1.

A business has the following items in it:

 Land-1000,000
 Machinery- 20,000
 Cash- 10,000
 Debt- 0
 Owner’s equity-?

What is the value of the Owner’s equity?

a. 1,000,000
b. 1,020,000
c. 1,010,000
d. 1,030,000

2. ABC has the Land of 1,500,000, Machinery of 80,000, Cash of 20,000, Owner’s equity 900,000 and Loan 500,000.
What is the value of the creditors?

a. 200,000
b. 700,000
c. 800,000
d. 1,100,000

3. During a reporting period, a company assets increased by 80,000,000. Liabilities decreased by 20,000,000. Equity
must therefore?

a. Decreased by 100,000,000
b. Increased by 100,000,000
c. Decreased by 60,000,000
d. Increased by 60,000,000

4. Scott's Lawn Service borrowed 10,000 from 3rd National Bank on November 1, 2018. The loan is for a term of
three years and carries a 15% rate of interest. Interest is due at the maturity of the loan. To properly accrue
interest expense in 2018, Scott should debit Interest Expense and credit Interest Payable for:

a. 1500
b. 1000
c. 500
d. 250

5. Rental Services, Inc. reviews its records at the end of December 2018 in anticipation of the end of its calendar
year. This process reveals that:

 2,000 of Accounts Receivable outstanding at the beginning of December has been collected and recorded.
 The December utility bill has not yet been paid. A phone call to the provider reveals that the invoice will
total 1,200 and will be mailed on January 4, 2019.
 Billing of 25,000 has been issued for the month.
 Services of 5,000 to Construction Experts were completed on December 30, 2018, but billing will not be
rendered until January 3, 2019.
If Rental Services takes no action on any of the above items:

a. Expenses for 2001 will be overstated by 1,200.

 b. Expenses for 2001 will be understated by 5,000.
c. Expenses for 2002 will be overstated by 1,200.
d. Expenses for 2002 will be understated by P5,000.

6. A company pays its employees every Friday. The amount paid every week is P600. September 30, 2018, is a
Tuesday. Assume that salaries for September were accrued on September 30. Which of the following
statements is true about the entry prepared on October 3, 2018?

a. Salaries payable must be debited by P240

b. Salaries Payable must be credited by P240
c. Salaries Payable must be debited by P360
d. Salaries Payable must be credited by P360

7. At December 31, 2018, interest expense of P960 is owed on a two-year bank note that will not be paid until July
2019, what is the appropriate accrual at the end of 2018?
a. Interest Expense .................. 960

Cash ..........................…….. 960

b. Interest Payable .................. 960

Interest Expense................. 960

c. Cash .............................…. 960

Interest Expense ..............… 960

d. Interest Expense .................. 960

Interest Payable ..............… 960

8. Sandra's Styling Salon, a Sole Proprietorship, pays weekly salaries of 8,000 each Friday for a five-day week
ending on that day. The accrual required for a fiscal period ending on a Tuesday includes a debit to Salaries
Expense and a credit to Salaries Payable for:

a. 1,600
b. 2,000
c. 3,000
d. 3,200

9. Business activities have the following characteristics, except

a. Intended for profit
b. Regularly undertaken
c. Financial in character
d. Transactions undertaken by the owner

10. It is the excess of expenses and cost over the income during accounting period
a. Income
b. Profit
c. Expenses
d. Losses
11. The two column form used for recording entries for accounting transactions
a. General Journal
b. General Ledger
c. Balance Sheet
d. Income Statement
12. Which of the following is correct Accounting Equation?
 a. Assets= Liabilities – Owner’s Equity
b. Assets÷ Liabilities + Owner’s Equity
c. Owner’s Equity = Liabilities + Assets
d. Liabilities = Owner’s Equity – Assets
13. A debit balance in which of the following accounts would indicate a likely error?
a. Assets
b. Cash
c. Fees Earned
d. Rent Expense
14. Under the accrual basis of accounting, revenues are reported in the accounting period when the
a. Cash Is Received
b. Service Or Goods Have Been Delivered
c. Both
d. None of the above
15. The long term assets that have no physical existence but are rights that have value is known as
a. Current assets
b. Fixed assets
c. Intangible assets
d. Investments
16. The following is not a type of liability
a. Short term
b. Current
c. Fixed
d. Contingent
17. The accounts that records expenses, gains and losses are
a. Personal accounts
b. Real accounts
c. Nominal accounts
d. None of the above
18. The entries that required at the end of the period to update the accounts before the preparation of financial
statements are known as:
a. Closing entries
b. Adjusting entries
c. Journal entries
d. Opening entries

