COLLEGE OF BUSINESS MANAGEMENT

TEST QUESTION
Prelim Examination
1st Semester, SY 2020 – 2021

WMAD 301/BM 101/BA 3 (FUNDAMENTALS OF ACCOUNTING)

Instructor: Marilyn B. Dagad-ay

Name: ______________________________________ Score:

50
Class Schedule: _____________________ Date: ____________

GENERAL INSTRUCTION: Carefully read and analyze each statement before answering. Work independently
and with utmost honesty.

MULTIPLE CHOICES: Write the letter of your answer on the blank provided before each number.
_____ 1. Which of the following is not an appropriate description of accounting?
a. Accounting is an information system.
b. Accounting is an exact science and art.
c. Accounting is the language of business.
d. Accounting is a process that leads to understandable information.
_____ 2. The following information is provided by the basic accounting reports, except
a. Profitability b. Liquidity c. Feasibility d. Stability
_____ 3. Which of the following accounting processes comes first ahead of the others?
a. Interpreting b. Measuring c. Communicating d. Identifying
_____ 4. The statement of financial condition reports the following, except
a. Profitability b. Financial Position c. Liquidity d. Solvency
_____ 5. Statement 1: Accounting is useful in making economic decisions.
Statement 2: Accounting demands critical thinking and creative skills.
a. Only statement 1 is correct. b. Both statements are correct.
c. Only statement 2 is correct. d. Both statements are not correct.
_____ 6. The following statements describe the nature of accounting, except
a. Accounting is a service activity.
b. Accounting is a process, an art and a discipline.
c. Accounting is the language and the eyes of business.
d. Accounting is a perfect science of business.
_____ 7. The function of accounting is to provide
a. quantitative information.
b. qualitative information.
c. quantitative and qualitative information.
d. mission and vision.
_____ 8. To determine the financial health of the business, an accountant should prepare a/an
a. Statement of Comprehensive Income b. Statement of Cash Flows
c. Statement of Financial Position d. Management Accounting Reports
_____ 9. The following are the external users of general purpose financial statements, except
a. Creditors b. Managers c. Government d. Employees
_____ 10. Statement 1: The primary function of accounting is to prepare the financial reports and provide
them for the economic decision makers.
Statement 2: The purpose of accounting is to help financial users see the true picture of the
business in social and psychological terms.
a. Only statement 1 is correct. b. Both statements are correct.
c. Only statement 2 is correct. d. Both statements are not correct.
_____ 11. Accountants employed by a business firm or a non-government organization are said to be
engaged in
a. General accounting b. Private accounting
c. Public accounting d. Independent accounting
_____ 12. Accountants whose services as professionals are hired not on employee-employer relationships
are said to be engaged in
a. General accounting b. Private accounting
c. Public accounting d. Government accounting
_____ 13. These external users of financial reports primarily use accounting information to assess their
return on investment in the business.
a. Government and its agencies b. Management
c. Investors d. Creditors
_____ 14. This is a form of business organization in which the ownership is evidenced by shareholdings.
a. Corporation b. Partnership c. Joint Venture d. Sole Proprietorship
_____ 15. Which of the following is not an accounting convention?
a. Debit and credit b. Equality of accounts
c. Dual aspect concept d. Point of sale
_____ 16. These refer to a more specific idea of doing accounting work.
a. Accounting principles b. Accounting concepts
c. Accounting procedures d. Accounting assumptions
_____ 17. The dual effect concept of recording business transactions is an example of
a. Accounting concepts b. Accounting conventions
c. Accounting assumptions d. Accounting principles
_____ 18. Which of the following is an explicit accounting assumption?
a. Accounting entity b. Going concern
c. Monetary unit d. Accounting period
_____ 19. All of the following are nominal accounts, except
a. Revenue b. Expenses c. Profit or loss d. Owner’s Equity
_____ 20. The following are reported in the Statement of Financial Position, except
a. Cost of sale b. Assets c. Liabilities d. Owner’s Equity
_____ 21. Statement 1: Under accrual accounting, the enterprise profit is the difference of cash receipts
and cash disbursements.
Statement 2: Under accrual accounting, the enterprise’s income will include income earned
from uncollected sales.
a. Only statement 1 is correct. b. Both statements are correct.
c. Only statement 2 is correct. d. Both statements are not correct.
_____ 22. To carry the value of an asset in the Statement of Financial Position based on its historical cost
is an application of
a. Accounting entity b. Accounting period
c. Going concern d. Monetary unit
_____ 23. To report the export sales denominated in foreign currency in the financial statements of a
domestic entity at Philippine peso value is an application of
a. Going concern b. Accounting period
c. Accounting entity d. Monetary unit
_____ 24. Statement 1: A fiscal year is inclusive of 12-month period that ends in the month of December.
Statement 2: An interim accounting period could be shorter or longer than 12 months.
e. Only statement 1 is correct. f. Both statements are correct.
g. Only statement 2 is correct. h. Both statements are not correct.
_____ 25. Which of the following is not a revenue account?
a. Owner’s drawing b. Interest income
c. Rent income d. Service income
_____ 26. The following items are reported in the Statement of Financial Position, except
a. Assets b. Liabilities c. Owner’s Equity d. Revenues
_____ 27. Timeliness is an ingredient of this basic qualitative characteristics of the financial statement.
a. Understandability b. Reliability
c. Relevance d. Comparability
_____ 28. The following are ingredients of reliability, except
a. Faithful representation b. Materiality
c. Substance over form d. Neutrality
_____ 29. Statement 1: Current assets are expected to be realized, or are held for sale or consumption in
the normal course of the business operating cycle.
Statement 2: Current assets are held primarily for trading purposes or for short-term period
and expected to be realized into cash within one year from the Statement of Financial Position
date.
a. Only statement 1 is correct. b. Both statements are correct.
c. Only statement 2 is correct. d. Both statements are not correct.
_____ 30. Statement 1: Current liability is expected to be settled in the normal course of enterprise’s
operating cycle.
Statement 2: Current liability is expected to be paid within one year from the SFP date.
a. Only statement 1 is correct. b. Both statements are correct.
c. Only statement 2 is correct. d. Both statements are not correct.
_____ 31. Statement 1: An accounting period is always comprised of 12 months.
Statement 2: An accounting period could end in a month other than December.
a. Only statement 1 is correct. b. Both statements are correct.
c. Only statement 2 is correct. d. Both statements are not correct.
_____ 32. Statement 1: The SFP reports the result of operations for an accounting period.
Statement 2: The SCI may report income or loss as a result of operations in an accounting
period.
a. Only statement 1 is correct. b. Both statements are correct.
c. Only statement 2 is correct. d. Both statements are not correct.
_____ 33. Which of the following accounts is reported in the Statement of Comprehensive Income?
a. Accrued interest b. Accumulated depreciation
c. Owner’s drawings d. Bad debt expense (doubtful accounts expense)
_____ 34. Which of the following is not an expense accounts?
a. Prepaid supplies b. Salary expense
c. Advertising expense d. Bad debts expense
_____ 35. One of the following assets is not a current asset.
a. Cash b. Accounts Receivable c. Equipment d. Inventories
_____ 36. According to accrual concept of accounting, financial or business transaction is recorded:
b. when profit is computed.
a. when cash is received or paid.
c. when transaction occurs. d. when SFP is prepared.
_____ 37. The John Marketing Company provides advertising services to an investment company in
year A but receives advertising fee in year B. The John Marketing Company recognizes this
revenue in year A. This action of John Marketing Company is justified by:
b. Economic entity concept
a. Monetary concept
c. Revenue recognition principle d. Going concern concept
_____ 38. A company is a going concern if:
a. its SFP shows a strong financial position.
b. its income statement or SCI for the current year shows huge profit.
c. there is no evidence that it will or will have to cease operations within foreseeable
future.
d. it is a public limited company.
_____ 39. Which accounting concept or principle states that the transactions of a business must be
recorded separately from those of its owners or other businesses?
b. Matching principle
a. Materiality concept
c. Time period concept d. Economic entity concept
_____ 40. The business or economic entity concept is applicable to:
b. Corporate
a. Sole proprietorship
c. Partnership d. All of the above
_____ 41. Which of the following states that a transaction is not recorded in the books of accounts
unless it is measurable in terms of money?
b. Monetary unit assumption
a. Matching principle
c. Revenue recognition principle d. Time period assumption
_____ 42. Which one of the following states that the life of a business can be divided into equal time
periods?
b. Economic entity concept
a. Time period assumption
c. Revenue recognition principle d. Accrual concept
_____ 43. The revenue is not recognized until it is earned and realized or at least realizable. To which
accounting principle/concept this statement belongs?
b. Going concern concept
a. Separate entity concept
c. Revenue recognition principle d. Conservatism concept
_____ 44. The auditor noticed that the financial statements of Meta Company were missing some
footnotes important for users for decision making. This action of the management is a
violation of:
b. Economic entity concept
a. Materiality concept
c. Going concern concept d. Full disclosure concept
_____ 45. A fixed asset costing P30,000 is depreciated over its estimated useful life of 15 years. This
action is related to:
b. Full disclosure concept
a. Matching principle
c. Monetary unit assumption d. None of the above
_____ 46. The Modern Enterprises reported all assets in the balance sheet at current market value.
This action is a violation of:
b. Full disclosure concept
a. Materiality concept
c. Conservatism concept d. historical cost concept
_____ 47. That a business may only report activities on financial statements that are specifically related to
company operations, not those activities that affect the owner personally, is known as which of
the following?

