Basic financial accounting and reporting by prof.

WIN ballada

Multiple choice

1. Suppose the opening balance of machinery account is a debit balance of P100,000. Within this
month, there is an acquisition of machinery by an equivalent settlement of P400,000 debt
amount. Also, there is a sale of machinery to the sole proprietor at the cost price of P20,000.
What is the opening balance of the machinery account the next month?
a. Debit balance of P480,000
b. Debit balance of P500,000
c. Credit balance of P480,000
d. Credit balance of P500,000
2. Accrual concept states that revenues and expenses of the firm should be recorded on ________
instead of _____________.
a. Accrual basis cash basis
b. Accrual basis credit basis
c. Cash basis accrual basis
d. Credit basis cash basis
3. Lorelei Corpuz enetered into a one-year tenancy contract from Mar. 1, 2017 to Feb. 28,2018. The
monthly rental was P90,000. For the year ended Dec. 31, 2017, Lorelei Corpuz paid P1,080,000
for the contract and recorded it as rental expenses. The profit for the year ended Dec. 31, 2017
was ___________.
a. Overestimated by P900,000
b. Overestimated by P180,000
c. Underestimated by P900,000
d. Underestimated by P180,000
4. Suppose an entry recorded an expense when it was paid, but the expense was incurred one year
before the payment date. Which of the following accounting principles has been violated?
a. Consistency concept
b. Historical cost concept
c. Accrual concept
d. Entity concept
5. The financial year of Divina Cayabyab ends on December 31 each year. On May 30, 2018. Divina
Cayabyab received an annual service fee of P600,000 from a customer for a service commencing
on June 1. On Dec. 31,2018,_____________.
a. P250,000 should be treated as unearned venues
b. P300,000 should be treated as unearned venues
c. P600,000 should be treated as unearned venues
d. P600,000 should be treated as revenues for the current financial year
6. At the beginning of the financial year, Edzel Singian paid a 3-year insurance premium of
P720,000. At the end of the financial year, ______________.
a. P720,000 should be treated as expense
b. P720,000 should be treated as prepaid expense
c. P240,000 should be treated as expenses
d. P240,000 should be treated as prepaid expenses
 7. Elvira Dacayo rents a new office and the less term is from Jan. 1,2018 to Dec. 31, 2018. For the
year ended Dec. 31,2017, Elvira Dacayo pays rent for three months. Based on the __________,
Elvira dacayo should record this transaction as expenses for the year __________.
a. Consistency principle 2018
b. Consistency principle 2017
c. Accrual concept 2018
d. Accrual concept 2017
8. Daisy Dangayo will rent a warehouse from 3J Realty from May 1, 2017 to Apr. 30, 2019. On Apr.
1, 2017, Daisy Dangayo paid P360,000. It included a cleaning fee of P10,000, two month’s rent,
and a rental deposit amounting to three month’s rent. What should be the related rental
expense recorded on the income statement for the year ended Mar. 31, 2018?
a. P770,000
b. P792,000
c. P840,000
d. P980,000

