CHAPTER ONE: INTRODUCTION TO ACCOUNTING

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QUIZ: MULTIPLE CHOICE

1. Which of the following statements regarding accounting is incorrect?

a. All business transactions and events are recorded in the accounting books.
b. Although bookkeeping and accounting are interrelated, they are not the same.
c. The purpose of accounting is to provide information that is useful in making economic decisions.
d. A transaction or event is recorded in the accounting records only if it has an effect on the assets, liabilities,
equity, income or expenses of the business.

2. Which of the following is not one of the necessary processes performed in accounting in order to provide
information that is useful to interested users?
a. Identifying
b. Summarizing
c. Recording
d. Counting

3. Accounting is described in various ways. Which of the following is not one of those descriptions?
a. Accounting is a process and a service activity.
b. Accounting is a social science and a practical art.
c. Accounting is the “language of business” because it is fundamental to the communication of financial
information.
d. Accounting is the art of professionally stealing money and other evil purposes.

4. Accounting has a long history. Which of the following is incorrect regarding the history of accounting?
a. Accounting can be traced as far back as the prehistoric times.
b. Accounting is as old as civilization and has evolved in response to economic and social needs of men.
c. Fra Luca Pacioli is the mama of modern accounting.
d. All of these are correct.

5. The main purpose of accounting is

a. To account for money so it will not be lost.
b. To provide information that is useful in making economic decisions.
c. To safeguard the assets of a company.
d. To provide a clear view of the state of the industry’s economy.

6. In accounting, the term “recording” is also called

a. Journalizing
b. Communicating
c. Debiting
d. Videoing

7. This process refers to the reporting of the information processed in the accounting system to interested users.
a. Measuring
b. Identifying
c. Communicating
d. Classifying
8. Which of the following statements is correct?
a. Financial accounting is the branch of accounting that deals with the specific needs of an entity’s management.
b. The internal users of accounting information include management, owners and creditors.
c. The external users of accounting information include potential and existing investors and lenders and other
creditors.
d. Government accounting is the branch of accounting that deals with the analysis of the costs of products and
services.

9. Which of the following statements is incorrect?

a. Erroneous financial statements can lead to bad financial decisions.
b. Internal users of financial information refer to the entity’s management personnel.
c. Tax accounting refers to the branch of accounting that deals with tax computations, filing of tax returns, and tax
planning.
d. Accounting education is the branch of accounting that deals with the teaching of accounting and related
subjects in order to produce competent and responsible business professionals.

10. The most common form of business organization is

a. Corporation
b. Sole Proprietorship
c. Partnership
d. Cell phone stand

11. This branch of accounting focuses on catering to the information needs of external users.
a. Management accounting
b. Financial accounting
c. Auditing
d. External accounting

12. These users need accounting information in order to regulate businesses that are within the scope of their
legal authority.
a. Employees
b. Creditors
c. Auditors
d. Government regulatory bodies or agencies

13. These users need accounting information in evaluating the stability of the business in so far as their job
security, future remuneration, and career growth and opportunities are concerned.
a. Employees
b. Creditors
c. Auditors
d. Regulatory authorities

14. The following are decisions made by external users except

a. Whether to hold or sell investments in stocks.
b. Whether or not to extend a loan to the business.
c. Whether to sell goods on credit to the business.
d. Whether to obtain additional capital from outside creditors or to generate it internally.
15. Which of the following users of financial information is not considered a creditor of the business?
a. A loan provider, such as a bank.
b. A supplier that sells goods to the entity on credit.
c. A customer that buys goods from the entity on credit.
d. A financing company that provides the entity with machineries on a “rent-to-own” basis.

