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AUDITING THEORY
I. Topic(s):
Overview of Auditing, Attestation and Assurance
III. Rundown
Description of Auditing and Its Importance
What is the auditing process? For society, what purpose does it serve? What role does
auditing play in corporate governance? Why is the process so important? As we begin
the study of auditing, these are key questions to answer. Unless we understand the
unique role that auditing performs in our society for contemporary business and the
public, we will not appreciate the significance of the various auditing standards as we
discuss principles, rules, and professional practice.
The relationship of the audit firm to the client can be described in the framework of
a principal-agent relationship. The principals in this relationship are the shareholders
of the company. The agent is management. A principal-agent relationship exists because
the owners of the company (the principals) are not involved in the daily management
of the company. They hire an agent (management) to run the company for them and to
make daily decisions for the company. This means that the owners of the company (the
principals) are removed from its daily operations and that management has more knowledge
about the daily operations than the owners. The owners (the principals) would like
management (the agent) to report correctly what its members know, so the principal
hires an auditor to increase the likelihood of correct reporting. Knowing that an auditor
will assess the financial statements, management is more likely to prepare them in
accordance with the accounting standards because it is the auditor’s job to determine
that management has complied with this requirement. Outsiders benefit when the
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Copyright of Prof. Hector U. Santos Jr., CPA, MBA
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any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
owners hire an auditor to protect their interests in the company because the information
available to outsiders is more likely to correspond to financial accounting standards.
The corporate governance process should protect outsiders from misstated financial
statements. Auditors perform an important job in corporate governance because their
role as trained professionals who are independent from the firm is unique in the corporate
governance process. Because auditors are independent, they are in a perfect position
to provide an opinion on whether the financial statements that management presents
have been prepared according to an applicable financial reporting framework. Outsiders
might reasonably trust such an opinion from an independent professional but would not
trust such an opinion from a person who was not independent. The review of the independent
auditor is not necessarily a pessimistic assessment, but it will likely be a less
optimistic assessment than that of management because an outsider without any relationship
(ownership, financial, employment) to the company issued it. The auditor will
present a relatively unbiased picture of the firm’s compliance or noncompliance with
the applicable financial reporting framework.
The capital markets system in the Philippines and the rest of the world rely on
accurate information. If auditors fail to perform their job, outsiders are hurt because
they make decisions about the companies based on information disclosed, and if the
information is wrong, the decision is likely to be wrong. For example, bankers may lend
money when they shouldn’t or may lend at a lower interest rate than appropriate if they
had known the correct information. Investors may fail to sell stock or buy stock in companies
that they wouldn’t if they had information that fairly presented the firm’s financial
position.
If the auditors fail to do their job, no one else does it. The financial statements for
public companies are filed with the
We often speak of auditors providing audit and assurance services. This means that
auditors provide several services. They provide the audit function, which involves having
the auditor assess whether the financial statements are presented in accordance with
the applicable financial reporting framework. This book focuses on the audit function
of auditors. Auditors also provide services that do not involve the review of a complete
set of financial statements or the issue of an opinion on the financial statements. For
example, each year SGV & Co. certifies the winners of the Ms. Earth Beauty Pageant.
In this case, an auditor provides an assurance service, not an audit service. The
public have more confidence in the process that determines
the winners when an outside, independent source is involved in preparing the information.
The other services provided by an auditing firm (that are not tax or consulting) are
referred to as attest services. For these services, the auditor typically attests or authenticates
the accuracy of some type of information. The attestation standards provide the
auditor guidance for such services. Some of the services that fall under attestation standards
are reports on (1) descriptions of systems of internal controls, (2) compliance
with statutory, regulatory, and contractual requirements, and (3) investment performance
statistics. An opinion is not issued as a result of attestation services. Instead, the
auditor issues a signed report containing the information requested by the outside party.
What would your life be like working in a public accounting firm? Exciting certainly,
occasionally tedious, and sometimes stressful because of deadlines and the constant
pressure to finish an audit, a tax return, or a consulting engagement by the deadline
and within the hours allowed for the job. A unique aspect of this profession is its promotion
policy. Accountants are typically promoted every year to assume new and increased
responsibilities. The profession relies on the constant influx of new employees (staff
accountants) at the lower levels to perform many of the daily auditing tasks. Fewer managers
and partners are needed at the upper levels to review the work of the lower level
staff. You will seldom be bored, and you will constantly be challenged. If these factors
sound appealing to you, then by all means consider joining this group of professionals
who are responsible to outsiders for information used in the business world to make
important decisions about companies.