a. Separate entity concept b. Going concern assumption

c. Monetary unit concept d. Time period assumption
_____ 48. That companies can present useful information in shorter time periods such as years, quarters,
or months is known as which of the following?
a. Separate entity concept b. Going concern assumption
c. Monetary unit concept d. Time period assumption
_____ 49. The ending owner’s capital of the business amounts to P100, 000. The beginning assets and
liabilities are P100, 000 and P60, 000, respectively, and the owner contributed additional
investment of P10, 000. If the business incurred P15, 000 operating expenses, the net income
would be
a. P 30, 000 b. P 40, 000 c. P 50, 000 d. P 60, 000
_____ 50. If the business assets are increased by P100, 000 and the liabilities are also increased by the
same amount, the change in owner’s capital would be
a. Increased by P200, 000 b. Decreased by P100, 000
c. Increased by P100, 000 d. No effect
___________________________________________________________________________

Noted:

Jacqueline L. Gawisan, MBA

Dean-CBM

COLLEGE OF BUSINESS MANAGEMENT

1st Semester, SY 2018 -2019
Prelim Examination

TABLE OF SPECIFICATION
ACCTG 2 (FUNDAMENTALS OF ACCOUNTING 2)

No. of No. of
Topics Type of Test %
Items Points
 Steps in the Accounting Cycle

 Analyzing Business Transactions

 Accounting for Service Business Multiple Choices 50 50 100%
 Analyzing Business Transactions
 Recording Business Transactions
 Preparation of Financial Statements
TOTAL 50 50 100%

Prepared:

Marilyn B. Dagad-ay, CPA

Instructor