Chapter 1 Introduction to Accounting

1. It is a business that is organized under an operation of law and has a separate legal entity.
a. Sole proprietorship c. Partnership
b. Corporation d. All of these

2. It is a type of business that changes basic inputs into products that are sold to customers.
a. Service c. Manufacturing
b. Trading d. Sole proprietorship

3. It is an information system that provides reports to stakeholders about the economic activities and
condition of a business.
a. Accounting information system c. Bookkeeping system
b. Language of business d. Science and art system

4. It is a specialized field of accounting that provides information primarily intended to aid

management in running day-to-day operations and in planning future operations.
a. Financial accounting c. Managerial or Management accounting
b. Auditing d. Taxation

5. It is a type of business that purchases products from other businesses and sells them to customers.
a. Service c. Manufacturing
b. Merchandising d. Sole proprietorship

6. It is a business that is owned by one individual.

a. Sole proprietorship c. Partnership
b. Corporation d. All of these

7. It is the field of accounting that is primarily concerned with the recording and reporting ofeconomic
data and activities to stakeholders outside the business.
a. Financial accounting c. Managerial or Management accounting
b. Accounting research d. Cost accounting

8. Accounting is often characterized as

a. the “language of business.” c. an information system.
b. both a science and an art. d. all of these

9. Which of the following is not considered an external user of accounting information?

a. investor c. creditor
b. lender d. management

10. Accounting systems (choose the incorrect statement)

a. provide information on business transactions for use by management in directing operations.
b. provide information that is needed in preparing financial statements.
c. consists of inputs, processes and outputs.
d. are optional for most businesses.
 2 Accounting Concepts and Principles

1. It is the concept in accounting that requires economic data to be recorded in terms of pesos.
a. going concern c. consistency
b. materiality d. unit of measure or stable monetary unit

2. The amounts for recording properties and services purchased by a business are determined usingthe
a. business entity concept c. matching principle
b. cost concept d. proprietorship principle

3. It is the concept of accounting that limits the economic data in the accounting system to data related
directly to the activities of the business.
a. business entity concept/ separate entity concept c. accrual basis
b. matching d. going concern

4. It is the authoritative body in the Philippines that has the primary responsibility for developing
accounting standards?
a. FASB c. FRSC
b. PFRS d. IASB

5. An accounting or reporting period is normally

a. 6 months. c. 2 years.
b. 1 year. d. 3 years.

6. Under this concept, income is recognized in the period in which it is earned, rather than when it is
collected.
a. going concern c. historical cost
b. cash basis d. accrual basis of accounting

7. This concept supports the reporting of expenses in the same period in which the related revenuesare
recognized.
a. materiality c. historical cost
b. matching d. entity concept

8. This accounting concept assumes that the economic life of the business can be divided into several
reporting periods.
a. fiscal year period c. calendar year period
b. accounting period d. division period
c.
9. An annual accounting period that starts on a date other than January 1.
a. fiscal year period c. interim period
b. calendar year period d. first period

10. Which of the following statements is correct?

a. Under the accrual basis of accounting, income and expenses are reported in the incomestatement
in the period in which cash is received or paid.
b. The concept that expenses incurred in generating revenue should be matched against therevenue
in determining profit or loss is called the cost concept.
c. The concept of materiality prohibits the rounding-off of amounts when presenting financial
reports.
d. Most businesses use the accrual basis of accounting.
 Chapter 3 The Accounting Equation

1. “Assets = Liabilities + Owner’s Equity” is referred to in accounting as

a. the basic accounting equation. c. the accountant’s creed.
b. the balance sheet. d. the accountant’s motto.

2. The liabilities are ₱85,000 and owner’s equity is ₱45,000, the amount of the assets
isa. ₱130,000 c. ₱85,000
b. ₱40,000 d. ₱45,000

3. If liabilities are ₱85,000 and owner’s equity is ₱295,000, the amount of the assets
isa. ₱380,000 c. ₱85,000
b. ₱210,000 d. ₱295,000

4. If assets are ₱375,000 and owner’s equity is ₱295,000, the amount of the liabilities
isa. ₱670,000 c. ₱80,000
b. ₱375,000 d. ₱295,000

5. The owner’s equity at the beginning of the period was ₱19,000; at the end of the period, assets were
₱98,000 and liabilities were ₱41,000. The owner made no additional investments or withdrawalsduring
the period. The profit (loss) for the period is
a. ₱18,000 c. ₱38,000
b. ₱28,000 d. (₱38,000)

6. If total assets increased by ₱85,000 and liabilities decreased by ₱9,000 during the period, the change
in owner’s equity was
a. ₱74,000 decrease c. ₱94,000 decrease
b. ₱74,000 increase d. ₱94,000 increase

7. Another way of writing the accounting equation is:

a. Assets + Liabilities = Owner’s Equity
b. Owner’s Equity + Assets = Liabilities
c. Assets = Owner’s Equity – Liabilities
d. Assets – Liabilities = Owner’s Equity

8. If owner’s equity is ₱46,000 and liabilities are ₱34,000, the amount of

assets isa. ₱12,000
c. ₱46,000
b. ₱34,000 d. ₱80,000

9. If total assets increased by ₱21,500 and owner’s equity increased by ₱8,000 during a period, the
amount and direction (increased or decreased) of the period’s change in total liabilities was
a. ₱13,500 increase c. ₱29,500 increase
b. ₱13,500 decrease d. ₱29,500 decrease

10. If total liabilities increased by ₱20,000 during a period of time and owner’s equity increased by
₱5,000 during the same period, the amount and direction (increase or decrease) of the period’s
change in total assets is:
a. ₱20,000 increase c. ₱25,000 decrease
b. ₱20,000 decrease d. ₱25,000 increase
 Chapter 4 Types of Major Accounts

1. In accounting, these refer to the resources owned or controlled by a business.

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

2. The simplest form of an account is the

a. T-account c. V-account
b. Tea account d. Z-account

3. The claims of a business owner over the assets of a business are referred to in accounting as
a. Receivables c. Owner’s equity
b. Liabilities d. Personal assets

4. The amount a business earns by selling goods to customers is recorded as

a. Sales revenue c. Customer’s fee
b. Service fees d. Customer income

5. Equipment, machinery, buildings, and land, collectively, are referred to as

a. property, plant and equipment. c. capital assets.
b. fixed assets. d. All of these

6. The residual claim against the assets of a business after the total liabilities are deducted is called
a. Equity c. Net assets
b. Capital d. All of these

7. These are debts owed by an entity to outsiders (creditors).

a. assets c. expenses
b. liabilities d. equity

8. This account represents the cost of unused supplies that are available for the business’ use in
thefuture.
a. accounts receivable c. supplies expense
b. prepaid supplies d. office surprise

9. Which of the following is an asset account?

a. accounts payable c. office supplies expense
b. inventory d. sales

10. Which of the following is a liability account?

a. accounts receivable c. utilities expense
b. prepaid supplies d. accounts payable