11. The ASC conceptual framework specifically mentions two underlying assumption. These are:

(a) accrual and going concern (c) going concern and time period

(b) accrual and accounting entity (d) time period and monetary unit

12. The effects of transactions and other events are recognized when they occur and not as

cash or its equivalent is received or paid, and they are recorded and reported in the financial

statements of the period to which they relate.

(a) accrual (c) time period

(b) going concern (d) monetary unit

13. Which of the following statements is incorrect?

(a) The accrual method, which builds directly on the revenue and matching principles,

ignores the timing of cash receipts or payments when determining when to recognize

revenue or expenses.

(b) Expenses are matched with revenue, not the reverse.

(c) In accordance with the unit of measure assumption, accountants normally revise the

amounts to reflects the changing purchasing power of money due to inflation or

deflation.

(d) In accordance with the going concern assumption, the life of a business is presumed to

be indefinite.

14. If a business is not being sold or closed, the amounts reported in the accounts for assets

used in the business operations are based on the cost of the assets. This practice is justified

by:

(a) accrual (c) continuity assumption

(b) time period (d) accounting entity

15. John Frivs is the sole owner and manager of Ace Services. John purchased a car for

personal use. He uses a van in the business. Which of the following is violated if John

recorded the cost of the car as an asset of the business?

(a) conservatism (c) full disclosure

(b) going concern assumption (d) separate entity assumption

16. What is the traditional accounting period?

(a) three months (c) two years

(b) six months (d) twelve months

17. Which underlying concept serves as the basis for preparing financial statements at regular

intervals?

(a) accounting entity (c) accounting period

(b) going concern (d) stable monetary unit

18. Revenue is expressed as the number of pesos received or the peso equivalent of the

commodities of services received. Cost is expressed as the number of pesos paid out of the

peso equivalent of the items given up. Fluctuations in value of the peso are ignored. The

above describes what accounting assumption?

(a) going concern (c) historical cost

(b) unit of measure (d) realization

19. The financial statements should be stated in terms of a common financial denominator.

(a) accrual (c) time period

(b) going concern (d) monetary unit

20. The concept of accounting entity is applicable:

(a) only to be legal aspects of business organizations.

(b) only to the economic aspects of business organizations.

(c) only to business organizations.

(d) whenever accounting is involved.