TOPIC 1: INTRODUCTION TO ACCOUNTING

1. Which of the following refers to the recognition of accountable and non-accountable events of business
transactions?
A. Communicating
B. Identifying
C. Summarizing
D. Measuring
2. What law regulates the practice of accountancy profession in the Philippines?
A. RA 9892
Note: It is also known as the Philippine
B. RA 9298 Accountancy Act 0f 2004 (PAA) that
C. RA 9293 regulates the practice of accountancy
profession in the country.
D. RA 9891
3. Why is it accounting is considered as a language of business?
A. Because accounting information allows businesses to assess the efficiency and effectiveness of their
business operations
B. Because accounting information can be used in analyzing current trends and forecasting future sales
C. Because accounting information is the determinant of the how the business is doing.
D. All of these.
4. Desiree wants to put up a bakery business. She is in dilemma on how to start a business. In order to help
Desiree, which of the following questions would be the first consideration that Desiree should think in order to
start her bakery business?
A. Where can I get capital for my business?
B. How many employees should I'm going to hire?
C. How much equipment do I need to purchase?
D. No more considerations to be made.
5. Accounting follows certain standards and professional ethics. The statement is true by which of the
following nature of accounting?
Note: Dahil pag sinabi nating discipline, mayroong
A. Accounting is a store house of information
standards or pamantayam ma sinusunod saan may
B. Accounting is a service activity propesyon o kurso. Of course part of discipline is
following professional ethics. Dito pumapasol yung
C. Accounting is a discipline mga right and conduct na dapat isaalang-alang ng
mga propesyonal sa anumang larangan including
D. Accounting is a process.
here in accountancy.
 Note: Statement 1 is correct dahil after the transaction has
6. Statement 1: Accounting starts when bookkeeping ends been completed (which is done through bookkeeping), dyan
Statement 2: Bookkeeping is a synonymous term na papasok si accounting at which the information provided
in bookkeeping is to be communicated to various users.
for accounting Take note that accounting is broadly concerned with
identifying, recording and communicating economic events.
A. All statements are correct
While bookkeeping focused on recording transactions of an
B. All statements are incorrect entity. Sa madaling sabi, sa accounting, lahat ay sakop niya
kasama na dito si bookkeeping. Si bookkeeping ang tanging
C. Statement 1 is correct while Statement 2 is incorrect pokus nya lang ay sa mga transaction na mayroon si
business. So definitely, bookkeeping is not the same as
D. Statement 1 is incorrect while Statement 2 is correct accounting

7. What branch of accounting deals with presenting accounting information primarily intended for external
users?
A. Tax Accounting Note: Ito yung branch of accounting na kung saan ang
preparation of financial statements/reports ay intended
B. Management Accounting
for EXTERNAL USERS. If the preparation of accounting
C. Financial Accounting reports is intended for INTERNAL USERS then, it is under
Management Accounting.
D. Government Accounting
8. He is recognized as a Father of Accounting for his double-entry system contribution by which businesses are
using nowadays. Who is it?
A. Fra Luca Pacioli
B. Aristotle
C. Albert Einstein
D. Juan Ponce Enrile
9. This branch of accounting focuses on review of tax compliance of the business. What is it?
A. Cost Accounting
B. Management Accounting
C. Government Accounting
D. Tax Accounting
10. The following are the functions involve in managerial accounting, except which one?
A. Budgeting and Forecasting Note: Dahil ito ay under sa Financial Accounting.
The rest of the choices are functions included in
B. Financial Statement Preparation Managerial accounting.
C. Evaluation of Business Decision
D. Cost Analysis
11. Which of the following statement below specifies the role of cost accounting?
A. XYZ Company prepares a general purpose financial statements
B. Desirable Manufacturing Company reports the cost Note: Because, Letter A is for Financial
Accounting. Letter C is for Accounting Education
of raw materials and labor used in the production. and Letter D is for Government Accounting.

