accounting, Taxation, and Government Accounting.
Summary of Accounting
- Accounting is identified as a service activity with various types of businesses based on the services/products they offer.
- There are three basic forms of business according to ownership and three primary types of activities for classifying business transactions.
- GAAP promotes completeness, consistency, and comparability of financial statements, reflecting the profession’s public interest responsibility.
Core Competence Framework for Accountancy
- Knowledge: Encompasses general, organizational, IT, and accounting knowledge essential for the profession.
- Skills: Includes intellectual, interpersonal, and communication skills that enhance professional effectiveness.
- Values: Emphasizes professional ethics and moral values, fundamental for ethical behavior in accounting.
Fundamental Principles for Ethical Professional Accountants
- Integrity: Accountants must be honest and straightforward in all relations.
- Objectivity: Must avoid bias and conflicts of interest that might influence professional judgment.
- Professional Competence and Due Care: Continuous maintenance of professional knowledge and skills to provide competent service.
- Confidentiality: Professional accountants should not exploit confidential information for personal advantage or disclose it to third parties.
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Description
Explore the fundamental concepts of accounting that are critical for understanding the accounting process. This quiz covers concepts such as the Entity Concept, Periodicity Concept, and the Going Concern principle. Test your knowledge on how these principles apply to financial statements.
