2 Semester AY 2018 - 2019 of

1.
Allowing entities to estimate rather than to physically count inventories at interim periods is an example of a
tradeoff between
a. Verifiability and Comparability c. Timeliness and Verifiability
b. Timeliness and Comparability d. Neutrality and Consistency
2. In classifying the elements of financial statements, the primary distinction between revenues and gains is
a. The materiality of the amounts involved
b. The likelihood that the transactions involved will recur in the future
c. The nature of the activities that gave rise to the transactions involved
d. The costs versus the benefits of the alternative methods of disclosing the transactions involved
3. Which of these statements is true concerning accrual accounting?

a. Revenues and expenses are recognized when they are earned/ incurred regardless of the time cash is
exchanged.
b. Revenues and expenses are accrued when cash is received or paid.
c. All expenses but not revenues are recognized when incurred.
d. Revenues and expenses are recognized when cash is exchanged regardless of the time events occur.
4. Which underlying concept serves as the basis for preparing financial statements at regular intervals?
a. Accounting entity c. Going concern
b. Accounting period d. Stable monetary unit
24. In the adjusted trial balance, the owner’s equity account reflects
a. The results of adjusting entries c. The beginning-of-the-period balance
b. The increase in income and expense d. The period ending balance
25. Which of the following steps comes first in worksheet preparation?

a. Preparation of an unadjusted trial balance
b. Financial statements
c. Preparation of an adjusted trial balance
d. Journalizing business transactions
26. Which of the following steps comes first in worksheet preparation?

a. Compute profit loss as the difference between total revenues & total expenses on the income statement
b. Enter the account balances in the unadjusted trial balance columns and total the amounts
c. Compute each account’s adjusted balance by combining the trial balance and adjustment figures
d. Enter the adjusting entries in the adjustment columns and total the amounts
27. If the income statement debit and credit columns are not equal after adding the respective columns,
a. An error has been made,
b. The company generated a profit,
c. The company incurred a loss,
d. The company either generated a profit or incurred a loss
28. The Income Statement Debit column of the worksheet contains

a. Expense account balances c. Asset account balances
b. Revenue account balances d. Contra asset account balances
29. The usefulness of the worksheet is in
a. Identifying the accounts that need to be adjusted
b. Summarizing the effects of all transactions of the period
c. Aiding the preparation of financial statements
d. All of the above
30. Which two steps in the accounting cycle are aided by the preparation of a worksheet
a. Analyze source documents and preparing financial statements
b. Posting journal entries and adjusting the accounts
c. Journalizing transactions and closing the accounts
d. Adjusting the accounts and preparing financial statements
2nd semester AY 2018 – 2019 Page 1 of 3

31. Assuming a company is profitable in the current period, the total of the balance sheet credit column in the
worksheet will be
a. Larger than the balance sheet debit column
b. Larger than the income statement debit column
c. Larger than the income statement credit column
d. Smaller than the balance sheet debit column
32. A statement of changes in equity

a. Shows the income and expenses of the entity for a given period
b. Has no relationship with the balance sheet
c. Indicates whether the cash position of the entity will permit withdrawals by the owner
d. Provides a link between the income statement and the balance sheet
33. Which of the following is a cash outflow from operating activities?

a. Payment to acquire property and equipment
b. Payment to settle notes payable
c. Payment for interest expense
d. Payment to owners in the form of withdrawals
34. Which of the following is a cash inflow from the financing activities?
a. Receipt from interest on notes receivable
b. Receipt from collections on notes receivable
c. Receipt from issuance of notes payable
d. Receipt from sale of property and equipment
35. Which of the following is an example of an operating activity?

a. Obtaining capital from owners c. Selling goods and services to customers
b. Purchasing equipment d. Selling land
36. Which of the following is an example of an investing activity?

a. Purchasing a building c. Obtaining a bank loan
b. Paying taxes to the government d. Producing goods and services
37. Which of the following is an example of a financing activity?

a. Employing workers c. Selling equipment
b. Paying off a loan d. Acquiring land
38. The statement of changes in equity would not show

a. The owner’s initial capital balance
b. Revenues and expenses
c. The owner’s withdrawals for the period
d. The owner’s ending capital balance
39. Some entities adjust their accounts and close their books only on an annual basis. For these firms,
worksheets:
a. May be prepared on an interim basis. c. Are not needed.
b. Are prepared only on annual basis. d. Are not necessary to this firm
40. Closing entries reduce the following type of accounts to a zero balance at the end of the period, except
a. Income and expense c. Income summary
b. Withdrawals d. Contra assets
41. If a trial balance were to be prepared on the first day of the new year, and the account Salaries Expense had a
credit balance, you would know that
a. Trial balance is a post-closing trial balance.
b. Adjusting entries have been recorded.
c. Trial balance is adjusted trial balance.
d. A reversing entry has been made.

42. Which of the following sequences of documents or records describes the proper sequence in the accounting
cycle?
a. Source documents, ledger, journal, financial statements
b. Journal, source documents, ledger, financial statements
c. Source documents, journal, ledger, financial statements
d. Ledger, source documents, journal, financial statements
43. The financial statements should be stated in terms of a common financial denominator.
a. Accrual c. Going concern
b. Time period d. Stable monetary unit
44. Objectivity is assumed to be achieved when an accounting transaction

a. Is recorded in a fixed amount of pesos.
b. Involves the payment or receipt of cash.
c. Allocates revenue or expenses in a rational and systematic manner.
d. Involves an arm’s- length transaction between two independent parties.
45. Which of the following accounting concepts states that an accounting transaction should be supported by
sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion?
a. Matching c. Objectivity
b. Periodicity d. Stable monetary unit
46. The communication phase of accounting is accomplished by

a. Storing data c. Reporting to decision makers
b. Recording data d. Processing data
47. Stating assets and liabilities and changes in them in terms of a common financial denominator is a
prerequisite in measuring financial position and periodic net income.
a. Unit of measure
b. Measurement of economic resources and obligations
c. Exchange price
d. Accrual
48. A professional accountant should be straightforward and honest in all professional and business relationships.
This is in consonance with the fundamental principle of
a. Objectivity c. Integrity
b. Confidentiality d. Professional competence and due care
49. Accountants employed by a particular business firm or not-for-profit organization, perhaps as chief
accountant, controller, or financial vice president, are said to be engaged in
a. General accounting c. Public accounting
b. Practice in commerce and industry d. Independent accounting
50. The basic purpose of accounting is

a. To provide the information that the managers of an economic entity need to control its operations.
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 measure the periodic income of the economic entity.
d. To provide quantitative financial information about a business enterprise that is useful in making rational
economic decision.

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1.

3. Which of these statements is true concerning accrual accounting?

25. Which of the following steps comes first in worksheet preparation?

26. Which of the following steps comes first in worksheet preparation?

28. The Income Statement Debit column of the worksheet contains

2nd semester AY 2018 – 2019 Page 1 of 3

32. A statement of changes in equity

33. Which of the following is a cash outflow from operating activities?

35. Which of the following is an example of an operating activity?

36. Which of the following is an example of an investing activity?

37. Which of the following is an example of a financing activity?

38. The statement of changes in equity would not show

2nd semester AY 2018 – 2019 Page 2 of 3

44. Objectivity is assumed to be achieved when an accounting transaction

46. The communication phase of accounting is accomplished by

50. The basic purpose of accounting is

2nd semester AY 2018 – 2019 Page 3 of 3

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