C. Mrs. Carmelita Mercado, a CPA, teaches her students the basic principles of accounting
D. The Department of Budget and Management (DBM) presents the budget allocation for the year 2020.
12. What are the three essential elements of accounting?
A. Identifying, Recording and Communicating
B. Measuring, Classifying and Summarizing
C. Identifying, Classifying and Recording
D. Communicating, Recording and Summarizing
13. What refers to the moral principles that guide an individual in the practice of profession?
A. Ethics
B. Norms
C. Values
D. Moral
14. Why is it accounting considered as an art?
A. Because accounting is a systematic method that requires technical skills and expertise for a clearer
presentation of accounting reports.
B. Because one of the purpose of accounting is to communicate information to its various users so it must be
presented in an artistic and creative way. Note: It is letter A. For letter B kasi though it is true that the purpose of
accounting is to communicate information....., it is primarily described in
C. Both A and B are correct
the nature of accounting as a language of business. Since the question is
D. None of these. why it is considered accounting as an art, letter A is the best answer. Dahil
ang accounting requires technical skills and knowledge para magkaroon
ng better judgement on the information provided in accounting. The term
"art" referring to it is characterized by how things are done.

15. If you are the owner of a Sari-Sari store, which of the following questions you may consider that an
accounting can support?
Note: Lahat po yan ay kinokonsider sa
A. How much revenue have I earned for this period?
isang business and those questions are
B. What is the value of my inventory? supported by accounting.

C. How much is my receivables?

D. All of these.
16. What government agency is responsible for tax collection in the Philippines?
A. Bureau of Internal Revenue Note: Ang COA ay ang ahensya nakatuon sa mga pagrereview ng mga
accounting reports kung ito ba ay nasusunod o kung ang information sa mga
B. Commission on Audit accounting reports ay tama (not understated or overstated). Ang SEC naman ay
nakatuon sa pamamahala ng mga securities grant by the corporation or other
C. Securities and Exchange Commission businesses. Ang BOC naman ay ang agency primarily tasked for collected to
D. Bureau of Customs those imported and exported products. So since the question ay kung anong
agency ang responsible for tax collection in whatever form or nature of
business sa bansa, BIR po ang sagot dyan.

17. Which of the following is NOT an example of external users?

A. Department of Trade and Industry Note: Because shareholders are
considered as INTERNAL USERS.
B. Mr. Mark Lopez, one of the shareholders in ABC Inc.
C. National Appliances, one of the major suppliers of The Good Buy Trading Center
D. Deborah, one of the loyal customers of Aling Kikay Sari-Sari store.
18. What branch of accounting concerns with searching new knowledge that will address new business set-
up?
A. Accounting Technology Note: Accounting Research is a branch
of accounting focuses on developing
B. Accounting Research standards that will create new
business opportunities.
C. Accounting Education
D. Accounting Information System
19. What are the two classification of users of accounting information?
A. Stakeholders and Stockholders
Note: Internal and External users of accounting
B. Strategic and Tactical information. Pag internal, directly silang involve sa
management of the business. Pag external, indirect
C. Internal and External yung kanilang involvement sa business.
D. None of these
20. If a CPA decided to practice his/her profession in an academic institution, what branch of accounting will
he/she under to?
A. Financial Accounting
B. Auditing
C. Tax Accounting
D. Accounting Education
 TOPIC 2: FORMS OF BUSINESS ORGANIZATION
1. What form of business organization is created by a contractual agreement between two or more
individuals?
A. Corporation
B. Partnership
C. Sole Proprietorship
D. Cooperative
2. Which of the following is a disadvantage of a partnership?
A. Unlimited life Note: C and D are advantages of partnership. A is not a
characteristic nor advantage/disadvantage of partnership.
B. Unlimited Liabilities of the partners
C. Better decision-making because "two heads are better than one"
D. Voluntary agreement
3. Alexa tells to her friends that she is a stockholder. This means that Alexa is
A. A part owner of the corporation
B. A co-owner of the partnership
C. An owner of a sole proprietorship business
D. raising chickens and other livestocks
4. What refers to an artificial being created under the existence of the law?
A. Cooperative
B. Sole Proprietorship
C. Partnership
D. Corporation
5. Which of the following is NOT an advantages of sole proprietorship?
A. The owner keeps all the profit Note: Obviously, it is a disadvantage of
sole proprietorship. Once the owner dies,
B. The life of the business is limited to the life of the owner.
the business will tend to cease its
C. It is easy to form and operate operation. Other choices are advantages
of sole proprietorship.
D. The owner makes all the decision
6. The owners of the cooperative are called?
A. Shareholders Note: Shareholders is for CORPORATION. Partners is for
PARTNERSHIP. Proprietor is for SOLE PROPRIETORSHIP.
B. Partners
C. Members
D. Proprietor
7. Where does the single proprietorship registered?
A. Department of Trade and Industry Note: Partnership and Corporation is registered to SEC.
Cooperative is registered to CDA. And when you are applying
B. Cooperative Development Authority
for a business permit, that's the time, you go to LGU.
C. Securities and Exchange Commission
D. Local Government Unit
8. The transfer of ownership in a partnership can be accomplished by which of the following assumptions?
A. Selling the business as it will form a new entity under a new owner
B. Selling the stocks of the business Note: When changes in ownership in a partnership occur
by withdrawal or retirement of partner, his/her interest
C. Selling the interest to one or more partners may be sold to other partner/s with the consent of all
partners. Letter A is for sole proprietorship. Letter B is for
but with the consent of all partners.
corporation. Letter D is for cooperative. He/she cannot
D. Cannot be transferred the ownership sell his/her membership to the business.

