Unit 1 Financial Reporting
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Questions and Answers

What is the primary purpose of accounting?

  • To provide quantitative financial information for economic decisions (correct)
  • To provide qualitative information for decision making
  • To set financial standards for businesses
  • To perform audits of financial statements

    • Which of the following is NOT considered an essential characteristic of accounting?

  • Quantitative information
  • Subjective analysis (correct)
  • Financial in nature
  • Useful in decision making

    • Which component of accounting is primarily analytical?

  • Identifying and interpreting results (correct)
  • Recording transactions
  • Classifying financial data
  • Summarizing financial results

    • What is one of the objectives of this financial reporting unit?

    <p>To identify the standard-setting bodies of the Philippines (D)</p> Signup and view all the answers

    How long is the expected study time for this unit?

    <p>Four study hours (A)</p> Signup and view all the answers

    Which definition of accounting emphasizes its role in decision-making?

    <p>Identifying, measuring, and communicating economic information (D)</p> Signup and view all the answers

    What type of information is accounting primarily concerned with?

    <p>Quantitative and financial information (D)</p> Signup and view all the answers

    How many total members are there in the FRSC?

    <p>15 (B)</p> Signup and view all the answers

    Which organization does NOT have a representative on the FRSC?

    <p>Department of Trade and Industry (C)</p> Signup and view all the answers

    What is the role of the Philippine Interpretations Committee (PIC)?

    <p>To prepare interpretations of PFRS for FRSC approval (D)</p> Signup and view all the answers

    What happens to proposed IFRSs after the FRSC evaluates and deliberates on them?

    <p>They are recommended for adoption to the Board of Accountancy (C)</p> Signup and view all the answers

    Which of the following is part of the Generally Accepted Accounting Standards in the Philippines?

    <p>Philippine Financial Reporting Standard (B)</p> Signup and view all the answers

    What defines a transaction as accountable within a business?

    <p>A transaction that can be quantified or expressed in terms of a unit of measure. (D)</p> Signup and view all the answers

    What is the primary purpose of measuring economic transactions in accounting?

    <p>To express accounting information in terms of a common financial denominator. (C)</p> Signup and view all the answers

    Which of the following best describes historical cost?

    <p>The amount paid to acquire an asset at the time of its acquisition. (D)</p> Signup and view all the answers

    If Rickrolled Inc. purchased equipment for ₱20,000,000 in 2021, what does this amount represent?

    <p>The historical cost of the equipment. (C)</p> Signup and view all the answers

    What does the current cost of an asset refer to?

    <p>The price it would cost to acquire the same or equivalent asset currently. (D)</p> Signup and view all the answers

    How would you define realizable value?

    <p>The cash amount expected when selling the asset in a regular transaction. (D)</p> Signup and view all the answers

    Which of the following statements is false regarding measurable transactions?

    <p>Hiring employees is a measurable transaction. (C)</p> Signup and view all the answers

    If the price of the same equipment decreases over time, which cost reflects this change?

    <p>Current cost. (D)</p> Signup and view all the answers

    Which of the following is NOT a financial attribute used for measurement?

    <p>Market value. (A)</p> Signup and view all the answers

    What does GAAP stand for in the context of accounting?

    <p>Generally Accepted Accounting Principles (C)</p> Signup and view all the answers

    Which body was established before the Financial Reporting Standards Council (FRSC) in the Philippines?

    <p>Accounting Standards Council (ASC) (C)</p> Signup and view all the answers

    What primary role does the Financial Reporting Standards Council (FRSC) serve?

    <p>To develop generally accepted accounting principles (A)</p> Signup and view all the answers

    How does GAAP respond to societal changes?

    <p>It modifies to meet the demands of complex financial transactions (A)</p> Signup and view all the answers

    What does the present value of an asset represent?

    <p>The discounted value of future cash inflows. (D)</p> Signup and view all the answers

    What legislative act is associated with the establishment of the Board of Accountancy (BOA) in the Philippines?

    <p>Philippine Accounting Act of 2004 (C)</p> Signup and view all the answers

    Which of the following is not a factor to consider when selecting a measurement basis?

    <p>Liquidity (D)</p> Signup and view all the answers

    What is one purpose of Generally Accepted Accounting Principles (GAAP)?

    <p>To guide the preparation and presentation of financial statements (C)</p> Signup and view all the answers

    What is the first step in the accounting communication process?

    <p>Recording (A)</p> Signup and view all the answers

    What is the role of the Professional Regulation Commission in the context of accounting standards?