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Copyright of Prof. Hector U. Santos Jr., CPA, MBA
This online resource is intended solely to whom it is authorized to receive it. If you are not the intended recipient you are hereby notified that
any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
Management of public companies typically prefers higher net income to lower net
income. Net income can be increased by either reducing expense or increasing revenue.
Various methods, for example, recording fictitious revenue will increase net income,
allowing the company to report higher net income; failing to record expenses at the end
of the year will also increase net income. Growth in revenue is also an important factor
for many companies. In this situation, managers try to show that revenue has increased
from the previous year even if net income has not. The desired outcome in many businesses
is for revenue and possibly net income to increase at a rate at least equal to the
prior year’s increase, and if possible, more than the previous year’s rate. Outsiders, particularly
stockholders, expect this level of growth, and if companies fail to meet these
targets, their stock price may drop as investors sell their stock and invest in other companies
that can meet the growth level desired.
The principal reason to misstate financial statements is to keep the company’s stock
price from falling. Investors react unfavorably when companies report lower revenue or
net income numbers from the previous year. Stock analysts from investment firms provide
advice on company stocks. These analysts generate expectations for quarterly
earnings per share for the companies they follow. If a company fails to meet these earnings
targets, even by $0.01, their stock price is likely to fall. A falling stock price is
generally bad for a company and often for the management of a company because managers
frequently have stock options in the firm in their compensation packages or own
shares of their company’s stock in their investment portfolios. A falling stock price hurts
the firm and often its management. If at all possible, it is to be avoided.
How can a company avoid a falling stock price? If revenue has not increased and net
income is lower this year than the prior year, one way to prevent a drop in the stock price
is to misstate the financial statements. It is the auditor’s job to gather sufficient appropriate
evidence and to assess with professional skepticism the decisions that management
made in preparing the financial statements. Before issuing a clean opinion on the
client’s financial statements, the auditor should be sure that the evidence gathered during
the audit supports the assessment that the financial statements are prepared using an
applicable financial reporting framework.
The incentives for misstatement in the financial statements for private companies
may completely differ from the incentives in a public company. Private companies’ management
may prefer lower net income to higher net income because it reduces their tax
burden, so it improves their cash flow. Or they may prefer higher net income because
they need to show growth in earnings to gain a bank loan. Understanding the incentives
of the company to misstate the financial statements is an important part of the audit
process. It is crucial for the auditor to identify the financial statement accounts with the
most potential for misstatement and to design audit procedures to determine that the
accounts are fairly presented according to the applicable financial reporting framework.
their daily work. The value of clear and accurate financial disclosure and the auditor’s
responsibility to outside users of financial statements to provide financial information
consistent with accounting regulations have never been more important than in today’s
business environment.
Auditors exercise a strong bargaining position with management. The high financial
and social costs of failed audits reflect both public interest and business necessity. Recognition
of the crucial place of the audit for users of financial statements serves notice
that accounting firms cannot merely use the audit process as “a loss leader” marketing
device to gain lucrative management consulting fees from their clients. The public
value of the audit cannot be too highly emphasized. The negative impact of failed
audits—loss of public confidence and investors’ trust—is apparent to observers of the
profession.
Recent world accounting scandals have demonstrated the vulnerability of firms and the high cost
of
audit failures. In 2002, Arthur Andersen’s (world’s no. 1 auditing firm in 2002) audit failure, its
legal battles, and the loss of
public reputation forced it out of business. This may not have been in the public’s best
interest or fair to the firm’s many partners, but Arthur Andersen’s damaged reputation
and a felony conviction related to its Enron audit led inevitably to the firm’s undoing.
Accounting firms do not sell a product; they produce a service. They have nothing to
offer except the quality of the service they provide and their image of integrity. Once a
firm’s reputation is destroyed, its professionals have little to offer clients. In 2002, in the
aftermath of the Enron scandal, would you have wanted to issue stock with Arthur
Andersen’s name on your financial statements?
With the many changes in the profession, you will face the challenge of learning new
rules and performing new internal control tests. Federal and state regulators and interested
outsiders will watch auditors as they perform their professional duties. Attention
will be focused on the auditors’ responsibility to determine whether the financial statements
present fairly the financial position of the firm and the results of its operations.
The auditors are expected to approach an audit with an independent mind and to
recognize that they are hired to protect the interests of outsiders. As an auditing student,
you must understand the importance of presenting unbiased information to these outsiders,
and you must avoid conflicts of interest and even the appearance of such conflicts
as you perform your job. This is an exciting and challenging time to enter the
profession.
