Saint Vincent College of Cabuyao

Brgy. Mamatid, City of Cabuyao, Laguna

Financial Accounting and Reporting

Name: Score:
Course & Section: Date:

ACCOUNTING CONCEPTS & DOUBLE ENTRY SYSTEM True False

1. Accounting Principle is general law or rule followed in the preparation of financial

statements

2. Usefulness, objectivity and feasibility are the three basic norms generally found in
accounting principles

3. The entity concept considers the business and the proprietor as distinct from each other

4. In accountancy, all business transactions are recorded as having dual aspect

5. It is on the basis of going concern concept that the asset are always valued at market
value

6. Since the life of the business is assumed to be indefinite, the financial statement of the
business should be prepare only when it goes into liquidation

7. According to money measurement concept, the efficiency of the top management of the
business must be clearly recorded in the books of accounts

8. According to periodic matching of cost and revenue concept, a business man is not only
to measure revenues in a particular accounting period but also has to calculate expenses
which can be assigned in earning such revenues

9. Cash basis considers the revenue as realized when the goods are produced

10 The losses from sale of capital assets need not be deducted from revenue to ascertain the
. net income

11 The convention of disclosure implies that all material information should be disclosed in
. the accounts

12 In keeping with the principle of materiality, important items must be recorded instead of
. being left out or merged with other items

13 The comparison of the results of one accounting period with that in the past is possible
. when the convention of consistency is adhered to by the business
14 The convention of conservation takes into account all prospective profits and all
. prospective losses.

On Financial Statements

1.The primary purpose of the balance sheet is to

            a.report the financial position of the reporting entity at a particular point in time
            b.measure the net income of a business up to a particular point in time
            c.determine cash flow for the period
            d.report the difference between cash inflows and cash outflows for the period 

2.  An expense is recorded when it is

a. paid
b. incurred
c.  15 days after receipt of invoice
d.  earned

3.   Company XYZ reported the following in 2005; total assets, $105,000; total liabilities, P 20,000;
contributed capital, P 70,000.  Therefore, retained earnings was
a.  P 45,000
b.  P 35,000
c.  P 25,000
d. P 15,000
4.  The separate entity assumption states that
a.  assets should be recorded at their initial acquisition cost
b.  each business is considered to be part of its owners
c.  the monetary unit should be Philippine Peso
d.  for measurement purposes, the resources, debts, and activities of a business should be
kept separate from those of the owners

5.  A company would report a net loss when

a.  retained earnings decreased due to paying dividends to shareholders
b.  its assets decreased during an accounting period
c.  its liabilities increased during an accounting period
d.  its expenses exceeded its revenues for an accounting period

6.  If Company XYZ owed Company ABC $50,000,  Company XYZ would reflect this in its
a.  balance sheet
b.  income statement
 c.  statement of cash flows
d. statement of stockholder’s equity

7.  Liabilities are defined as

a.   possible debts or obligations of an entity as a result of future transactions which will
be paid with assets or services
b.   possible debts or obligations of an entity as a result of past transactions which will be
paid with assets or services
c.    probable debts or obligations of an entity as a result of future transactions which will
be paid with assets or services
d.    probable debts or obligations of an entity as a result of past transactions which will
be paid with assets or services

8. Which of the following is not a liability?

a.  Accounts payable
b.  Accounts receivable
c.  Notes payable
d. Income taxes payable

9.   On January 1, 2005, Company XYZ. started the year with a P 50,000 credit balance in its retained
earnings account.  During 2005, the company earned net income of P 40,000 and declared and paid
dividends of P 10,000.  Also, the company received cash of P 15,000 as an additional investment by
its owners.  Therefore, the balance in retained earnings on December 31, 2005, would be
a.  P 67,000
b.  P 42,000
c.  P 57,000
d.  P 80,000

10. The principle which holds that all of the expenses incurred in earning revenue should be identified
with the revenue recognized and reported for the same period is the
a. revenue principle
b. liability principle
c. timing principle
d. matching principle