Multiple choice

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

a. Adjusting the accounts
b. Applying the cash basis of accounting
c. Applying the matching rule
d. Recognizing revenues when earned and expenses when incurred
2. The matching rule is applied
a. Because it is required by the Tax Code.
b. By expensing certain items immediately and in their entirely.
c. To help make the bookkeeper’s job easier.
d. To help produce a more accurate measurement of an entity’s performance.
3. The going concern assumption is not applied to
a. Entities about to file for bankruptcy.
b. Entities that have been in existence for less than a year.
c. Entities that have sustained losses for the previous two years.
d. The partnership form of business.
4. A service vehicle might be depreciated over 5 years because
a. Income tax provisions require depreciation over the next 5 years.
b. It will be paid for in 5 years.
c. It will help generate revenue for the company over the next 5 years.
d. It will lose most of its market value in 5 years.
5. The journal entry to record an accrued expense result in which of the following types of
accounts being debited and credited?
a. Asset and income
b. Asset and liability
c. Expense and asset
d. Expense and liability
6. If a P2,500 adjustment for depreciation is omitted, which of the following financial statement
errors will occur?
a. Assets will be understated
b. Expenses will be overstated
c. Owner’s equity will be overstated
d. Profit will be understated
7. The amount of accrued but unpaid expenses at the end of the period is both an expense and
a. A deferral.
b. A liability.
c. An asset.
d. An income.
8. Accrued revenues
a. Decrease assets.
b. Decrease liabilities.
c. Increase assets.
d. Increase liabilities.
9. Accrued expenses
a. Decrease assets.
b. Decrease liabilities.
c. Increase assets.
d. Increase liabilities.
10. The word “accrued” implies which of the following?
a. Money has been paid and the service has been provided.
b. Money has been paid but no services have been provided.
c. Money has been paid for a service to be performed during the next period.
d. Money has not been paid or received but the service has already been performed or
rendered.
11. If an adjusting entry were not made at the end of a period to remove the earned revenue from
the Unearned Revenues account,
a. Assets would be understated.
b. Liabilities would be overstated.
c. Liabilities would be understated.
d. Owner’s equity would be overstated.
12. Which of the following transaction results in an increase in revenues?
a. Collection of cash on account
b. Receipt of cash from bank loan
c. Sale of land at cost for cash
d. Services rendered on credit
13. The cost of doing business is also known as
a. A liability.
b. An assets.
c. An expense.
d. Revenue.
14. An item that represents services received by the firm for which it will pay for in the future is
called
a. An accrued expense.
b. An accrued revenue.
c. An unearned revenue.
d. A prepaid expense.
15. An item that represents services provided by a firm for which it will receive payment in the
future is called
a. A prepaid expense.
b. An accrued expense.
c. An accrued revenue.
d. An unearned revenue.
16. Which of the following is an example of an adjusting entry?
a. Recording depreciation expense on a truck
b. Recording the billing of customers for services rendered
c. Recording the payment of salaries to employees
d. Recording the purchase of supplies on account
17. Which of the following transactions results in an increase in expenses?
a. Cost of employee salaries
b. Payment on accounts payable
c. Purchase of office equipment on credit
d. Repayment of principal of bank loan
18. Which of the following pairs of accounts would not appear in the same adjusting entry?
a. Interest revenues and Interest Payable
b. Rent Expense and Rent Payable
c. Service Revenues and Accounts Receivable
d. Service Revenues and Unearned Revenues
19. The Supplies account had a P2,800 debit balance at the end of the accounting period before
adjustment for supplies used, and an inventory of P600 worth of unused supplies was on hand.
Which of the following is the required adjusting entry?
a. Debit Supplies Expense P600 and credit Supplies P600.
b. Debit Supplies P600 and credit Supplies Expense P600.
c. Debit Supplies P2,200 and credit Supplies Expense P2,200.
d. Debit Supplies Expense P2,200 and credit Supplies P2,200.
20. A Law firm began November with office supplies of P16,000. During the month, the firm
purchased supplies of P29,000. On November 30, supplies on hand totaled P21,000. Supplies
expense for the period is
a. P24,000.
b. P29,000.
c. P45,000.
d. P21,000.
21. The adjusting entry to accrue salaries expense
a. Debits salaries expense and credits cash.
b. Debits salaries expense and credits salaries payable.
 c. Debits salaries payable and credit cash.
d. Debits salaries payable and credits salaries expense.
22. Adjusting entries involve
a. At least one real and one nominal account.
b. Only capital accounts.
c. Only nominal accounts.
d. Only real accounts.
23. A prepaid expense is not an
a. Asset.
b. Economic resource.
c. Expired cost.
d. Unexpired cost.
24. The decrease in usefulness of property and equipment as time passes is called
a. Consumption.
b. Contra asset.
c. Depreciation.
d. Deterioration.
25. Accumulated depreciation is reported in the
a. Balance sheet.
b. Income statement.
c. Statement of owner’s equity.
d. Both a and b.
26. Under the revenue recognition principle, revenue is recorded
a. After it has been earned, but not before.
b. At the earliest acceptable time.
c. At the end of the accounting period.
d. At the latest acceptable time.
27. The broad classification of adjusting entries are
a. Accruals and closing.
b. Accrual and deferrals.
c. Closing and trials.
d. Trials and deferrals.
28. On Nov. 15, 2017, cash is received in advance of rendering services. Assuming that the services
have been performed by Dec. 31, 2017, the adjusting entry would be a debit to
a. Cash and a credit to Service Revenues.
b. Service Revenues and a credit to Accounts Receivable.
c. Unearned Revenues and a credit to Cash.
d. Unearned Revenues and a credit to Service Revenues.
29. Which of the following pairs of account could not be included in the same adjusting entry?
a. Interest Expense and Interest Receivable
b. Rent Expense and Rent Payable
c. Salaries Expense and Salaries Payable
d. Unearned Revenues and Service Revenues
30. Which of the following is an example of an accrual?
 a. Payment of two years’ insurance in advance
b. Salaries incurred but not yet paid
c. The purchase of office supplies
d. Tuition revenue collected in advance
31. An adjusted trial balance is prepared to
a. Both test that the ledger is still in balance after the accounts have been adjusted and
facilitate preparation of the financial statements.
b. Facilitate preparation of the adjusting entries.
c. Facilitate preparation of the financial statements.
d. Test that the ledger is still n balance after the accounts have been adjusted.
32. Which of the following accounts would normally be found on the credit side of the adjusted trial
balance?
a. Accumulated Depreciation-Equipment
b. Depreciation Expense-Equipment
c. Janet Matuguinas, Withdrawals
d. Prepaid Insurance
33. Which of the following is not an application of accrual accounting?
a. Adjusting unearned advertising revenues to the proper balance at the end of the month
b. Recording advertising revenues at the time the cash payment is received
c. Recording advertising revenues at the time the work is done
d. Recording telephone expense the monthly bill is received
34. Which of the following accounts is an income statement account?
a. Accounts Receivable
b. Owner’s Capital
c. Salaries Expense
d. Salaries Payable
35. Which of the following is an example of a deferral?
a. Legal fees already earned but not yet collected
b. Property taxes accrued but not yea paid
c. The accumulation of interest in a bank account
d. The purchase of an entity vehicle
36. Which of the following situations involves a deferral?
a. Recording accrued interest
b. Recording depreciation
c. Recording unrecorded revenue
d. Recording unrecorded salaries
37. When a sale takes place
a. A revenue account will increase.
b. Assets will be unaffected.
c. Liabilities will increase.
d. One assets account will increase and another will decrease.
38. Which of the following accounts is a contra account?
a. Accumulated Depreciation-Office Equipment
b. Depreciation Expense-Office Equipment
 c. Office Equipment
d. Unearned Revenues
39. Which of the following situations is an example of an accrual?
a. Recording depreciation
b. Recording supplies consumed
c. Recording the portion of prepaid rent that has expired
d. Recording unrecorded revenues
40. Failure to adjusting for accrued salaries at the end of the period will result in an
a. Overstatement of assets.
b. Overstatement of liabilities.
c. Overstatement of profit for the period.
d. Understatement of profit for the period.
41. Companies usually choose a fiscal year that ends
a. At different time each year, depending on the tax consequences.
b. During the peak of the busy season.
c. During the slack season.
d. On July 31.
42. Expenses are incurred
a. Only during the adjustment process.
b. To generate revenue.
c. To produce assets.
d. To produce liabilities.
43. The matching rule relates the least to
a. Accrual accounting
b. Caused-and-effect relationships.
c. Systematic and rational allocation.
d. The cash basis of accounting
44. Which of the following assets is not subject to depreciation?
a. Art equipment
b. Computers
c. Land
d. Store fixtures
45. The carrying value of a depreciable assets equals
a. The estimated amount for which of the asset could be sold.
b. The estimated cost to replace the asset.
c. The original cost minus accumulated depreciation.
d. The original cost minus depreciation expense for the current period.
46. Which of the following transactions is the most difficult to assign to specific time periods?
a. The accrual of the interest
b. The expiration of insurance
c. The incurrence of salaries
d. The use of equipment
47. Financial statement time periods should be of equal length
a. And should correspond with the calendar year.
 b. And should end during the peak season.
c. To comply with loan agreements.
d. To make comparison meaningful.
48. An entity recorded office supplies in an asset account when the supplies were purchased. Failure
to take an inventory and make an adjusting entry will result in an
a. Overstatement of owner’s equity.
b. Understatement of assets.
c. Understatement of liabilities.
d. Understatement of owner’s equity.
49. Which of the following is an application of accrual accounting?
a. Depreciating a building as quickly as allowed by income tax regulatioms
b. Expensing a machine in its entirety when purchased
c. Recording revenue at the time payment is received
d. Recording utilities expense when the monthly bill is received
50. An entity’s weekly payroll of P5,000 is paid on Fridays. Assume that he last day of the months
falls on Wednesday. Which of the following is the required adjusting entry?
a. Debit Salaries Expense P3,000 and credit Salaries Payable P3,000
b. Debit Salaries Expense P2,000 and credit Salaries Payable P2,000
c. Debit Salaries Expense P3,000 and credit Salaries Expense P3,000
d. Debit Unpaid Salaries P3,000 and credit Salaries Payable P3,000
51. Which of the following transactions result in the recognition of an expense?
a. Expiration of usefulness of equipment during the accounting period
b. Payment of the principal of a loan
c. Payment on accounts payable
d. Withdrawal of cash by the owner
52. A customer’s promise to pay for goods or services.
a. Creates a liability for the company.
b. Decreases the company’s liabilities.
c. Increases the assets of the company.
d. Increase the company’s Cash amount.
53. The journal entry to record an accrued revenue results in which of the following types of
accounts being debited and credited?
a. Asset and income
b. Asset and liability
c. Expense and asset
d. Expense and liability
54. A business received cash of P30,000 in advance for revenue that will be earned later. The cash
receipt entry debited and credited unearned revenues for P30,000. At the end of the period,
P11,000 is still unearned. The adjusting entry for this situation will
a. Debit revenue and credit unearned revenues for P19,000.
b. Debit revenue and credit unearned revenues for P11,000.
c. Debit unearned revenues and credit revenues for P19,000.
d. Debit unearned revenues and credit revenues for P11,000.
55. As the usefulness of the assets property and Equipment expires,
 a. A liability is created
b. An amount is transferred from one asset account to another.
c. A related expense account is reduced.
d. The cost of the asset is allocated to an expense account.
56. Which of the following accounts could not be credited in an adjusting entry?
a. Interest Receivable
b. Office Supplies
c. Prepaid Rent
d. Service Revenues
57. The principal difference between depreciation and most other types of expenses is that
depreciation
a. Can be avoided if the asset is in a good condition as when it was purchased.
b. Does not require an immediate cast outlay.
c. Is not deductible if it will cause a loss.
d. Is subject to more precise measurement.