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any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
The relevant range is the range of activity levels throughout which the assumptions for cost
behavior are valid. Outside the relevant range, total fixed costs may change and/or variable costs
per unit may change.
Analyzing General Ledger Account Activity: All general ledger accounts have four basic components:
• beginning balance
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
• Additions or inflows
• Withdrawals or outflows
• ending balance
Since inventory is a current asset account with a normal debit balance, the basic equation for all
inventory accounts is:
• Beginning balance + Additions = Ending balance + Withdrawals
OR
• Beginning balance + Additions - Withdrawals = Ending balance
• OR
• Beginning balance + Additions - Ending balance = Withdrawals
• OR
• Withdrawals + Ending balance - Beginning balance = Additions
• OR
• Withdrawals + Ending balance – Additions = Beginning balance
Example #1
The finished goods inventory of company XYZ on May 1 was P 40,000. During May, P100,000 of
completed goods was added. The balance on May 31 was P30,000. Determine the value of goods sold
from the finished goods inventory during May.
Solution #1
Beginning balance P40,000
+Cost of goods manufactured 100,000
=Goods available 140,000
Deduct: Ending inventory 30,000
=Cost of goods sold during May P110,000
• Raw materials inventory may contain both direct materials and indirect materials waiting to be
used
• Work-in-process inventory is the “manufacturing” or “production” account because this account
accumulates direct materials used and the addition of conversion costs (direct
• labor and overhead costs incurred) to complete the manufacturing process.
• After the goods have been manufactured, the Cost of Goods Manufactured is transferred from
work-in-process inventory to finished goods inventory.
• The cost of completed or finished goods remains in finished goods inventory until the goods are
sold, at which time the cost of goods is transferred from finished goods
inventory to cost of goods sold.
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any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
• In Financial Accounting, cost of goods sold was based on merchandise inventory which was
purchased and then to customers.
• For manufacturing companies, the finished goods inventory account replaces the merchandise
inventory account.
• Rather than being purchased, finished goods are the end-product of the manufacturing process
and are transferred into the finished goods account from the work-in-process inventory account.
Example #2A:
The Tartan Company has provided the following financial information for last year.
Solution #2A:
Schedule of Cost of Goods Sold
• The value of the goods transferred from work-in-process to finished goods is called Cost of
Goods Manufactured.
• Work in process and raw materials accounts are used to determine cost of goods manufactured
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any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
Example #2B:
Using the data in Example 2A, prepare a cost of goods manufactured schedule.
Solution #2B:
Schedule of Cost of Goods Manufactured
Example #3
Classify the following costs according to the cost terms.
1. Wood used for making tables.
2. Wages of the assembly workers in a furniture factory.
3. Salary of the factory supervisor.
4. Electricity to run factory equipment.
5. Janitorial salaries.
6. Rent on a factory building.
7. Plastic parts used to make toys.
8. Glue used to make toys.
9. Lubricants on production machines.
Solution #3
Cost Behavior To Units of Production
Variable Fixed Direct Indirect
1. X X
2. X X
3. X X
4. X X
5. X X
6. X X
7. X X
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any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
8. X X*
9. X X
* These materials would usually be considered indirect. They are insignificant in amount and it would not
be cost-effective to trace them to individual products.
“If you really want to do something, you will find a way. If you don’t, you’ll find an excuse”- Jim
Rohn
--END--
V. Recommended References:
1. Managerial Accounting by Garrison
2. Managerial Accounting by Kieso Weyganth
3. Managerial Accounting by local authors
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Copyright of Prof. Hector U. Santos Jr., CPA, MBA
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any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
THEORY OF ACCOUNTS
I. Topic(s):
Conceptual Framework of Accounting
III. Rundown
Please read the latest textbook version of “Financial Accounting Volume 1” by Valix
And other accounting authors about the conceptual framework of accounting.
The objective of financial reporting is the foundation of the Framework. The objective of
general-purpose financial reporting is to provide financial information about the
reporting entity that is useful to present and potential equity investors, lenders, and
other creditors in making decisions in their capacity as capital providers.
The fundamental qualities that make accounting information useful for decision making
are relevance and faithful representation.
(1) Completeness: The financial statements include all the information that is
necessary for faithful representation of the economic phenomena that it
purports to represent.
(2) Neutrality: Information is neutral if it is unbiased, i.e., it is not presented in
a manner that favors one set of interested parties over another.
(3) Free from error: Does not mean total freedom from error. It means that
the information presented is as accurate as possible, given any estimates
are based on the best information available at the time.
