Professional Documents
Culture Documents
6. Which of the following is NOT part of the functions of the accounting system?
a) Reporting the results of the operations during the period
b) Analysing and recording business transactions of the enterprise.
c) Classifying and summarizing the effects of the transactions on the accounting elements.
d) Preparing financial statements that are favorable to the data users.
7. The professional organization that serves the needs of accountants who work for a single company is the:
a) Securities and Exchange Commission (SEC)
b) Philippine Association of Management Accountants (PAMA)
c) Association of CPAs in Public Practice (ACPAPP)
d) Financial Reporting Standards Council (FRSC)
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d) Controlling costs
10. Which of the following is NOT one of the four primary financial statements?
a) Statement of retained earnings
b) Statement of cash flows
c) Statement of financial position
d) Statement of financial performance
11. Corporations differ from proprietorships and partnerships in several ways. One difference is that:
a) Only corporations are going-concern
b) Retail stores are usually not owned by corporations
c) People can invest in corporation with limited personal risk
d) Only corporations adhere to the business entity concept
13. Which of the following provides the guidance for determining what accounting treatment where a Philippine Financial
Reporting Standards (PFRS) or a Philippine Accounting Standards (PAS) does not provide specific guidelines?
a) Generally Accepted Amortization Standards
b) Generally Accepted Auditing Standards
c) Accounting standards and practices
d) Conceptual framework
14. Which of the following is NOT a service typically provided by large public accounting firms?
a) Re-designing operating procedures
b) Making management decisions
c) Performing audits
d) Establishing accounting systems
15. Which of the following is NOT a step in the decision making process?
a) Identify the issue
b) Gather information
c) Identify alternatives
d) Select the option that will result in the greatest financial increase
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c) They are the same laws within our legal system
d) They have been formulated in the public sector
21. For management accountants, avoiding conflicts of interest by refusing compromising gifts and favors is included in
the code of ethics requirement of
a) Competence
b) Confidentiality
c) Integrity
d) Objectivity
23. Which of the following involves determining the cost of certain business activities and interpreting cost information?
a) Cost accounting
b) Management accounting
c) Tax accounting
d) Financial accounting
24. Which of the following statements does not pertain to the definition of income statement?
a) Tells the story of the profits and losses experienced by the firm for a given period of time
b) Report the results of operations over a specific period of time
c) Explains, in part, how the company’s financial position changed over a specific period of time
d) Is the end of accounting process that conveys the management and external parties to concise the
picture of the cash movement of the company over a specified period of time
25. When the company purchases for $500,000 cash an asset with market value of $750,000, which accounting concept,
principle, or assumption specifically requires that the asset be reported at $500,000 on the balance sheet?
a) Going-concern assumption
b) Cost principle
c) Objectivity principle
d) Business entity concept
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27. Under which form of business are the owners directly responsible for the debts of the business?
a) Partnership only
b) Sole proprietorship only
c) Corporation only
d) Sole proprietorship and partnership
28. Resource increases from the sale of goods or services are called
a) Revenues
b) Assets
c) Gains
d) Naet income
29. Which of the following is NOT one of the four general types of financial statement notes?
a) Supplementary information required by the BIR
b) Additional information about the summary totals found in the financial statements
c) Disclosure of important information that is not recognized in the financial statements
d) Summary of significant accounting policies
30. Which of the following activities would NOT be classified as investing activities?
a) Purchase of land
b) Purchase of supplies
c) Sale of equipment
d) Sale of properties
31. Which of the following transactions would appear on the statement of cash flows as financing activities?
a) Cash paid for expenses
b) Investment by the owner(s)
c) Purchase of equipment
d) Cash received from the revenue transactions
33. Office equipment was purchased by issuing a check for $15,000 and note payable for the balance of $45,000. What
is the effect the transaction has on the financial position of the company?
a) Assets,decrease; Liabilities, increase; Equity, no change.
b) Assets,decrease; Liabilities, no change; Equity, increase.
c) Assets,increase; Liabilities, increase; Equity, no change.
d) Assets,no change; Liabilities, no change; Equity, no change.