    <p>To recommend the creation of the FRSC (B)</p> Signup and view all the answers

    Which of the following statements about GAAP is true?

    <p>GAAP must evolve to remain relevant in complex financial landscapes (B)</p> Signup and view all the answers

    Which of the following describes the classifying process in accounting?

    <p>Sorting and grouping similar transactions. (B)</p> Signup and view all the answers

    What is contained in a complete set of financial statements?

    <p>Statement of financial position, income statement, and statement of cash flows. (C)</p> Signup and view all the answers

    What significant change occurred to the Accounting Standards Council (ASC)?

    <p>It was replaced by a more advanced body, the FRSC (C)</p> Signup and view all the answers

    A receivable of ₱20,000,000 forty years from today is valued how?

    <p>At its present value, which is less than ₱20,000,000. (D)</p> Signup and view all the answers

    What is implied about the complexity of financial transactions in society?

    <p>They are becoming increasingly complicated over time (C)</p> Signup and view all the answers

    Which component of accounting focuses on distributing reports to users?

    <p>Communicating (B)</p> Signup and view all the answers

    What does the revised conceptual framework introduce in terms of measurements?

    <p>New concepts such as fair value and current cost. (C)</p> Signup and view all the answers

    Which of the following describes the process of summarizing in accounting?

    <p>Preparing financial statements. (C)</p> Signup and view all the answers

    What is the purpose of classifying transactions in accounting?

    <p>To create a ledger for future reference. (D)</p> Signup and view all the answers

    Study Notes

    Unit 1 Financial Reporting

    • This unit reviews core accounting concepts.
    • It details the standard-setting bodies in the Philippines.
    • It outlines the process of developing accounting standards.

    Introduction

    • The unit provides a general review of accounting concepts.
    • It includes information on financial reporting standard setters.
    • It covers the general political procedures for setting standards.

    Unit Learning Objectives

    • Students should be able to review basic financial reporting concepts.
    • Identify the standard-setting bodies in the Philippines.
    • Understand the process of creating accounting standards.

    Timing

    • The unit requires approximately 4 study hours.
    • 3 hours for reading and comprehension.
    • 1 hour for assessments.

    What is Accounting?

    • Accounting is a service activity.
    • It provides financial information for economic decision-making.
    • It involves recording, classifying, and summarizing transactions.
    • It interprets the results of these transactions.

    Essential Characteristics of Accounting

    • It uses quantitative information.
    • It is financial in nature.
    • It is useful for decision-making.

    Components of Accounting - Identifying

    • Determining if a transaction is recordable.
    • Not all business activities are recordable.
    • Accountable transactions affect assets, liabilities, or equity.

    Components of Accounting - Measuring

    • Assigning peso amounts to transactions and events.
    • Accounting information needs a common financial denominator.
    • Philippine Peso is used as the measurement unit.
    • Transaction values can be determined using historical cost, current cost, realizable value, and present value.

    Components of Accounting - Communicating

    • Preparing and distributing accounting reports.
    • Users of accounting information include potential investors, customers, etc.
    • Procedures for recording and classifying (journalizing and posting to ledgers).
    • Summarization into financial statements (statement of financial position, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows).

    Generally Accepted Accounting Principles (GAAP) in the Philippines

    • Represents the rules, procedures, practices, and standards.
    • Standards evolve to meet societal needs.
    • GAAP standards can be modified and evolve over time.

    Standard-Setting Bodies

    • Accountancy bodies determine the generally accepted accounting principles (GAAP).
    • Financial Reporting Standards Council (FRSC) developed the Philippine Financial Reporting Standards (PFRS).
    • Philippine Accounting Standards (PAS) were preceded by PFRS.
    • The FRSC is made up of several representatives from various professional organizations and government bodies.

    Philippine Interpretations Committee (PIC)

    • Formed to interpret and provide guidance on PFRS.
    • Addresses issues not specifically covered by existing PFRS.

    International Arena

    • The International Accounting Standards Board (IASB) aims for global uniformity in accounting principles.
    • It issues pronouncements called International Financial Reporting Standards (IFRS).
    • IFRS promotes transparency and comparability.

    The Standard-Setting Process

    • The development of accounting standards is a political process.
    • Many groups exert influence on this process (e.g., investors, government bodies).

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    Related Documents

    Unit 1 Financial Reporting PDF - Accountancy

    Description

    This quiz focuses on core accounting concepts covered in Unit 1 of Financial Reporting. It addresses standard-setting bodies in the Philippines and the processes involved in developing accounting standards. Prepare to review essential financial reporting principles and their significance in economic decision-making.

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