(1) Asset: A resource controlled by the entity as a result of past events and
from which future economic benefits are expected to flow to the entity.
(2) Liability: A present obligation of the entity arising from past events, the
settlement of which is expected to result in an outflow from the entity of
resources embodying economic benefits.
(3) Equity: The residual interest in the assets of the entity after deducting all
its liabilities.
b. Transactions, events, and circumstances that affect a company during a period
of time.
c.
Monetary Unit Assumption: Money is the common denominator of economic
activity and provides an appropriate basis for accounting measurement and
analysis. The monetary unit is assumed to remain relatively stable over the
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unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
The basic principles of accounting are used to record and report assets, liabilities,
equity, revenues, and expenses. The four basic principles of accounting are:
(1) Cost Principle: IFRS requires many assets and liabilities be reported at
their acquisition price, or cost, sometimes referred to as historical cost. It
is thought to be a faithful representation of the amount paid for a given
item. Many users favor the cost principle because it is verifiable.
(2) Fair Value: Is a market based measure. At acquisition historical cost and
fair value are identical. In subsequent periods, as market and economic
conditions change, the two diverge. It is felt that where fair value
information is available, it provides more relevant information about the
expected future cash flows related to an asset or liability.
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This online resource is intended solely to whom it is authorized to receive it. If you are not the intended recipient you are hereby notified that
any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
15
Copyright of Prof. Hector U. Santos Jr., CPA, MBA
This online resource is intended solely to whom it is authorized to receive it. If you are not the intended recipient you are hereby notified that
any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
BUSINESS LAW
IV. Topic(s):
Law on Business Transactions - Obligations
V. Learning Objectives:
1. To learn about the sources of obligation and their concepts
2. To learn kinds of obligations in general and under Civil Code
3. To learn specific circumstances affecting obligation in general
4. To learn duties of an obligor to give, to do and not to do
5. To learn extinguishment of obligation
VI. Rundown
Please read the latest textbook version of “Obligation and Contract” by Hector S. De Leon or by
Suarez
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This online resource is intended solely to whom it is authorized to receive it. If you are not the intended recipient you are hereby notified that
any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
ONLINE ASSESSMENTS
Reminders:
1. Should be submitted using excel format on or before January 15, 2020 exclusively to
saintvincentdeferrercollege@yahoo.com
2. Answers should follow below format for easy checking
a. Mutiple Choice
Multiple
Choice AT TOA MAS BL
1 a a b a
2 c a a a
3 a a b a
4 c a a a
5 a a b a
6 c
7 a
8 a
9 c
10 a
b. True or False
True or
False AT TOA MAS BL
1 True False True False
2 True False True False
3 True False True False
4 True False True False
5 True False
6 True False
7 True False
8 True False
9 True False
10 True False
c. Identification
True or
False AT TOA MAS BL
Management
1 PSA GAAP Accounting Obligatio
2 AASC
3
4
5
6
7
8
9
10
d. Problem Solving
– must write/type the solution and answer.
e. Fill in the blanks
– must write the question and answer
3. Excell file should have a file name which consists of surname, first name and part
number (Example: SantosHectorPart1, DelaCruzJuanPart1, etc.)
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Copyright of Prof. Hector U. Santos Jr., CPA, MBA
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
4. Failure to follow instruction 1,2 and 3 will automatically get zero score from this
edition of online assessment
5. Not all the answer in the online assessments can be found here, so it’s your
responsibility to read, read, read and read other resources such as text books etc.
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unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
QUESTIONS:
(Multiple Choice & Identification)
Auditing Theory
1. The single feature that most clearly distinguishes
auditing, attestation, and assurance is
a. Type of service.
b. Training required to perform the service.
c. Scope of services.
d. CPA’s approach to the service.
20
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
5. Period costs include direct materials, direct labor and manufacturing overhead.
True False
7. Direct materials and direct labor are also called prime costs.
True False
19. Finished goods inventory consists of units completed that have not been sold to a
customer.