16. It is the branch of accounting that involves the careful analysis of economic events and other variables to
understand their impact on decisions.
a. Accounting education
b. Cost accounting
c. Accounting research
d. Tax accounting

17. It is the process of objectively evaluating evidence and expressing an opinion regarding the correspondence
between management’s assertions and established criteria.
a. Accounting education
b. Auditing
c. Accounting research
d. Tax accounting

18. You own a business. Your business is engaged in buying goods at a wholesale price and reselling them at retail
prices on Facebook. Your business is a
a. Service business
b. Manufacturing business
c. Merchandising business
d. Monkey business

19. An advantage of a sole proprietorship over the other forms of a business organization is
a. You are the only boss and you keep all the profits.
b. Although it is easier to form, it may be more difficult to raise financing.
c. It has unlimited life.
d. It has limited liability.

20. Which of the following is not an advantage of a partnership over the other forms of business organization?
a. Compared to a sole proprietorship, risks are spread out over more than one owner.
b. Compared to a cooperative, the business organization is driven more towards the earning of profit.
c. Compared to a corporation, it is easier to form because of fewer legal requirements.
d. Compared to a corporation, it has an unlimited life and an unlimited liability.

“Do not be anxious about anything, but in everything by prayer and supplication with thanksgiving let your
requests be made known to God. And the peace of God, which surpasses all understanding, will guard your hearts
and your minds in Christ Jesus.”

Philippians 4:6-7
 CHAPTER TWO: ACCOUNTING CONCEPTS AND PRINCIPLES

Name: Date:
Professor: Section: Score:

QUIZ: MULTIPLE CHOICE

1. Which of the following terms may not refer to the logical notions and procedures that guide the accountant in
recording and communicating financial information?
a. Accounting concepts
b. Accounting principles
c. Accounting standards
d. Accounting laws and regulations

2. Under this concept, a business is not expected to end its operations in the near term.
a. Separate entity concept
b. Going concern
c. Stable monetary unit
d. Materiality

3. Transactions and other events are recorded in the periods in which they occur, not when they affect cash.
a. Going concern
b. Accrual basis
c. Reporting period
d. Consistency

4. The personal transactions of the business owner that do not involve the business are not recorded in the books
of accounts of the business. This relates to the concept of
a. Separate entity concept
b. Going concern
c. Stable monetary unit
d. Materiality

5. Presenting all amounts in the financial statements in Philippine pesos and disregarding the effects of inflation
on the purchasing power of the Philippine peso relate to the concept of
a. Separate entity concept
b. Going concern
c. Stable monetary unit
d. Materiality

6. Under this concept, the life of the business is divided into series of reporting periods.
a. Time period
b. Periodicity
c. Reporting period
d. All of these

7. The banking industry in the Philippines is mainly regulated by the

a. CDA
b. SEC
c. BSP
d. BIR
8. The Standards used in the Philippines are patterned from
a. U.S. GAAP.
b. Spanish Standards
c. Japanese Financial Reporting Standards
d. international standards, called the International Financial Reporting Standards (IFRS) issued by the International
Accounting Standards Board (IASB) which is based in the U.K.

9. Recording assets at their acquisition cost (entry value), rather than at their net selling price (exit value), is in
line with the concept of
a. Single entity concept
b. Historical cost concept
c. Going concern concept
d. Matching principle

10. Which of the following relates to the concept of consistency?

a. Treating the business as a separate entity from its owner.
b. Recording sales revenue when a sale occurs rather than when the sale price is collected.
c. Measuring assets at their acquisition cost.
d. Using the same accounting treatment for similar items from period to period.

11. Which of the following is an application of the concept of prudence or conservatism?

a. Choosing a potentially unfavorable outcome over a potentially favorable one.
b. Choosing a potentially favorable outcome over a potentially unfavorable one.
c. Deliberately understating assets and income and deliberately overstating liabilities and expenses.
d. Doing nothing in cases of uncertainty.

