The basic purpose of accounting is
Ans: To provide quantitative financial information about
a business enterprise that is useful in making rational
economic decision
Financial accounting can be broadly defined as the
area of accounting that prepares
Ans: General purpose financial statements to be used
by parties both internal and external to the business
enterprise
The basic components of the financial statements
do not include
Ans: Statement of Cost of Goods Sold
The basic components of the financial statements
Ans: Statement of Comprehensive Income,
Statement of Financial Position/ balance sheet,
Statement of Cash Flows
What is the objective of financial statements?
Ans: To provide information about the financial
position, performance and changes in financial position
of an entity that is useful to a wide range of users in
making economic decisions
It is an independent private sector body with the
objective of achieving uniformity in the
accounting principles which are used by business
enterprises for financial reporting around the
world Ans:
International Accounting Standards Committee
The highest accounting standard-setting
authority in the Philippines
Ans: Financial Reporting Standards Council
It is the body authorized by law to promulgate
rules and regulations affecting the practice of
accountancy in the Philippines
Ans: Professional Regulatory Board of Accountancy
They encompass the conventions, rules, and
procedures necessary to define what the
accepted accounting practices are  Expense accounts normally have ________
Ans: Generally accepted accounting principles
The GAAP in the Philippines are now known as
Ans: Both PAS and PFRS
Philippine Financial Reporting Standards (PFRS)
include all of the following, except
Ans: Framework for the Preparation and Presentation
of Financial Statements
The purpose of International Accounting
Standards (IAS) and International Financial
Reporting Standards (IFRS) is to
Ans: Promote uniform accounting standards among
countries of the world
The accounting equation
Ans: Shows the claims on the entity's assets
represented by creditors and owners
The double-entry system of accounting means
that every transaction 
Ans: Affects at least two general ledger accounts and
is recorded by an equal amount of debits and credits
Which among the rules on debit and credit below
is not correct? 
Ans: Assets and expenses are debited when
increased, and liabilities, revenues and equity are
credited when increased
Debits
Ans: Increase assets and expenses and decrease
liabilities, revenue, and equity
Credits
Ans: Decrease assets and expenses and increase
liabilities, revenue, and equity
Income accounts normally have ________
balances. These accounts increase on the
________ side and decrease on the ________
side. 
Ans: credit; credit; debit
Liability accounts normally have ________
balances. These accounts increase on the
________ side and decrease on the ________
side.
Ans: credit; credit; debit
Owner's Equity accounts normally have ________
balances. These accounts increase on the
________ side and decrease on the ________
side. 
Ans: credit; credit; debit
Asset accounts normally have ________
balances. An increase in asset is recorded as a
________ while a decrease in asset is recorded as
a _______
Ans: debit; debit; credit
balances. An increase in expense is recorded as a
________ while a decrease in expense is recorded
as a ________.
Ans: debit; debit; credit
X purchased a new register system for his
grocery store, paying P1,000 in cash and issuing
a P6,000 note payable for the balance owed. As a
result of this transactions, X's balance sheet
would reflect 
Ans: An increase in assets and an increase in
liabilities
Which among the following is the last step in the
accounting cycle?
Ans: Journalizing and posting of closing entries
What is the correct sequence for recording
transactions and preparing financial statements 
Ans: Journal, ledger, trial balance, financial statements

Journalizing is performed in what phase of the
accounting process?
Ans: Recording
General ledger serves what phase of the
accounting process?  asset account on December 31, 2021 should be
Ans: Classifying
Which statement about the trial balance is
incorrect?
Ans: A trial balance proves that all amounts have
been posted to the correct amounts
X has completed the posting process for the
month of June and has prepared a trial balance in
which the debits total P11,000 and the credits
total P11,100. Which of the following errors would
be the most likely candidate in causing the trial
balance not to balance by P100? 
Ans: A P50 debit was posted as a P50 credit
The purpose of adjusting entries is to
Ans: Apply the realization principle and the matching
principle to transactions affecting two or more
accounting periods
Adjusting entries are needed because an entity  analysis.
Ans: Uses the accrual basis of accounting
Accruals are
Ans: Adjusting entries where revenue or expense
recognition precedes cash flow
Which of the following least resembles a typical
adjusting entry
Ans: Debit asset, credit liability
Which of the following statements is false
regarding adjusting entries?
Ans: Each adjusting entry affects one revenue
account and one expense account
An accrued expense is an expense
Ans: Incurred but not paid
An unearned revenue can be best described as an
amount
Ans: Collected and not currently matched with
expense
The failure to properly record an adjusting entry
to accrue an expense results in
Ans: Understatement of expense and an
understatement of liability
The failure to properly record an adjusting entry
to accrue a revenue results in 
Ans: Understatement of revenue and an
understatement of asset
The premium on a three-year insurance policy
expiring on December 31, 2023 was paid in total
on January 1, 2021. The original payment was
initially debited to a prepaid asset account. The
appropriate journal entry had been recorded on
December 31, 2021. The balance in the prepaid
Ans:  The same as it would have been if the original
payment had been debited initially to an expense
account
A document prepared to prove the equality of
debits and credit after all adjustments is the 
Ans: Adjusted trial balance
Which financial statement is most useful in
assessing the profitability of the business
enterprise? 
Ans: Statement of Comprehensive Income
The financial statement that shows the sources
and uses of cash.
Ans: Statement of Cash Flow
A part of financial statement that shows the
corporate profile, estimates and provisions used
by company, and detailed computation and
Ans: Notes to Financial Statement
The closing process
Ans: Posts all closing entries to the appropriate
general ledger account
After the accounts have been closed 
Ans: The revenue, expenses, and income summary
accounts have zero balances
Accumulated depreciation is an example of
Ans: nominal and contra account
Premium on bonds payable is an example of
Ans: real and adjunct account
Which an example of a nominal and contra
account?
Ans: Sales discount
Reversing entries 
Ans: Impact the statement of financial position and
the income statement
Which of the following statements regarding
reversing entries is incorrect? 
Ans: Reversing entries change amounts reported in
the statement of financial position for the previous
period
Which of the following adjusting entries cannot
be subject to reversing entries? 
Ans: Deferral of expense under the asset method
and  unearned revenue under the liability method