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Fundamentals of Accountancy, Business & Management 1

SECOND GRADING EXAMINATION

1. The process of providing financial information to external decision makers is referred to as:
a. Public accounting.
b. Government accounting.
c. Financial accounting.
d. Managerial accounting.

2. This account is used to record payments received from customers prior to the delivery of goods
or rendering of services.
a. Accrued income
b. Unearned income
c. Prepaid asset
d. Accounts receivable

3. A chart of accounts is
a. a listing of all accounts and their balances.
b. a subsidiary ledger.
c. a special journal.
d. a listing of all account titles.

4. How is profit or loss calculated?

a. It is the difference between net assets at the beginning and end of the accounting period
irrespective of transactions with owners.
b. It is the difference between net liabilities at the beginning and end of the accounting period.
c. It is the difference between assets and liabilities.
d. It is the difference between income and expenses.

5. Aling Nena’s Sari-sari Store’s total sales during the period were ₱100M. Of that amount, ₱60M
was on credit. If the total business expenses were ₱70M, how much is the profit (loss)?
a. 30M
b. (30M)
c. 10M
d. (10M)

6. The beginning equity is ₱5,000. If total income for the period is ₱8,000 while total expenses are
₱6,000, how much is the ending balance of equity?
a. 7,000
b. 5,000
c. 3,000
d. 1,000

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7. The ending equity is ₱9,000. If total income for the period is ₱5,000 while total expenses are
₱8,000, how much is the beginning balance of equity?
a. 12,000
b. 9,000
c. 6,000
d. 0

8. If the beginning equity is ₱50,000 while the ending equity is ₱70,000, how much is the profit
(loss) for the period?
a. 20,000
b. (20,000)
c. 10,000
d. (10,000)

9. Entity A’s total assets, liabilities and equity were ₱10,000, ₱7,000 and ₱3,000, respectively, at the
beginning of the period. During the period, total liabilities decreased by ₱4,000 while profit was
₱5,000. How much is the ending total assets of Entity A?
a. 12,000
b. 11,000
c. 9,000
d. 7,000

10. At the start of the period, a business has total assets of ₱500,000 and total liabilities of ₱300,000.
During the period, the business earned total income of ₱1,000,000 and total expenses of ₱640,000.
No additional investments or withdrawals were made by the owner. Total assets at the end of
the period were ₱830,000. How much is the total liabilities at the end of the period?
a. 280,000
b. 270,000
c. 260,000
d. 240,000

11. The generally accepted accounting principles (GAAP) in the Philippines are represented by the
PFRSs which are issued by the
a. Pinoy Accounting Standards.
b. Kapisanan ng mga Kontador sa Pilipinas.
c. Financial Reporting Standards Council.
d. International Accounting Standards Board.

12. Which of the following assumptions means that money is the common denominator of economic
activity and provides an appropriate basis for accounting measurement and analysis?
a. Going concern
b. Periodicity
c. Stable monetary unit
d. Economic entity

13. This branch of accounting focuses on catering to the information needs of internal users.
a. Management accounting
b. Financial accounting

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 c. Auditing
d. External accounting

14. You want to put up a business – a pizza parlor. However, you have this dilemma – you do not
want to put up the business alone but you also do not want to enter into business deals with
people you do not trust. At the most, you are only willing to accept one other individual to help
you put up your pizza business. You have in mind your best friend who is more than willing to
contribute resources in putting up the business. She is very excited about your business proposal
and even changed her Facebook status to “self-employed.” She just texted you that she is willing
to quit her day job in order to help you put up the pizza business. What type of business
organization best suits your need?
a. Sole proprietorship
b. Partnership
c. Corporation
d. Cooperative

15. The following are decisions made by internal users except

a. To analyze the profitability of product lines
b. To impose taxes
c. To decide whether to continue or discontinue product lines
d. To decide whether to build new production facilities

16. Mang Kulas Company sells “balut,” “penoy,” “taho,” and barbeque. At the same time, Mang
Kulas Company also offers spa, manicure, pedicure, and armpit hair removal to its customers.
Mang Kulas Company is referred to as a
a. high breed business.
b. hybrid business.
c. complicated business.
d. hard-working business.