19. Which of the following serves as the justification for the recognition of expired cost?
A. Cause and Effect Association
B. Systematic and rational allocation
C. Immediate recognition of an expense
D. Minimization of income tax liability

20. Information about sources and uses of an enterprise’s cash and cash equivalents is provided in the
A. Statement of comprehensive income
B. Statement of changes in equity
C. Statement of cash flows
D. Statement of financial position

21. Which of the following adjusting entries does not require reversal at the beginning of the new accounting
period?
A. Debit salary expense and credit salary payable
B. Debit unearned rent and credit rent revenue
C. Debit prepaid rent and credit rent expense
D. Debit interest receivable and credit interest income

22. The financial statements most frequently provided include all of the following except the

a. statement of financial position.

b. income statement.
 c. statement of cash flows.
d. statement of retained earnings.

23. The information provided by financial reporting pertains to

a. individual business enterprises, rather than to industries or an economy as a whole or to members of
society as consumers.
b. business industries, rather than to individual enterprises or an economy as a whole or to members of
society as consumers.
c. individual business enterprises, industries, and an economy as a whole, rather than to members of
society as consumers.
d. an economy as a whole and to members of society as consumers, rather than to individual enterprises or
industries.
24. Accrual accounting is used because
a. cash flows are considered less important.
b. it provides a better indication of ability to generate cash flows than the cash basis.
c. it recognizes revenues when cash is received and expenses when cash is paid.
d. none of the above.

25. The two major standard-setting organizations in the world are

a. Financial Accounting Standards Board (FASB) and the International Organization of Securities Commission
(IOSCO).
b. Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
c. The International Accounting Standards Board (IASB) and International Organization of Securities
Commission (IOSCO).
d. The International Accounting Standards Board (IASB) and the Standards Advisory Council (SAC).

26. The partners capital amount is credited in the following cases except when it involves the recording of the

a. Additional investment
b. Original investment
c. Share in profit
d. Debit balance of the drawing account at the end of the period

27. Non-cash assets invested into a partnership are recorded at

a. Zero
b. Their original cost
c. Their carrying value
d. Their fair market value

28. Which of the following will not result in dissolution of a partnership?

a. Incapacity of a partner
b. Negative capital balances of a partner
c. Bankruptcy of a partner
d. Admission of a partner

29. Narvaez invested P400,000 for a one-fourth interest in a partnership in which the other partners have capital
totaling P800,000 before admitting Narvaez. After distribution of the bonus, what is Narvaez’s capital balance?

a. 100,000
b. 200,000
c. 300,000
d. 400,000
 30. Unearned Revenues was P6,000 at December 31, 2015 and P7.500 at December 31, 2016. Service Revenues was
P42,000 for year 2016. How much cash was received for services provided during 2016?

a. P55,500
b. P40,500
c. 28,000
d. 43,500

Use of the following information to answer the questions 31 - 35 below. The following information pertains to Luz Un
Machine Shop:
 Accrued interest on a note receivable amounted to P1.000.
 A one-year insurance policy was purchased for P20,000 and debited to Prepaid Insurance. Three months have
passed since the purchased.
 Depreciation of buildings is at P50,000.
 The company received at P36,000 advance payment during the year on service still to be performed and
credited to Unearned Service Revenue. By the end of the year, One-Fourth of the services had been performed.
 The company's Supplies amount showed a beginning debit balance of P2,000 and supplies purchased of P8,000.
P3,000 of supplies were on hand at year-end.

31. The adjusting entry for supplies would include a

a . credit to supplies for P3,000.

b. credit to supplies Expense for P8,000.
c. . debit to supplies Expense for P7,000.
d. debit to supplies Expense for P8,000.

32. The adjusting entry for depreciation on buildings would include a

a. credit to Accumulated Depreciation-Buildings for P50,000.

b. credit to buildings for P50,000.
c. credit to Depreciation Expense-Buildings for P50,000.
d. debit to Accumulated Depreciation-Buildings for P50,000.