11.  An income statement reports

a. revenues, expenses, assets, and liabilities during an accounting period
b. net income of a business for a period of time
 c. net income of a business at a point in time
d. resources, liabilities, and stockholders’ equity of a business at a point in time

12.  One of the sections on the statement of cash flows is

a.  financing activities
b.  inventing activities
c.  borrowing activities
d. cycling activities

13.  A calendar year reporting company preparing its annual financial statements should use the phrase At
December 31, 2005 in the heading of
a. all of the required financial statements it prepares
b. none of the required financial statements it prepares
c.  the income statement
d.  the balance sheet

Accounting equation MCQs

1)

The Basic accounting equation is

A)  Asset=Expense +Income 

B)  Assets=Cash+Capital 

C)  Assets=Capital+Liabilities

D)  Assets=Expenses+Capital

2)

Find out the value of assets if: Liabilities=$5000 and Capital=$1000

A)  $4000 

B)  $6000 

C)  $7000

D)  $3000

3)

Calculate the amount of cash if: Total assets=$10,000 Total liabilities=$10,000 Total Capital=$5000

A)  $6000 
B)  $10,000 

C)  $5000

D)  $1000

4)

Capital increases if ______ increases 

A)  Expenses 

B)  Drawings 

C)  Interest on capital

D)  Revenue

5)

Capital of a business decreases if there is an increase in 

A)  Drawings 

B)  Income 

C)  Gains

D)  Fresh capital

6)

If the total liabilities of a business decrease by $5000 what will be the effect on total asset? (assuming the
amount of capital remain same) 

A)  Remain constant 

B)  Decrease by $5000 

C)  Increase by $5000

D)  Increase by $10,000

7)

If the business's owner withdraws cash for his/her personal use what will be the effect on capital?

A)  Increase in capital 

B)  Remain the same 

C)  Decrease in capital

D)  No effect on capital

8)

Net income equal to Revenues minus

A)  Gains 

B)  Depreciation 

C)  Expenses

D)  Capital expenditures

9)

Collection of account receivable will 

A)  Increase assets and decrease assets 

B)  Increase assets and decrease liabilities 

C)  Increase assets and increase capital

D)  Increase assets and increase cash

10)

Payment of expenses will ______ the assets

A)  Increase 

B)  Reduce 

C)  apportion

D)  Overstate
11)

Which of the following is the practical implementation of the accounting equation?

A)  Cash flow statement 

B)  Income statement 

C)  Statement of changes in equity

D)  Statement of financial position

12)

Which of the following accounting equation is correct?

A)  Cash+Other assets=Capital-Liabilities 

B)  Capital+ Liabilities=Assets+Income 
C)  Assets-Liabilities=Capital

D)  Assets+Capital=Liabilities 

13)

Fresh capital introduction will increase

A)  Assets and liabilities 

B)  Assets and equity 

C)  Liabilities and equity and bank balance 

D)  Capital and liabilities

14)

Cash received for services rendered will

A)  Increase cash and liability 

B)  Increase equity and liability 

C)  Increase fixed assets and cash

D)  Increase cash and equity

15)

Which of following best describes the increase in equity expands_______

A)  Business operations 

B)  cash outflows 

C)  Inflows of cash

D)  Appropriation expenses

16)

If Cash=$1000 inventories=$4000 Debtors=$5000 fixed assets=? Capital+Liabilities=$15000 What is the

Amount of total assets?

A)  $5000 
B)  $10,000 

C)  $15,000

D)  $20,000

17)

Depreciation decreases

A)  Liabilities 

B)  Cash 

C)  Bank

D)  Capital

18)

An increase in provision for bad debt will 

A)  Decrease net income 

B)  Decrease liabilities 

C)  Increase net income

D)  Increase liabilities

19)

Current assets - Current liabilities=?

A)  Capital 

B)  Absorbed capital 

C)  Net assets

D)  Net working capital

20)

Assets-Liabilities=?

A)  Cash 
B)  Equity 

C)  Net income

D)  Net expenses