St.

Paul University Quezon City

Quiz no.1 / SY 2022-2023
Fundamentals of Accounting (Mr. Christian Z. Reyes)

Name ___________________________Course & Yr. ____________ Date ________ Score ________

SOLUTION

I. Multiple Choice Questions (20 points)

1. Which of the following is not an objective of financial statements?

a. To provide information about the financial position of an enterprise.

b. To provide information about the economic decisions of the enterprise.
c. To provide information about the performance of an enterprise.
d. To provide information about the changes in financial position of an enterprise.

Answer: b

2. Presented below are the advantages of a partnership over a sole proprietorship. Select the exception:

a. Better decision-making.
b. Personal involvement in the business.
c. Larger capacity to raise capital.
d. None of these.

Answer: d

3. The primary goal of a business.

a. Profit.
b. Increase in the selling price of its products or services.
c. Make a name in the community.
d. None of these.

Answer: a

4. The going concern concept requires that –

a. Market values of assets are relevant.

b. Long-lived assets are adjusted for current prices.
c. Business firms shall continue to operate indefinitely.
d. Answer not given.

Answer: c

5. The users of financial statements who are interested in information that enables them to determine whether
their loans and interest attaching to them, will be paid when due.

a. Suppliers c. Lenders
b. Investors d. Trade creditors

Answer: c

6. This is the simplest form of business and it involves the provision of services to clients or customers in
exchange for a fee.

a. Sole Proprietorship c. Merchandising concern

b. Service Business d. Manufacturing business

Answer: b

7. The following are examples of companies engaged primarily in the merchandising business, except:

a. Shintaro General Merchandising c. Winner Hardware Store

b. Magic Book Retailer, Inc. d. Stice & Stice Repair

Answer: d

8. Which of the following is not presented in an income statement?

a. Revenues c. Net income

 b. Expenses d. Dividends

Answer: d

9. The components of a complete set of financial statements does not include –

a. Manufacturing schedule c. income statement

b. Cash flow statement d. balance sheet

Answer: a

10. Financial statements should be prepared at least –

a. Annually c. quarterly
b. Semiannually d. monthly

Answer: a

11. The accounting equation:

a. Shows the claims of creditors on the company’s assets.

b. Is used to determine the amount of assets owned.
c. Is used to determine the amount of income earned during the period.
d. Shows the claims on the entity’s assets by both the creditors and the owner/proprietor or partners.

Answer: c

12. The accounting equation is normally presented as: A = L+E. Which of the following is an acceptable
alternative presentation of the accounting equation?

a. Assets + Liabilities = Equity

b. Equity + Assets = Liabilities
c. Assets = Equity – Liabilities
d. Assets – Liabilities = Equity

Answer: d

13. The accounting equation, an increase in asset can be associated with:

a. An increase in a liability.
b. A decrease in equity.
c. A decrease in a liability.
d. An increase in another asset.

Answer: a

14. Decrease in asset may:

a. Decrease another asset.

b. Decrease liabilities.
c. Increase equity.
d. Increase liabilities.

Answer: b

15. If the total assets increased P40,000 during the period and total liabilities decreased P24,000 during the
same period, the amount and direction (increase or decrease of the change in equity for that period:

a. A P64,000 increase.
b. A P64,000 decrease.
c. A P16,000 increase.
d. A P 16,000 decrease.

Answer: a

Assets = Liabilities + Equity

+ 40,000 - 24,000 + 60,000

16. As of December 31, 2009, ACJ CO. has assets of P350,000 and equity of 200,000. How much are liabilities
as at December 31, 2009?
 a. P100,000
b. P150,000
c. P200,000
d. P250,000

Answer: b

Assets = Liabilities + Equity

350,000 150,000 200,000

17. If revenue was P90,000, expenses were P75,000 and the withdrawal was P20,000, the amount of net
income or net loss would be:

a. P90,000 net income.

b. P15,000 net income.
c. P75,000 net loss.
d. P5,000 net loss.

Answer: b

Revenue 90,000
Less: Expenses 75,000
Net income (Net loss) 15,000

18. Net income will result during a time period when:

a. Assets exceed liabilities.

b. Assets exceed revenues.
c. Expenses exceed revenues.
d. Revenues exceed expenses.

Answer: d

19. The following can be found in an income statement, except:

a. Liabilities.
b. Revenues.
c. Net income.
d. Net loss.

Answer: a

20. Which of the following best presents the effect of performing services on credit?

a. Increase in assets and decrease in equity.

b. Increase in assets and increase in equity.
c. Increase in assets and increase in liabilities.
d. Increase in liabilities and increase in equity.

Answer: b

II. Matching Financial Statement Items to Balance Sheet and Income Statement
Categories (10 points)

The following are items taken from its recent balance sheet and income statement. Mark each item in the
following list with letters to indicate whether it would be reported as an ASSET, LIABILTIES, OR
STOCKHOLDERS’ EQUITY account on the balance sheet or a REVENUE or EXPENSE account on the
income statement.

1. Accounts payable LIABILITIES

2. Accounts receivable ASSET
3. Cash ASSET
4. Income tax expense EXPENSE
5. Selling administrative expense EXPENSE
6. Sales revenue REVENUE
7. Accrued expense LIABILITIES
8. Patent ASSET
9. Land ASSET
10. Unearned income LIABILITIES
III. For each of the transactions, write two (or more) effects on the accounting equation of
the business or company. (10 points)

1. The owner invests personal cash in the business.

Answer:

Assets Increase Decrease No effect

Liabilities Increase Decrease No effect
2. Equity Increase Decrease No effect The owner
withdraws
business assets for personal use.

Answer:

Assets Increase Decrease No effect

Liabilities Increase Decrease No effect
Equity Increase Decrease No effect

3. The company receives cash from a bank loan.

Answer:

Assets Increase Decrease No effect

Liabilities Increase Decrease No effect
Equity Increase Decrease No effect

4. The company repays the bank that had lent money to the company.

Answer:

Assets Increase Decrease No effect

Liabilities Increase Decrease No effect
Equity Increase Decrease No effect

5. The company purchases equipment with its cash.

Answer:

Assets Increase Decrease No effect

Liabilities Increase Decrease No effect
Equity Increase Decrease No effect

6. The owner contributes her personal truck to the business.

Answer:

Assets Increase Decrease No effect

Liabilities Increase Decrease No effect
Equity Increase Decrease No effect

7. The Co. purchases a significant amount of supplies on credit.

Answer:

Assets Increase Decrease No effect

8. Liabilities Increase Decrease No effect The Co.
Equity Increase Decrease No effect purchases
land by
paying half in cash and signing a note.

Answer:

Assets Increase Decrease No effect

9. Liabilities Increase Decrease No effect The owner
Equity Increase Decrease No effect withdraw
cash for
personal use.

Answer:
 Assets Increase Decrease No effect
10. Liabilities Increase Decrease No effect The
Equity Increase Decrease No effect company
repays the
suppliers.

Answer:

Assets Increase Decrease No effect

Liabilities Increase Decrease No effect
Equity Increase Decrease No effect

Giving up doesn't always mean you are weak … sometimes it means that
you are strong enough to let go
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