DON JOSE ECLEO MEMORIAL FOUNDATION COLLEGE OF SCIENCE AND TECHNOLOGY

Justiniana, Edera, San Jose Dinagat Islands

Prelim Exam – Accounting 1

Total: 115 items

I. True or False (2 points each)

Instruction: Writing letter “T” if the statement is correct and “F” if the statement is wrong.

1. Accounting provides management with information which is of financial in character and identifies which data is relevant for
decision-making.
2. The primary role of an accountant in business is to prepare financial statements.
3. Decision-makers of the business are relying on financial accounting data to be able to make decisions.
4. The “no profit, no loss” situation of the business is referred to as “break-even”.
5. The primary motive of a person engaged in business is profit.
6. The accountancy profession is continually evolving and developing to meet the changing needs of time.
7. The preparation of financial statements is governed and guided by concepts or assumptions which are the very foundations
of GAAP.
8. The length of accounting period chosen depends on the need of the owner for financial information about his business.
9. The period of one month is considered the shortest among the accounting periods.
10. Owner’s Equity represents residual interest in the assets of the business after deducting all liabilities.
11. The excess of revenue over expenses is called operating loss.
12. It becomes compulsory to all business establishments to maintain and keep business records as required by law.
13. Accounting is considered the “language of business” because it is used as a medium of communication in the world of
business.

II. Enumeration Type

1. What are the five (5) elements of financial statements?

III. Matching Type

Instruction: Write the letter only that indicates the letter of the word or group of words that fit/s the given statement.

a) Working Capital h. Calendar Year O. Loss

b) Profit i. Current Ratio
c) Owner’s Equity j. Going-Concern Assumption
d) Materiality k. Return On Investment
e) Proprietor l. Break-even
f) Suppliers and Creditors m. Unit of measure
g) Interim Financial Statements n. Time-period Assumption

1. The excess of revenues over expenses.

2. The excess of expenses over revenues
3. A matter of professional judgment in determining the materiality of an item.
4. The business is in “no gain, no loss” situation.
5. One of the users of the financial statement.
6. Financial statements covering the period of less than a year.
7. The difference between current assets and current liabilities.
8. The owner of a sole proprietorship business.
9. A test of profitability.
10. An assumption which gives the business a continuous life of existence.
11. An assumption which divided the life of the business into equal periods.
12. A test of solvency.
13. An accounting period which usually begins on January 1 and ends on December 31 of the same year.
14. The difference between total assets and total liabilities.
 15. An assumption which considers peso as our unit measure.

IV. Identifying the Nature of Business Organization

Instruction: Enumerated below are list of business organizations. Identify and classify each based on the nature of business whether it
is a Service Concern, Trading or Merchandising, Manufacturing and Agri-Business.

1. Hotel Industry 11. Repair Shop

2. Shopping Malls 12. Sari-sari Store
3. Key Duplicator 13. Shipping Lines
4. Bag Factory 14. Pineapple Plantation
5. Gasoline Station 15. Schools
6. Restaurants 16. Vegetable Stalls
7. Bus Company 17. Beauty Parlor
8. Internet Café 18. Cigarette Factory
9. Banana Plantation 19. Bookstore
10. Barber Shop 20. Airline Business

V. Classifying Accounting Values

Instruction: Classify the following account titles as to Assets, Liabilities, and Owner’s Equity, Income, Expenses. Write the letter A if it’s an
Asset, L if it’s a Liability, O if it’s an Owner’s Equity, I if it’s an Income and E if it’s an Expense.

1. Cash in Bank 11. Repairs and Maintenance

2. Felinda Dabalos, Capital 12. Commission Income
3. Postage and Communication 13. Petty Cash Fund
4. Accounts Receivable 14. Insurance Expense
5. Accounts Payable 15. Retainer Income
6. Unused office supplies 16. Cash on Hand
7. Taxes and Licenses 17. Unearned Retainer Income
8. Advances to Employees 18. Interest Income
9. Felinda Dabalos, Drawing 19. Interest Expense
10. Notes Receivable 20. Office Supplies Expense

VI. Normal Balances of Accounts

Instruction: Write the word either Debit or Credit, which indicate the normal balance of each of the given account.

1. Notes Receivable 16. Utilities expense

2. Taxes and Licenses 17. Supplies Used
3. Cash in Bank 18. Office Equipment
4. Accounts Payable 19. Salaries and Wages Payable
5. Alex Ajoc, Capital 20. Rent Expense
6. Insurance Expense 21. Land
7. Interest Income 22. Interest Receivable
8. Unused Supplies 23. Furniture and Fixture
9. Alex Ajoc, Drawing 24. Prepaid Advertising
10. Prepaid Insurance 25. Subscription Income
11. Miscellaneous expense
12. Notes Payable Prepared By:
13. Prepaid Rent HONEYZEL P. ONTOLAN
14. Interest Expense Instructor
15. Professional Income
 Prelim Exam – Accounting 1
ANSWER KEY
111+4=115 items

I. True or False 5) Service 7) Credit

1) T 6) Service 8) Debit
2) T 7) Service 9) Debit
3) T 8) Service 10) Debit
4) T 9) Agri-Business 11) Debit
5) T 10) Service 12) Credit
6) T 11) Service 13) Debit
7) T 12) Trading/Merchandising 14) Debit
8) T 13) Service 15) Credit
9) T 14) Agri-Business 16) Debit
10) T 15) Service 17) Debit
11) F 16) Merchandising 18) Debit
12) T 17) Service 19) Credit
13) T 18) Manufacturing 20) Debit
19) Merchandising 21) Debit
ii. Enumeration Type 20) Service 22) Debit
23) Debit
1) Assets V. Classifying Accounting Values 24) Debit
2) Liabilities
25) Credit
3) Owner’s Equity or Capital 1) Asset
4) Revenue or Gains 2) Owner’s Equity
5) Expenses and Losses 3) Liability
4) Asset
iii. Matching Type 5) Liability
6) Asset
1) B
7) Expense
2) O
8) Asset
3) D
9) Owner’s Equity
4) L
10) Asset
5) F
11) Expense
6) G
12) Income
7) A
13) Asset
8) E
14) Expense
9) K
15) Income
10) J
16) Asset
11) N
17) Asset
12) I
18) Income
13) H
19) Expense
14) C
20) Expense
15) M
vi. Normal Balance of Account
iv. Identifying the Nature of Business
Organization 1) Debit
2) Debit
1) Service
3) Debit
2) Merchandising
4) Credit
3) Sevice
5) Credit
4) Manufacturing
6) Debit