REVIEWER IN FINANCIAL ACCOUNTING AND REPORTING ( ACCTG 101)

1. Accounting is being defined by the Accounting Standard Council as

a. the art of recording, classifying, and summarizing in a significant manner in terms of money,
transactions and events which are in part at least of a financial character and interpreting the
results thereof.
b. the process of identifying, measuring, and communicating economic information to permit
informed judgment and decision by users of the information.
c. service activity. Its function is to provide quantitative information, primarily financial in nature,
about economic entities, that is intended to be useful in making economic decisions.
d. A body of knowledge which has been systematically gathered, classified, and organized.

2. Events involving an entity and an external party.

a. External events
b. External events other than transfers
c. non-reciprocal transfers
d. Internal event

3. Which of the following events is considered an internal event?

a. sale of inventory on account

b. provision of capital by owners
c. borrowing of money
d. conversion of raw materials into finished goods

4. The analytical phase of accounting which significantly portrays the liquidity, solvency, profitability of a
business.

a. interpreting
b. summarizing
c. recording
d. classification

5. Which area of public accounting means the examination of financial statements by a CPA for the
purpose of expressing an opinion as to the fairness of the financial statements.

a.) External Auditing

b.) Internal Auditing
c.) Management Advisory Services
d.) Taxation

6. The basic purpose of accounting is

a.) To measure the periodic income of the economic entity

b.) To provide information that the creditors of an economic entity can use in deciding whether to make
additional loans to the entity
c.) To provide quantitative information about a business enterprise that is useful in making rational
economic decisions
d.) To provide the information that the managers of an economic entity need to control its operations.

7. Which of the following statements is incorrect regarding accounting concepts?

a. Under the Accrual Basis of accounting, revenues are recognized when earned and expenses
are recognized when incurred, not when cash is received and disbursed.

b. Under the Going concern concept, the business entity is assumed to carry on its operations
for an indefinite period.

c. Under the Business entity/ Separate entity/ Entity/ Accounting entity Concept, the business is
treated separately from its owners.

d. Under the Time Period/ Periodicity/ Accounting Period concept, the life of the business is
divided into series of reporting periods.

e. Under the Cost-benefit concept, the cost of processing and communicating information
should exceed the benefits derived from it.

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8. Mr. Van owns a butcher shop, a restaurant, and a catering business. Separate financial statements
are prepared for each business independent of the other businesses. What accounting principle or
assumption is being applied in this situation?

a. Time period assumption

b. Full-disclosure principle
c. Separate entity assumption
d. Unit-of-measure assumption

9. Under this concept, a business is not expected to end its operations in the near term.

a. Separate entity concept

b. Going concern
c. Stable monetary unit
d. Materiality

10. Which of the following is not a characteristic of management accounting?

a. The level of detail is greater than financial accounting.

b. It must be in compliance with the IFRSs.
c. There is one primary user group.
d. It deals primarily with segments of an organization.

11. Which of the following statements is correct?

a. Accounting and bookkeeping are synonyms.

b. The process of providing financial information to external decision makers is referred to as
managerial accounting.
c. financial statements generally include all the balance sheet, statement of profit or loss and other
comprehensive income, statement of changes in equity, statement of cash flows, notes, and the
corporate income tax return.
d. financial accounting applies to both business and non-business organizations.

12. A common set of accounting standards and procedures are called.

a. financial account standards

b. generally accepted accounting principles
c. objectives of financial reporting
d. statements of financial accounting concepts

13. The Philippine Financial Reporting Standards (PFRSs) are standards adopted by the

a. Accounting Standards Council (ASC)

b. Financial Reporting Standards Committee (FRSC)
c. Philippine Institute of Certified Public Accountants (PICPA)
d. Financial Reporting Standards Council (FRSC)

14. The basic sequence in the accounting process can best be described as:

a. Transaction, journal entry, source document, ledger account, trial balance.

b. Source document, transaction, ledger account, journal entry, trial balance.
c. Transaction, source document, journal entry, trial balance, ledger account.
d. Transaction, source document, journal entry, ledger account, trial balance .

15. Given the dual effects of accountable events, an increase in a liability cannot possibly be
accompanied by a (an):

a. increase in asset
b. decrease in asset
c. decrease in equity
d. no effect on assets

16. The best interpretation of the word credit is the

a. offset side of an account.

b. right side of an account.
c. increase side of an account
d. decrease side of an account

17. The normal balance of any account is the

a. left side.
b. side which increases that account
c. right side
d. side which decreases that account.