34. If the current liabilities are $62,100 and the current ratio is 0.7, what is the total of the current assets?
a) $88,714.28
b) $45,244.28
c) $43,470.00
d) -$45,244.28
35. If the company has an assets of $800,000, liabilities of $360,000 and capital stock of $300,000, what is the amount of
retained earnings?
a. $140,000
b. $440,000
c. $500,000
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d. $660,000
36. Which of the following financial statements provides a picture of the enterprise at a particular point in time?
a) Statement of changes in equity
b) Statement of cash flows
c) Statement of comprehensive income
d) Statement of financial position
38. As a gesture of goodwill, office supplies of $3,000 were sold to a neighboring business that paid cash for supplies.
What is the effect the transaction had on the financial position of the company?
a) Assets,decrease; Liabilities, increase; Equity, no change.
b) Assets,decrease; Liabilities, no change; Equity, increase.
c) Assets,increase; Liabilities, increase; Equity, no change.
d) Assets,no change; Liabilities, no change; Equity, no change.
40. Notes to the financial statements about lawsuits, pledged assets, contractual commitments, and due dates on large
liabilities that help the users interpret the financial statements are required under an important GAAP known as which
of the following?
a) Going concern assumption
b) Cost principle
c) Window dressing
d) Disclosure
41. Measures taken by management to make the company appear as strong as possible in its financial statements are
called which of the following?
a) Window dressing
b) Adequate disclosure
c) Improvements of accounting equation
d) GAAP
43. Articulation refers to the relationship among the financial statements. What item on the balance sheet ties to the
statement of cash flows?
a) Beginning cash
b) Ending cash
c) Net income
d) Revenues
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44. The accuracy of the information contained in the financial statements is the responsibility of the
a) CPA
b) Board of Directors
c) Management
d) Stockholders
45. Which of the following classifications refers to those activities whereby cash is obtained or repaid to owners and
creditors?
a) Borrowing
b) Financing
c) Investing
d) Operating
47. Cash was invested in the business in exchange for capital stock. What is the effect the transaction has on the
financial position of the company?
a) Assets,decrease; Liabilities, increase; Equity, no change.
b) Assets,increase; Liabilities, no change; Equity, increase.
c) Assets,increase; Liabilities, increase; Equity, no change.
d) Assets,no change; Liabilities, no change; Equity, no change.
48. The company paid its employees their weekly wages of $36,000, what is the effect did the transaction have on the
financial position of the company?
a) Assets,decrease; Liabilities, decrease; Equity, no change.
b) Assets,increase; Liabilities, no change; Equity, increase.
c) Assets,decrease; Liabilities, no effect; Equity, decrease.
d) Assets,no change; Liabilities, no change; Equity, no change.
50. The idea that transactions are recorded at their exchange prices at the transaction date is referred to as the
a) Cost principle
b) Monetary measurement principle
c) Going concern assumption
d) Arm’s length transaction assumption
51. Which of the following distinguishes between current and long-term assets?
a) Comparative statement of financial position
b) Statement of comprehensive income
c) Classified balance sheet
d) Liquidity balance sheet
52. The company paid a $50,000 installment on a note payable of $450,000. What is the effect the transaction has on the
financial position of the company?
a) Assets,decrease; Liabilities, decrease; Equity, no change.
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b) Assets,decrease; Liabilities, no change; Equity, decrease.
c) Assets,increase; Liabilities, increase; Equity, no change.
d) Assets,no change; Liabilities, no change; Equity, no change.
53. The company sold the $940,000 a piece of equipment that was used in production, collecting a down payment of
$300,000 and a note receivable for the balance to be paid in subsequent accounting periods. On the statement of
cash flow, the $640,000 balance would be
a) Reported as a financing activity of $940,000
b) Reported as an operating activity as $940,000
c) Reported as an investing activity as $940,000
d) Disclosed as a noncash investing and financing transaction
55. Suppose you decide to purchase a stereo and an independent store dealer offers to sell you a system that retails for
$4,000 for a price of $3,695. After the negotiation, you purchase the system for $3,400. The $3,400 is considered the
accounting measurement for the transaction because of the
a) Double-entry assumption
b) Going concern assumption
c) Arm’s-length assumption
d) Fair value assumption
56. Users of accounting information who analyze the financial statement and monitor the development of a company are
called?
a) Creditors
b) Investors
c) Taxing authorities
d) Government regulatory agencies
59. Which of the following is NOT a key component of the definition of accounting?
a) Useful
b) Qualitative
c) Financial
d) Decision-oriented
60. Which of the following is true about the double-entry system of bookkeeping?
a) It was developed in the 1300s-1400s in Italy
b) It was developed in the 1300s-1400s in France
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c) It was developed in the 1400s-1500s in Italy
d) It was developed in the 1400s-1500s in France
61. Which of the following organizations has specific legal authority to establish accounting standards for publicly held
companies?
