PART 1: MULTIPLE CHOICE

1. Which of the following is not a core financial statement?

a. The Income Statement

b. Statement of Cash Flows
c. The Trial Balance
d. The Balance Sheet
2. The income statement, which presents the results of operations, can be
prepared in many forms including:

a. Single Step Income Statement

b. Condensed Income Statement
c. Common Sized Income Statement
d. All of the above
3. Which of the following account types increase by debits in double-entry
accounting?

a. Assets, Expenses, Losses

b. Assets, Revenue, Gains
c. Expenses, Liabilities, Losses
d. Gains, Expenses, Liabilities
4. Which of the following is true?

a. Accounts receivable are found in the current asset section of a

balance sheet.
b. Accounts receivable increase by credits.
c. Accounts receivable are generated when a customer makes
payments.
d. Accounts receivable become more valuable over time.
5. A company that uses the cash basis of accounting will:

a. Record revenue when it is collected.

b. Record revenue when it is earned.
c. Record revenue at the same time as accounts receivable.
d. Record bad debt expense on the income statement.
6. What are the main sections on a balance sheet?

a. Assets, liabilities, income

b. Assets, liabilities, equity
c. Assets, liabilities, expenses
d. Assets, gains, revenue
7. How are a company’s financial statements used?

a. For internal analysis

b. For external negotiation
c. For compliance
d. All of the above
8. Which of the following scenarios increases accounts payable?

a. A customer fails to pay an invoice.

b. A supplier delivers raw materials on credit.
c. Office supplies are purchased with cash.
d. None of the above
9. Which of the following must a certified public accountant (CPA) have in-
depth knowledge of to pass the CPA licensing exam? (Check all that
apply.)

a. Accounting software packages

b. Auditing
c. Derivatives
d. International banking laws
10. What is the result of the following transaction for Company A?
Company A’s customer is unable to pay for a previous credit sale in
accordance with Company A’s 90-day payment terms. The customer
makes a promissory note to Company A that extends payment over a
24-month term including 5% interest.

a. No result because the customer didn’t pay.

b. Accounts receivable increases because of the interest.
c. A note receivable is recorded in non-current assets.
 d. Company A records the loan as a liability.
11. When are liabilities recorded under the accrual basis of
accounting?

a. When incurred
b. When paid
c. At the end of the fiscal year
d. When bank accounts are reconciled
12. Which is true about time in accounting?

a. Current liabilities are debts payable within 2 years.

b. Balance sheets reflect a company’s financial position at a certain
point in time.
c. The time value of money is a finance concept, not relevant in
accounting.
d. Accounts receivable are more easily collected as time passes.
13. When a company purchases property, plant, and equipment, how
is it reflected on the statement of cash flows?

a. As a source of cash in the "cash from investing activities" section

b. As a source of cash in the "cash from financing activities" section.
c. As a use of cash in the "cash from investing activities" section.
d. As a use of cash in the "cash from operating activities" section.
14. What would the journal entry be for a company that takes out a
five-year, $100,000 business loan?

a. Debit $100,000 non-current asset, Credit $100,000 non-current

liabilities
b. Debit $100,000 current asset, Credit $100,000 non-current
liabilities
c. Debit $100,000 non-current liabilities, Credit $100,000 non-current
assets
d. Debit $100,000 current liabilities, Credit $100,000 current assets
15. Which accounts are associated with cost of goods sold?

a. Accrued interest
 b. Depreciation
c. Dividends
d. Inventory
16. Which organizations are involved in development of US Generally
Accepted Accounting Principles (GAAP)? (Check all that apply.)

a. Financial Accounting Standards Board (FASB)

b. Government Accounting Standards Board (GASB)
c. Securities and Exchange Commission (SEC)
d. Federal Accounting Standards Advisory Board (FASAB)
17. Which inventory valuation method reflects the most current
market value for inventory on hand?

a. Last-in-First-Out (LIFO)
b. Average Costs
c. First-in-First-Out (FIFO)
d. Specific Identification
18. Which of the following statements is not true about intercompany
accounting?

a. Intercompany transactions are between two units within the same

legal entity.
b. Intercompany transactions are eliminated in consolidated parent
financial statements.
c. They can significantly impact taxes.
d. Intercompany transactions are between different legal entities
under the same parent control.
19. Which is the method of depreciation used for US tax returns that
is not GAAP-compliant?

a. Straight-line method
b. Modified accelerated cost recovery systems
c. Double-declining balance method
d. Units of production method
20. What is the most-used method to amortize intangible assets on a
company’s financial statements?

a. Straight-line method
b. Sum of the years’ digits method
c. Double-declining balance method
d. Units of production method
21. Which financial statement is a report of a company’s revenues
and expenses during a certain time period?

a. Statement of Changes in Equity

b. Income Statement
c. Statement Of Cash Flows
22. After making a sale of $3,000, where $1,200 is paid in cash and
$1,800 is sold on credit, how would a company go about updating its
balance sheet?

a. $1,800 debit in accounts receivable; $3,000 credit in retained

earnings; $1,200 debit in cash
b. $3,000 debit in retained earnings; $1,200 credit in cash; $1,800
credit in accounts receivable
c. $1,800 debit in accounts payable; $1,200 debit in cash; $3,000
credit in retained earnings
d. $1,200 credit in cash; $1,800 credit in accounts payable; $3,000
debit in retained earnings
23. Which is not an example of financing cash flow?

a. Paying off a debt of $25,000

b. Investing in equipment worth $90,000
c. Paying $12,000 worth of dividends to shareholders
d. Issuing $42,000 worth of shares
24. Which side of the ledger account are debits recorded on?

a. Left
b. Right
c. Depends on the debit
25. Are assets on the balance sheet recorded at their estimated fair
market value?

a. Yes
b. No
c. Sometimes; it’s situational
26. Increasing an asset involves crediting the account.

a. True
b. False
27. Unearned revenues are recorded on a company’s balance sheet
under which kind of account?

a. Current asset
b. Owners’ or stockholders’ equity
c. Non-current asset
d. Liability
28. What is the minimum number of accounts that accounting entries
can have?

a. One
b. Four
c. Five
d. Two
29. The listing of all the financial accounts within a company’s general
ledger is called the _____.

a. Chart of accounts
b. Journal entry
c. Balance sheet
d. P&L statement
30. Which is not classified as a current asset?

a. Cash
b. Product inventory
 c. Liquid assets
d. Prepaid liabilities
e. Property

PART 2: CLASSIFICATION
Kindly identify what is the nature of each accounts. (Asset, Liabilities,
Equity, Income, Expense, Contra Assets or Contra Liabilities)
1. Accounts Payable
2. Property and Equipment
3. Accrued Expenses
4. Intangible Asset
5. Accumulated Depreciation
6. Professional Fee
7. Retained Earnings
8. Input VAT
9. Output VAT
10.Unearned Revenue

PART 3: ENTRY
Company A bought an equipment on account amounting to P30,000
exclusive of taxes. What will be the entry in the books of the seller and the buyer?
Considering that VAT is 12% and EWT is 1%?

PART 4: COMPUTATION
Company A has the following data during the year for its Income Statement.
Revenue 10,000,000
Direct Cost 6,000,000
OPEX 2,000,000
Compute for the income tax due during the year.