17. A person who is engaged in business is called

a. a boss.
b. an entrepreneur.
c. Chinese.
d. all of these

18. This refers to information that is expressed in words or descriptive form.

a. Qualitative information
b. Financial information
c. Quantitative information
d. Information System

19. The communicating process of accounting includes all of the following except
a. Recording
b. Summarizing
c. Classifying
d. Controlling

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20. Which of the following best describes the basic purpose of accounting?
a. To provide information about a reporting entity that is useful in making economic decisions.
b. To provide all the information needed by management in managing the operations of a
reporting entity.
c. To provide information that the creditors can use in deciding whether to make additional
loans.
d. To provide accountants something to do.

21. An event is considered an accountable event if

a. it has an effect on the assets, liabilities, equity, income or expenses of the entity.
b. it cannot be measured reliably.
c. it cannot be expressed in terms of a unit of measure.
d. it involves sociological and psychological matters.

22. Which of the following is not a characteristic of an asset?

a. It has the potential to provide economic benefits.
b. It is a resource controlled by the entity.
c. It causes an outflow of economic benefits when it is settled.
d. It has resulted from a past event.

23. It is the left side of an account.

a. Debit
b. Credit
c. Date
d. Account title

24. It is a record of the increases and decreases in a specific item of asset, liability, equity, income or
expense.
a. Journal
b. Account
c. Accountant
d. Notes

25. Which of the following is not a balance sheet account?

a. Cash
b. Accounts payable
c. Owner’s drawings
d. Salaries expense

26. These are assigned to each account to facilitate recording, cross-referencing, and retrieval of
information.
a. Account titles
b. Account numbers
c. Mobile numbers
d. Hashtags

27. Entity A’s equipment was lost due to theft. How will Entity A record this event?
a. Recognize the carrying amount of the lost equipment as gain.

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 b. Charge the carrying amount of the lost equipment as loss.
c. Go to the police station and record the event in the police officer’s logbook.
d. This event is not recorded.

28. Entity A has an interest-bearing note payable. At the end of the period, Entity A would most
probably recognize which of the following?
a. Interest income
b. Interest expense
c. Gain
d. Bad debts expense

29. This represents the value of inventories that have been sold during the accounting period.
a. Interest Expense
b. Travel expense
c. Rent expense
d. Cost of sales

30. This account is used to record sales on credit.

a. Accounts receivable
b. Accounts receivable
c. Cash
d. Cost of sales

31. This account is used to record the cost of purchased goods that are intended for resale.
a. Building
b. Inventory
c. Accounts receivable
d. Owner’s capital

32. The business acquires equipment. The business allocates the equipment’s cost over the
equipment’s useful life, instead of expensing it right away. The portion of the equipment’s cost
that is expensed during the period is recorded as
a. Bad debts expense.
b. Equipment.
c. Allowance for bad debts.
d. Depreciation expense.

33. This account is used when a business purchases inventory on account (on credit).
a. Cash
b. Accounts receivable
c. Accounts payable
d. Prepaid supplies

34. Payments to employees as compensation for the services they have rendered during a period are
recorded in this account.
a. Rent expense
b. Cost of sales or Cost of goods sold
c. Freight-out

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 d. Salaries expense

35. This account is used to record the investments of the business owner to the business.
a. Owner’s capital
b. Owner’s drawings
c. Salaries expense
d. Loss

36. Revenues earned from rendering services are recorded in this account.
a. Sales
b. Service fees
c. Interest income
d. Gains

37. Which of the following would result to income of ₱320,000?

a. Total expenses of ₱280,000 and loss of ₱40,000
b. Total expenses of ₱360,000 and profit of ₱40,000
c. Total expenses of ₱220,000 and loss of ₱100,000
d. Total expenses of ₱360,000 and loss of ₱40,000

38. Which of the following would result to total expenses of ₱480,000?

a. Total income of ₱360,000 and profit ₱120,000
b. Total income of ₱580,000 and loss of ₱100,000
c. Total income of ₱630,000 and profit of ₱150,000
d. Total income of ₱630,000 and loss of ₱150,000

39. A business has total assets, liabilities, and equity of ₱10,000, ₱7,000 and ₱3,000, respectively, at
the beginning of the period. During the period, total liabilities decreased to ₱4,000 while profit
was ₱5,000. How much is the ending total assets?
a. 12,000
b. 11,000
c. 9,000
d. 7,000

40. Who was the first Filipino Certified Public Accountant?

a. Lapu-lapu
b. Andres Bonifacio
c. Spongebob Squarepants
d. Don Vincente Fabella

“From the ends of the earth I call to you, I call as my heart grows faint; lead me to the rock that is higher than
I.” (Psalms 61:2)

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