Adjusting account

Multiple choice

1. Which of the following events would be associated with an end-of-period adjustment?

a. Decision to start a second production shift.
b. The payment of salaries and wages.
c. The recording of depreciation on equipment.
d. The transfer of staff to another department.
2. Deferred revenues should be reported as
a. Contributed capital on the balance sheet.
b. Expenses on the income statement.
c. Income on the income statement.
d. Liabilities on the balance sheet.
3. Accrued revenues should be reported as
a. Assets on the balance sheet.
b. Expenses on the income statement.
c. Liabilities on the balance sheet.
d. Revenues on the income statement.
4. WIN.com sells one-year and two-year subscription for its electronic book-of-the-month
download business. Subscription are collected in advance and credited to sales. An analysis of
the recorded sales activity revealed the following
2017 2018

Sales P420,000 P500,000

Less: Cancellations 20,000 30,000

Net Sales P400,000 P470,000

Subscriptions EXxpiraitons:

2017 P120,000

2018 155,000 P130,000

2019 125,000 200,000

2020 140,000

P400,000 P470,000

In WIN.com’s Dec. 31, 2018 balance sheet, the balance for unearned subscription revenues
should be
a. P470,000
b. P465,000
c. P400,000
d. P340,000
5. A deferred expense should be recorded when
a. An expense is incurred as cash is paid.
b. A non-cash resource is consumed after cash is paid.
c. A service is rendered before payment of cash.
d. Cash is paid before an expense has been incurred.
6. An accrued expense should be recorded
a. By a buyer when a service is received on payment of cash.
b. By a seller when a service is rendered before payment of cash.
c. When an expense is incurred as cash is paid.
d. When an expense is incurred before cash is paid.
7. An analysis of Angelina Tagay Antiquies unadjusted prepaid expense account at Dec. 31, 2018
revealed the following:
- An opening balance at P15,000 for Angelina Tagay’s comprehensive insurance policy.
Angelina Tagay paid an annual premium of P30,000 on July 1, 2017.
- A P32,000 annual insurance premium payment made July 1, 2018.
- A P20,000 advance rental payment for a warehouse leased for one year beginning Jan. 1,
2019.

In its Dec. 31, 2018 balance sheet, what amount should Angelina Tagay report as Prepaid
Expenses?

a. P52,000
b. P36,000
c. P20,000
d. P16,000
8. An accrued revenue should be recorded by
a. Buyer when a service is received on payment of cash.
b. Seller when a customer pays for a service before the service is rendered.
c. Seller when a service is rendered before receipt of cash.
 d. Seller when a service is rendered on receipt of cash.
9. On Nov. 1, 2018, Alevir Pido Portraits paid P36,000 to renew its insurance policy for 3 years. On
Dec. 31, 2017, Alevir Pido’s unadjusted trial balance showed a balance of P900 for prepaid
insurance and P44,100 for insurance expense. What amounts should be reported for prepaid
insurance and insurance expense in Alevir Pido’s Dec. 31, 2018 financial statement?
Prepaid Insurance Insurance Expense
a. P33,000 P12,000
b. P34,000 P12,000
c. P34,000 P11,000
d. P34,900 P10,100
10. An entity that pays employees every two weeks has paid workers P375,000 in wages and salaries
for week completed during 2017. In addition, the employees earned one week’s salary of P7,200
at the end of December that will be paid as part of the P14,400 payroll at the end first week of
January in 2018. How much should the company report for salaries and wages expense for
2017?
a. P367,800.
b. P375,000.
c. P389,400.
d. P382,200.
11. Deferred expense should be reported as
a. Assets on the balance sheet.
b. Expenses on the income statement.
c. Income on the income statement.
d. Liabilities on the balance sheet.
12. Accrued expenses should be reported as
a. Assets on the balance sheet.
b. Expenses on the income statement.
c. Liabilities on the balance sheet.
d. Revenues on the income statement.
13. Roberto Orcajada Realty pays commissions to its sales staff at the rate of 3% of net sales. Sales
staff are not paid salaries but are given monthly advances of P15,000. Advances are chaged to
commission expense, and reconciliations against commissions are prepared quarterly. Net sales
for the year ended Mar. 31, 2018 were P15,000,000. The unadjusted balance in the commissions
expense account on March 31, 2018 was P400,000. March advances were paid on Apr. 3,2018.

In its income statement for the year ended Mar. 31, 2018, what amount should Roberto
Orcajada report as commission expense?
a. P465,000
b. P450,000
c. P415,000
d. P400,000
14. At the beginning of 2017, an entity purchased a fire insurance policy covering a property for a
period of two years. The P5,600 cost of the policy was paid in cash. At the end of 2017, the
company will reduce Prepaid insurance for this policy by
 a. P0
b. P467
c. P5,600
d. P2,800
15. An end-of-period adjustment involves
a. A change in an account balance that is neither an accrual or a deferral.
b. A recognition of the extra cash flows related to the year-end delivery of goods and services.
c. An adjustment that result in revenues or expenses being reported in a different time period
from the associated cash flows.
d. An exchanges of resources between two departments in an organization.
16. A deferred revenue should be recorded by a
a. Buyer when a service is received on payment of cash.
b. Seller when a customer pays for a service before the service is rendered.
c. Seller when a service is rendered before receipt of cash.
d. Seller when a service is rendered on receipt of cash.
17. Based on 2018 sales of music recorded by an artist under a contract with therese IndieMusic, the
artist earned P200,000 after an adjustment of P16,000 for anticipated returns. In addition,
therese paid the artist P150,000 in 2018 as a reasonable estimate of the amount recoverable
from future royalties to be earned by the artists.

What amount should therese report in its 2018 income statement as royalty expense?
a. P200,000
b. P216,000
c. P350,000
d. P366,000
18. How would the proceeds received from the advance sale of non-refundable tickets for a
theatrical performance be reported in the seller’s financial statements before the performance?
a. Revenue for the entire proceeds.
b. Revenue to the extent of related costs expended.
c. Unearned revenue for the entire proceeds.
d. Unearned revenue to the extent of related cost expended.
19. Under Maurice Sabio Vintage Clothing services accounting system, all insurance premiums paid
are debited insurance. For interim financial reports, Maurice Sabio makes monthly estimated
changes to insurance expenses with credits to prepaid insurance. Additional information for the
year ended Dec. 31, 2018 is as follows:

Prepaid insurance at Dec. 31, 2017 P110,000

Charges to insurance expense during 2018 (including a year- 437,500
End adjustment of P10,500)
Prepaid insurance at Dec. 31, 2018
What was the total amount of insurance premiums paid by Maurice Sabio during 2018?
a. P327,500
b. P427,000
c. P437,500
 d. P448,000
20. Salaries and wages that are recorded as expenses at year end but remain unpaid are an example
of
a. A deferred expense.
b. A deferred revenue.
c. An accrued expense.
d. Ana accrued revenue.
21. An entity has P1,500 of supplies on hand at the end of 2017. During 2018, P2,750 of supplies
were purchased. A count of supplies on hand at the end of 2018 found an inventory of P875.
What was the amount of supplies expense for 2018?
a. P1,875.
b. P5,125.
c. P3,375.
d. P4,250.
22. Edgar Detoya Law must determine the Dec. 31, 2018 year-end accruals for advertising and rent
expenses. A P5,000 advertising bill was received Jan. 7, 2019. It related to cost of P3,750 for
advertisements in Jan. 2019 issues of the newspaper.

A store lease, effective Dec. 16, 2017 calls for fixed rent of P12,000 per month, payable one
month from the effective date and monthly thereafter. In addition, rent equal to 5% of net sales
over P3,000,000 per calendar year is payable on Jan. 31 of the following year. Net sales for 2018
were P5,500,000. In its Dec. 31, 2018 balance sheet, Edgar Dotoya should report accrued
liabilities of
a. P125,000.
b. P128,000.
c. P131,000.
d. P134,000.
23. SuySan Real Estate owns an office building and leases the office under a variety of rental
agreements involving rent paid in advance monthly or annually. Not all tenants make timely
payments of their rent. SuySan’s balance sheets contained the following data:
2017 2018

Rental Receivable P192,000 P248,000

Unearned Rentals 640,000 480,000

During 2018, SuySan received P1,600,000 from tenants. What amount of rental revenues should

Suysan record for 2018?

a. P1,816,000
b. P,1708,000
c. P1,440,000
d. P1,332,000
24. The purchased of a prepaid insurance policy would initially be recorded as
a. A deferred expense.
b. A deferred revenue.
 c. An accrued expense.
d. An accrued revenue.