9. What form of business organization is characterized by an association of persons with common bond of
interest, voluntarily joined together to meet economic, social and cultural needs?
A. Cooperative
B. Corporation
C. Partnership
D. Incorporation
10. Which of the following statement falls under advantages of having corporation?
A. Can raise additional funds by selling shares/stocks to the public Note: Only letter B is the disadvantage of
corporation. A and C are advantages of
B. It is complicated to set-up forming corporation.

C. Shareholders are not personally liable for the debts of the corporation
D. A and C are correct.
11. This type of business is characterized by buying and selling of finished goods to customers. What is it?
A. Manufacturing Business
Note: Primary description of
B. Merchandising Trading merchandising business is buying and
C. Service Business selling goods in order to generate profit.

D. All of these.
12. Which of the following is an example of service business
A. Aling Kikay's Grocery
B. Angela's Pharmacy
C. Shoeport Manufacturing Inc.
D. Atty. LaiLaw Firm
13. What refers to the type of business by which more than one type of business according to nature of
operation are performed?
A. Business combination Note: When a business performs service activity,
merchandising activity and manufacturing activity,
B. Hybrid business it is called hybrid business. Yung nature ng kanilang
operation is characterized by these three activities.
C. Coordinating business
D. Special business
14. What type of business organization is characterized by offering professional skills, advice and
consultations?
A. Merchandising Business
B. Service Business
C. Manufacturing Business
D. Partnership
15. ABS-CBN and GMA are one of the largest broadcasting networks in the Philippines. What is the major type
of activity that these companies are provided?
A. Service Activity
B. Buying and Selling Goods
C. Processing Goods
D. None of these
16. The following are examples of merchandising business except which one?
A. Alma's Secret Salon Note: It is letter A because it is service
business. The rest of the choices are
B. Ken Super Store
examples of merchandising business.
C. AC Generika Drug Store
D. Desiree's BakeShop
17. This type of business is characterized by combining raw materials, labor and expenses in the product for a
sale later on. What is it?
A. Partnership
B. Service Business
C. Merchandising Trading
D. Manufacturing Business
18. Which of the following statement falls under merchandising business?
A. XYZ Company sells furnitures to customers in a form of cash or credit
B. Mang Tasyo offers massage therapy for his customers with 20% discount
C. Toyota Manufacturing Inc. produces variety of cars based on customer's preference.
D. Atty. Gagbo offers legal consultation to the public.
19. Which of the following businesses below is an example of manufacturing business?
A. Gail and Alexa Barber Shop
B. Shoeport Manufacturing Inc.
C. Lady's Pharmacy
D. Aling Nena Sari-Sari Store
20. The statement of comprehensive income of a service business is in what format?
A. Multi-Step Note: Because it presents only the specific revenues and
B. Single-Step expenses of the business. Multi-Step SCI is usually used in
merchandising business. It is called multiple step SCI
C. Under-Step because there are a lot of procedures to be made before
arriving at the net income. Included sa multiple step yung
D. No-step
computation of net sales, COGS, Gross Profit and etc.

