EVALUATION

MULTIPLE CHOICE. Write the letter of the correct answer beside the item
number.

1. The business owner inappropriately included his personal expenses with the expenses of
the business. Which of the following concepts is violated?
a. Historical cost
b. Separate entity concept
c. Accrual concept
d. Time period

2. The income of the business during the current year is low. To report profit, the owner
deliberately did not recognize depreciation expense. Which of the following qualitative
characteristics is violated?
a. Materiality
b. Relevance
c. Faithful representation
d. Predictive value

3. Inventories acquired for ₱100,000 are deliberately valued at a selling price of ₱300,000.
Which of the following principles is most likely not violated?
a. Historical cost
b. Materiality
c. Faithful representation
d. Free from error

4. A business sells goods to a customer who promises to pay for the purchase price next
year. The business records the sale this year, when the transaction has occurred, rather
than waiting until next year when the sale price is collected. This is an application of
which of the following accounting principles?
a. Accrual basis
b. Stable monetary unit
c. Credit principle
d. Utang concept

5. Right now, the business owner does not expect that its business will end in the
foreseeable future. This accounting assumption is called
a. Prudence.
b. Cost-benefit.
c. Going concern.
d. Liquidating concern.
6. A business purchased a small stapler. The stapler is expected to be used for a long period
of time. However, the business immediately expensed the cost of the stapler rather than
recognizing it as an asset to be depreciated over the stapler’s useful life. The business is
invoking which of the following accounting concepts?
a. Cost-benefit
b. Accrual basis
c. Full disclosure
d. Matching

7. A business acquired goods that are held for resale. Instead of expensing immediately the
cost of the goods, the business initially recognized them as assets. As each good is sold,
the business recognizes the cost of the good sold as expense. This is an application of
which of the following accounting concepts?
a. Completeness
b. Relevance
c. Full disclosure
d. Matching

8. This accounting principle entails trade-offs to be made between the level of detail and the
conciseness of information presented in the financial statements, keeping in mind the
costs of preparing the information.
a. Comparability
b. Relevance
c. Full disclosure
d. Matching

9. This concept requires a business to apply the same accounting policies for like items and
retain those accounting policies from period to period.
a. Consistency
b. Verifiability
c. Going concern
d. Matching

10. Big companies often round-off peso amounts when presenting financial statements. This
practice is acceptable because of which of the following concepts?
a. Historical cost
b. Materiality
c. Faithful representation
d. Rounding principle