Chapter 1

Introduction to Accounting
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QUIZ: MULTIPLE CHOICE

1. Which of the following statements regarding accounting is incorrect?

a. All business transactions and events are recorded in the accounting books.
b. Although bookkeeping and accounting are interrelated, they are not the same.
c. The purpose of accounting is to provide information that is useful in making economic
decisions.
d. A transaction or event is recorded in the accounting records only if it has an effect on the
assets, liabilities, equity, income or expenses of the business.

2. Which of the following is not one of the necessary processes performed in accounting in order to
provide information that is useful to interested users?
a. Identifying
b. Summarizing
c. Recording
d. Counting

3. Accounting is described in various ways. Which of the following is not one of those
descriptions?
a. Accounting is a process and a service activity.
b. Accounting is a social science and a practical art.
c. Accounting is the “language of business” because it is fundamental to the communication of
financial information.
d. Accounting is the art of professionally stealing money and other evil purposes.

4. Accounting has a long history. Which of the following is incorrect regarding the history of
accounting?
a. Accounting can be traced as far back as the prehistoric times.
b. Accounting is as old as civilization and has evolved in response to economic and social
needs of men.
c. Fra Luca Pacioli is the mama of modern accounting.
d. All of these are correct.

5. The main purpose of accounting is

a. to account for money so it will not be lost.
b. to provide information that is useful in making economic decisions.
c. to safeguard the assets of a company.
d. to provide a clear view of the state of the industry’s economy.

6. In accounting, the term “recording” is also called

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 a. journalizing.
b. communicating.
c. debiting.
d. videoing.

7. This process refers to the reporting of the information processed in the accounting system to
interested users.
a. Measuring
b. Identifying
c. Communicating
d. Classifying

8. Which of the following statements is correct?

a. Financial accounting is the branch of accounting that deals with the specific needs of an
entity’s management.
b. The internal users of accounting information include management, owners and creditors.
c. The external users of accounting information include potential and existing investors and
lenders and other creditors.
d. Government accounting is the branch of accounting that deals with the analysis of the costs
of products and services.

9. Which of the following statements is incorrect?

a. Erroneous financial statements can lead to bad financial decisions.
b. Internal users of financial information refer to the entity’s management personnel.
c. Tax accounting refers to the branch of accounting that deals with tax computations, filing of
tax returns, and tax planning.
d. Accounting education is the branch of accounting that deals with the teaching of accounting
and related subjects in order to produce competent and responsible business professionals.

10. The most common form of business organization is

a. corporation.
b. sole proprietorship.
c. partnership.
d. cell phone stand.

11. This branch of accounting focuses on catering to the information needs of external users.
a. Management accounting
b. Financial accounting
c. Auditing
d. External accounting

12. These users need accounting information in order to regulate businesses that are within the
scope of their legal authority.
a. Employees
b. Creditors
c. Auditors
d. Government regulatory bodies or agencies
13. These users need accounting information in evaluating the stability of the business in so far as
their job security, future remuneration, and career growth and opportunities are concerned.
a. Employees
b. Creditors
c. Auditors
d. Regulatory authorities

14. The following are decisions made by external users except

a. whether to hold or sell investments in stocks.
b. whether or not to extend a loan to the business.
c. whether to sell goods on credit to the business.
d. whether to obtain additional capital from outside creditors or to generate it internally.

15. Which of the following users of financial information is not considered a creditor of the
business?
a. A loan provider, such as a bank
b. A supplier that sells goods to the entity on credit
c. A customer that buys goods from the entity on credit
d. A financing company that provides the entity with machineries on a “rent-to-own” basis

16. It is the branch of accounting that involves the careful analysis of economic events and other
variables to understand their impact on decisions.
a. Accounting education
b. Cost accounting
c. Accounting research
d. Tax accounting

17. It is the process of objectively evaluating evidence and expressing an opinion regarding the
correspondence between management’s assertions and established criteria.
a. Accounting education
b. Auditing
c. Accounting research
d. Tax accounting

18. You own a business. Your business is engaged in buying goods at a wholesale price and
reselling them at retail prices on Facebook. Your business is a
a. service business.
b. manufacturing business.
c. merchandising business.
d. monkey business.

19. An advantage of a sole proprietorship over the other forms of a business organization is
a. you are the only boss and you keep all the profits.
b. although it is easier to form, it may be more difficult to raise financing.
c. it has unlimited life.
d. it has limited liability.

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20. Which of the following is not an advantage of a partnership over the other forms of business
organization?
a. Compared to a sole proprietorship, risks are spread out over more than one owner.
b. Compared to a cooperative, the business organization is driven more towards the earning of
profit.
c. Compared to a corporation, it is easier to form because of fewer legal requirements.
d. Compared to a corporation, it has an unlimited life and an unlimited liability.

“Do not be anxious about anything, but in everything by prayer and supplication with thanksgiving let your
requests be made known to God. And the peace of God, which surpasses all understanding, will guard your
hearts and your minds in Christ Jesus.” (Philippians 4:6-7)

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