Adjusting the accounts

Multiple choice

1. Which of the following transactions will not result in the recognition of an expense?
a. A cash withdrawal by the owner.
b. Expiration of prepaid insurance.
c. Interest accrued on a bank loan.
d. Use of machinery during the period.
2. The accountant may spread the cost of a building over many year’s primarily because of the
a. Fiscal year assumption.
b. Going concern assumption.
c. Periodicity assumption.
d. Periodicity assumption and going concern assumption.
3. Which of the following accounts would probably need to be adjusted at year-end?
a. Land
b. Notes Payable
c. Supplies
d. Withdrawals
4. Which of the following is an example of an accrual?
a. Bookkeeping fees collected but not yet earned.
b. Equipment purchased for use the business.
c. Interest earned but not yet received.
d. Six months’ rent paid in advance.
5. Which of the following accounts would likely not need to be adjusted at year-end?
a. Land
b. Office Supplies
c. Prepaid Advertising
d. Unearned Revenues
6. Which of the following is an example of a deferral?
a. A commission collected in advance.
b. Interest earned on a bank account.
c. Interest expense incurred but not yet paid.
d. Medical fees earned but not yet collected.

Use the following information to answer question 7 to 11 below. The trial balance for Patrocinio
Abad Claims Adjuster appears as follows:
Patrocinio Abad Claims Adjuster
Trial Balance
Dec. 31, 2018
Cash P20,000
Accounts receivable 50,000
Prepaid insurance 5,000
 Supplies 15,000
Office Equipment 40,000
Accumulated Depreciation-
Office Equipment P20,000
Accounts Payable 30,000
Abad, Capital 60,000
Service revenues 50,000
Salaries Expense 10,000
Rent Expense 20,000
P160,000 P160,000
7. If on Dec. 31. 2018, supplies on hand were P2,000, the adjusting entry would contain a
a. Credit to Supplies expense for P13,000.
b. Credit to Supplies for P2,000.
c. Debit to Supplies expense for P13,000.
d. Debit to Supplies for P2,000.
8. If on Dec. 31, 2018 the insurance still unexpired amounted to P2,000, the adjusting entry would
contain a
a. Credit to Prepaid Insurance for P2,000.
b. Credit to Prepaid Insurance for P3,000.
c. Debit to Insurance Expense for P2,000.
d. Debit to Prepaid Insurance for P3,000.
9. If the estimated depreciation for office equipment were P20,000, the adjustinf entry would
contain a
a. Credit to Accumulated Depreciation-Office Equipment for P20,000.
b. Credit to Depreciation Expense-Office Equipment for P20,000.
c. Credit to Office Equipment for P20,000.
d. Debit to accumulated Depreciation-Office Equipment for P20,000.
10. If as of Dec. 31, 2018 the rent of P10,000 for December had not been recorded or paid, the
adjusting entry would included a
a. Credit to accumulated rent for P10,000.
b. Credit to Cash for P10,000.
c. Debit to Rent Expense for P10,000.
d. Debit to Rent Payable for P10,000.
11. If services totaling P12,500 had been performed but not yet billed, the adjusting entry to record
this would include a
a. Credit to Service Revenues for P12,500.
b. Credit to Service Revenues for P62,000.
c. Credit to Unearned Service Revenues for P12,500.
d. Debit to Service Revenues for P12,500.
12. The recording of an expense could result in a corresponding increase in
a. A liability.
b. An asset.
c. Owner’s equity.
d. Revenue.
13. Office Supplies were P9,000 at the end of January and P11,400 at the end of February. During
February, Office Supplies Expense equaled P3,000. How much cash was paid for office supplies
during February?
a. P2,400
b. P14,000
c. P17,400
d. P5,400
14. An adjusting entry would not include which of the following accounts?
a. Cash
b. Interest Receivable
c. Property Taxes Payable
d. Unearned Revenues
15. Salaries Payable were P3,500 at the end of September and P2,800 at the end of October. Salaries
Expense for October was P18,000. How much cash was paid for salaries during October?
a. P18,700
b. P24,000
c. P17,000
d. P11,700
16. An adjusting entry can include a debit to a(n)
a. Asset and a credit to a liability.
b. Expense and a credit to a revenue.
c. Liability and a credit to a revenue.
d. Revenue and a credit to an asset.
17. The adjustment for that portion of revenue received in advance which now has been earned is
to debit
a. Cash and credit Unearned Revenues.
b. Service Revenues and credit Unearned Revenues.
c. Unearned Revenues and credit Cash.
d. Unearned Revenues and credit Service Revenues.
18. Which of the following transactions during the year would most likely not need an adjusting
entry at the end of the period?
a. Cash withdrawal by the owner.
b. Performance of a service that previously was paid for.
c. Purchase of a two-year insurance policy.
d. Purchase of office equipment.
19. An adjusting entry cannot include a debit to a(n)
a. Asset and a credit to a liability.
b. Asset and credit to a revenue.
c. Expense and a credit to an asset.
d. Liability and a credit to a revenue.
20. An adjusting entry made to record accrued interest on a note payable due next year consist of a
debit to
a. Interest Expense and a credit to Cash.
b. Interest Expense and a credit Interest Payable.
 c. Interest Expense and a credit Notes Payable.
d. Interest Receivable and a credit to Interest Earned.
21. Failure to record depreciation at year-end will result in an
a. Overstatement of total assets.
b. Overstatement of total liabilities.
c. Understatement of profit.
d. Understatement of total liabilities.
22. Which of the following transactions will not result in an increase in revenues?
a. Accumulation of interest in bank account.
b. An investment in the business by the owner.
c. Sale of goods on credit.
d. Sale of services for cash.
23. Unearned Revenues was P6,000 at the end of February and P7,500 at the end of March. Service
Revenues was P42,000 for the month of March. How much cash was received for services
provided during March?
a. P55,500
b. P40,500
c. P28,500
d. P43,500
24. Failure to adjust for accrued Salaries at year-end will result in an
a. Overstatement of liabilities.
b. Overstatement of profit.
c. Understatement of assets.
d. Understatement of owner’s equity.

Use the following information to answer questions 25 to 29 below. The following information
pertains to Luz Un Machine Shop:

a. Accrued interest on a note receivable amounted to P1,000.

b. A one-year insurance policy was purchased for P20,000. Three months have passed since the
purchase.
c. Depreciation on buildings is at P50,000.
d. The company received a P36,000 advance payment during the year on services still to be
performed. By the end of the year, one-fourth of the services had been performed.
e. The company’s Supplies account showed a beginning debit balance of P2,000 and supplies
purchased of P8,000; P3,000 of supplies were on hand at year-end.
25. The adjusting entry for Supplies would include a
a. Credit to Supplies for P3,000.
b. Credit to Supplies Expense for P8,000.
c. Debit to Supplies Expense for P7,000.
d. Debit to Supplies Expense for P8,000.
26. The adjusting entry for depreciation on buildings would include a
a. Credit to Accumulated Depreciation- Buildings for P50,000.
b. Credit to Buildings for P50,000.
c. Credit to Depreciation Expense-Buildings for P50,000.
 d. Debit to Accumulated Depreciation-Buildings for P50,000.
27. The adjusting entry for the insurance policy would include a
a. Credit to Insurance Expense for P15,000.
b. Credit to Prepaid Insurance for P5,000.
c. Debit to Insurance Expense for P15,000.
d. Debit to Prepaid Insurance for P5,000.
28. The adjusting entry to record the accrued interest on the note would include a
a. Credit to Interest Income for P1,000.
b. Credit to Interest Receivable for P1,000.
c. Debit to Interest Expense for P1,000.
d. Debit to Interest Payable for P1,000.
29. The adjusting entry to record the amount of service revenues earned during the period would
include a
a. Credit to Unearned Service Revenues for P9,000.
b. Debit to Service Revenues for P27,000.
c. Debit to Unearned Service Revenues for P9,000.
d. Debit to Unearned Service Revenues for P27,000.

