MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1)

Under this concept, assets are initially recorded at their acquisition cost
A)
Single entity concept

B)
Going concern concept
C)

Matching principle

D)

Historical cost concept

2)

Entries are listed in the journal:

A)

in order of importance.
B)

with income statement accounts first and then balance sheet accounts.
C)

alphabetically.
D)

chronologically.

3)

Which of the following is NOT a business transaction?

A)

A company sells land for cash.

B)

A company borrows money from the bank.

C)

A company buys goods on account.

D)

A company fired 10 percent of the employees due to lackluster sales.

4)

The normal balance of an account:

A)

falls on the side where decreases are recorded.

B)

must be computed after every transaction.

C)

falls on the side where increases are recorded.

D)

cannot be computed in a manual accounting system.

5)

The proper order for the accounting process is:

A)

transaction occurs, posting, journalizing.

B)

posting, transaction occurs, journalizing.

C)

transaction occurs, posting, transaction analyzed, journalizing.

D)

transaction occurs, transaction analyzed, journalizing, and posting.

6)

The accounting standards used in the Philippines are specifically referred to as the
A)
International Accounting Standard
B)

Philippine Accounting Standardizations

C) Philippine Financial Reporting Standards D) Generally Acceptance Accounting
Principles
7)

The process of ascertaining wheter a business transaction is to be recorded or not.

A)

Communicating
B)

Measuring

C)

Identifying

D)

Journalizing

8)

Total debits should always equal the total credits in every transaction
A)

none of these

B)

Duality principle
C)

Rules of debit and credit

D)

Trial balance

9)

Borrowing money from a bank is an example of __________ activity.

A)

investing

B)

financing
C)

both investing and financing

D)

operating

10)
An entity's total assets and total equity decreased but total liabilities remained the same. There were no
transactions involving the entity and its owners during the period. Which of the following could be a valid
reason for this?
A)

The entity has incurred a loss.

B)

The entity obtained a loan

C)

The entity earned a profit

D)

The entity received a donation

11)

Posting is:
A)

copying the information from the journal to the trial balance.

B)

entering the data into the journal.

C)

copying the information from the ledger to the financial statements.

D)

copying the information from the journal to the ledger.

12)

The ledger:
A)

is a grouping of all of the balance sheet accounts only.

B)

contains only the permanent accounts used by a business.

C)

contains all the accounts used by a business.

D)

is a grouping of all the income statement accounts only.

13)

Decreases in stockholders' equity that result from the cost of operating the business are:
A)

expenses.

B)

assets.

C)

liabilities.

D)

revenues.

14)

The debt created by a business when it makes a purchase of inventory on account is a(n):
A)
Account receivable.

B)

note payable.

C)

revenue.

D)

account payable.

15)

As a practical matter most companies prepare financial statements:

A)

at the end of the accounting period.

B)

only when both the balance sheet and income statement are affected.
C)

after every transaction.

 D)

at the close of every business day.

16)

Which of the following are considered enhancing qualitative characteristics?

I. Comparability
II. Verifiability
III. Materiality
IV. Understandability
A)

I, II and II

B)

I, II and IV
C)

I and II

D)

I, II, III and IV

17)

During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in
accordance with which basic accounting concept?
A)

Objectivity

B)

Periodicity

C)

Matching

D)

Conservatism

18)

The accounting principle that requires revenue to be recorded when earned is the:
 A)

Matching principle.

B)

Accrual reporting principle.

C)

Revenue recognition principle.

D)

Time period assumption.

19)

This qualitative characteristic means that financial statements are neither materially misstated nor important
information is omitted
A)

Completeness

B)

Neutrality

C)

None of the above

D)

Free from Error

20)

This qualitative characteristic enables user to make comparisons to identify and understand the similarities in,
and the differences among, reported information.
A)

Verifiability

B)

Comparability
C)

Understandability
D)

Timeliness

21)

The adjustment for an accrued expense:

A)

decreases expenses and increases liabilities.

B)

increases expenses and increases liabilities.

C)

increases expenses and decreases assets.

D)

decreases expenses and increases assets.

22)

An accountant failed to record the adjusting entry for accrued revenues. How does this error affect the balance
sheet?
A)

The liabilities at the end of the period will be understated.

B)

The liabilities at the end of the period will be overstated.

C)

The assets at the end of the period will be understated.

D)

The assets at the end of the period will be overstated.

23)

Which accounts are used in the adjusting entry to record salaries owed to employees, but not paid until the
next accounting period?
A)

Salaries Payable and Deferred Salaries Expense

B)

Deferred Salaries Payable and Salaries Receivable

 C)

Salaries Expense and Salaries Payable

D)

Unearned Salaries and Salaries Payable

24)

Adjusting entries:
A)

adjust Unearned Revenue.

B)

close the expense accounts.

C)

adjust Cash.

D)

close the revenue accounts.

25)

Which accounts are used in the adjusting entry to record salaries owed to employees, but not paid until the
next accounting period?
A)

Unearned Salaries and Salaries Payable

B)

Salaries Payable and Deferred Salaries Expense

C)

Salaries Expense and Salaries Payable

D)

Deferred Salaries Payable and Salaries Receivable

1)

D
2)

D
3)

D
4)

C
5)

D
6)

C
7)

C
8)

B
9)

B
10)

A
11)

D
12)

C
13)

A
14)

D
15)

A
16)

B
17)

B
18)

C
19)
D
20)

B
21)

B
22)

C
23)

C
24)

A
25)