TEST BEGINS HERE

1. What is the effect of performing services on account on the basic accountin Equation?

a. increase assets and decrease owner’s equity

b. increase assets and increase owner’s equity
c. increase assets and increase liabilities

2. As of December 31, 2006 Stonewall Company has assets of P3,500 and owner’s equity of
P2,000. What the liabilities are for stonewall Company as of December 31, 2006?

a. P2,500
b. P2,000
c. P1,500

3. Which of the following statements about an account is TRUE?

a. In its simplest from, an account consists of two parts.

b. An account is an individual accounting record of increases and decreases in
specific asset, liability and owners equity items.
c. There are separate accounts for specific assets and liabilities but only one account
for owners equity items.

4. What are debits?

a. debits increase both assets and liabilities

b. debits decrease both assets and liabilities
c. debits increase assets and decrease liabilities

5. What is the nature of the revenue account?

a. revenue account is increased by debits

b. revenue account is decreased by credits
c. revenue account is increased by credits

6. Which of the following statements about a journal is FALSE?

a. it is not a book of original entry

b. it provides a chronological record of transactions
c. it discloses in one place the complete effect of a transaction.

7. The trial balance shows supplies P1,350 and supplies expense. P0. If P600 of
supplies are on hand at the end of the period, what is the adjusting entry?

a. Dr. Supplies P750 Cr. Supplies Expense P750

b. Dr. Supplies P600 Cr. Supplies Expense P600
c. Dr. Supplies Expense P750 Cr. Supplies P750
 8. What is a Ledger?

a. ledger contains only asset and liability accounts

b. ledger shows accounts in alphabetical order.
c. Ledger a collection of the entire group of accounts maintained by ab entity.

9. What is Posting?

a. posting normally occurs before journalizing

b. posting transfers ledger transaction data to the journal
c. posting transfers journal entries to ledger accounts

10. What account will have a zero balance after closing entries have been
journalized and posted?

a. service revenue
b. allowance for bad debts
c. prepaid insurance

11. What SALES accounts have a normal debit balance?

a. sales discounts
b. sales returns and allowances
c. nether A nor B

12. When are posting from the purchase journal to the subsidiary ledger made?

a. yearly
b. monthly
c. daily

13. What is a trial balance?

a. Trial balance is a list of accounts with their balances at a given time.

b. Trial balance proves the mathematical accuracy of journalized transactions
c. Trial balance will not balance if a correct journal entry is posted twice

14. What is the trial balance is NOT in balance?

a. trial balance will not balance if a correct journal entry is posted twice
b. trial balance will not balance if the purchase of supplies on account is debited
to supplies and credited to cash
c. trial balance will not balance if a P100 cash drawing by the owner is debited to
owners drawing for P1,000 and credited to cash for P100.

15. Which of the following statements is INCORRECT?

a. the work sheet is essentially a working tool of the accountant

b. the work sheet is distributed to management and other interested parties
c. the work sheet cannot be used as a basis for posting to ledger accounts
 16. What types of account will appear in the post closing trial balance?

a. permanent (real) accounts

b. temporary accounts
c. nominal accounts

17. What is an adjusted trial balance?

a. trial balance after journal entries have been prepared

b. first trial balance
c. trial balance after adjusting entries are journalized and posted

18. Which of the following statements is TRUE regarding net income?

a. assets exceed liabilities

b. assets exceed revenues
c. revenues exceed expenses

19. On the last day of the period, Jim Alas company buys a P9,000 machine on
credit.
What financial statement/s will be affected by this transaction?

a. income statement only

b. balance sheet only
c. income statement and statement of changes in equity only

20. What is the financial statement that reports assets liabilities and owners
equity?

a. income statement
b. statement of changes in equity
c. balance sheet

21. How assets are usually classified in a balance sheet?

a. current assets; long term assets; property, plant and equipment; and intangible
assets
b. current assets; long term assets; tangible and intangible assets
c. current assets and non-current assets

22. How are current assets listed on the balance sheet?

a. by liquidity
b. by importance
c. by longevity

23. Internal control is used in an entity to enhance the accuracy and reliability of
its accounting
Records. What else is another purpose of internal control from the list provided below?
a. safeguard
b. prevent fraud
c. produce correct financial statement

24. What is NOT included as part of physical controls?

a. safe and vaults to store cash

b. independent bank reconciliation
c. locked warehouses for inventories

25. Which of the following items in a cash drawer at November 30 io NOT

considered cash?

a. money orders
b. coins and currency
c. check from a customer dated December 1

26. What principle of internal control is used when prenumbere checks are used
whenever cash is disbursed?

a. establishment of responsibility
b. segregation of duties
c. document procedures

27. What principle of internal control is used when an entity permits only
designated personnel to handle cash receipts.

a. establishment of responsibility
b. segregation of duties
c. physical, mechanical and electronic controls

28. Which of the following is not reported under additional paid-in-capital?

a. paid-in capital in excess of per value

b. common stock
c. paid-in capital in excess of stated value

29. What is retained earnings?

a. a subdivision of paid in capital

b. net income retained in the corporation
c. Closed to capital stock.

30. What body issues the Philippine Accounting standards?

a. Philippine accounting standards board

b. Philippine accounting standards committee
c. Financial reporting standards council
 31. What is full disclosure?

a. Financial statement should disclose all assets all their cost.

b. Financial statement should disclose only those events trial can be measured in
pesos
c. financial statement should disclose all events and circumstances that would
matter to users of financial statements

32. What is the primary criterion by which accounting information can be judged?

a. consistency
b. predictive value
c. decision usefulness

33. What is depreciation?

a. valuation
b. cost allocation
c. cash accumulation

34. MM company purchased equipment on January 1, 2005 at a total invoice cost

of P400,000.
The equipment has an estimated salvage value of P10,000 and an estimated useful life of
5 years. What is the amount of accumulated depreciation at December 31, 2005? If the
Straight-line method of depreciation is used?

a. P160,000
b. P156,000
c. P78,000

35. Blinka retailers accepted P50,000 of Citibank visa credit card charges for
merchandise sold on july 1 citibank charges 4% for its credit card use. The
entry to record this transaction by Blinka Retailers will include a credit sales
of P50,000 and what are the debit account title/s and amounts?

a. cash P48,000 and service charge Expense P2,000

b. accounts receivable P48,000 and service charge expense P2,000
c. accounts receivable P50,000

36. BB Company on june 15 sells merchandise on account to Chaz Co. for P1,000
terms 2/10, n/30. June 20, Chaz Co.returns merchandise worth P300 to BB
Company. On june 24, payment received from Chaz Co. for the balance due.
What is the amount of cash received?

a. P700
b. P686
c. P680

37. Which of the following represent techniques used by the financial analyst?
a. peso and percentage changes on financial statements
b. common-size statement
c. all of the above

38. Which is NOT included as part of trend analysis?

a. trend analysis is also known as horizontal analysis

b. shows changes between years in both dollar and percentage form
c. it is simple to identify trends by looking at the raw data alone

39. What is the financial statement that shows both peso and percentages in the
report?

a. a balance sheet
b. a common-size statement
c. a proportional financial statement

40. Which of the following is representative of vertical analysis?

a. vertical analysis in the income statement causes all accounts to be related as a

percentage of net income
b. vertical analysis in the balance sheet cause all accounts to be related as a
percentage of total assets
c. percentages used in vertical analysis make identifying trends difficult