Page 1 of 4

Name ___________________________________Course, year & section___________________

ACC 1261 QUIZ Date _________________ Score _____________

Encircle the letter of your choice.

1. Attributes of a corporation includes:
I. It is created by operation of law.
II. It enjoys the right of succession
III. Has limited life.
IV. Investors will directly manage their own money rather than entrusting that task to others.
I. I and II only
II. II and III only
III. III and IV only
IV. IV and I only
2. Users of Financial Information are as follows:
I. Potential investors use the financial information so evaluate credit ratings.
II. Stockholders use the financial information to evaluate operations of the firm.
III. Government use the financial information to evaluate tax of the firm.
IV. Economic planners use financial information to control the operations of the firm.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
3. Which of the following statement on the Basic Accounting concepts is correct?
I. Realization principle states that when an entity sells furniture for P5,000, the entity will recognize
sales upon delivery of the furniture or when the legal title to the goods is transferred.
II. An example of matching principle is where a company has sales representatives who earn
commissions, the company should recognize the commission expense in the same period as the sales
revenue that the sales representatives generated, even if the commission payment is not made until the
following year.
III. Alejandro, the director for sales, has been with the company for 20 years. His loyalty and sincerity
have always been with the company. He is one of the reasons for the company’s impressive success.
Thus, Alejandro’s loyalty and sincerity must be reflected in the financial statements.
IV. Entity rule states the transactions of different entities should be accounted for together.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
4. Which of the following is false?
I. Preference shares may be given rights and privileges not enjoyed by the owners of other stocks.
II. Par Value shares are shares in which a specific amount is fixed in the Articles of Incorporation,
appearing on the Certificate of Stock.
III. Treasury shares are stocks that has been issued by the corporation as fully paid and later reacquired
but not retired.
IV. Promotion shares are shares which may be purchased by the corporation from the holders of such
shares upon the expiration of a fixed period.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
5. Which of the following is the classifications of a corporation as to its purpose?
I. Civil corporation
II. Ecclesiastical corporation
III. Corporation aggregate
IV. OPC
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
6. Which of the following statements are false?
I. Stable monetary unit principles states that, if a company purchases a building for P1,000,000, it
should be recorded as such, and should remain on the books for that amount until disposed of. If the
building appreciates to P1,250,000 in the next few years, no adjustment should be.
 Page 2 of 4

II. Based on the concept of prudence, in choosing between acceptable alternatives, accountant will select
the alternative that will report less profit, less asset amount or a greater liability.
III. The accountant in a company with an annual revenue of P10,000,000 will not anymore emphasize in
the financial reports a customer who fails to pay a P1,000. For decision-makers looking at financial
reports regarding the company's performance, a single customer defaulting on a small contract has no
little bearing on the fiscal budget. This is an example of relevance concept.
IV. Under the historical cost principle, the effects of inflation are ignored in the accounting records.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
7. Which of the following statements are correct?
I. Consistency argues that, if the corporation chooses a certain accounting treatment for a particular kind
of transaction of occurrence, it should continue to apply the same approach from one accounting
period to another, unless there is a solid cause to alter it.
II. A newly purchased pencil is an asset of the business. Whenever the pencil is used, a part of the asset
is consumed. Materiality deviates the matching principle in this example. The cost of the pencil will
be expense outright instead of spread over the life the pencil is used.
III. The periodicity principle states that an organization can report its financial results within certain
designated periods of time. This time periods need not be at regular interval. Example of this is if in
year 1 the entity produces its financial statement after 6 months; the next financial statements can be
prepared after 3 months.
IV. Falsifying financial statements by entering bogus orders that will increase the Revenue or Sales is in
accordance with the objectivity principle.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
8. The following are components of a corporation:
I. Incorporators
II. Customers
III. Employees
IV. Underwriters
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
9. Suppose the owner withdrew cash for personal use, what is the effect of this business transaction to the
accounting equation?
I. Decrease in asset.
II. Decrease in owner’s equity.
III. Increase in owner’s equity.
IV. Increase in assets.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
10. According to double-entry system; if there is a decrease in cash, there must have been;
I. A decrease in owner’s equity.
II. A decrease in Accounts Payable.
III. An increase of owner’s equity.
IV. An increase in Sales.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
11. Normal balances of accounts are:
I. Patent has a normal debit balance.
II. Accounts Payable has a normal credit balance.
III. Accounts Receivable has a normal credit balance.
IV. Estimated warranty liability has a normal debit balance.
a. I and II only
b. II and III only
 Page 3 of 4

c. III and IV only

d. IV and I only
12. Suppose a debtor repays his debt of P5,000 by transferring the money into the bank account of the other
entity. The effect of the transaction on the accounting equation would be;
I. Liabilities increase by P5,000.
II. Assets decrease by P5,000.
III. Liabilities decrease by P5,000.
IV. Assets increase by P5,000.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
13. In a double-entry accounting system, debit means:
I. Decreases in liabilities and owner’s equity
II. Decrease in assets and expenses.
III. Increase in liabilities, and owner’s equity.
IV. Increase in assets and expenses.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
14. The following are classifications of a corporation according to degree of public participation with regard
to share ownership:
I. Holding Corporation
II. Subsidiary Corporation
III. Publicly-held Corporation
IV. Close Corporation
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only
15. The following transactions increases the assets and the stockholders’ equity:
I. The entity received cash from investors.
II. Collection of accounts.
III. Payment of debts.
IV. Rendered services on account.
a. I and II only
b. II and III only
c. III and IV only
d. IV and I only

FILL IN THE BLANKS Indicate in a table format the effects of each transaction to the Accounting
Equation, using below chart of accounts.
Accounts Payable Expenses
Accounts Receivable Furniture &
Fixtures
Capital Inventory
Cash Office Supplies
Customer Advances Sales
Withdrawal
On the 2nd month of operation, the entity has the following business transactions:
a. Purchased computer chairs for P50,000. Paid only P30,000 for this month, and the balance will be paid
next month.
b. Received payment (P35,000) from customers for items sold last month.
c. Paid the current salaries of the employees; P15,000.
d. Sold inventory on account; P25,000. Cost of inventory, P20,000.
e. Paid last month’s rental, P6,500.
f. Received down payment, P10,000, for items to be delivered next month.
g. Received statement of account for lights (P2,500) and water (P500).
h. Received display shelves (P5,000) and office supplies (P3,000) as additional investment from owners.
i. Owner withdraws for personal use, P5,000.
Page 4 of 4