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18. Which is false concerning the rules of debit and credit?

a.) The left side of an account is always the debit side and the right side is always the credit side
b.) The word “ Debit” means to increase and the word “ credit” means to decrease
c.) Increases In assets and expenses are debit entries and increase the liabilities and revenues are
credit entries
d.) The normal balance of any account appears on the side for recording increases

19. The purchase of service vehicle on account

a.) Will decrease asset and decrease liability

b.) Will decrease equity
c.) Will increase asset and decrease a liability
d.) Will increase asset and increase in a liability

20. When an entity acquires computer equipment for cash

a.) An asset is increased, and a liability is decreased.

b.) Assets and owner’s equity are increased.
c.) One asset is increased, and another asset is also increased.
d.) One asset is increased while another asset is decreased.

21. In the accounting equation, an increase in asset can be associated with

a.) A decrease in a liability

b.) A decrease in owner’s equity
c.) An increase in a liability
d.) An increase in another asset

22. This is prepared to prove the equality of the debits and credits in the ledger after the closing process.

a. Trial balance
b. chart of accounts
c. Worksheet
d. post-closing trial balance

23. The post-closing trial balance contains

a. nominal, real, and mixed accounts

b. real and mixed accounts
c. real and nominal accounts
d. real accounts only

24. Which of the following best expresses the primary purpose of the general ledger?

a.) The general ledger provides a record of transactions classified by account.

b.) The general ledger provides a record from which the journal entries are later posted.
c.) The general ledger provides a listing of the dates of transactions affecting each account, in what
amounts and its ending balance.
d.) The general houses only accounts which are supported by subsidiary ledgers.

25. Which of the following statements regarding a trial balance is incorrect?

a.) A trial balance should always balance.

b.) A trial balance is a test of the equality of the debits and credits in the ledger.
c.) A trial balance that is in balance proves that no error of any kind has been made in the accounts
during the accounting period.
d.) A trial balance is useful in the preparation of the income statement and the balance sheet.

26. Under this concept, some costs are initially recognized as assets and recognized only as expenses
when the related revenue is recognized.

a. Separate entity concept

b. Historical cost concept
c. Going Concern
d. Matching principle

27. Which of the following is one of the fundamental qualitative characteristics?

a. Comparability
b. Relevance
c. Timeliness
d. Verifiability

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 28. It is an economic resource controlled by the entity that has resulted from past events and has a potential to
produce economic benefits.

a. Asset
b. Liability
c. Equity
d. Income

29. Which of the following is a correct accounting equation?

ASSETS LIABILITIES EQUITY INCOME EXPENSES

a. ₱920,000 ₱710,000 ₱290,000 ₱440,000 ₱420,000
b. ₱870,000 ₱310,000 ₱240,000 ₱570,000 ₱150,000
c. ₱890,000 ₱240,000 ₱340,000 ₱600,000 ₱190,000
d. ₱740,000 ₱530,000 ₱170,000 ₱1,900,000 ₱1,860,000

30. Entity A had total assets, liabilities, and equity of ₱150M, ₱90M and ₱60M, respectively, at the beginning of the
period. During the period, Entity A’s total liabilities decreased to ₱40M, while its profit was ₱25M. There were no other
transactions or events that affected equity during the period. How much is Entity A’s ending total assets?

a. ₱75M
b. ₱115M
c. ₱95M
d. ₱125M

31. Entity A has ending total assets of ₱150M and ending total liabilities of ₱90M. Entity A had a beginning equity of
₱30M. If Entity A incurred total expenses of ₱50M during the year, how much was the total income?

a. ₱90M
b. ₱40M
c. ₱50M
d. ₱80M

32. Entity A has ending total assets of ₱90M and ending total liabilities of ₱60M. Entity A had a beginning equity of
₱10M. If Entity A earned total income of ₱45M during the year, how much were the total expenses?

a. ₱0
b. ₱20M
c. ₱15M
d. ₱25M

33. The business renders services to clients.

a. Sales
b. Service fees
c. Interest income
d. Gain

34. A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next
week. Which of the following accounts is increased and therefore debited?

a. Cash
b. Accounts receivable
c. Notes receivable
d. Sales

35. Your business obtained a ₱1M loan from a financing company. The financing company made you sign a contract
promising to repay the loan after a year. Which of the following accounts is increased and therefore credited?

a. Accounts payable
b. Accounts receivable
c. Notes payable.
d. Notes receivable

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36. Which of the following is most likely not considered an adjusting entry?

a. The accrual of an electricity bill for electricity used but not yet paid
b. The recognition of depreciation expense for the period
c. The recognition of the used and unused portions of a prepaid rent
d. The entry to record the collection of interest receivable

37. Which of the following is most likely considered an adjusting entry?

a. The entry to record the payment of interest payable

b. The entry to record the collection of accounts receivable
c. The entry to record the purchase of equipment
d. The entry to record bad debts expense for the period

38. Use the following information to answer the following questions: VICTORY Realty Company had the following
balance sheet accounts and balances:

Accounts Payable P 60,000 Equipment P 70,000

Accounts Receivable P 10,000 Victory, Capital P ????
Building ???? Land P 70,000
Cash P 30,000

39. If the balance of the Victory, Capital was P 210,000, what would be the balance of the building account?

a.) P 250,000 c.) P 90,000

b.) P 40,000 d.) P210,000

40. If the balance of the building account was P 150,000 and the equipment was sold for P 70,000, what would be the
total of owner’s equity?

a.) P 150,000 c.) P 270,000

b.) P 160,000 d.) P 330,000

41. If the balance of the building account was P 140,000 and P 30,000 of Accounts Payable was paid in cash, what
would be the balance of victory capital account?

a.) P 210,000 c.) P 320,000

b.) P 260,000 d.) P 340,000

42. These are the means by which the information accumulated and processed in financial accounting is periodically
communicated to the users.

a. financial statements
b. trial balance
c. worksheet
d. management reports

43. While preparing the worksheet, the accountant made the following entry: Debit Inventory – ending and Credit
Income Summary. This entry can be properly termed as a(n)

a. Adjusting entry
b. Closing entry
c. Reclassification entry
d. Correcting entry

44. These are entries prepared at the end of the accounting period to “zero out” all temporary accounts in the ledger.

a. adjusting entries
b. reversing entries
c. closing entries
d. reclassification entries

45. Amounts transferred to income summary represent

a. increases and decreases in owner`s equity

b. all the expenses of a company
c. the asset balance of a company
d. increases and decreases in owners’ equity not directly recognized in equity

46. The Post- Closing Trial Balance would not include which of the following accounts?

a) Accumulated Depreciation- Office Equipment

b) Owner’s Capital
c) Owner’s Withdrawals
d) Unearned Legal Fees

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47. The classification and normal balance of the sales discount account would be:

a.) Contra revenue and debit c.) Expense and Debit

b.) Contra revenue and credit d.) Revenue and Credit

48. This column would show the account number of the ledger accounts to which entries have been posted

a.) Money Column c.) Date Column

b.) Particulars Column d.) Folio Column

49. What are Debits?

a.) Debits decreases assets and increase liabilities

b.) Debits increases both assets and liabilities
c.) Debits decreases both assets and liabilities
d.) Debits increases both expenses and assets

50. Which of the following is not an example of a source document?

a. Delivery receipt
b. Sales invoice
c. Special journal
d. Bank statement

51. Which of the following is the effect of purchasing inventory on account?

a. Inventory is increased and Cash is decreased

b. Inventory is increased and Accounts payable is increased
c. Inventory is increased and Accounts payable is decreased
d. Inventory is decreased and Accounts payable is increased

52. Which of the following is the effect of a sale of goods on account?

a. Accounts receivable is increased and Cash is decreased

b. Accounts receivable is increased and Accounts payable is increased
c. Accounts receivable is increased and Sales is increased
d. Accounts receivable is decreased and Sales is decreased

53. The business pays ₱1M rent in advance.

a. Rent expense Rent payable

b. Prepaid rent Accounts payable
c. Prepaid rent Cash
d. Rent expense Owner’s drawings

54. The business spends ₱1M in marketing and promoting the products.

a. Advertising expense Owner’s capital

b. Advertising expense Cash
c. Accounts receivable Equipment
d. Accounts payable Cash

55. The business collects ₱3M accounts receivable from a customer.

a. Cash Accounts receivable

b. Cash Accounts payable
c. Accounts receivable Sales
d. Cash Sales

56. The business purchases inventory costing ₱900K on account or on credit.

a. Cash Accounts payable

b. Inventory Cash
c. Inventory Accounts payable
d. Accounts payable Owner’s capital

57. Liabilities, owners' equity, and income are

a. decreased by credits and increased by debits.

b. decreased by debits and increased by credits.
c. decreased by both debits and credits
d. its depends on the situation

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58. Entity A had a cash balance of ₱310,000 at the beginning of the period. During the period Entity A had the
following transactions:

• Rendered services worth ₱420,000, on account.

• Obtained a ₱500,000 loan.
• Collected ₱270,000 accounts receivable.
• Paid total expenses of ₱680,000.
• Paid half of the loan.

How much is the ending balance of cash?

a. 150,000
b. 90,000
c. 160,000
d. 140,000

59. The heading of a trial balance does not include which of the following?

a. Name of the business

b. Title of the report
c. Type of activity that the business is engaged with.
d. Date of the report

60. Aling Nena’s Sari-sari Store’s total sales during the period were ₱100M. Of that amount, ₱60M was on credit. If
the total business expenses were ₱70M, how much is the profit (loss)?

a. 30M c. 10M
b. (30M) d. (10M)

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