TOPIC 3: ACCOUNTING PRINCIPLES AND CONCEPT

1. What accounting concept applies when the cash withdrawn by the owner from the business is recorded as
"owner's personal drawings"?
A. Going-concern
B. Accounting Entity
C. Matching Principle
D. Stable monetary-unit
2. What best describes the term "going concern"?
A. When current liabilities exceeds current assets
B. The expenses exceed income
C. The ability of the entity to continue in operation for the foreseeable future.
D. The potential to contribute to the flow of cash and cash equivalent to the entity.
3. Which basic accounting assumption is threatened by severe inflation in the economy?
A. Going-concern assumption Note: The inflation refers to the increase of price in certain
B. Monetary-unit assumption products in the country. Kapag ang nagkakaroon ng inflation, there
is a tendency that the purchasing power of currency will slow.
C. Periodicity assumption Habang patagal ng patagal, ang currency ay bumabagal ang value.
That concept applies on the monetary unit assumption.
D. Economic entity assumption
4. Timeliness is an element of this basic qualitative characteristic of the financial statement. What is it?
A. Understandability
Note: Under qualitative characteristic of
B. Reliability financial statements, timeliness is part
of relevance.
C. Relevance
D. Comparability
5. Statement 1: A fiscal year is inclusive of 12-month period that ends in the month of December.
Statement 2: An interim accounting period could be shorter or longer than 12-months.
A. Only statement 1 is correct Note: Statement 1 should be Calendar year. Fiscal
B. Both statements are correct year starts in any month of the year. In statement
2, it should be shorter than or less than one year
C. Only statement 2 is correct. since it is an interim period.

D. Both statements are not correct

6. This is the most common financial attribute used in measuring financial information. What is it?
A. Realizable values
Note: On historical cost, we recognized the value
B. Historical cost of assets purchased at actual cost. And it the
most common financial attribute in measuring
C. Current cost
financial information as per instructed.
D. Present value
7. What concept of accounting requires a business to apply accounting policies consistently and present
information consistently from one period to another?
A. Going-concern assumption
B. Consistency assumption
C. Economic entity assumption
D. Monetary-unit assumptio
8. What refers to the set of standards or principles followed by an accountants to indicate how to report
economic events?
A. Philippine Financial Reporting Standards Note: GAAP is the set of standards followed by an
accountant to indicate how to report economic
B. Philippine Accounting Standards events (transactions).In the book of Millan, GAAP
compose of Accounting Concepts and Principles.
C. International Financial Reporting Standards
D. Generally Accepted Accounting Principles
9. What accounting principle indicates the presentation of financial statements at specific time-interval?
A. Periodicity assumption Note: In some references, it is called Time-Period
B. Economic entity assumption Concept. It specifies the period when financial
statements should be reported. It can be in a
C. Conservatism or Prudence calendar or fiscal year or interim.

D. Monetary-unit assumption
10. It is the official accounting standard body in the Philippines patterned with IFRS that indicates the
standards followed by the country are similar to those countries worldwide. What is it?
A. Philippine Accounting Standards
Note: It is the official accounting standard body in
B. Philippine Financial Reporting Standards the Philippines patterned with the IFRS indicating
that the standards follow is similar to those other
C. International Financial Reporting Standards
countries worldwide.
D. Generally Accepted Accounting Principles
11. Desirable Distributors engaged in the buying and selling of goods. The business initially treat the cost of
goods purchased as asset and recognize it as an expense only when the goods are sold. What accounting
principle is being applied to the given situation?
A. Full-Disclosure Principle Note: In matching principle, goods purchased are
initially recorded as an asset and later on
B. Matching Principle
recognized as an expense when sales are
C. Going-concern assumption generated/earned.