33. The adjusting entry for insurance policy would include a

a. credit to insurance Expense for P15,000.

b. credit to Prepaid Insurance Expense for P5,000.
c. debit to Insurance Expense for P15,000.
d. debit to Prepaid Insurance for P5,000.

34. The adjusting entry to record the accrued interest on note would include a

a. credit to interest income for P1,000.

b. credit to interest Receivable for P1,000.
c. debit to interest Expense for P1,000.
d. debit to interest Payable for P1,000.

35. The adjusting entry to record the amount of service revenues earned during the period would include a

a. credit to Unearned Service Revenues for P9,000.

b. debit to Service Revenues for P27,000.
c. debit to Unearned Service Revenues for P9,000.
d. debit to Unearned Service Revenues for P27,000.
36. The income statement debit column of the worksheet contains.

a. assets accounts balances.

b. expense account balances.
c. liability account balances.
d. revenue account balances.

Use of the following information to answer questions 37 – 40 below:

 Account name Debit Credit
Sales 750,000
Sales Returns and Allowances 15,000
Purchases 170,000
Purchases Returns and Allowances 20,000
Transportation In 30,000
Selling Expenses 85,000
General and Administrative Expenses 275,000

In addition, beginning merchandise inventory was P55,000 and ending merchandise inventory was P35,000.

37. Net sales for the period were

a. P755,000
b. P180,000
c. P735,000
d. P775,000

38. Net purchases for period were

a. P150,000
b. 180.000
c. P210,000
d. P430,000

39. Cost of goods sold for the period was

a. P235,000
b. P160,000
c. P200,000
d, P170,000

40. Profit for period was

a. P525,000
b. P160,000
c. P250,000
d. P175,000

41. Which of the following is correct?

Assets Liabilities Capital

a. P7,850 P1,250 P6,600
b. P8,200 P2,800 P11,000
c. P9,550 P1,150 P8,200
d. P5,420 P6,540 P1,120

42. Which of the following is not subject to depreciation?

a. Building
b. Equipment
c. Land
d. Machinery
43. The purchase of an asset for cash will?

a. Have no effect on total assets or total liabilities

b. Increase total assets and decrease total liabilities
c. Increase total assets and decrease total owner’s equity
d. Increase total assets and increase total owner’s equity.

44. When an owner deposits cash in an account in the name of the business, it is an increase to

a. Cash and accounts payable

b. Cash and account receivable
c. Cash and capital
d. Cash and withdrawal.

45. A business received P6.000 cash from charge costumer’s to apply on account. The effect of the transaction is?

a. An increase in an asset and a decrease in liability.

b. An increase in an asset and a decrease in another asset.
c. An increase in an asset and decrease in capital.
d. An increase in an asset and an increase in capital.

46. Over a period of time, if total assets increase by P270,000 and total liabilities decrease by P70,000 then owner’s
equity will be increased by?

a. P70,000
b. P340,000
c. P270,000
d. P200,000

47. The process of transferring journal entry information from the journal to the ledger is called.

a. Analyzing
b. Footing
c. Journalizing
d. Posting

48. A P800 credit items is accidentally posted as a debit. The trial balance column totals will therefore differ by?

a. P0.
b. P400.
c. P800.
d. P1,600

49. The first financial statement that is prepared from the trial balance is the?

a. Balance report.
b. Income statement.
c. Statement of cash flows.
d. Statement of changes in equity.
50. Office supplies are expensed?

a. At no time, since they are assets.

b. When they are consumed (used up).
c. When they are paid for.
d. When they are purchased.
51. The directors of a corporation are responsible for

a. declaring dividends
b. maintaining shareholder records
c. the day to day managing of the business
d. preparation of accounting records and financial statements.

