1. From the information below, what is the LAST step in the accounting cycle?

a. Record transaction in a journal

b. Analyze transactions from source documents
c. Post journal entries to general ledger
d. Adjust the general ledger accounts
2. What function does trial balance serve in the accounting process?
a. Recording
b. Classifying
c. Summarizing
d. Reporting
3. Credits are used to record decreases in
a. Assets, expenses, and drawings
b. Expenses, liabilities, and equity
c. Revenues, dividends, and assets
d. Revenues, liabilities, and equity
4. Which of the following is a contra and a nominal account at the same time?
a. Accumulated profits and losses
b. Purchase return
c. Carriage inwards
d. Accumulated depreciation
5. All of the following is an example of adjusting entry, EXCEPT
a. Payment of accrued wages to employees
b. Depreciation of an equipment
c. Recording of unrecorded sales on account
d. Recording a receivable doubtful of collection
6. The adjusting entry of an advance payment of rental fee recorded by debiting Prepaid
rent and crediting rent expense, is an approach of recording known as
a. Asset Method
b. Expense Method
c. Liability Method
d. Income Method
7. Which of the following accounts is NOT affected by the closing process?
a. Expense accounts
b. Revenue accounts
c. Capital accounts
d. None of the choices
8. Which journal is used to record credit purchase of furniture and fixture transaction?
a. General journal
b. Purchase journal
c. Sales journal
d. Cash disbursements journal
9. Adjusting entries that should be reversed include precollected items that
a. Create an expense account when adjusted
b. Create an asset account when adjusted
c. Create an income account when adjusted
d. Create a liability account when adjusted
10. Deposits held as compensating balances
a. Usually do not earn interest
b. If unrestricted as to withdrawal may be included as cash equivalent
c. If legally restricted and held against short term credit may be included as current
assets
d. If legally restricted and held against long term credit may be included among
current assets
11. The petty cash fund is P20,000 while the petty cash voucher is P10,000, assuming the
currencies and coins is only P8,000. The journal entry for the replenishment would
include
a. Debit to expenses at P12,000
b. Debit to cash shortage at P12,000
c. Credit to cash at P10,000
d. Credit to cash at P12,000
12. The two secondary qualities that make accounting information useful for decision
making are
a. Comparability and consistency
b. Materiality and timeliness
c. Relevance and reliability
d. Understanding and comparability
13. Comparability is sometimes sacrificed for
a. Relevance
b. Conservatism
c. Objectivity
d. Reliability
14. Statement I: Materiality is a threshold or cut off point rather than a primary
qualitative characteristic in determining useful information.
Statement II: Information is material if its omission or misstatement could influence
the economic decisions of users taken on the basis of the financial statements.
Statement III: Materiality depends on the size of the item or error judged in the
particular circumstances of its omission or misstatement.
a. All statements are true
b. Only statement II is true
c. Only statement I is false
d. Only statement III is false
15. Under PAS I, which of the following DOES NOT refer to a current asset?
a. It is held primary for the purpose of being traded
b. It is expected to be realized within twelve months after the balance sheet date or
within the normal operating cycle whichever is shorter
c. It is a cash or a cash equivalent unrestricted for more than 12 months from BS
date
d. It is expected to be realize, sold or consumed within the entity’s normal operating
cycle
16. Under PAS 1, which of the following DOES NOT refer to a current liability
a. It is expected to be settled within 12 months or the entity’s normal operating
cycle whichever is shorter.
b. It is held primarily for the purpose of being traded
c. It is due to be settled within 12 months after the balance sheet date
d. The entity does not have an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date
17. Offsetting of liabilities and assets is
a. Allowed in all cases
b. Not allowed in all cases
c. Allowed unless not permitted by PFRS
d. Not allowed unless permitted by PFRS
18. Which is NOT required to be presented as minimum information on the face of the
balance sheet?
a. Biological assets
b. Provisionary liability
c. Extraordinary items
d. Investments accounted for under cost method
19. It is a liability of uncertain timing or account. It can be probable or measurable
but not both
a. Provision
b. Unearned income
c. Accrued liability
d. Contingent liability
20. Which of the following is NOT a related party as envisaged by PAS 24
a. A director of the entity
b. The parent company of the entity
c. The brother of the executive officer of the entity
d. A shareholder of the entity that holds 29% stake in the entity
21. These are post balance sheet events that provide evidence of conditions that existed
after the balance sheet date
a. Adjusting events
b. Non-adjusting events
c. Favorable events
d. Extraordinary events
22. They refer to increase in equity from ordinary transactions of an entity
a. Revenues
b. Dividends
c. Comprehensive income
d. Gains
23. In accounting, the term PROBABLE means that the probability that the event will occur
is
a. Highly uncertain
b. More than the probability that the event will not occur
c. Less than the probability that the event will not occur
d. Same as the probability that the event will occur
24. Which of the following is NOT considered as an application of the cause and effect
association principle?