D. Consistency Principle
12. Which of the following statements is NOT correct regarding the basic accounting concepts?
A. Rounding off of large amounts when presenting financial statements is acceptable under the concept of
materiality
B. An entity that is going out of business is a going-concern Note: Because it applies the concept of
LIQUIDATING CONCERN. The rest of the
C. Applying the separate entity concept allows the reporting choices are correct.
of a true and fair picture of business financial affairs
D. Applying the same accounting treatment for similar items
from one period to another relates to "Consistency"
13. When making judgments and estimates under conditions of uncertainty, the accountant chooses the
favorable one. What accounting concept is being applied to the given statement?
A. Economic entity assumption
B. Monetary-unit assumption
C. Prudence/Conservatism
D. Time-Period Concept
14. Monica's General Merchandise purchased goods with an original price of 10,000 at discounted price of
8,000. The business recorded the goods at 8,000. What accounting concept did Monica's General Merchandise
apply?
A. Discounted price concept Note: Again, in historical cost concept, we
recognized the assets purchased at an ACTUAL
B. Going-concern concept COST (sa kung anong amount mo siya nakuha).

C. Accrual Basis concept

D. Historical Cost concept
15. Today, Desiree went to Kuya J's restaurant and ordered "Fried Chicken and Halo-halo". Desiree told Jasper,
the owner, that she will pay him next week. Jasper records immediately the sale today, rather than next week
after collecting Desiree's due. What accounting concept did Jasper apply?
A. Liquidating concern
B. Historical cost concept
C. Stable-monetary unit
D. Accrual basis concept
16. Angela's Educational Supply purchases two staplers costing 300 each. The business charges the cost of one
of staplers as expense but recognizes the cost of the other stapler as asset. Which of the following concept is
violated?
A. Materiality concept Note: Sa consistency concept, we have be specific
with the methods of recognizing an items bought.
B. Going-concern concept
Kung sa asset mo siya irerecord, dapat sa asset din
C. Consistency concept irerecord yung iba pang item na tulad niya.

D. Stapler concept
17. Under accrual basis of accounting, a business records sale when?
A. When the sale price is collected
B. When the sale occurs
C. At the point in time when (a) and (b) above are satisfied
D. Either A or B, as an accounting policy choice
Note: That in accrual basis of accounting, we
recognized revenues when it is earned
regardless when the cash has been collected.
Accrual - nagawa/nagamit mo na bago mo
makuha.
Deferral- nakuha na sayo pero di mo pa
nagagawa/nagagamit.
18. Which of the following statements is INCORRECT regarding the accounting standards used in the
Philippines?
A. The accounting standards used in the Philippines consist of the Philippine Financial Reporting Standards
(PFRS)
B. The PFRSs are derived from the International Financial Reporting Standards (IFRS)
C. The accounting standards used in the Philippines are similar to those used in other countries worldwide
D. The accounting standards used in the Philippines are inferior compared to international standards.
Note: Ang nagpamali lang sa statement ay yung term na "inferior".
Take note that the standards we follow ay same lang sa ibang bansa. Hindi tayo naka-aangat sa kanila.

19. Statement 1: A calendar year method indicates that the accounting period ends in December 31
Statement 2: In cash basis of accounting, revenues are recognized when it is earned rather than when cash
is collected
A. Only statement 1 is correct
Note: Statement 1 is correct.
B. Only statement 2 is correct Statement 2 ISN'T correct because that
is for accrual basis of accounting.
C. Both statements are correct
D. Both statements are incorrect
20. Due to bankruptcy and losses incurred, ABC Company decided to terminate their business. Which of the
following concept applies the given situation?
A. Going-concern concept
B. Accounting entity concept
C. Liquidating concern concept
D. Consistency concept
 TOPIC 4: ELEMENTS OF FINANCIAL STATEMENTS (TYPES OF MAJOR ACCOUNTS)

1. Which of the following is NOT an example of real accounts?

A. Accounts Receivable Note: Interest Income is a NOMINAL ACCOUNT. The rest of the choices are
B. Owner's, Capital all examples of real accounts.
Note that real accounts are assets, liabilities and owner's capital while
C. Prepaid Expenses temporary/nominal accounts are revenues, expenses and owner's drawing.