52. The most powerful person in a corporation is the

a. incorporator
b. president
c. general manager
d. chairman of the board

53. One who has agreed to take shares from the corporation on the original issue of such share is called

a. incorporator
b. member
c. promoter
d. subscriber

54. Accounting information is considered relevant when it

a.) Can be depended on to represent the economic conditions and events that it is intended to represent
b.) Is capable of making a difference in a decision
c.) Is understandable by reasonably informed uses of accounting information
d.) Is verifiable and neutral

55. It is defined as outflows or other using up of assets or incurring of liabilities during a period as a result of
delivering or producing goods and/ or services

a.) Assets c.) Expenses

b.) Liabilities d.) Loss

56. The value received is P 5,000 cash and the credit is to notes payable. This transaction could be best described as:

a.) The payment of the P5, 000 notes payable outstanding

b.) Issuance of a P 5,000 promissory note for equal amount of cash received
c.) Acceptance of 5,000 credit note from supplier
d.) Acceptance of P 5,000 debit note from supplier

57. Assume that a company’s fiscal year ends on December 31. Which of the following events involve an adjusting
entry that would be affected by how the event was originally recorded?

a.) Sale of merchandise on account

b.) Signing of a one year lease or to be used in production of goods for sale
c.) Salaries earned by employees this year will be paid next year
d.) Payment of advertising for six months coverage starting October 1 of current year

58. The reason why revenue is recorded by a credit entry to a revenue account is

a.) That revenue always involves a debit to either the cash or accounts receivable account
b.) Explained by the realization principle
c.) Explained by the matching principle
d.) That revenue increases owner’s equity

59. Which of the following types of accounts measure economic flows over a period of time?
 a.) Real Accounts
b.) Nominal Accounts
c.) Mixed Accounts
d.) Summary Accounts

60. One of the distinctions between a partnership and a corporation is that a partnership:

a.) May be formed by one person

b.) Is created by operation of law
c.) Acts through a board of directors
d.) May exist for an indefinite period

61. Their names are not mentioned in the articles of incorporation as originally forming the corporation and are
signatories thereof:

a. Corporators
b. Shareholders
c. Incorporators
d. Members

62. Which of the following statements is incorrect regarding worksheet?

a.) The worksheet is essentially a working tool of the accountant

b.) The worksheet is distributed to management and other interested parties for the purpose of validating the
amounts shown in the financial statements
c.) The worksheet cannot used as a basis for posting to the ledger accounts
d.) The financial statements can be prepared directly from the worksheet before journalizing the adjusting and
closing entries

63. Under the revenue principle, revenue is recorded

a.) After it has been earned, but not before

b.) At the end of the accounting period
c.) At the earliest possible time
d.) At the latest acceptable time

64. Which of the following account titles will not appear on the unadjusted trial balance under the perpetual
system?

a.) Merchandise Inventory, beginning

b.) Merchandise Inventory, ending
c.) Cost of Goods Sold
d.) Sales

65. Reversing entry is said to be needed for some adjusting entries made at the end of the accounting period.
Reversing entries are:

a.) Always necessary

b.) Not necessary
c.) Optional
d.) None of the above

66. When a merchandise is returned or a price adjustment is granted, an entry is made in the:

a.) General Journal

b.) Cash Receipts Journal
c.) Purchases Journal
d.) Cash Disbursement Journal

67. If the partnership agreement does not specify how profit is to be allocated, profits or losses should be allocated
a.) Equally
b.) In accordance with their capital contribution
c.) In proportion to the average of capital invested during the period
d.) Equitably so that partners are well compensated for their time and effort

68. A Liquidation differs from a dissolution in that in a Liquidation

a.) Assets may be revalued

b.) The business will not continue
c.) There may be an adjustment of partners capital accounts
d.) Gains and losses are distributed according to the partnership agreement

69. A corporation in which the shares of stocks are owned by the immediate members of the family.

a.) Non Stock Corporation

b.) Corporation Sole
c.) Close Corporation
d.) None of the above

70. Adjusting Entries must be immediately be made:

a.) After the journal entries have been posted

b.) After the financial statements are prepared
c.) After reversing and closing entries are made
d.) After the trial balance are prepared

71. The balance of Prepaid Insurance Expense should appear in the:

a.) Balance Sheet Debit Column

b.) Balance Sheet-Credit Column
c.) Income Statement- Debit Column
d.) Income Statement- Credit Column

72. It is a service activity whose purpose is to provide quantitative information about the economic entities that is
intended to be useful in making economic decisions.

a. Accounting
b. Transactions
c. Generally Accepted Accounting Principles
d. Business organization

