FABM 1 QUIZ

1) Which of the following is not a basic component of financial statement?

a. Statement of financial position
b. Statement of change in cash
c. Statement of cash flow
d. Income statement

2) Economic activities relate to transactions affect _______________

a. Financial performance
b. Financial position
c. Cash flows
d. All of the above

3) Which of the following is not an output of the accounting process?

a. Statement of financial position
b. Notes to financial statement
c. Income Statement
d. None of the above

4) Which of the following activities undertaken by Jose Mercado (in the opening case) did not
result in a business transaction that is financial in nature?
a. Purchase of photocopying machine
b. Borrowing of money from his father
c. Receipt of electricity bill
d. Hiring of a staff

5) Which professional organization below defines accounting as a service activity?

a. American Association of Certified Public Accountants
b. Philippine Institute of Certified Public Accountants
c. American Accounting Association
d. Accounting Standards Council

6) Because accounting is an art, _______________

a. It refers to something that can be performed.
b. It refers to a skill that can be enhanced
c. It refers to a behavioral knowledge
d. All of the above

7) Accounting being regarded as the performance of specific actions such as identifying,

measuring, and communicating financial information is though the nature of accounting as
______________
a. A service activity
b. A process
c. An art
d. A skill

8) The management of owners report on how well the business fares is a reflection of how they
run the business. What function of accounting does this primarily refer to?
a. To help interested users come up with informed decisions.
b. To fulfill the stewardship function of the management.
c. To support daily operations of the business.
d. All of the above.

9) Which of the following is not considered as an external user?

a. regulatory agencies
b. taxing authorities
c. employees
d. suppliers
10) Which of the following statements about users of accounting information is correct?
a. Management is an external user.
b. Tax authorities are internal users.
c. Employees are external users.
d. Creditors are external users.

11) Who carries the responsibility to review the work of the accountants and issue opinions as to
the fairness of financial statements?
a. the board of directors
b. the internal auditors
c. the external auditors
d. management

12) Which of the following is an internal user of a company’s financial information?

a. creditors with long-term contracts with the company
b. holders of the company’s bonds
c. stockholders in the company
d. board of directors

13) “GAAP” refers to ______________

a. Guideline for Accountants, Accounting Procedures
b. General Association of Accounting Practitioners
c. General Accounting and Auditing Principles
d. Generally Accepted Accounting Principles

14) The requirement that only transaction data capable of being expressed in terms of money be
included in the accounting records relates to the _______________.
a. economic entity assumption
b. monetary unit assumption
c. cost principle
d. both b and c

15) Financial statements combining the operations of Juan Cruz and J. Cruz Plumbing Services
would violate the ____________.
a. economic entity assumption
b. monetary unit assumption
c. ownership assumption
d. cost principle

16) The assumed continuation of a business entity in the absence of evidence to the contrary is
an example of the accounting concept of ________________.
a. going concern
b. compatibility
c. consistency
d. accrual

17) Recording the purchase price of a pencil sharpener (with an estimated useful life of ten years)
as an expense of the current period is justified by the _____________.
a. going concern assumption
b. comparability principle
c. materiality concept
d. matching principle

18) Conservatism is best described as selecting an accounting alternative that

_______________.
a. is least likely to mislead users of financial information
b. has the least favorable impact on owners’ equity
c. overstates, as opposed to understates, liabilities
d. understates assets and/or net income
19) The financial statements prepared for the business are separate and distinct from the owners.
This is in accordance with the ____________.
a. economic entity assumption
b. going concern principle
c. full disclosure principle
d. matching principle

20) The accrual basis of accounting is based primarily on ____________.

a. conservatism and revenue realization
b. revenue realization and matching
c. conservatism and matching
d. consistence and matching

21) Accountants prepare financial statements at arbitrary points in time during a company’s
lifetime in accordance with the accounting concept of ___________.
a. accounting periods
b. comparability
c. materiality
d. matching

22) Applying the concept of double-entry accounting system, which of the following best refers to
the term
“debit”?
a. decrease
b. right side
c. increase
d. left side

23) Which of the following derivations is not consistent with the basic accounting equation?
a. Assets less liabilities equal owner’s equity
b. Liabilities equal owner’s equity less assets
c. Owner’s equity equal assets less liabilities
d. Liabilities equal assets less owner’s equity

24) Which of the following will cause owner’s equity to increase?

a. purchase of additional assets from existing cash of the business
b. revenues are more than expenses
c. revenues are less than expenses
d. withdrawal made by the owner

25) Which of the following is not an asset account?

a. prepaid rent expense
b. accounts receivable
c. building
d. none of the above

26) Which of the following is a liability account?

a. advances from customers
b. advances to employees
c. notes receivable
d. utilities expense

27) Which of the following is not a revenue account?

a. professional fees
b. interest income
c. cost of sales
d. sales
28) Which of the following is not an expense account?
a. prepaid utilities expense
b. taxes and licenses
c. supplies expense
d. wages expense

29) Which of the following does not describe an asset?

a. economic benefits are expected to flow
b. controlled by the business
c. result of future transaction
d. arising from past events

30) Which of the following does not describe a liability?

a. claims against the assets of the business
b. settled in the past transactions or events
c. an economic outflow is expected
d. measured reliability