QUIZ#1: PRINCIPLES OF ACCOUNTING

GENERAL INSTRUCTIONS: FOR PART 1 (MULTIPLE CHOICE), USE THE MICROSOFT FORMS LINK
AS YOUR ANSWER SHEET. FOR PART 2 AND 3, SHOW YOUR SOLUTIONS IN A SEPARATE SHEET OF
PAPER AND SUBMIT THRU MS TEAMS (EITHER SCANNED OR TAKE A PICTURE OF IT). NO
SOLUTION NO CREDIT FOR PART 2 AND 3. SOLUTIONS MUST BE HANDWRITTEN.
PART 1: MULTIPLE CHOICE
1. The kinds of business are
a. Single proprietorship, partnership, corporation
b. Service, merchandising and manufacturing
c. Single proprietorship, partnership, corporation, cooperative
d. All of the above

2. The equity of the owners

a. Assets b. Liabilities c. Capital d. Debtors

3. Rendering service on account will

a. Increase an asset account only c. Increase an asset account and a liability account
b. Increase capital account only d. Increase an asset account and an income account

4. The accounting equation is

a. Assets - Liability = Equity c. Assets - Equity = Liability
b. Asset = Liability + Equity d. All of the above

5. Which of the following statements best describes the term “going concern”?
a. When current liabilities of an entity exceed current assets
b. The ability of the entity to continue in operation for the foreseeable future
c. The potential to contribute to the flow of cash and cash equivalents to the entity
d. The expenses of an entity exceed its income

6. These refers to present obligations arising from past events.

a. Assets c. Capital
b. Liabilities d. Revenues

7. A business in which ownership is divided in shares

a. Corporation b. Sole Proprietorship c. Partnership d. Cooperative

8. The financial statement which shows the results of the operation

a. Statement of Financial Position
b. Statement of Cash Flows
c. Statement of Changes in Capital
d. Statement of Comprehensive Income

9. Financial statements are useful for

a. Making economic decision c. Assessment of the business status
b. Planning for the business d. All of the above

10. The branch of accounting that serves the needs of “Internal Users”.
a. Financial Accounting c. Managerial Accounting
b. Taxation d. Auditing
11. The branch of accounting that serves the needs of “External Users”.
a. Financial Accounting c. Managerial Accounting
b. Taxation d. Auditing

12. Refers to an increase in economic benefit during the accounting period in the form of an increase in asset or
a decrease in liability that results in increase in equity, other than contribution from owners.
a. Income b. Gains c. Revenue d. Profit

13. These are decreases in economic benefit during the accounting period in the form of a decrease in asset or
an increase in liability that result in decrease in equity, other than distribution to owners.
a. Losses b. Expenses c. Drawing d. Revenue
14. Which of the following is not a classification of liabilities?
a. Contingent liabilities c. Current Liabilities
b. Long term liabilities d. Anticipated liabilities

15. The use of accrual basis of accounting justifies the:

a. Going concern principle c. Full disclosure principle
b. Matching principle d. Cost principle

16. Because of this basic accounting principle or guideline, an accountant might be allowed to violate another
accounting principle if an amount is insignificant. This employs the use of judgement or estimates.
a. Revenue recognition principle c. Materiality principle
b. Matching principle d. Cost principle

17. Collection of accounts due from a customer will:

a. Increase the total assets and will not affect liability
b. Not affect total assets and will not affect capital
c. Decrease assets and increase capital
d. Decrease assets and decrease liability

18. The company purchased equipment, paid 50% and the balance is on account. This transaction will:
a. Increase assets and increase liability
b. Decrease assets and increase liability
c. Not affect the total assets
d. Increase liability and decrease capital

19. Additional cash investment from the owner is an example of cash flows from
a. Operating activities
b. Financing activities
c. Investing activities
d. Ordinary activities

20. Cash collection from a customer is an example of cash flows from

a. Operating activities
b. Financing activities
c. Investing activities
d. Ordinary activities