a. Cost of sales
b. Sales commission
c. Depreciation of property
d. Uncollectible accounts expense
25. Under the capital maintenance approach, net income is computed as the EXCESS OF
a. Total assets over total liabilities
b. Income over expenses
c. Ending capital over beginning capital
d. Beginning capital over ending capital
26. Comprehensive income includes changes in equity, except those resulting from
distribution to and contributions from owners. Which of the following is NOT a
component of comprehensive income?
a. Revenues
b. Dividends
c. Losses
d. Expenses
27. An entity shall include in its inventory all goods
a. Owned but only possessed by the entity at the balance sheet date
b. Owned and possessed by the entity at the balance sheet date
c. Owned by the entity at the balance sheet date, but only at the location
d. Not possessed but owned by the entity at the balance sheet date, regardless of
location.
28. FOB destination means that
a. The freight charges are actually to be paid by the seller
b. The freight charges are actually to be paid by the buyer
c. The ownership of the goods are actually transferred upon receipt of the goods by
the buyer and the seller is the owner of the goods while in transit
d. The ownership of the goods is transferred upon shipment of the goods by the seller
and the buyer is the owner of the goods while in transit
29. Net realizable value is computed as
a. Estimated selling price less estimated cost to sell
b. Estimated selling price less estimated cost to complete
c. Estimated selling price less estimated cost to sell and estimated cost to complete
d. Estimated selling price less estimated cost to complete, estimated cost to sell
and normal profit margin
30. Which inventory costing method is most conservative in periods of inflating inventory
costs?
a. FIFO
b. LIFO
c. Weighted average
d. Cannot be determined without more information
31. In computing cost ratio, the FIFO retail method should
a. Include mark up and markdown less beginning inventory
b. Exclude markup and markdown less beginning inventory
c. Include markup but not markdown plus beginning inventory
d. Exclude markup but not markdown plus beginning inventory
32. Which of the following is an acceptable basis for valuation of inventory in published
financial statements?
a. Conversion cost
b. Current replacement cost plus taxes
c. Prime cost
d. Current selling price less cost of disposal
33. Statement I: Trade receivables are classified as current assets if they are to be
collected within one year or within the normal operating cycle, whichever is longer.
Statement II: Non trade receivables are classified as current assets if they are to
be collected within one year or within the normal operating cycle, whichever is
shorter.
a. Both statements are true
b. Both statements are false
c. Only statement I is true
d. Only statement I is false
34. On INITIAL RECOGNITION, accounts receivable are generally reported at
a. Pawn value
b. Net realizable value
c. Maturity value
d. Market value
35. Statement I: Short-term notes, interest bearing or non-interest bearing, are stated
at face value
Statement II: Interest bearing long-term notes shall be stated at present value.