Worksheet and Financial Statements

Multiple Choice

1. Which of the following types of information is not found in financial statement?

a. Profits
b. Revenue
c. Selling prices
d. Assets
2. Accounting data flow from the
a. Balance sheet to the income statement
b. Income statement to the statement of owner’s equity
c. Statement of owner’s equity to the balance sheet
d. Both b and c are correct
3. Consider the steps in the accounting cycle. Which part of the accounting cycle provides
information to help a business decide whether to expand its operations?
a. Post-Closing Trial Balance
b. Adjusting Entries
c. Closing Entries
d. Financial Statements
4. Which columns of the accounting work sheet show unadjusted amounts?
a. Trial Balance
b. Adjustments
c. Income Statement
d. Balance sheet
5. Which columns of the work sheet show profit?
 a. Trial Balance
b. Adjustments
c. Income Statement
d. Both b and c
6. Which situation indicates a loss on the income statement?
a. Total debits equal total credits
b. Total credits exceed total debits
c. Total debits exceed total credits
d. None of the above
7. Supplies has a P60,000 unadjusted balance on your trial balance. At year-end you count supplies
of P20,000. What adjustment will appear on your work sheet?
a. Supplies 40,000

Supplies Expense 40,000

b. Supplies Expense 20,000

Supplies 20,000
c. Supplies expense 40,000
Supplies 40,000
d. No adjustment is needed because the Supplies account already has a correct balance.
8. Which of the following is a cash inflow from financing activities?
a. Receipt from collection on notes receivable.
b. Receipt from interest on notes receivable.
c. Receipt from issuance of notes payable.
d. Receipt from sale of property and equipment.
9. In the adjusted trial balance, the owner’s equity account reflects

a. The beginning-of-the-period balance.

b. Increase to income and expense.

c. The period ending balance.

d. The result of adjusting entries.

10. Which of the following steps comes first in worksheet preparation?

a. Compute each account’s adjusted balance by combining the trial balance and
adjustment figures.
b. Compute profit or loss as the difference between total revenues and total expense on
the income statement.
c. Enter the account balances in the unadjusted trial balance columns and total the
amounts.
d. Enter the adjusting entries in the adjustment columns and total the amounts.
11. If the income statement debit and credit columns are not equal after adding the respective
columns.
a. An error has been made.
b. The entity either generated a profit or incurred a loss.
c. The entity generated a loss.
d. The entity incurred a loss.
e. The liabilities must exceed the assets.
12. The income statement debit column the work sheet contains
a. Asset account balances.
b. Expense account balances.
c. Contra asset account balances.
d. Liability account balances.
e. Revenue account balances.
13. The amount of profit will appear on the debit side of the income statement columns on a
worksheet,
a. If profit exceeds the owner’s withdrawals.
b. If total assets exceeded total liabilities for the period.
c. If total expenses exceeded total revenue for the period.
d. If total revenue exceeded total expenses for the period.
e. If withdrawals have been made during the period.
14. If total credits exceed total debits in the balance sheet columns of a worksheet,
a. A loss has occurred.
b. A mistake has been made.
c. A profit has occurred.
d. Assets exceed liabilities.
e. No conclusion can be drawn until the closing entries have been made.
15. In which columns of a worksheet would the adjusted balance of accumulated depreciation
appear?
a. Adjusted Trial Balance Credit, Balance Sheet debit
 b. Adjusted Trial Balance Credit, Income Statement Credit
c. Adjusted Trial Balance Debit, Balance Sheet Debit
d. Trial Balance Credit, Adjustments Credit, Adjusted Trial Balance Credit, and Balance
Sheet Credit
e. Trial Balance Debit, Adjusted Trial Balance Debit
16. Worksheets are prepared because
a. The aid in the preparation of the financial statements, adjusting entries, and closing
entries.
b. They are necessary for the preparation of the financial statements.
c. They are required by generally accepted accounting principles.
d. They constitute a permanent record of all adjusting entries made for the period.
17. Assuming an entity is profitable in the current period, the total of the balance sheet credit
column in the worksheet will be
a. Lagers than the balance sheet debit column.
b. Lager than the income statement credit column.
c. Larger than the income statement debit column.
d. Smaller than the balance sheet debit column.
18. The usefulness of the worksheet is in
a. Aiding the preparation of financial statements.
b. Identifying the accounts that need to be adjusted.
c. Summarizing the effects of all the transactions of the period.
d. All of the above.
19. If the initial sum of the balance sheet credit column on a worksheet is greater than the initial
sum of the balance sheet debit column, then
a. A loss occurred during the period.
b. An error was made on the worksheet.
c. The sum of the income statement credit column must exceed the sum of the income
statement debit column.
d. All of the above.
20. A statement of changes in equity
a. Has no relationship with the balance sheet.
b. Indicates whether the cash position of the entity will permit withdrawals by the owner.
c. Provides a link between the income statement and the balance sheet.
d. Shows the income and expenses of entity for a given period.
21. Which of the following is an example of an investing activity?
a. Obtaining a bank loan
b. Paying taxes to the government
c. Producing goods and services
d. Purchasing a building
22. Which of the following is an example of a financing activity?
a. Acquiring land
b. Employing workers
c. Paying off a loan
d. Selling equipment
23. The statement of changes in equity would not show
a. Revenues and expenses.
b. The owner’s ending capital balance.
c. The owner’s initial capital balance.
d. The owner’s withdrawals for the period.
24. The profit figure appears in all the following financial statement except the
a. Balance sheet.
b. Income statement.
c. Statement of cash flows.
d. Statement of changes in equity.
25. The statement of cash flows would disclose the withdrawal of the cash by the owner
a. In the financing activities section.
b. In the investing activities section.
c. In the notes to the financial statements.
d. In the operating activities section.
26. Which of the following is an example of an operating activity?
a. Obtaining capital from owners
b. Purchasing equipment
c. Selling goods and services to customers
d. Selling land
27. The owner’s Capital account is found on the
a. Balance sheet debit column and nowhere else.
b. Trial balance credit column, adjusted trial balance credit column, and balance sheet
credit column of a worksheet.
c. Trial balance credit column, adjustments credit column, adjusted trial balance credit
column, and balance sheet credit column of a worksheet.
d. Trial balance credit column and income statement debit column of a worksheet.
e. Trial balance debit column, adjustments debit column, adjusted trial balance credit
column, and income statement credit column of a worksheet.
28. If the amount of profit for the current period is less than the amount of the owner’s
withdrawals, there will be a(n)
a. Decrease in the cash account.
b. Decrease in the owner’s capital account.
c. Increase in liabilities on the balance sheet.
d. Increase in line cash account.
e. Increase in the owner’s capital account.
29. Profit for Jeffrey Franco’s Treasures is P250,000 for the current year. The owner withdrew
P30,000 per month for personal living expense. The owner’s capital account will show a net
a. Decrease of P110,000.
b. Decrease of P360,000.
c. Increase of P610,000.

a. increase of P360,000.
18. Which of the following is a cash outflow from operating activities?
a. Payment for interest expense
 b. Payment to acquire property and equipment
c. Payment to settle notes payable
d. Payment to owners in the form of withdrawals
19. The trial balance debit orcredit amount of each account is combined with the amount of any
debit or credit adjustment to that account to determine the new balance of the account. This
process is known as
a. Balancing
b. Cross-footing
c. Footing
d. Totaling
20. which of the following comes first in the accounting process?
a. Journalizing external transactions
b. Preparation of an adjusted trial balance
c. Preparation of an unadjusted trial balance
d. Worksheet preparation
21. which two steps in the accounting cycle are aided by the preparation of a worksheet?
a. Adjusting the accounts and preparing financial statements
b. Analyze source documents and preparing financial statements
c. Posting journal entries and adjusting the accounts
d. Journalizing transactions and closing the accounts
22. Posting a P3,000 debit as a credit causes an error
a. In the journal
b. Known as transposition
c. That is diviisible by 9
d. That is divisible by 2
Use the following information to answer questions 35 to 39 below. Villanueva Realty had the
following balance sheet accounts and balances:

Accounts Payable P60,000 Equipment P70,000

Accounts Receivable 10,000 Arlyn Villanueva, Capital ?

