ACCT101 - Prelim - THEORY (25 pts)

MULTIPLE CHOICE
DATE:

1. Which of the following is an example of use of asset event?

a. paying off a loan
b. producing goods
c. purchase of an equipment
d. selling a vehicle

2. Which of the following is not an application of accrual accounting?

a. Recording uncollected delivery of goods
b. Recording of utilities expense upon receipt of billing statement
c. Recording of unearned revenues
d. Recording accrued interest at year end

3. In the accounting equation, an increase in asset can be associated with

a. A decrease in owner's equity
b. An increase in another asset
c. An increase in liability
d. A decrease in liability

4. When an entity acquires computer equipment for cash,

a. Assets and owner's equity are increased
b. An asset is increased and a liability is decreased
c. One asset is increased while another is also increased
d. One asset is increased while another is decreased

5. Which is not an attribute of accounting?

a. It is an art of recording, classifying, summarizing and interpreting
b. It provides qualitative information
c. None of the above
d. It is a service activity.

6. Your bookkeeper is confused on the rules of debits and credits. Which one of the following would you advise him/her? (bonus)
a. To combine a credit amount with another credit amount means you subtract.
b. The normal balance of a contra account is the opposite of its related account.
c. Assets, liabilities, and equity have debit normal balances.
d. The normal balance of an account determines the side in which the account is decreased.

7. Suppose Ms. D. Guilbert, a sole proprietor, withdraws P50,000 computer unit from the business. The journal entry should be:
a. Dr. Guilbert, Capital; Cr. Guilbert Withdrawals
b. Dr. Guilbert, Withdrawals; Cr. Cash
c. Dr. Guilbert, Withdrawals: Cr. Guilbert, Capital
d. Dr. Guilbert, Withdrawals, Cr. Computer Equipment

8. For accounting purposes, the business entity should be considered separate from its owners if the entity is
a. a corporation
b. a proprietorship
c. a partnership
d. all of the above

9. Failure to record the adjusting entry at the end of the period the unexpired insurance, the omission will cause
a. total owner's equity to be overstated
b. total expenses to be overstated
c. total revenues to be overstated
d. total assets to be overstated

10. Which of the following is not a branch of accounting

a. Taxation
b. Cost Accounting
c. Business Accounting
d. Financial accounting

11. The consistency concept means that

a. None of the above
b. Firms in the same industry must account for similar items in the same way
c. When preparing the accounts of a firm, one should normally account for similar items in the same way from one accounting period to the next
d. Firms may never change the way in which they prepare their accounts

12. Payment of interest in advance gives rise to

a. deferred income
b. accrued income
c. accrued expense
d. deferred expense
13. Suppose Assunta De la Rosa settles the rental expenses of the business amounting to P20,000 through her personal bank account. The journal entry should be: Dr. Rent expense,
Cr. Liability Adjusting Dr. De la rosa Capital, Cr. Cash,
a. Dr. De la Rosa, Capital; Cr. Rental expense
b. Dr. Rent expense; Cr. De la Rosa, Withdrawals
c. Dr. Rental expense; Cr. De la Rosa, Capital (closet answer, trick question) WALA GID YA ANSWER BOBO SIR ALAN
d. Dr. Rental expense; Cr. Cash

14. Failure to record the entry for accrued salaries results in

a. total owner's equity is understated
b. total assets are overstated
c. total owner's equity is overstated
d. total liabilities are overstated

15. The entity concept means that

a. Accounts must be prepared for every firm
b. The financial affairs of a firm and its owner are always kept separate for the purpose of preparing accounts
c. Because a firm is separate and distinct from its owners, those owners cannot have access to its assets unless the firm ceases to trade
d. None of the above

16. When the proprietor withdraws cash or other assets, the Withdrawal account is
a. Debited and credited
b. Debited
c. Credited
d. Not affected

17. The recording of an expense could result in a corresponding increase in

a. an asset
b. owner's equity
c. revenue
d. a liability

18. Expenses can be defined as

a. Decreases in economic benefits in the form of outflows or depletion of assets or incurrence of liabilities that result in decreases in equity
b. Increases in owner's equity
c. Decreases in owner's equity
d. Inflows of assets from delivering or producing goods or rendering services

19. An adjusting entry must contain

a. a real account and a nominal account
b. two nominal accounts
c. an asset account and a liability account
d. two real accounts

20. Which of the following equations is correct?

a. Capital = Assets + Liabilities
b. Liabilities - Capital = Assets
c. Capital = Assets - Liabilities
d. Assets + Capital = Liabilities

21. Which of the following does not belong to the group?

a. Supplies expense
b. Accrued expense (considered as liability because the “accrued” word
c. Rent expense
d. Cost of goods sold

22. The periodicity concept

a. Results from the BIR requirement that taxable income be reported on an annual basis
b. Involves dividing the life of a business entity into accounting periods of equal length thus enabling the financial users to periodically evaluate the results of
business operations
c. Requires all companies to use a fiscal year ending December 31
d. Requires that all companies prepare monthly, quarterly, and annual financial statements

23. Suppose Mr. Chan, a sole proprietor, withdraws P40.000 cash from the business. At the same time, he brings his brand new laptop with a value of P40.000 to the business. The
journal entry should be
a. Dr. Computer Equipment. P40,000: Cr. Chan Capital P40,000 and Dr. Chan Withdrawals. P40,000: Cr. Cash P40,000
b. Dr. Chan, Withdrawals. P40.000: Cr. Chan Capital P40.000 and Dr. Computer Equipment, P40.000: Cr. Cash P40,000
c. Dr. Shan Capital P40,000: Cr. Computer Equipment, P40.000 and Dr. Chen Withdrawals, P40,000: Cr. Cash, P40,000
d. No entry would be required

24. A credit entry decreases the balance of

a. Assets
b. Liabilities
c. Owner's equity
d. Income
25. An adjusting entry cannot include a debit to a (an)
a. asset and a credit to a liability
b. asset and a credit to a revenue
c. expense and a credit to an asset
d. liability and a credit to a revenue