THEORIES

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1. RA 9298 The law regulating the practice of 16. Economic Entity The financial statements that are prepared
accountancy in the Philippines Assumption for the business are seperate and distinct
2. Board of It is the body authorized by law to 17. Economic Entity Is applicable to all forms of business
Accountancy promulgate rules and regulations Assumption organizations.
3. Public, Private, Three main areas in the practice of the 18. Accounting Which assumption serves as the basis for
Government accountancy profession period preparing financial statements at regular
Accounting artificial points in time?
4. Auditing The primary service of CPA's in public 19. Monetary unit Which basic accounting assumption is
practice assumption threatened by the existence of severe
inflation in an economy?
5. Private Accountants employed in entities in various
accounting capacity as accounting stadf, chief 20. Economic entity When a parent and subsidiary
accountant, or controller relationship exists, consolidated financial
statements are prepared in recognition of
6. Government It is the area of the accountancy profession
Accounting that encompasses the process of Analyzing, 21. Going concern The valuation of a promise to receive a
Classifying, Summarizing and cash in the future at present value is valid
Communicating all transactions because of the accounting concept of
7. Financial The accounting standard setting body in the 22. Going concern What is The accounting concept that
Reporting Philippines at the Present time. justifies the usage of accruals and
Standard deferrals?
Council
23. Conceptual Is intended to establish; the objectives
8. From a The IASB declared that the merits of Framework and concepts for use in developing
position of proposed standards are assessed standards of financial accounting and
neutrality reporting.
9. Discussion The Chronological order in the evaluation 24. Objective of In the Conceptual Framework for the
paper, of a typical standard financial Financial Reporting what provides the
Exposure reporting "why" of accounting?
draft, and
25. Decision The underlying theme of the Conceptual
Standard
usefulness Framework is
10. Managerial Developing accounting information for use
26. Existing and The primary focus of financial reporting
Accounting within an entity.
potential on meeting the needs of which of the
11. Both internal Financial accounting can be broadly investors, following groups?
and external defined as the area of accounting that lenders and
to the entity prepares general pupose financial creditors
statements to used by parties?
27. Financial Pertains to individual business entities,
12. Generally Derive their credibility and authority from reporting rather than to industries or an economy
Accepted recognition and acceptance by the as a whole or to members of society as
Accounting accountancy profession. consumers
Principles
28. Qualitative Are the attributes that make the
(GAAP)
characteristics information provided in financial
13. Best describes The accounting principles have been statements useful to users.
GAAP developed on the basis of such factors as
29. Qualitative Are considered either fundamentals or
usage and practical necessity
enhancing
14. Going Best describes; The ability of the entity to
30. Qualitative Contribute to the decisions-usefulness of
Concern continue in operation for the foreseeable
financial reporting information
future.
31. Qualitative Distinguish better information from
15. Going Which basic assumption may not be
inferior information for decision making
Concern followed when entity in bankruptcy
purposes
Assumption prepares financial statements?
32. Relevance and The fundamental qualitative 48. Understandability For information to be useful, the linkage
Faithful characteristic between the users and the decision
representation made is?
33. Accounting Is considered relevant when it is capable 49. Comparability Information is measured and reported in
information of making a difference in a decision. a similar fashion
34. Predictive value, The ingredients of relevant financial 50. Cost The conceptual framework includes
and confirmatory information are which of the following constraints?
value
51. Verifiability The ability through consensus among
35. Faithful the quality of information that gives measurers to ensure that information
Representation assurance that is reasonably free from represents what it purports to represent
error and bias?
52. Objectivity Accounting concept states that an
36. Freedom from The best description of faithful accounting transaction shall be
Error representation in relation to information supported by sufficient evidence to
in financial statements allow two or more qualified individuals
to arrive at essentially similar
37. Completeness, The ingredients of faithful representations
conclusion.
neutrality and
free from error 53. Objectivity Is assumed to be achieved when an
accounting transaction, Involves an arms
38. Comparability, qualitative characteristic of financial
length transaction between two
understandability, information
independent parties
verifiability and
timeliness 54. Conservatism The underlying concept governing the
GAAP pertaining to recording gain
39. Comparability Information about two different entities
contigencies
engaged in the same industry has been
prepared and presented in similar 55. Cost benefit The usefulness of providing information
manner in financial statements is subject to the
constraint of?
40. Verifiability The characteristic that is demonstrated
when a high degree of consensus can be 56. Asset It is a resource controlled by the entity
secured among independent measures as a result of past event
using the same measurement method
57. Liability It is a present obligation of an entity
41. Verifiability Concept of accounting holds that, arising from past event the settlement of
Financial statements shall be based on which is expected to result in an outflow
arm's length transactions from the entity of resources embodying
economic benefits
42. Timeliness An entity issuing the annual financial
reports within one month at the end of 58. Equity It is the residual interest in the assets of
reporting period the entity after deducting all of the
liabilities
43. Timeliness and Allowing entities to estimate rather than
verifiability physically count inventory at an interim 59. Income It is an increase in economic benefit
period during the accounting period related to
an increase in asset or a decrease in
44. Decision The overriding qualitative characteristic
liability that results in increase in equity
usefulness of accounting information
other than contribution from owners.