12. The cost of providing or using information should not exceed the information’s usefulness.
a. Materiality
b. Cost-benefit or Cost constraint
c. Going concern
d. Relevance

13. Under this concept, some costs are initially recognized as assets and recognized only as expenses when the
related revenue is recognized.
a. Separate entity concept
b. Historical cost concept
c. Going concern
d. Matching principle

14. Businesses are required by law to file tax returns with this government agency.
a. Security and Exchange Commission
b. Bureau of Internal Revenue
c. Cooperative Development Authority
d. Bangko Sentral ng Pilipinas

15. The accounting standards that are currently used in the Philippines are referred to as the
a. Philippine Financial Reporting Standards (PFRS)
b. Philippine GAAP
c. Filipino Accounting Standards (FAS)
d. Juan’s GAAP
16. The usefulness of information is assessed in terms of its
a. Qualitative characteristics.
b. Verifiability
c. Timeliness
d. Size

17. Which of the following is one of the fundamental qualitative characteristics?

a. Comparability
b. Relevance
c. Timeliness
d. Verifiability

18. Which of the following is correct concerning the qualitative characteristics?

a. Free from error means the information contained in the financial statements is perfectly accurate in all respects.
b. Neutrality means information is selected or presented with bias to increase the probability that the information
will be received favorably by the users.
c. Information that is not capable of affecting the decisions of users is considered irrelevant.
d. The enhancing qualitative characteristics can convert non-useful information to useful information.

19. A business purchased equipment for ₱10,000 but deliberately reported it as ₱100,000. Which of the following
principles is most likely not violated?
a. Faithful representation
b. Free from error
c. Historical cost
d. Materiality

20. This qualitative characteristic requires at least two items.

a. Comparability
b. Timeliness
c. Verifiability
d. Understandability

“The Spirit of the Lord will rest on him — the Spirit of wisdom and of understanding, the Spirit of counsel
and of might, the Spirit of the knowledge and fear of the Lord.”

Isaiah 11:2
 CHAPTER THREE: THE ACCOUNTING EQUATION

Name: Date:
Professor: Section: Score:

QUIZ: MULTIPLE CHOICE

1. It is an economic resource controlled by the entity that has resulted from past events and has a potential to
produce economic benefits.
a. Asset
b. Liability
c. Equity
d. Income

2. The term ‘economic resource’ connotes

a. an asset
b. a liability
c. an equity
d. all of these

3. The term ‘present obligation’ connotes

a. an asset
b. a liability
c. an equity
d. all of these

4. The claim of the owner(s) on the total assets of an entity is also called
a. assets
b. liabilities
c. equity
d. profit

5. It is a present obligation that has resulted from past events and has the potential to cause a transfer of an
economic resource in its settlement.
a. asset
b. liability
c. expense
d. income

6. A business owner’s contribution to the business results in

a. An increase in assets and an increase in income.
b. A decrease in assets and an increase in owner’s equity.
c. An increase in assets and an increase in liabilities.
d. An increase in assets and an increase in owner’s equity.

7. Indicating to others, through your past action, that you will accept and discharge certain responsibilities,
thereby creating an expectation on them that you will do so, creates an obligation called
a. Legal obligation
b. Construction obligation
c. Indicative obligation
d. Constructive obligation
8. A decrease in the economic benefits of a resource would be treated as
a. asset
b. liability
c. expense
d. income

9. Which of the following would not give rise to income?

a. enhancement in the value of an asset
b. decrease in liabilities
c. investment by the business owner to the business
d. all of these

10. In which of the following did a loss occur?

ASSETS = LIABILITIES + EQUITY + INCOME - EXPENSES
a. ₱920,000 ₱710,000 ₱290,000 ₱440,000 ₱520,000
b. ₱870,000 ₱310,000 ₱240,000 ₱470,000 ₱150,000
c. ₱890,000 ₱240,000 ₱240,000 ₱600,000 ₱190,000
d. ₱740,000 ₱530,000 ₱170,000 ₱1,900,000 ₱1,860,000

11. In accounting, a negative amount is normally presented

a. beginning with a minus sign
b. as a squeezed amount
c. in parentheses
d. negatively

12. Assets and liabilities result from

a. past events
b. future events
c. income and expenses
d. life events

13. Which of the following is incorrect regarding profit?

a. Profit is measured only indirectly as an arithmetical difference.
b. Profit is the excess of total income over total expenses.
c. Profit increases equity.
d. Profit is earned if total income is less than total expenses.

