The basic purpose of accounting is 

*
1 point

To provide quantitative financial information about a business enterprise that is useful in making
rational economic decision
To provide information that the managers of an economic entity need to control its operations
To provide information that the creditors of an economic entity can use in deciding whether to
make additional loans to the entity
To measure periodic income of the economic entity

Financial accounting can be broadly defined as the area of accounting that prepares *
1 point

Financial statements to be used by investors only

General purpose financial statements to be used by parties both internal and external to the
business enterprise
General purpose financial statements to be used by parties internal to the business enterprise
only
Financial statements to be used primarily by management

The basic components of the financial statements do not include *

1 point

Statement of Financial Position

Statement of Cost of Goods Sold
Statement of Comprehensive Income
Statement of Cash Flows

What is the objective of financial statements? *

1 point

To prepare comparable, relevant, reliable and understandable information to investors and

creditors
To prepare financial statements in accordance with all applicable Standards and Interpretations
To prepare a statement of financial position, an income statement, a statement of cash flows and
a statement of changes in equity
To provide information about the financial position, performance and changes in financial position
of an entity that is useful to a wide range of users in making economic decisions

It is an independent private sector body with the objective of achieving uniformity in

the accounting principles which are used by business enterprises for financial
reporting around the world *
1 point

International Federation of Accountants

Financial Accounting Standards Council
International Accounting Standards Committee
Securities and Exchange Commission
The highest accounting standard-setting authority in the Philippines is *
1 point

PICPA
Financial Accounting Standards Board
Accounting Standards Committee
Financial Reporting Standards Council

It is the body authorized by law to promulgate rules and regulations affecting the
practice of accountancy in the Philippines *
1 point

Securities and Exchange Commission

Financial Reporting Standards Council
Philippine Institute of Certified Public Accountants
Professional Regulatory Board of Accountancy

They encompass the conventions, rules, and procedures necessary to define what the
accepted accounting practices are *
1 point

Accounting assumptions
Qualitative characteristics
Recognition principles
Generally accepted accounting principles

The GAAP in the Philippines are now known as *

1 point

PAS
PFRS
SFAS
Both PAS and PFRS

Philippine Financial Reporting Standards (PFRS) include all of the following, except *
1 point

Framework for the Preparation and Presentation of Financial Statements

Philippine Accounting Standards equivalent to IAS issued by IASC
Philippine Financial Reporting Standards equivalent to IFRS issued by IASB
Philippine Interpretations equivalent to IFRIC and SIC Interpretations, and Interpretations
developed by PIC

The purpose of International Accounting Standards (IAS) and International Financial

Reporting Standards (IFRS) is to *
1 point

Issue enforceable standards which regulate the financial accounting and reporting of
multinational corporations
Arbitrate accounting disputes between auditors and international companies
Develop a uniform currency in which the financial transactions of companies throughout the world
would be measured
Promote uniform accounting standards among countries of the world

The accounting equation *

1 point

Shows the claims on the entity's assets represented by creditors and owners
Is used to determine the amount of liabilities owned
Is used to determine the amount of income earned during the most recent accounting period
Shows the claims on the owner's equity represented by creditors

The double-entry system of accounting means that every transaction *

1 point

Results in changes in accounts on both sides of the balance sheet

Is recorded initially on both the journal and the general ledger
Affects at least two general ledger accounts and is recorded by an equal amount of debits and
credits
Increases one general ledger account while decreasing another

Which among the rules on debit and credit below is not correct? *
1 point

Debit means increase, and credit means decrease

The normal balance of any account appears on the side for recording increases
Assets and expenses are debited when increased, and liabilities, revenues and equity are
credited when increased
The debit is always on the left side of the accounting double entry

Debits *
1 point

Increase assets and decrease expenses, liabilities, revenue, and equity

Increase assets and equity and decrease liabilities, expenses and revenue
Increase assets and expenses and decrease liabilities, revenue, and equity
Decrease assets and expenses and increase liabilities, revenue, and equity

Credits *
1 point

Increase assets and decrease expenses, liabilities, revenue, and equity

Decrease assets and expenses and increase liabilities, revenue, and equity
Increase assets and expenses and decrease liabilities, revenue, and equity
Increase assets and equity and decrease liabilities, expenses and revenue

Income accounts normally have ________ balances. These accounts increase on the
________ side and decrease on the ________ side. *
1 point
debit; debit; credit
debit; debit; debit
credit; credit; credit
credit; credit; debit

Liability accounts normally have ________ balances. These accounts increase on the
________ side and decrease on the ________ side. *
1 point

credit; credit; credit

debit; debit; credit
debit; debit; debit
credit; credit; debit

Owner's Equity accounts normally have ________ balances. These accounts increase
on the ________ side and decrease on the ________ side. *
1 point

debit; debit; credit

credit; credit; credit
credit; credit; debit
debit; debit; debit

Asset accounts normally have ________ balances. An increase in asset is recorded

as a ________ while a decrease in asset is recorded as a ________. *
1 point

credit; credit; debit

debit; debit; debit
credit; credit; credit
debit; debit; credit

Expense accounts normally have ________ balances. An increase in expense is

recorded as a ________ while a decrease in expense is recorded as a ________. *
1 point

credit; credit; debit

debit; debit; credit
debit; debit; debit
credit; credit; credit

X purchased a new register system for his grocery store, paying P1,000 in cash and
issuing a P6,000 note payable for the balance owed. As a result of this transactions,
X's balance sheet would reflect *
1 point