73. The claims of the creditors on the business enterprise

a. Assets
b. Liabilities
c. Owner’s equity
d. All of the above

74. A twelve month period that starts in January and ends in December 31

a. Fiscal year
b. Lunar year
c. Calendar year
d. None of the above
75. The person to whom a liability is owed

a. Debtor
b. Creditor
c. Owner
d. None of the above

76. This is the phase of accounting that makes accounting the language of business

a. Recording
b. Classifying
c. Summarizing
d. Interpreting

77. This is the exchange price considered in the accounting books upon recognition of the business transaction.

a. Cost
b. Assessed value
c. Market value
d. Book value

78. A company that is engaged in processing of raw material to finished goods intended for sale

a. Service company
b. Merchandising company
c. Manufacturing company
d. None of the above

79. The rights or claims of the owners of a business enterprise

a. Assets
b. Liabilities
c. Owner’s equity
d. All of the above

80. The concept that requires the distinction between the personal assets and liabilities of a proprietor from his
business assets and liabilities.

a. Entity
b. Stable monetary unit
c. Periodicity
d. All of the above

81. This is the final figure in the income statement when expenses exceed revenue

a. Net income
b. Net loss
c. Ending capital
d. Beginning capital
82. Reports which summarizes the financial position of results of operation of a business

a. Financial statements
b. Interim reports
c. Common balance sheet
d. Beginning capital

83. These increase owner’s equity

a. Withdrawals and net loss

b. Investments and net income
c. Donations to charitable institutions
d. None of the above

84. Obligations that must be paid within twelve months or in the normal operating course of the business
operating cycle.

a. Current liabilities
b. Non-current liabilities
c. Other liabilities
d. None of the above

85. Which of the following is an expense?

a. Payment of liability
b. Payments of worker’s salaries
c. Payment of the liability of the owner
d. Cash withdrawal of the owner

86. An electronic repair shop is an example of a ___________

a. Trading business
b. Manufacturing business
c. Electrical business
d. Service business

87. This form of business organization has its ownership evidence by shareholdings

a. Joint ownership
b. Corporation
c. Sale proprietorship
d. Partnership

88. Which of the following is not an asset account

a. Accounts receivable
b. Prepaid rent expense
c. Building
d. None of above
 89. Which of the following is a liability account?

a. Notes receivable
b. Advances from customers
c. Advances to employees
d. Utilities expense

90. Which of the following is not a revenue account

a. Interest income
b. Sales
c. Professional fees
d. Cost of sales

91. Statement 1: A limited partnership normally has one or more general partners whose liability is unlimited.
Statement 2: A partnership may be established for charity.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true

92. Statement 1: A corporation or a partnership can be a corporator.

Statement 2: A de jure corporation exists in fact and in law.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true

93. Statement 1: A person owning stock on date of record will receive share dividends that have been declared.
Statement 2: A share dividend will cause an increase in the total number of shares issued and outstanding.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true
94. Statement 1: A restriction on retained earnings leaves total retained earnings unchanged.
Statement 2: Dividends on cumulative preference shares do not become a liability of the corporation until
they are declared by the board of directors.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true

95. Statement 1: Closing entries deal primarily with the balances of real accounts.
Statement 2: Closing entries can be prepared by referring solely to the income Statement columns of the
worksheet.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true
96. Statement 1: Post-Closing trial balance tests the equality of the accounts after the adjustments and the closing
entries are posted.
Statement 2: After the adjusting and closing entries have been recorded and posted, the general ledger
accounts that appear on the balance sheet have no balances.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true

97. Statement 1: The Adjusted Trial Balance columns of worksheet are prepared by combining the Trial Balance
and Adjustments columns of the worksheet.
Statement 2: When the Income Statements columns of the worksheet are initially footed, they should be out
of balance by the amount of profit or loss.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true

98. Statement 1: The worksheet is prepared after the formal adjusting and closing entries.
Statement 2: On a worksheet, the balance of the owner's Capital account is its ending amount for the
period.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true

99. Statement 1: A stockholder may bind the corporation to a contract.

Statement 2: The arbitrary value assigned to a share of stock is called market value.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true

100. Statement 1: The policy-making body in a corporation is called the board of directors.
Statement 2: The officers of a corporation elect the members of the board of directors.

a) Only statement 1 is true

b) Only statement 2 is true
c) Both statements are true
d) Both statements are not true