a) Philippine Institute of Certified Public Accountant
b) Financial Reporting Standards Council
c) Bureau of Internal Revenue
d) Securities and Exchange Commission
62. Which area of the accounting emphasis is not a major part of financial accounting?
a) Auditing
b) Regulatory
c) Criminal investigation
d) Internal audit
63. The character of externally reported information is characterized by all to the following except:
a) Is oriented toward the future
b) Largely historical in nature
c) May be inexact and contain approximations
d) Is general-purpose in nature
66. Measures used by an organization to guard against errors, waste and to assure the reliability of accounting
information; to promote compliance with management policies; and to evaluate the level of performance of all
divisions of the company, are called
a) Integrity
b) Audits
c) Internal control structure
d) Internal auditing
68. The emphasis in the financial accounting is on which of the following external user groups
a) Management
b) Educators
c) CPA
d) Investors and creditors
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69. Accounting can be described as a
a) Service activity
b) Merchandising activity
c) Manufacturing activity
d) All of these
70. The basic functions of the accounting system include all the following except:
a) Classifying the effects of similar transaction
b) Interpreting and recording the effects of the business transactions
c) Summarizing and communicating the information contained in the system
d) Dictating the specific types of business transactions that the enterprise may engage in
71. Which of the following professional accounting organizations intends to influence the concepts and ethical practice of
management accounting and financial management?
a) Association of CPAs in Public Practice (ACPAPP)
b) Philippine Institute of Certified Public Accountant (PICPA)
c) Government Association of CPAs (GACPA)
d) Philippine Association of Management Accountants (PAMA)
72. Accountants typically perform what action related to the financial results of business activities?
a) Report the result of business activities
b) Advise on how to structure business activities
c) Both a and b
d) None of the above
74. Only the $2,000 debit portion was posted of an adjusting entry in which Insurance Expense was debited and
Unexpired Insurance was credited. As a consequence of this error,
a) Trial balance will have a debit balance of $2,000 greater than the credit balance
b) Trial balance will have a credit balance of $2,000 greater than the debit balance
c) Trial balance will have equal totals of debit and credit balances
d) Assets will be understated by $2,000
75. Jim is a lawyer who requires that his clients pay him in advance of legal services rendered. Jim routinely credits
Legal Service Revenue when his clients pay hin in advance. In June, Jim collected $12,000 in advance fees and
completed 75% of the work related to these fees. What adjusting entry is required by Jim’s firm at the end of June?
a) Debit: Unearned Revenue $3,000; Credit: Legal Service Revenue $3,000
b) Debit: Unearned Revenue $9,000; Credit: Legal Service Revenue $9,000
c) Debit: Legal Service Revenue $3,000; Credit: : Unearned Revenue $3,000
d) Debit: Legal Service Revenue $9,000; Credit: : Unearned Revenue $9,000
77. Failure to prepare an adjusting entry at the end of the period to record an accrued revenue would cause
a) An understatement of revenues and understatement of liabilities
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b) An understatement of revenues and overstatement of liabilities
c) An understatement of revenues and understatement of assets
d) An understatement of revenues and overstatement of assets
78. Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When
wages are incurred in one period and paid in the next period, this often leads to which account appears on the
balance sheet at the end of the period?
a) Wages Expense
b) Wages Payable
c) Due from Employees
d) Due to Employer
79. A company spends P10 million pesos for an office building. Over whar period should the cost be written off?
a) All in first year
b) Over the useful life of the building
c) When the 10 million is expended in cash
d) After 10 million in revenue is earned
80. At the end of July, the first month of the business year, the usual adjusting entry transferring rent earned to revenue
account from the unearned rent account was omitted. Indicate which items will bw incorrectly stated because of the
error on the income statement for the month of July.
a) Assets, no effect; Liabilities, understated; Equity, overstated.
b) Assets, no effect; Liabilities, overstated; Equity, understated.
c) Assets, understated; Liabilities, no effect; Equity, understated.
d) Assets, overstated; Liabilities, no effect; Equity, overstated.
81. Adjustments would not be necessary if financial statements were prepared to reflect net income from
a) Interim operations
b) Monthly operations
c) Fiscal year operations
d) Lifetime operations
84. On March 31, 2019, Pheonix, Inc. paid Melanie Publishing Company P15,480 for a 3-year subscription for five
different magazines. The subscriptions started immediately. What is the amount of revenue that should be recorded
by Melanie Publishing Company for each year of the subscription?
a) 2019: P15,480; 2020: P0; 2021: P0; 2022: P0
b) 2019: P3,870; 2020: P5,160; 2021: P5,160; 2022: P1,290
c) 2019: P5,160; 2020: P5,160; 2021: P5,160; 2022: P0
d) 2019: P0; 2020: P0; 2021: P0; 2022: P15,480
85. If business pays rent in advance and debit a Prepaid Rent account, the company receiving the rent earned payment
will credit
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a) Cash
b) Prepaid Rent
c) Unearned Rent Revevue
d) Accrued Rent Revenue
86. Can financial statements be prepared directly frm the adjusted trial balance?
a) Yes, adjusting entries have been recorded in the general journal and posted to the ledger accounts.
b) They can because that is only reason that an adjusted trial balance is prepared
c) No, the adjusted trial balance merely proves the equality of the total debit and total credit balances in the ledger
after adjustments are posted. It has no other purpose
d) They cannot. The general ledger must be used.