Building ? Land P70,000

Cash 30,000

35. If the balance of the Villanueva, capital account was P210,000. What would be the balance of the
Building account?

a. P250,000
b. P40,000
c. P90,000
d. P210,000
36. If the balance of the Building account was P170,000. What would be the total of liabilities and
owner’s equity?
a. P170,000
b. P270,000
c. P320,000
 d. P350,000
37. If the balance of the building account was P150,000 and the equipment was sold for P70,000,
what would be the total of owner’s equity?
a. P150,000
b. P160,000
c. P270,000
d. P330,000
38. If the balance of the Building account was P140,000 and P30,000 of accounts Payable were paid
in cash, what would be the balance of the Villanueva, Capital account?
a. P210,000
b. P260,000
c. P320,000
d. P340,000
39. if the balance of the building account was P80,000 and P30,000 of accoutns payable were paid in
cash, what would be the total liabilities and owner’s equity?
a. P140,000
b. P180,000
c. P190,000
d. P230,000
Use the following information to answer questions 40 to 42 below. The following is the balance sheet for
noeme Par Day Care:

Noeme Par Day Care

Balance Sheet

Dec. 31, 2018

Assets Liabilities

Cash P80,000 Accounts Payable P160,000

Accounts Receivable P10,000

Land P140,000 Owner’s Equity

Building P440,000 par,Capital P640,000

Equipment P130,000

Total Assets P800,000 Total Liabilities and Owner’s Equity P800,000

40. if the balance in the cash account were used to pay part of Account’s Payable, then total
liabilities and owner’s equity would
a. decrease by P80,000
 b. decrease by P160,000
c. increase by P80,000
d. increase by P160,000
41. if the equipment were sold for P130,000, then the Par, Capital accunt would
a. decrease by P130,000
b. increase by P130,000
c. increase by P370,000
d. stay the same
42. if the balance in the Cash account were used to buy more equipment, then the total assets
would
a. decreased by P80,000
b. increased by P80,000
c. increased by P210,000
d. remain unchanged

multiple choice

1. Manufacturing costs would not include

a. Depreciation on factory equipment.
b. Indirect labor costs.
c. Indirect materials used.
d. Sales salaries expense.
2. Each of the following is true with respect to product costs, except
a. Direct labor is an example of a product cost.
b. Product costs are deducted from revenue when the manufacturing process is completed.
c. Product costs are not regarded as expense of the current period.
d. Product costs represent inventoriable costs.
3. Which of the following is not liekly to be treated as a product cost?
a. Depreciation on the factory.
b. Interest paid on notes payable.
c. Portion of the cost of running the quality control department.
d. Wages paid to factory workers.
4. The purchases-raw materials account is debited when
a. Direct materials are placed into production.
b. Direct materials are purchased.
c. Indirect materials are placed into production.
d. Indirect materials are purchased.
5. The direct labor account is debited
a. At the end of the payroll period, when employess are paid.
b. When a new factory employee begins work.
c. When related labor costs are transferred into the Work in process inventory account.
d. When the goods manufactured are completed.

Multiple choice
1. The type of transaction that would appear in the sales journal would be a sale of
a. Equipment for cash.
b. Equipment in exchange for a note.
 c. Merchandise for cash.
d. Merchandise for account.
2. The receipt of cash arising from a sales transaction would be recorded in the
a. Cash payments journal
b. Cash receipts journal
c. Purchases journal
d. Sales journal
3. The classification and normal balance of the sales discount accout would be
a. Contra revenue and debit
b. Contra revenue and debit
c. Expense and debit
d. Revenue and credit
4. An item retailing for P10,000 subject to a trade discount of 25%, is paid for within the discount
period on terms of 2/10,n/30. What is the amount of payment?
a. P10,000
b. P7,500
c. P7,400
d. P7,350
5. Each time an entry is recorded in the purchases journal, the credit would beentered in the,
a. Account payable column.
b. Accounts receivable column.
c. Purchases column.
d. Supplies column.
6. Which of the following items would be recordded in the purchases journal?
a. Equipment purchases on account
b. Merchandise purchased on account
c. Supplies purchased on account
d. All of the above.
7. The controlling account in the general ledger that summarizes the debits and credits to the
individual accounts in the customers ledger is called-
a. Accounts payable
b. Accounts receivable
c. Purchases
d. Sales
8. In frequent sales return would be recorded in which journal?
a. Cash payments
b. Cash receipts
c. General
d. Sales return
9. The individual amounts in the accounts payable column of the purchases journal are posted to the
appropriate account in the
a. Accounts payable ledger
b. Accounts receivable ledger
c. General journal
d. General ledger
10. The controlling account in the general ledger that summarizes the individual accounts with
creditors in a subsidiary ledger is called
a. Accounts payable
b. Accounts receivable
c. Purchases
d. Sales returns and allowances
 11. If a firm uses special journals, in which journal would the sale of merchandise for cash be
recorded?
a. Cash disbursements journal
b. Cash receipts journal
c. General journal
d. Sales journal
12. If a firm uses special journals acquired merchandise for P5,000 giving a P5,000 note payable. In
which journal would the transaction be recorded?
a. Cash disbursement journal
b. Cash receipts journal
c. General journal
d. Purhcase journal
13. A special journal contained columns for cash, purchases discounts, and accounts payable. This
journal is
a. A cash disbursement journal
b. A cash receipts journal
c. A purchases journal
d. A sales journal
14. Which of the following is true of a voucher system?
a. All major expendtures, including cash transactions for payment of rent and utilities
expense, would first be credited to vouchers payable before payment is made.
b. The check register replaces the cash receipts journal
c. The voucher register contains a debit column for vouchers payable
d. Transactions are first entered in the check register, and later, when payment is made, in
the voucher register.
15. When merchandise is returned or a price adjustment is granted, an entry is made in the
a. Adjustment journal
b. Cash receipt journal
c. General journal
d. Purchases journal

