LONG TEST IN FUNDAMENTALS IN ACCOUNTANCY, a. Direct Method c.

Asset Method
BUSINESS AND MANAGEMENT 2 b. Operating Method d. Indirect Method
_____13. To find ending A/R,
NAME: _______________________________________________ a. = Beg. A/R + Net Sales – Collections
b. = Beg A/R – Ending A/R
DATE: _____________________ SCORE: _______________ c. = Beg A/R – Net Sales + Collections
Directions: Choose the correct answer. Write your answer on a d. None of the above.
separate sheet. _____14. Cash flow statement is also known as the following,
_____1. It is a financial statement that shows how changes in except:
balance Sheet accounts and income affect cash and cash a. Statement of Cash Flows
equivalents. b. Cash Inflow Statement
a. Statement of Cash Flows c. Funds Flow Statement
b. Balance Sheet d. Cash Statement
c. Statement of Changes in Equity _____15. Which of the following is not a cash transaction?
d. Notes to Financial a. Purchase goods on cash
_____2. Which of the following is not a use of the statement of cash b. Purchase goods on credit
flows? c. Depreciation expense
a. Aids in the prediction of future cash flow. d. Cash paid to owners
b. Helps estimate the amount of funds that will be needed _____16. It is the process of evaluating risk, performance, financial
from creditors or stockholders. health and future prospect of a business.
c. Provides insights into the quality and reliability of a. Income Statement Analysis
reported income. b. Balance Sheet Analysis
d. Provides a measure of the future obligations of the c. Trial Balance Analysis
company. d. Financial Statement Analysis
_____3. Cash inflows and outflows are divided into three sections _____17. There are three kinds of financial statement analysis
or categories based on the underlying cause or nature of the cash techniques, except:
flows: except: a. Horizontal Analysis
a. Operating Activities c. Investing Activities b. Vertical Analysis
b. Funding Activities d. Financing Activities c. Parallel Ratios
_____4. On the statement of cash flows, the cash flows from d. Financial Ratios
operating activities section would include: _____18. It reports the peso value of the gross profit earned for
a. Receipts from interest on short-term notes receivable every peso of sales.
b. Receipts from the issuance of capital stock a. Gross Profit Ratio
c. Payments for the acquisition of investments b. Operating Income Ratio
d. Payments for cash dividends c. Probability Ratio
___d__5. Which statement is incorrect? d. Net Profit Ratio
I. Statement of cash flows provides important insights about the _____19. ROA means
liquidity and solvency of a company which are vital for survival and a. Return on Accounts Payable
growth of any organization. b. Return on Asset
II. By summarizing key changes in financial position during a c. Return on Accounts Receivable
period, cash flow statement serves to highlight priorities of d. Return on Accumulation
management. _____20. To get Gross Profit Margin:
III. Statement of cash flows provides important insights about the a. Gross Profit/Net Sales
liquidity and solvency of a company which are vital for survival and b. Net Sales/Gross Profit
growth of any organization. c. Net Income/Net Sales
a. I and II c. II and III d. Gross Profit - Net Sales
b. I and III d. All of the above
_____6. The following are operating activities, except: II. Indicate whether the items are categorized as operating,
a. Interest Paid c. Cash payments to employees financing and investing activity. Use + if the items represents cash
b. Interest Received d. Cash payment for PPE inflows and – if it represents cash outflows. (2 points each).
ITEM OPERATING FINANCING INVESTING
_____7. The following are operating activities, except:
a. Cash payment to income taxes. Cash received from rental
b. Cash receipts from sale of PPE. Withdrawal by owners
c. Cash receipts from sale of goods. Cash received from bank
d. Cash receipts from rendering of services. loan
_____8. Which of the following account title are included in Cash received from sales
investing activities? Cash collected from sales
a. PPE, Intangible Assets, and Investments Payment to suppliers
b. Sales, PPE, Salaries Expense, and Interest Expense
Payment of patents
c. Accounts Payable, Sales and PPE
d. None of the above. Payment of income taxes
______9. Which activities represents the cash flow during an Cash paid for insurance
accounting period from primary revenue generating activities of a Purchase of new vehicle
business? III. Identify the formulas to be used for each financial ratio. (2
a. Operating Activities c. Investing Activities points each)
b. Funding Activities d. Financing Activities 1. Net Profit Margin
______10. These activities include events and transactions that
affect long-term assets.
a. Operating Activities c. Investing Activities 2. ROA
b. Funding Activities d. Financing Activities
______11. If equipment were purchased for $75,000, the journal
entry would be:
a. Dr. Equipment Cr. A/P
b. Dr. Cash Cr. A/P 3. ROE
c. Dr. Equipment Cr. Cash
d. Dr. Equipment Cr. A/P
_____12. Under this approach, the operating activity starts with Net
Income and it will be adjusted with its non-cash items such as 4. Asset Turnover
depreciation.
 5. Days in Inventory

KEY TO CORRECTION IN FUNDAMENTAL IN

ACCOUNTANCY, BUSINESS AND MANAGEMENT 2
TEST I 5. DAYS IN INVENTORY
1. A = 365 / INVENTORY TUROVER
2. C
3. B
4. A
5. bonus
6. D
7. B
8. A
9. A
10. C
11. C
12. D
13. A
14. B
15. B
16. D
17. C
18. A
19. B
20. A

TEST II.
ITEM OPERATING FINANCIN INVESTING
G
Cash received from rental +
Withdrawal by owners -
Cash received from bank
loan
+
Cash received from sales +
Cash collected from sales +
Payment to suppliers -
Payment of patents -
Payment of income taxes -
Cash paid for insurance -
TEST Purchase of new vehicle -
III.

1. NET PROFIT MARGIN

= NET INCOME / NET SALES

2. ROA
= NET INCOME / AVERAGE
ASSETS

3. ROE
= NET INCOME / AVERAGE
EQUITY

4. ASSET TURNOVER
= NET SALES / AVERAGE ASSETS