D. Interest Income
2. Which of the following is reported correctly?
A. Profit = Revenue > Expenses
B. Revenue < Expenses = Profit
C. Loss = Expenses < Revenue
D. Revenue > Expenses = Loss
3. It is considered as the most liquid asset. What is it?
A. Notes Receivable
B. Cash
C. Prepaid Expenses
D. Accounts Receivable
4. It refers to the list of account titles used in the preparation of financial statements arranged according to its
liquidity. What is it?
A. Accounts
B. Chart of accounts
C. Financial statements
D. None of these
5. The following are examples of non-current assets except which one?
A. Furnitures and Fixtures
B. Automobiles
C. Merchandise Inventory
D. Office Equipment
6. What refers to an asset without physical substance?
A. Liquid Assets
Note: Intangible assets are assets
B. Tangible Assets without physical substance or form. It
is classified as non-current assets.
C. Current Assets
D. Intangible Assets
7. Which of the following is NOT a liability account?
A. Accrued expenses
Note: Accrued income are revenues earned but not
B. Unearned income yet collected. It is classified as an asset account. The
rest of the choices are examples of liability account.
C. Accrued income
D. Interest Payable
8. Which of the following is an example of asset account?
A. Unearned Interest
B. Prepaid Insurance
C. Supplies Expense
D. AC, Capital
9. What refers to the owner's claim in the business?
A. Revenues
Note: Owner's equity is the residual interest or
B. Expenses claims of the owner in the business. It is
obtained by deducting assets to liabilities.
C. Owner's Equity
D. Liabilities
10. Which of the following is NOT true about chart of accounts? Note: Because chart of accounts are
A. The chart of accounts is the foundation of financial statements arranged according to its LIQUIDITY
(madaling ma-convert into cash). The rest of
B. The chart of accounts is arranged alphabetically the choices are true about chart of accounts.

C. The chart of accounts help to identify where the money is coming from and where it is going
D. The chart of accounts is list of account titles used by the companies in their financial records.
11. It is a written promise from the customers to pay his/her receivables at certain future date. What is it?
A. Accounts Receivable
B. Notes Receivable
C. Loans Receivable
D. Interest Receivable
12. What refers to the resources owned by the business?
A. Assets
B. Revenues
C. Liabilities
D. Expenses
13. What refers to the decrease in economic benefits during the year in a form of outflows of assets or
incidence of liabilities resulting in the decrease in equity?
A. Expenses
Note: In short
B. Revenues explanation, expenses
decrease owner's equity.
C. Liabilities
D. Assets
14. The National Telecommunications Commission (NTC) released a "cease and desist" order against the ABS-
CBN due to unavailability of franchise. Franchise is what kind of asset?
A. Non-Current Assets Note: Franchise is an example of intangible
B. Intangible Assets assets. Other examples of intangible assets
are patents, copyright and trademark.
C. Current Assets
D. Fixed Assets
15. Wash and Fold Super Clean Laundry bought columnar notebooks, official receipts and ballpens. These
items are recorded in what specific account title?
A. Miscellaneous expenses
Note: Franchise is an example of intangible
B. Office Supplies expenses assets. Other examples of intangible assets
are patents, copyright and trademark.
C. Laundry Supplies expense
D. SSS and Philhealth Premium expense
16. Which of the following is an example of non-current liabilities?
A. Notes Payable (due in 6 months)
B. Accounts Payable
C. Loans Payable (due in 9 months)
D. Mortgage Payable
17. What refers to the increase in economic benefit during the accounting period in a form of inflow of assets
and decrease in liabilities resulting in the increase in equity?
A. Revenues
B. Expenses
C. Liabilities
D. Assets
18. Which of the following is NOT arranged properly?
A. Cash, Accounts Receivable, Supplies, Accounts Payable
B. Accounts Payable, Notes Payable, Revenues
C. Cash, Inventory, PPE, Salaries Expense
D. Cash, Prepaid Expenses, Accounts Receivable, PPE
19. It is recognized as an asset at the time of payment and later on, recognized as an expense when it is
already incurred. What is it?
A. Accrued Expenses
Note: Deferred Expenses or Prepaid Expenses
B. Deferred Expenses are expenses paid in advance. They are treated
as an asset at the time of payment and later on,
C. Other Expenses recognized as an expense when it is incurred.
D. Losses
20. It is the primary source of revenue in a merchandising business. What is it?
A. Sales Revenue
Note: Sales is the primary source of
B. Service Revenue
revenue in a merchandising business.
C. Interest Income
D. Commission Income