Multiple choice

1. Suppose RJ Garcaino Sound had sales of P300,000 and sales returns of P40,000 Cost of goods
sold was P160,000. How much gross profit did RJ Garciano Sound report?
a. P160,000
b. P180,000
c. P100,000
d. P260,000
2. Suppose Ramir Alindogan Catering’s inventory account showed a balance of P100,000 before the
year-end adjustments. The physical count of goods on hand totaled P97,000. To adjust the
accounts, Ramir Alindogan would make this entry:
a. Inventory 3,000
Accounts Receivable 3,000
b. Cost of Goods sold 3,000
Inventory 3,000
c. Inventory 3,000
 Cost of Goods sold 3,000
d. Accounts Payable 3,000
Inventory 3,000
3. Which account in question 2 would Ramir Alindogan close at the end of the year?
a. Cost of Goods sold
b. Accounts Receivable
c. Accounts Payable
d. Inventory
4. On a worksheet for a merchandising entity that uses the perpetual inventory system,
a. The cost of goods sold is contained in one account in the Balance sheet columns.
b. The cost of goods sold is contained in one account in the Income Statement columns.
c. The cost of golds sold is created by an entry in the Adjustments columns.
d. The items composing cost of goods sold are scattered through the Income statement
columns.
5. Which of the following accounts would not appear on a worksheet for a merchandising entity that
uses the periodic inventory system?
a. Cost of Goods sold
b. Purchases
c. Sales returns and Allowances
d. Transportation in
6. Which of the following accounts would appear on a worksheet for a mercahndising entity that
uses the perpetual inventory system?
a. Cost of Goods sold
b. Income summary
c. Purchases
d. Purchases returns and allowances
7. The closing entries for a merchandising entity using the perpetual inventory system
a. Are fewer in number than if the periodic system were used
b. Are the same regardless of inventory system used
c. Calculate the gross profit in the Income summary account
d. Do not affect the Merchandise inventory account
8. Which of the following accounts would not be closed by a merchandising entity that uses the
perpetual inventory system?
a. Cost of Goods sold
b. Income summary
c. Merchandise inventory
d. Sales return and allowances
9. On a worksheet prepared for a merchandising entity that uses the perpetual inventory system,
a. The components of cost of goods sold are contained in several accouts in the Income
statement columns.
b. The Income summary account is used to adjust the Owner’s capital account
c. The inventory amount in the Balance sheet columns is the same as in the Trial Balance
columns
d. The owner’s withdrawals account is closed into the owner’s capital account.
10. Which of the following accounts would appear on a worksheet for a merchandising entity that
uses the periodic inventory system?
a. Cost of Goods sold
b. Income summary
c. Purchases returns and allowances
 d. All of these
11. Which of the following account is closed by debiting the account?
a. Purchases
b. Purchases returns and allowances
c. Sales returns and allowances
d. Transportation in
12. Which of the following accounts is unique to a merchandising entity that uses the periodic
inventory system?
a. Cost of Goods sold
b. Merchandise inventory
c. Purchases
d. Transportation in
13. The merchandise inventory account balance in the Trial balance columns of a worksheet for a
merchansiding entity that uses the periodic inventory system
a. Appears in both the debit and the credit columns
b. Appears in the credit column only
c. Is corrected as stated
d. Is the same as it was at the beginning of the period
Multiple choice

1. Penetrante owns and operates a large hardware store in Cabanatuan City that employs about
forty-five personnel. She delegates some of the decision making to two supervisors. Penetrante’s
business is organized as a
a. Corporation.
b. Partnership.
c. Sole proprietorship.
d. Limited partnership.
2. Jumawan loves to cook. She receives unqualified praise whenever she prepares a meal for
someone. Encouraged by these compliments and eager to put her culinary talents to good use,
Jumawan decides to open a boutique restaurant in Dumaguete City. Since she plans to maintain
complete control of the business, she will most likely organize it as a
a. Limited partnership.
b. Corporation.
c. General partnership.
d. Sole proprietorship.
3. A budding entrepreneur wants to start a business but is unsure of the legal form suited for her.
Short of cash, she has to take the form that is least expensive and most flexible in terms of
decision making and implementation. Which would you recommend?
a. Joint venture
b. Partnership
c. Sole proprietorship
d. Cooperative
e. Corporation
4. Unlimited liability means
a. There is no limit on the amount an owner can borrow.
b. Creditors will absorb any loss from nonpayment of debt.
c. The business can borrow money for any type of purchase.
 d. The owner is responsible for all business debts.
e. Shareholders can borrow money from the business.
5. Cabrera inherited a large amount of money from his parents. Cabrera wishes to start his own
business in Batangas. His lawyers encourage him to make it a corporation. What disadvantage of
a sole proprietorship are the lawyers trying to avoid?
a. Unlimited liability
b. Lack of management skills
c. Retention of all profits
d. Lack of money
6. After Russell has maximized her standby credit limit from the CDO Bank and still cannot cope
with working capital needs of her fast-growing business, what is her recourse if she wants her
company to continue growing?
a. Obtain a partner or form a corporation to accessmore funds.
b. Hire more employees.
c. Turn away potential new customers.
d. Continue to plead with the bank for more money.
e. Hold a fundraising campaign.
7. Daganta’s partnership agreement with two partners was done haphazardly and thus caused
some limitations. One of the concerns was uneven productivity among the partners. The
agreement required each partner to contribute to every aspect of the business to receive an
equal portion of the profits. This agreement did not reflect the idea that
a. Partners need not be “equal” because each bring varied talents and knowledge into the
partnership.
b. General partners are required to be active in day-to-day business operations.
c. Customers and creditors of a limited partnership need not be protected.
d. The limited partnership law requires every general partnership to have at least one limited
partner.
e. Each partner may enter into contracts on behalf of all the others.
8. The person who assumes full co-ownership of a partnership including unlimited liability is a
a. Sole proprietor.
b. Shareholder.
c. Limited partner.
d. General partner.
9. The partner who can lose only what he has invested in a business is the
a. General partner.
b. Sole proprietor.
c. Manager.
d. Employee.
e. Limited partner.
10. Alibangbang and Sol decided to go into business together. They started by listing the essential
terms of their agreement along with their rights and duties. Alibangbang and Sol created a(n)
a. Article of partnership.
b. Licensing agreement.
c. Articles of incorporation.
d. Division of partnership agreement.
11. Which of the following would least likely be stated in the articles of partnership?
a. Who will make each the final decisions
b. How much each partner will invest
c. What the duties of each partner are
d. What products the company will sell
e. What will happen if a partner dies or wants to dissolve the partnership
12. Burgos, Del Mundo and Gonzales are partners in an accounting firm with each partner owing an
equal share of the business. Del Mundo died suddenly of a heart attack. What will most likely
become of the partnership?
a. It will immediately cease to exist. Burgos and Gonzales will have to find new jobs.
b. Del Mundo’s share of the business will automatically be split between Burgos and Gonzales.
c. Burgos and Gonzales will be able to purchase Del Mundo’s interest from his estate.
d. It will be dissolved. Burgos and Gonzales will lose personal property to pay business debts.

Multiple choice

1. An ordinary or preference shareholder is similar to a ___________ because he can lose no

more than the value of the investment.
a. General partner
b. Limited partner
c. Sole proprietor
d. Nominal partner
e. Stockbroker
2. What is the primary disadvantage of both a sole proprietorship and a partnership that a
corporation overcomes?
a. No access to capital
b. Taxing complications
c. Unlimited liability
d. Ease of start-up
e. Lack of secrecy
3. A corporation whose stock can be purchased by anyone and is traded in stock markets is
known as a (n)
a. Government- owned corporation.
b. Close corporation.
c. Open corporation.
d. Not-for-profit corporation.
4. Shares of 1st Global StratDev stock cannot be purchased in any stock exchange or just any
individual. This means that 1st Global StartDev is a (n)
a. Partnership.
b. Open partnership.
c. Family corporation.
d. Close corporation.
5. When organizing a corporation, the incorporators submit articles of incorporation to
a. A judge.
 b. The Securities and Exchange commission.
c. The National Bureau of Investigation.
d. The Board of Investments.