87. If the company’s adjustment for unearned rent had incorrectly been made for P18,000 instead of P12,000, what
would have been the effect on the financial statements?
a) Revenues would have overstated by P6,000; net income would have overstated by P6,000; liabilities would have
overstated by P6,000; and owner’s equity would have overstated by P6,000.
b) Revenues would have overstated by P6,000; net income would have overstated by P6,000; liabilities
would have understated by P6,000; and owner’s equity would have overstated by P6,000.
c) Revenues would have understated by P6,000; net income would have understated by P6,000; liabilities would
have understated by P6,000; and owner’s equity would have understated by P6,000.
d) Revenues would have understated by P6,000; net income would have understated by P6,000; liabilities would
have overstated by P6,000; and owner’s equity would have undestated by P6,000.
88. If unearned revenues are initially recorded in revenue accounts and have not all been earned at the end of the
accounting period, then failure to make an adjusting entry will cause
a) Revenues to be overstated
b) Revenues to be understated
c) Liabilities to be overstated
d) Asset to be understated
90. King University sold season tickets for 2018 football season for P160,000. A total of 8 games will beplayed during
September, October and November. In September, two games where played. In October, three games where played.
The balance in Unearned Revenue at October 31 is
a) P60,000
b) P100,000
c) P40,000
d) P0
91. Accrued salaries of P17,750 owed to employees for December 30 and 31 are not considered in preparing the
financial statements for the year ended December 31. Indicate which item on the balance sheet as of December 31,
will be incorrectly stated either overstated or understated.
a) Assets, no effect; Liabilities, understated; Equity, overstated.
b) Assets, no effect; Liabilities, overstated; Equity, understated.
c) Assets, understated; Liabilities, no effect; Equity, understated.
d) Assets, overstated; Liabilities, no effect; Equity, overstated.
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92. A company usually determines the amount of supplies used during a period by
a) Taking the difference between the supplies purchased and the supplies paid during the period
b) Adding the supplies on hand to the balance of the supplies account
c) Summing the amount of supplies purchased during the period
d) Taking the difference between the balance of the supplies account and cost of supplies on hand
93. Which of the following is NOT a reason that business documents are used in a business?
94. On January 25, Blayne Corporation bought supplies from a supplier for P3,600 on account. On Febuary 20, Blayne
paid the P3,600 owed to the supplier. The correct entry to record the purchase on January 25 is?
a) DR. Supplies 3,600; CR. Supplies Expense 3,600
b) DR. Supplies 3,600; CR. Accounts Payable 3,600
c) CR. Supplies 3,600; DR. Accounts Payable 3,600
d) CR. Supplies 3,600; DR. Supplies Expense 3,600
95. On May 16, Bennion Company, providing services to Bonaccorsi Inc. for P10,000 cash and P60,000 credit. On June
10, Bonaccorsi Inc. paid Bennion Company to record the transaction on May 16 would incloude:
a) A credit to Accounts Receivable
b) A credit to Cash
c) A credit to Service Revenue
d) A debit to Accounts Payable
97. Which of the following is the correct order for preparing a journal entry?
a) Identify which account is involved; For each account, detrermine if it is increased or decreased; For each
account, determine by how much it has changed
b) For each account, detrermine if it is increased or decreased; Identify which account is involved; For each
account, determine by how much it has changed
c) For each account, detrermine if it is increased or decreased; For each account, determine by how much it has
changed; Identify which account is involved
d) Identify which account is involved; For each account, determine by how much it has changed; For each account,
detrermine if it is increased or decreased.
98. A trial balance may balance even when each of the following occurs except when
a) A journal entry is posted twice
b) Incorrect accounts are used in journalizing
c) A transposition error is made
d) A transaction is not journalized.
99. Which of the following is NOT ussually part of an entry in the General Journal?
a) Account numbers for the debit and credit entry
b) An explanation of the transaction
c) The transaction date
d) Account titles for the debit and credit entry
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