45. Relevant Best describes information that
60. Expense It is a decrease in economic benefit
influences the economic decisions of
during the accounting period related to
users
a decrease in asset or an increase in
46. Relevance The quality of information that enables liability that results in decrease in equity
users to better forecast future operations other than distributions to owners.
47. Unbiased Term best describes information in
financial statements that is neutral
61. Revenue This arisies in the course of ordinary regular 77. Recorded The term recognized is synonymous with
activities and is referred to by a variety of
78. Matching Is best demonstrated by associating effort
different names including sales, fees, interest,
principle with accomplishment
dividend, royalties and rent.
79. Debits Increase assets and expenses; decrease
62. Recognition Process of incorporating in the statement of
liabilities, revenue and equity
financial position or statement of
comprehensive income an item that meets 80. Double Means the dual effect of each transaction is
the definition of an element of the financial entry recorded with a debit and a credit
statements. accounting
system
63. Matching of Process that involves the simultaneous or
cost with combined recognition of revenue and 81. Trial balance Is useful in preparing the statement of
revenue expenses that result directly from the same financial position
transactions and other events. 82. Unadjusted Provides information that is helpful when
64. Systematic When economics beneits are expected to trial balance making adjusting entries
and rational arise over several accounting periods. 83. The trial Can be used to uncover errors in journalizing
allocations balance and posting
65. Measurement It is a process of determining the monetary 84. One real Adjusting entries involve
amounts at which the elements of the and one
financial statements are recognized nominal
66. Present Measurement attributes; the most relevant account
value 85. Prepaid The adjusting entry for depreciation has the
67. Current cost Amount of cash or cash equivalent that expense same effect as?
would have to be paid if the same or an 86. Accrual Adjusting entries where revenue or expense
equivalent asset was acquire currently. recognition precedes cash flow
68. Current cost Best describes assets recorded at the amount 87. Closing Remove the balances from the temporary
that represents the immediate purchase cost entries accounts
of an equivalent asset
88. Postclosing Does not include nominal accounts
69. Realizable The amount of cash that could currently be trial balance
value obtained by selling the asset in an orderly
89. Reversing Are desirable to exercise consistency and
disposal
entries establish standardized procedures
70. Revenue It is probable that future economic benefit
90. Reversing Impact the statement of financial position and
recognition will flow to the entity and the amount can be
entries the income statement
principle measured reliably
91. All accruals Reversing entries apply to?
71. Revenue States that revenue shall recognized at a
principle point when an exchange transaction has 92. Annually Financial statements must be prepared at least
occured and the yearning process is 93. Consistency It is the presentation and classification of
essentially complete of financial statement items on a uniform basis
72. At the point Generally, Revenue is recognized presentation from one accounting period to the next
of sale 94. Three An entity shall prepare how many statements
73. When the Normally, Revenue from sale of goods is of financial position?
title to the recognized 95. Materiality Depends on the relative size and nature of the
goods omission os misstatement judged in the
changes surrounding circumstances
74. Revenue The process of identifying transactions to be 96. Statement Omits many items that are of financial value
recognition recorded as revenue of financial
75. Realization The process of converting noncash resources position
and rights into cash or claims to cash
76. Unrealized Gains on assets unsold are identified in a
precise sense by the term
97. Noncurrent Section of the statement of financial position 116. Adjusting Are events that provide evidence of
assets should cash that is restricted for the entries conditions that existed at the end of the
settlement of a liability due 18 months after reporting period
the reporting period be presented?
117. Financial Are authorized for issue when the board of
98. Current Section of the statement of financial position statements directors reviews the financial statements
liabilities should employment taxes that are due for
118. Comprehensive It is a change in equity during a period
settlement in 15 months time be presented?
income resulting from transactions and other
99. Noncurrent An entity has a loan due for repayment in six events, other than changes resulting from
liabilities months time but the entity has the option to transactions with owners in their capacity
refinance for repayment two years later. as owners
100. Investment Must be included on the face of the 119. Profit or loss It is the total of income less expense,
property statement of financial position excluding the components of other
comprehensive income
101. Deffered tax Must be included as a line item in the
statement of financial position 120. Prior period Appear first in a statement of retained
error earnings
102. Statement A potential investor primarily use to assess
of financial liquidity and financial flexibility 121. Historical cost The financial capital concept requires that
position net assets shall be measured at?
103. Asset Are neither assets nor liabilities 122. Current cost The physical capital concept requires the
valuation adoption of which measurement basis?
accounts
104. Working Current asset less current liabilities
capital
105. Net assets Represents total assets less total liabilities
106. Operating Permits some assets to be classified as
cycle current even though these are more than one
concept year removed from becoming cash
107. Current Trade installment accounts receivable
asset normally collectible in 18 months
108. Noncurrent Equity investments held to finance
investments construction of additional plant should be
classified as?
109. Current Accrued revenue would normally appear
asset under
110. Noncurrent Plant expansion fund
asset
111. Deficit A debit balance in retained earnings
112. Corporate Prepare the most accurate financial forecast
management for a corporate entity based on empirical
evidence
113. Current Most useful information in predicting future
earnings cash flows
114. Accrual basis Is most useful for predicting the long-term
financial performance
115. Notes to Amplify or explain items presented in the
financial body of financial statements
statements