Statement III: Non-interest bearing long term notes shall be stated at discounted
value
a. All statements are true
b. Only statement I is true
c. Only statement I is false
d. Only statement II is false
36. A method of estimating uncollectible accounts that emphasizes INCOME MEASUREMENT is
the allowance method based on
a. Aging of receivables
b. Receivable financing
c. Percent of receivables
d. Percent of sales
37. Under the ALLOWANCE METHOD, the entry to recognize bad debt expense
a. Increases net income
b. Decreases current assets
c. Has no effect on current assets
d. Has no effect on net income
38. Under the DIRECT WRITE OFF METHOD, entries at the time of collection of an account
previously written off would
a. Increase net income
b. Have no effect on net income
c. Decreases the allowance for doubtful accounts
d. Have no effect on the allowance for doubtful accounts
39. The amount of accounts receivable is included in total receivables with appropriate
disclosure when
a. Pledged (yes); assigned (yes); factored (yes)
b. Pledged (yes); assigned (yes); factored (no)
c. Pledged (yes); assigned (no); factored (no)
d. Pledged (no); assigned (no); factored (no)
40. ABC Company factored its receivables WITH RECOURSE to XYZ Bank. ABC received cash as
a result of this transaction which is best described as a
a. Loan from XYZ collateralized by ABC’s accounts receivable
b. Loan from XYZ to be repaid by the proceeds from ABC’s accounts receivable
c. Sale of ABC’s accounts receivable to XYZ with the risk of uncollectible accounts
retained by ABC
d. Sale of ABC’s accounts receivable to XYZ with the risk of uncollectible accounts
transferred to XYZ
41. The term FINANCIAL ASSETS AT FAIR VALUE THROUGH EQUITY may refer to
a. Trading Securities
b. Available for sale securities
c. Held to maturity securities
d. Investment in unaffiliated companies and associates
42. Transaction costs incurred are CAPITALIZED in acquiring this type of investment
securities
a. Trading securities
b. Available for sale
c. TS, AFS, and HTM
d. TS and AFS
43. Unrealized gains or losses on AFS are included and presented in the
a. Liability section of the balance sheet
b. Asset section of the balance sheet
c. Income statement
d. Statement of comprehensive income
44. Under the EQUITY METHOD, property dividends received by the investor from the
associate are recorded as
a. Dividend income
b. A deduction from the investment account
c. A deduction from investor’s share of the associate’s profits
d. An addition to the investor’s share of the associate’s profits
45. If an entity fails to amortize the premium on its trading bond investment, the income
is
a. Overstated
b. Understated
c. No affected
d. Either overvalued or understated
46. A bond investment with interest payment dates on May 1 and November 1 is purchased on
August 1. The amount of (A) interest receivable and (B) interest income on December
31 would be equal to
a. (A) 2 months (B) 5 months
b. (A) 5 months (B) 5 months
c. (A) 2 months (B) 8 months
d. (A) 5 months (B) 8 months
47. An entity made a year-end amortization for its only investment in bonds:
DECEMBER 31 INVESTMENT IN BONDS 100
INTEREST INCOME 100
The bond investment must have been purchased at
a. Par
b. Face Value
c. A discount
d. A premium
48. A bond investment with interest payment dates on February 1 and August 1 is sold on
June 1, the cash received from the sale
a. Does not include the accrued interest
b. Includes accrued interest for 2 months
c. Includes accrued interest for 4 months
d. Includes accrued interest for 7 months
49. PAS 40 requires that investment property be accounted for using the
a. Cost model or fair value model
b. Cost model or revaluation model
c. Cost model or net realizable value model
d. Cost, fair value or net realizable value model
50. The carrying amount of a bond liability is
a. Call price of the bond plus bond discount or minus bond premium
b. Face value of the bond plus related premium or minus related discount
c. Face value of the bond plus related discount or minus related premium
d. Maturity value of the bond plus related discount or minus related premium
51. An entity neglected to amortize the DISCOUNT on outstanding bonds payable. What is
the effect of the failure to record discount amortization on interest expense and
bond carrying amount, respectively?
a. Understated and understated
b. Understated and overstated
c. Overstated and overstated
d. Overstated and understated
52. Which of the following costs should be expensed immediately?
a. Cost of opening a new facility
b. Cost of introducing a new product or service, including cost of advertising and
promotional activities
c. Cost of conducting business in a new location
d. All of the above
53. Which of the following is NOT capitalized into the cost of property, plant and
equipment?
a. Cost of excess materials from a purchasing error
b. Cost of testing whether the asset works correctly
c. Initial delivery and handling cost
d. Cost of preparing the site for installation
54. LOSS from the sale of treasury shares shall be charged to
a. Loss on sale of treasury shares to be reported as other expense
b. Retained earnings and then share premium from treasury shares
c. Share premium from treasury shares and then retained earnings
d. Share premium from original issuance, share premium from treasury shares and then
retained earnings
55. The preemptive right of an ordinary shareholder is the right to
a. Share proportionately in corporate assets upon liquidation
b. Share proportionately in any new issue of shares of the same class
c. Receive cash dividends before distribution to preference shareholders
d. Exclude preference shareholders from voting rights

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 1 D 11 D 21 B 31 A 41 B
2 C 12 D 22 A 32 D 42 B
3 A 13 A 23 B 33 C 43 D
4 B 14 C 24 C 34 D 44 B
5 A 15 B 25 C 35 D 45 C
6 B 16 A 26 B 36 D 46 A
7 D 17 D 27 D 37 B 47 C
8 A 18 C 28 C 38 D 48 C
9 C 19 D 29 C 39 B 49 A
10 C 20 C 30 B 40 C 50 A
51 A
52 D
53 A
54 C
55 B