21. Cash paid for fixed assets purchases is an example of cash flows from
a. Operating activities
b. Financing activities
c. Investing activities
d. Ordinary activities

22. If a situation arises where there are two acceptable alternatives for reporting an item, conservatism directs
the accountant to choose the alternative that will result in less net income and/or less asset amount.
a. Revenue recognition principle c. Materiality principle
b. Principle of conservatism d. Cost principle

23. The International Generally Accepted Accounting Principles (GAAP) such as International Accounting
Standard (IAS) and International Financial Reporting Standards (IFRS) are adopted in the Philippines
beginning:
a. January 1, 2004 c. January 1, 2006
b. January 1, 2005 d. January 1, 2007

24. Rendering service on account and receiving promissory from a customer will:
a. Increase assets and increase capital
b. Increase assets and increase liability
c. Decrease assets and decrease capital
d. Decrease assets and decrease liability

25. A transaction that will not affect asset but will increase liability is:
a. Purchasing supplies on account
b. Collection of a long-term receivable from a customer
c. Owner’s withdrawal for personal use
d. Received billing for current month utilities to be settled on the following month
PART 2: COMPLETE THE TABLE BELOW BY UTILIZING THE ACCOUNTING EQUATION
Complete the Elements of Financial Statements
Show solutions in good accounting way at the back of this test paper.
Assets Liabilities Owner's Equity
1. ₱ 760,000 ₱ 360,000
2. ₱ 860,000 ₱ 592,000
3. ₱ 108,000 ₱ 760,000
4. ₱ 626,600 ₱ 376,240
5. ₱ 800,000 ₱ (100,000)

PART 3: ANALYIS OF TRANSACTIONS

REQUIREMENTS:
1. Make a Tabular Analysis of the following Transactions (use the given Chart of Accounts)
2. Prepare the following Financial Statements:
a. Statement of Financial Position; and
b. Statement of Comprehensive Income
Below are the selected transactions during the first month of operation (June 2020) of Awesome Events
Management Company.

June 1 – Ms. Romina Mondragon, an entrepreneur, invest P2,000,000 cash to start her business that provides events
management services to its clients.

June 3 – Purchased office supplies for cash amounting to P30,000.

June 4 – Purchased furniture and fixtures and issued notes, P300,000.

June 8 – Purchased equipment on account, P400,000.

June 9 – Provide one day coordination service in the wedding of a client for cash, P80,000.

June 10 – Provide services for the celebration of client’s 50th wedding anniversary on account, P100,000.

June 11 – Paid half of the amount due to the supplier of furniture and fixtures purchased last June 4.

June 14 – Rendered professional services on a corporate event on account, P50,000

June 15 – Purchased additional supplies on account, P5,000.

June 16 – Paid half of the amount due to the supplier of equipment purchased last June 8.

June 17 – Collected the amount due from a customer for services rendered last June 10.

June 19 – Rendered services to a client who celebrated her 18th birthday amounting to P80,000. The company received
partial payment of P35,000 and the balance is evidenced by a note.

June 21 – Rendered professional expertise to a wedding held in Tagaytay, P90,000. The client paid P40,000 and the
balance is on account.

June 22 – Collected P22,500 from a customer for the service rendered last June 14.

June 23 – Paid advertising expenses of P25,000.

June 25 – The owner made additional investment of P200,000.

June 27 – Paid the rent for the month, P95,000.

June 28 – Ms. Mondragon withdrew P86,400 for personal use.

June 29 – Paid the salaries of employees for the month, P75,000

June 30 – Received billing for utilities for the month, P25,670. Payment will be made on July.
Chart of Accounts
Cash Utilities Payable
Accounts Receivable Professional Fee
Notes Receivable Advertising Expense
Supplies Rent Expense
Furniture & Fixtures Salaries Expense
Equipment Utilities Expense
Accounts Payable R. Mondragon, Drawing
Notes Payable R. Mondragon, Capital