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2011 NATIONAL CPA MOCK BOARD EXAMINATION In partnership with the Professional Review & Training Center, Inc. and Isla Lipana & Co. T H E O R Y O F A C C O U N T S

INSTRUCTIONS: Select the best answer for each of the following questions. Mark only one answer for each item on the answer sheet provided. AVOID ERASURES. Answers with erasures may render your examination answer sheet INVALID. Use PENCIL NO.2 only. GOODLUCK!

1. 1. Choose the incorrect statement. a. The objective of external financial statements is to communicate the economic effects of completed transactions and other events in the entity. b. General purpose financial statements were developed primarily because all outside users have the same information needs. c. The double-entry system of accounting has been used for centuries. d. The practice of accounting requires considerable professional judgment.

2. Which statement is incorrect regarding Philippine Financial Reporting Standards (PFRSs)? a. PFRSs set out recognition, measurement, presentation and disclosure requirements dealing with transactions and events that are important in general purpose financial statements. b. PFRSs are based on the Framework, which addresses the concepts underlying the information presented in general purpose financial statements. c. PFRSs are designed to apply to the general purpose financial statements and other financial reporting of all profit-oriented entities. d. PFRSs are designed to apply to not-for-profit activities in the private sector.

3. Which of the following statements regarding the conceptual framework is correct? a. The

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