Multiple choice

1. Which of the following qualifications is necessary in order that one may be elected president of
the corporation?
a. He must be a citizen and a resident of the Philippines.
b. He must be a director of the corporation.
c. He must not be a shareholder or director of a competitor corporation.
d. He must not be a president of any other corporation.
e. All of the above.
2. It is the supreme authority in matters of management of the regular and business affairs of a
corporation.
a. Board of directors
b. Majority shareholders
c. Minority shareholders
d. None of the above
3. Choose the situation which illustrates the minimum requirement of the law to corporate
formation:
Authorize Capital Subscribed Capital Paid-In Capital
a. P100,000 P25,000 P5,000
b. 100,000 5,000 5,000
c. 50,000 12,500 3,125
d. 60,000 15,000 5,000
4. The following are the steps in the creation and organization of a corporation except
a. Incorporation.
b. Promotion.
c. Formal organization and commencement of the business operations.
d. None of the above.
5. The par value of ordinary shares is equal to
a. The amount received by the corporation when the share was originally issued.
b. The amount at which the share is currently trading in an organized market.
c. A designated peso amount per share established in the articles of incorporation.
d. The book value of the ordinary shares.
6. The arbitrary value assigned to a share of stock is called
a. Market value.
b. Par value.
c. Liquidation value.
d. Book value.
7. Right of the corporation to continue as a juridical entity for the period stated in the Articles of
Incorporation despite the death of any shareholder:
a. Right of succession
b. Right od pre-emption
c. Right of existence
 d. None of the above
8. The directors of a corporation are responsible for
a. Declaring dividends.
b. Maintaining shareholders records.
c. The day to day managing of the business.
d. Preparation of accounting records and financial statements.
9. A corporation is being organized with and authorized share capital of P50,000. How much of this
P50,000 should be subscribed and how much must be actually paid?
Amount Subscribed Amount paid
a. P12,500 P3,125
b. 10,000 2,500
c. 25,000 6,250
d. 12,500 5,000
10. A corporation has the following attributes except
a. An artificial being with a personality separate and apart from its shareholders.
b. Created by operation of law
c. Enjoys the right of succession
d. Has the powers, attributes and properties expressly authorized by law or incident to its
existence.
e. None of the above
11. The owners of shares in a stock corporation are called
a. Incorporators.
b. Promoters.
c. Members.
d. Shareholders.
12. Refers to an equitable right of shareholders to subscribe to newly issued shares of the
corporation in proportion to their present in order to maintain their equity in their surplus as
well as proportionate standing in the corporation.
a. Right of redemption
b. Pre-emptive right
c. Right to be sued
d. Concept of corporate entity
13. The advantage of a corporation from a partnership is
a. The death of a shareholder will not dissolve the corporation because of its power of
succession.
b. Its management is centralized on the board of directors.
c. Shareholders have limited liability.
d. Shareholders are not general agents of the business
e. All of the above
14. The most powerful person in a corporation is the
a. Incorporator.
b. President.
c. Vice-president.
d. Chairman of the board.
15. The shareholders or members mentioned in the Articles of Incorporation originally forming and
composing the corporation and who are signatories thereof are called
a. Incorporators.
b. Corporators.
c. Promoters.
d. Subscribers.
e. None of the above
16. One of the following is not a characteristic of the corporate form of organization.
a. Limited liability of shareholders
b. Mutual agency
c. Continuous existence
d. Centralized authority
17. The ordinary stock of the corporation entitling the owner to pro-rata dividends without any
priority over any other shareholders but equally with all other shareholders except preference
shareholders is
a. Preference share.
b. Guaranteed share.
c. Convertible share.
d. Ordinary share.
18. One who has agreed to take shares from the corporation on the original issue of such share is
called
a. Incorporator.
b. Member.
c. Promoter.
d. Subscriber.
19. No par value shares cannot be issued
a. For less than P5.00.
b. With preference as to assets to dividends.
c. Without being fully paid.
d. By banks, trust companies, insurance companies, public utilities, and building and loan
associations.
e. All of the above.
20. Incorporators
a. A number of natural persons not less than 5 but not more than 15
b. Majority are residents of the Philippines
c. Must own or be a subscriber to at least one share of the share capital of the stock
corporation to be formed
d. Need not be citizens of the Philippines
e. All of the above
21. Persons who compose the corporation whether as shareholders or members are called
a. Corporators.
b. Incorporators.
c. Promoters.
d. Subscribers.
e. None of the above
 22. Five persons decided to organize a corporation. Which of the following situation illustrates best
the minimum requirement of the law to capital formation?
Authorized Capital Subscribed Capital Paid-In Capital
a. P100,000 P20,000 P5,000
b. 100,000 25,000 5,000
c. 100,000 25,000 6,250
d. 100,000 30,000 6,000
23. Which of the following is a disadvantage of the corporate form of business?
a. Corporations lack mutual agency.
b. There is a greater degree of government control and supervision.
c. Ownership shares can be easily transferred.
d. Owner’s liability is limited.

Multiple choice

1. Treasury stock is considered to be

a. Authorized and issued shares.
b. Issued and outstanding shares.
c. Authorized and unissued shares.
d. Unissued and outstanding shares.
2. Which of the following statements about treasury stock are correct?
I. Treasury stock does not receive dividends.
II. Treasury stock is not included in the earnings per share calculation.
III. Treasury stock is the same as unauthorized stock.
IV. Treasury stock does not have voting rights.
a. I, II, and IV
b. I,II, and III
c. II, III, and IV
d. I,II,III, and IV
3. When corporation issues new ordinary shares, which of the following will increase?
I. Total liabilities
II. Total assets
III. Quick assets
IV. Net worth
a. I and II
b. III and IV
c. II, III, and IV
d. I, II, III, and IV
4. An advantage of a partnership is
a. Limited liability.
b. Ability to raise capital,
c. Ease of formation.
d. Transfer of ownership.
5. If a partner in a partnership dies,
a. Each remaining partner receives an equal share of the deceased partner’s ownership of the
business.
 b. The partnership is dissolved.
c. The partner’s spouse takes the deceased partner’s place.
d. A new partner is added to the partnership.
6. An advantage of a corporation is
a. Ease of formation.
b. Limited liability.
c. Regulation.
d. Double taxation.
7. If a significant amount of capital is needed to start a business, how should the business be
organized?
a. Corporation
b. General partnership
c. Limited liability partnership
d. Sole proprietorship
8. On the balance sheet, a corporation must disclose all of the following except number of shares
a. Authorized.
b. Issued.
c. Unissued.
d. Outstanding.
9. Authorized shares are the
a. Number of shares that have been distributed to shareholders.
b. Total number of shares that can be issued by the corporation at any time.
c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
10. Issued share are the
a. Number of shares that have been distributed to shareholders.
b. Total number of shares that can be issued by the corporation at any time.
c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
11. Outstanding shares are the
a. Number of shares that have been distributed to shareholders.
b. Total number of shares that can be issued by the corporation at any time.
c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
12. Treasury shares are the
a. Number of shares that have been issued to shareholders.
b. Total number of shares that can be issued by the corporation at any time.
c. Number of shares that are owned by shareholders at the balance sheet date.
d. Number of shares the corporation has repurchased.
13. The difference between issued shares and outstanding shares of stock is
a. Authorized stock.
b. Common stock.
c. Preferred stock.
d. Treasury stock.
 14. When Bradley Corporation incorporated it was authorized to issue 1,000,000 shares of common
stock. It immediately issued 50,000 shares. In 2015, it issued and additional 20,000 shares. In
2018, it repurchased 5,000 shares with the intent of reissuing them. On the Dec. 31,2018,
balance sheet, Bradley Corporation would show
a. 50,000 shares issued and 45,000 shares outstanding.
b. 70,000 shares issued and 65,000 shares outstanding.
c. 70,000 shares issued and 70,000 shares outstanding.
d. 1,000,000 shares issued and outstanding.

Multiple choice

1. On a statement of financial position, treasury stock is shown as a(n)

a. Asset.
b. Liability.
c. Deduction from the ordinary shares account.
d. Deduction from total share holders’ equity.
2. Which of the following is a characteristics of ordinary shares?
a. Voting rights
b. Guaranteed dividends
c. Maturing date
d. Receives dividends before preference shareholders
3. Ordinary shareholders usually have all of the following rights except to
a. Vote to elect the board of directors.
b. Share in the assets in a profitable liquidation.
c. Participate in day-to-day operations of the entity.
d. Receive their proportional share of dividends are declared.
4. Which of the following is a characteristic of preference shares?
a. Voting rights
b. Guaranteed dividends
c. Maturity date
d. Receives dividends before ordinary shareholders
5. A corporation might repurchase its own stock for all of the following reasons except to
a. Vote for the board of directors.
b. Use for employee compensation.
c. Improve financial ratios.
d. Deter a takeover attempt.