True False
True False
4. Costs that are taken directly to the income statement as expenses in the period in
which they are incurred are:
a) Product costs
b) Prime costs
c) Sunk costs
d) Period costs
5. The potential benefit given up when one alternative is selected over another is a:
a) Prime cost
b) Sunk cost
c) Opportunity cost
d) Direct cost
9. Mary works at a convenience store and is paid P400 a week. She considers
enrolling in a college to earn a degree. She thinks she will have to quit her job if she goes
to college. The wages that she will lose if she chooses college are:
a) Sunk cost
b) Opportunity cost
c) Indirect cost
d) Prime cost
10. Which cost is not relevant to the decision whether to purchase a new chocolate
dipping machine or continue using the old one:
a) The cost of the new machine
b) Lower maintenance costs for the new machine
c) The cost of the old machine
d) Additional training required for operating the new machine
11. At the end of June XYZ company had the following balances:
Direct materials used P30,000
Direct labor 18,000
Factory rent 7,000
Indirect materials 5,000
Salary of production supervisor 4,000
Advertising costs 12,000
Rent on administrative office 3,500
Depreciation on factory equipment 6,100
12. Company ABC had the following balances for the month of April: Finished goods,
April 1 P45,000
Cost of goods manufactured 20,000
Finished goods, April 30 14,000
The cost of goods sold for April is:
a) P 51,000
b) P 20,000
c) P34,000
d) P 65,000
14. A cost that goes into Work in Process inventory and then into the Finished Goods
inventory before appearing on the income statement as cost of goods sold is a:
a) Period cost
b) Fixed cost
c) Opportunity cost
d) Product cost
16. The following information was taken from company XYZ’s records for the current
month. Raw materials used in production P 35,000 (P25,000 direct, P10,000 indirect);
direct labor costs incurred P20,000; selling expenses P5,000; insurance on factory
P4,000; administrative salaries P12,000; Rent P15,000 (80% factory,
20% administrative offices). The total inventoriable costs for the current month were:
a) P88,000
b) P61,000
c) P71,000
d) P74,000
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
Theory of Accounts
9. Company A issuing its annual financial reports within one month of the end of the year is
an example of which enhancing quality of accounting information?
a. Neutrality.
b. Timeliness.
c. Predictive value.
d. Representational faithfulness.
25
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SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
10. What is the quality of information that enables users to better forecast future operations?
a. Reliability.
b. Materiality.
c. Comparability.
d. Relevance.
11. Which of the following ingredients of fundamental qualities is part of faithful
representation?
a. Neutrality.
b. Productive value.
c. Confirmatory value.
d. Timeliness.
12. Decision makers vary widely in the types of decisions they make, the methods of
decision making they employ, the information they already possess or can obtain from
other sources, and their ability to process information. Consequently, for information to
be useful there must be a linkage between these users and the decisions they make. This
link is
a. relevance.
b. reliability.
c. understandability.
d. materiality.
13. The two fundamental qualities that make accounting information useful for decision
making are
a. comparability and consistency.
b. materiality and timeliness.
c. relevance and faithful representation.
d. reliability and comparability.
15. The quality of information that gives assurance that it is reasonably free of error and bias
a. relevance.
b. faithful representation.
c. verifiability.
d. neutrality.
16. Financial information does not demonstrate consistency when
a. firms in the same industry use different accounting methods to account for the same
type of transaction.
b. a company changes its estimate of the salvage value of a fixed asset.
c. a company fails to adjust its financial statements for changes in the value of the
measuring unit.
d. none of these.
17. When information about two different enterprises has been prepared and presented in a
similar manner, the information exhibits the characteristic of
a. relevance.
b. reliability.
c. consistency.
d. none of these.
Business Law
1. Obligation is a juridical necessity to give, to do or not to do
Right is the power which a person has to demand from another prestation
4. Facultative obligation is one where only one prestation has been agreed upon but the
obligor may render another substitution.
Generally, may the debtor pay anyone of the solidary creditors?
5. Merger in the person of the principal debtor or creditor do not extinguishes the principal
obligation.
In law, payment and performance are synonymous.
a. True, True b. True, False c. False, True d. False, False
9.Events which could not be foreseen or which though foreseen were inevitable.
10.Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has
been no stipulation to the contrary. Which of the following are not an exception?
a. Not transmissible by law
b. Not transmissible by their very nature
c. Presumptions are rebuttable by evidence.
d. There is a stipulation of the parties that they are not transmissible
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Copyright of Prof. Hector U. Santos Jr., CPA, MBA
This online resource is intended solely to whom it is authorized to receive it. If you are not the intended recipient you are hereby notified that
any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.
SAINT VINCENT DE FERRER COLLEGE AUGUST 2019
BS ACCOUNTANCY (1st semester SY 2020-2019) Part 1
ONLINE RESOURCES by Prof. Hector Santos Jr., CPA, MBA
28
Copyright of Prof. Hector U. Santos Jr., CPA, MBA
This online resource is intended solely to whom it is authorized to receive it. If you are not the intended recipient you are hereby notified that
any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be
unlawful.