TRUE OR FALSE:

True - Various decision-makers depend upon the financial reports of an organization.

Thus, financial statements are the responsibility of the management.

True - Accounting has evolved in response to the social and economic needs of society.

False - The basic summary device of accounting is Journal.

True - The set of guidelines and procedures that constitute acceptable accounting
practice at a given time is GAAP.

False - Free from error means being perfectly accurate in all aspects.

False - If the business has ₱150,000 worth of assets and a liability of ₱50,000, the net
worth is ₱200,000.

True - In deciding where an item or an aggregate of items is material, the nature and size
of the item are evaluated together.

True - The owner is called a businessman after investing properties in the business;
stockholders are also businessman.

True - Accounting is an art that deals with the recording of business transactions to the
books of account. Art represents the manner of presenting the report and how to
generate information.

False - Assets plus profit less drawings less liabilities equals closing capital.

True - The conceptual framework identifies primary users of financial statements to be

the existing and potential investors, lenders and other creditors.

True - Asset is a resource controlled by the enterprise as a result of past events and from
which future economic benefits are expected to flow to the enterprise.

False - Accounting is an exact science rather than art.

False - Expenses represent the cash paid for goods sold or services rendered in the
process of generating revenue.

False - For every transaction, there is at least one account affected.

True - Failure to record the adjusting entry for accrued salaries results in the current
year's profit being overstated.

False - As equipment is depreciated, its book value increases and it accumulated

depreciation increases.

True - An adjusting entry includes at least one balance sheet account and at least one
income statement account.
False - All decreases in owner's equity are a result of expenses.

True - Accounting periods should be of equal length to facilitate comparisons between

periods.

True - Failure to record the adjusting entry for depreciation will overstate assets on the
balance sheet.

False - The owner's personal withdrawals for the year cause a decrease in profit.

True - Relevance and faithful representation are the fundamental qualitative

characteristics of useful financial information.

True - RA 9298 is also known as the Philippine Accountancy Act of 2004.

False - Objectivity connotes relevance and trustworthiness.

False - The first step in the accounting cycle is the journalization. It is a process of
recording business transactions to the journal in chronological order.

False - A ledger is a collection of transactions.

False - The IFRS foundation produces IFRSs. The IFRS foundation is overseen by the
IASB.

True - One of the objectives of the IFRS foundation is to bring about convergence of
national accounting standards and IFRSs.

False - The normal balance of any account refers to the side of account (debit|credit)
where decreases are recorded.

True - Business transactions are expressed in terms of money.

False - The concept of accounting is applicable only to the legal aspects of business
organization.

True - Qualitative characteristics are the attributes that make the information provided in
the financial statements useful to users.

False - Cash from operations consists of cash proceeds from selling of old asset.

False - A recording error caused by the erroneous rearrangement of didgits, such as

writing ₱627 as ₱672 is called transpotato.

False - The Board of Accountancy is the integrated national professional organization of

the CPAs in the Philippines.

False - Predictive and confirmatory value, timeliness, and materiality are the ingredients
of relevant financial information.

False - Expenses cause decreases in owner's equity and are recorded by credits.
True - Each partner is personally liable for any debit incurred by the partnership.

False - Internal auditor and external auditor can be one person exercising the same
functions in the same company.

False - In accordance with the adjusting entry for accrued salaries, all the accounts
involved are decreased.

True - An audit is the independent examination that ensures the fairness and reliability of
the reports that managements submits to users outside the business entity.

False - Historical Cost convention values all assets at their cost to the business, without
any adjustment for depreciation.

False - Not all financial transactions can be analyzed in terms of the basic accounting
model.

True - In a partnership, an owner's equity account exists for each partner.

True - Historical cost convention fails to take account of changing price levels over time.

True - Partnership is not a separate entity from he partners themselves.

True - Assets less liabilities less opening capital plus drawings equals profit.

False - The sequence of account titles in a trial balance depends upon the size of the
account balances.

True - A business transaction is the occurrence of an event or of a condition that must be

recorded.

False - Assets less liabilities less drawings equals opening capital plus profit.

True - Equipment is listed as an asset because it is used up in a relatively long period of

time.

False - The basic summary device of accounting is the accounting equation.

False - Accounts that appear on the left side of the accounting equation usually have
credit balances.

True - The entity is not a going concern if the management has the needs to liquidate the
entity.

False - The IFRS interpretations committee is a forum for the IASB to consult with the
outside world.

True - Income is increases in economic benefits during the accounting period that
increases equity which may have resulted from the sale of goods or rendering of
services by the business.
False - Payment of a liability will not affect total assets but will cause total liabilities to
decrease.

False - Accounting is a profession that should be guided by the code of ethics or by the
professional standards promulgated by PRC or BOA.

False - Income increases owner's equity and is recorded by a debit.

False - Consistency underlies the depreciation of assets over their useful lives.

False - Prepaid supplies expense account is not an asset account.

True - Ledger is a collection of account titles which compose of assets, liabilities, equity,
income, expense, and drawing.

False - Owner's equity is an excess of an entity's capital over its liabilities.

False - In the fundamental accounting equation, assets are added to liabilities.

False - One characteristic of a corporation is that its owners are personally liable for any
losses incurred by the business.

False - A cash acquisition of a laptop computer will cause total assets to increase.

True - The PRC is a government agency that regulates professionals in the Philippines. A
CPA is also a profession after passing government's examination conducted by PRC.

True - The account capital is used to record the investments of the owner, while the
withdrawal of capital is recorded using the owner's drawing account.

False - The effects of transactions and other events are recognized when they occur and
not as cash or its equivalent is received or paid, and they are recorded and reported in
the financial statements of the periods to which they relate is the concept of time period.

False - Liability, income, capital, and drawing accounts have the same credit normal
balance account.

True - The benefits of financial reporting information must justify the costs of reporting
that information.

True - To record the transaction, it requires a journal entry. Elements of a journal entry
may include the date, a credit and debit accounts and amounts, and finally a brief
explanation to be recorded in the ledger.

False - The corporate form of business organization emerged in Venice.

False - The Qualitative characteristics of financial information measure the extent to

which an entity has complied with all relevant standards and interpretation.

False - Cash can be invested, while non-cash asset cannot be invested.

True - According to the balance sheet equation, the assets of a business entity must
always equal the liabilities and owner's equity.

True - The entity concept states that each entity should be evaluated separately.

False - A withdrawal by the owner is recorded as a deduction from assets and an

increase in expenses.

True - The accounting equation may be expressed as OE=A-L.

True - Generally accepted accounting principles encompasses the conventions, rules

and procedures necessary to define accepted accounting practice at a particular time.

True - An expense may be recognized and recorded although no cash outlay has been
made.

False - Debit signifies increases while credit signifies decreases.

False - Partnership can normally transfer their partnership with ease.

False - RA 9268 is the law regulating the practice of accounting in the Philippines.

True - An accounting information system is the combination of personnel, records and

procedures that a business uses to meet its need for financial information.

True - The first step in analyzing a transaction is to determine what accounts are
involved.

True - Partners are personally liable for the liabilities of the partnership if the partnership
is unable to pay.

True - General purpose financial statements are those financial statements prepared to
meet the common needs of users who are not in a position to require an entity to prepare
reports tailored to their particular information needs.

False - The purpose of financial statements is to provide information about the financial
position, performance and changes in the financial position of an entity that is useful to
the wide range of users in making financial economic decisions.