14. A business incurs total expenses of ₱630,000 and reports loss of ₱270,000. How much is the total income?
a. 900,000
b. 320,000
c. 380,000
d. 360,000

15. 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
16. Which of the following is a correct accounting equation?

ASSETS LIABILITIES EQUITY

a. ₱460,000 ₱190,000 ₱170,000
b. ₱230,000 ₱150,000 ₱70,000
c. ₱1,120,000 ₱990,000 ₱130,000
d. ₱1,020,000 ₱510,000 ₱410,000

17. Which of the following is a correct accounting equation?

ASSETS LIABILITIES EQUITY INCOME EXPENSES

a. ₱920,000 ₱710,000 ₱290,000 ₱440,000 ₱420,000
b. ₱870,000 ₱310,000 ₱240,000 ₱570,000 ₱150,000
c. ₱890,000 ₱240,000 ₱340,000 ₱600,000 ₱190,000
d. ₱740,000 ₱530,000 ₱170,000 ₱1,900,000 ₱1,860,000

18. Entity A had total assets, liabilities, and equity of ₱130M, ₱80M and ₱50M, respectively, at the beginning of the
period. During the period, Entity A’s total liabilities decreased by ₱20M, while its profit was ₱25M. There were
no other transactions or events that affected equity during the period. How much is Entity A’s ending total
assets?
a. ₱95M
b. ₱135M
c. ₱85M
d. ₱125M

19. Entity A had total assets, liabilities, and equity of ₱150M, ₱90M and ₱60M, respectively, at the beginning of the
period. During the period, Entity A’s total liabilities decreased to ₱40M, while its profit was ₱25M. There were
no other transactions or events that affected equity during the period. How much is Entity A’s ending total
assets?
a. ₱75M
b. ₱115M
c. ₱95M
d. ₱125M

20. Entity A had total assets of ₱120M and total liabilities of ₱80M at the beginning of the period. If at the end of
the period, total assets increased by ₱30M, while total liabilities remained the same, Entity A’s total equity at
the end of the period would be
a. ₱70M
b. ₱90M
c. ₱60M
d. ₱80M

21. Entity A had total assets and total liabilities of ₱120M and ₱85M, respectively, at the beginning of the period.
During the period, Entity A earned total income of ₱60M and incurred total expenses of ₱45M. How much is
Entity A’s ending total equity?
a. ₱60M
b. ₱90M
c. ₱50M
d. ₱120M
22. Entity A had total assets and total liabilities of ₱150M and ₱80M, respectively, at the beginning of the period.
During the period, Entity A earned total income of ₱60 and incurred total expenses of ₱40. Entity A’s total
assets decreased to ₱130M by year-end. There were no additional contributions by, or distributions to, the
owner during the period. How much is Entity A’s ending total liabilities?
a. ₱60M
b. ₱80M
c. ₱70M
d. ₱40M

23. Entity A has ending total assets of ₱90M and ending total liabilities of ₱60M. Entity A had a beginning equity
of ₱10M. If Entity A earned total income of ₱45M during the year, how much were the total expenses?
a. ₱0
b. ₱20M
c. ₱15M
d. ₱25M

24. Entity A has ending total assets of ₱150M and ending total liabilities of ₱90M. Entity A had a beginning equity
of ₱30M. If Entity A incurred total expenses of ₱50M during the year, how much was the total income?
a. ₱90M
b. ₱40M
c. ₱50M
d. ₱80M

25. At year-end, Entity A’s total assets and total liabilities are ₱190M and ₱70M, respectively. If Entity A had a
beginning equity of ₱145M and there were no contributions from, or distributions to, the owner during the
period, how much profit (loss) did Entity A earn (incur) during the year?
a. ₱35M
b. ₱25M
c. (₱35M)
d. (₱25M)

“Education is the passport to the future, for tomorrow belongs to those who prepare for it today.”

Malcolm X