General Instructions: Choose the best answer.

1. Which form of business organization is characterized by limited liability?

a. Sole Proprietorship
b. Partnership
c. Corporation
d. Both A & B

2. All of the following describe accounting, except

a. A service activity
b. An information system
c. An exact science rather than an art
d. A universal language of business

3. They encompass the conventions, rules, and procedures necessary to define what is accepted
accounting practice.
a. Accounting Assumptions
b. Accounting Concepts
c. Conceptual Frameworks
d. Generally Accepted Accounting Principles or GAAP

4. Which of the following entries records the receipt of a utility bill from the water company?
a. debit Accounts Payable, credit Cash
b. debit Accounts Payable, credit Utilities Payable
c. debit Utilities Expense, credit Accounts Payable
d. debit Utilities Payable, credit Accounts Receivable

5. Which of the following is not an example of non-current assets ?

a. a second-hand computer used in the office
b. van that is purchased through installments
c. P 32,000 Cash
d. A building bought by the entity

6. Which of the following items has no effect on owner’s equity?

a. Expense
b. Owner’s Withdrawal
c. Purchase of land
d. Revenue

7. Which of the following is not an example of additional capital?

a. A sole proprietor purchases a car through the bank account of the entity.
b . A sole proprietor brings a second-hand computer from his home to the office.
c. A sole proprietor transfers P 1,000 from his own bank account to the entity:
account.
d. A sole proprietor uses his own building as an office without receiving any rent.

8. Which of the following combinations of trial balance totals suggest the presence of either a
transposition error or number slide?
a. P65,470 debit and P68,170 credit
b. P33,220 debit and P35,420 credit
 c. P25,670 debit and P26,670 credit
d. P25,670 debit and P26,670 credit

9. Which financial statement reports the revenues and expenses for a period of time such as a
year or a month?
a. Balance Sheet
b. Income Statement
c. Statement of Cash Flows
d. None of these

10. Revenues minus expenses equals _____________.

a. Gross Sales
b. Net Expenses
c. Net Income
d. Net Sales

11. The first financial statement that is prepared from the trial balance is the
a. statement of cash flows.
b. statement of cash flows.
c. income statement.
d. balance sheet.

12. Assets minus liabilities equals __________.

a. Net Income
b. Current Assets
c. Current Liabilities
d. Equity

13. On Apr. 1, 2023,Wenn sets up a firm and brings in office equipment of P50,000 and inventory
of P30,000 to the business. Wenn puts P80,000 into the firm's cash box and P100,000 into the
firm's bank account. Meanwhile, the firm lends P50,000 cash to RD and Associates and
borrows P200,000 from the bank to acquire a piece of premises.

What is the amount of the firm's capital on Apr. 1, 2023?

a. 510,000
b. 206,000
c. 260,000
d. 216,000

14. Under the double-entry system, what is the value of X assets, current liabilities, non-current
liabilities and capital are X P40,000, P60,000 and P350,000 respectively?
a. 250,000
b. 350,000
c. 370,000
d. 450,000

15. A business has the following items in it:

- Land P 100,000
- Machinery 20,000
 - Cash 10,000
- Debt 30,000
- Owner’s equity ______?
What is the value of the owner’s equity?
a. 100,000
b. 160,000
c. 60,000
d. 130,000

16. A debtor repays his debt of P50,000 by transferring the money into bank account of the
business The effect of the transaction on the accounting equation would be:
a. Both assets and liabilities increase by P50,000
b. Both assets and liabilities decrease by P50,000
c. Only assets decrease by P50,000
d. Assets and liabilities remain unchanged.

17. At the beginning of the year, the assets of Alice in Wonderland Services were P360, 000 and
its owner's equity was P200,000. During the year, assets increased by P120,000 and liabilities
increased by P20,000. What was the owner's equity at the end of the year?
a. 300,000
b. 460,000
c. 480,000
d. 320,000

18. Capital = Assets – Liabilities

a. True
b. False

19. At the beginning of the year, MJ Calling Station had liabilities of P100,000 and owner's equity
of P96,000. If assets increased by P40,000 and liabilities decreased by P30,000, what was the
owner's equity at the end of the year?
a. 136,000
b. 126,000
c. 110,000
d. 166,000

20. The liabilities of Belle Stylist equal one-third of the total assets, and the owner's equity is
P240,000. What is the amount of the liabilities?
a. 80,000
b. 120,000
c. 160,000
d. 240,000

Yes you can!