An increase in assets and a decrease in liabilities

A decrease in assets and an increase in liabilities
An increase in assets and an increase in owner's equity
An increase in assets and an increase in liabilities

Which among the following is the last step in the accounting cycle? *
1 point

Preparation of the post-closing trial balance

Journalizing and posting of closing entries
Preparation of financial statements
Preparation of reversing entries

What is the correct sequence for recording transactions and preparing financial
statements *
1 point

Ledger, trial balance, journal, financial statements

Journal, ledger, trial balance, financial statements
Financial statements, trial balance, ledger, journal
Journal, trial balance, ledger, financial statements

Journalizing is performed in what phase of the accounting process? *

1 point

Recording
Summarizing
Classifying
Reporting

General ledger serves what phase of the accounting process? *

1 point

Recording
Reporting
Summarizing
Classifying

Which statement about the trial balance is incorrect? *

1 point

A trial balance determines the equality between the total debits and credits
A trial balance is required in the accounting process
A trial balance proves that all amounts have been posted to the correct amounts
A trial balance lists all open accounts in the general ledger as of a time period

X has completed the posting process for the month of June and has prepared a trial
balance in which the debits total P11,000 and the credits total P11,100. Which of the
following errors would be the most likely candidate in causing the trial balance not to
balance by P100? *
1 point

The purchase of supplies on account was never posted to the general ledger
A P100 debit was posted as a P100 credit
A P50 debit was posted as a P50 credit
A P100 debit was posted as a P100 credit and a P100 credit was posted as a P100 debit

The purpose of adjusting entries is to *

1 point

Adjust the owner's capital account for the revenue, expense and withdrawal transactions which
occurred during the year
Adjust daily the balances in asset, liability, revenue and expense accounts for the effects of
business transactions
Prepare revenue and expense accounts for recording the transactions of the next accounting
period
Apply the realization principle and the matching principle to transactions affecting two or more
accounting periods

Adjusting entries are needed because an entity *

1 point

Uses the accrual basis of accounting

Has earned revenue during the period by selling products from its central operations
Uses the cash basis of accounting rather than the accrual basis
Has expenses

Accruals are *
1 point

Adjusting entries where cash flow and revenue or expense recognition are simultaneous
Adjusting entries where revenue or expenses are recognized in the absence of cash flow
evidence
Adjusting entries where revenue or expense recognition precedes cash flow
Adjusting entries where cash flow precedes revenue or expense recognition

Which of the following least resembles a typical adjusting entry *

1 point

Debit revenue, credit liability

Debit asset, credit liability
Debit expense, credit liability
Debit asset, credit revenue

Which of the following statements is false regarding adjusting entries? *

1 point

Each adjusting entry affects one statement of financial position and one income statement
account
Each adjusting entry affects one revenue account and one expense account
Adjusting entries involve accruals or deferrals
Cash is neither debited nor credited as a result of adjusting entries

An accrued expense is an expense *

1 point

Incurred but not paid

Not reasonably estimable
Paid but not incurred
Incurred and paid

An unearned revenue can be best described as an amount *

1 point

Not collected and currently matched with expense

Collected and currently matched with expense
Not collected and not currently matched with expense
Collected and not currently matched with expense

The failure to properly record an adjusting entry to accrue an expense results in *
1 point

Understatement of expense and an overstatement of asset

Understatement of expense and an overstatement of liability
Understatement of expense and an understatement of liability
Overstatement of expense and an understatement of asset

The failure to properly record an adjusting entry to accrue a revenue results in *
1 point

Understatement of revenue and an understatement of liability

Understatement of revenue and an understatement of asset
Overstatement of revenue and an overstatement of liability
Overstatement of revenue and an overstatement of asset

The premium on a three-year insurance policy expiring on December 31, 2023 was
paid in total on January 1, 2021. The original payment was initially debited to a
prepaid asset account. The appropriate journal entry had been recorded on December
31, 2021. The balance in the prepaid asset account on December 31, 2021 should
be *
1 point

The same as the original payment

The same as it would have been if the original payment had been debited initially to an expense
account
Zero
Higher than if the original payment had been debited initially to an expense account
A document prepared to prove the equality of debits and credit after all adjustments is
the *
1 point

Adjusted financial statements

Adjusted statement of financial position
Adjusted trial balance
Post-closing trial balance

Which financial statement is most useful in assessing the profitability of the business
enterprise? *
1 point

Statement of Cash Flow

Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Financial Position

The financial statement that shows the sources and uses of cash. *
1 point

Statement of Comprehensive Income

Statement of Changes in Equity
Statement of Cash Flow
Statement of Financial Position

A part of financial statement that shows the corporate profile, estimates and provisions
used by company, and detailed computation and analysis. *
1 point

Statement of Changes in Equity

Statement of Financial Position
Statement of Cash Flows
Notes to Financial Statement

The closing process *

1 point

All of the choices are correct regarding the closing process

Transfers all income statement items to their related statement of financial position account
Is done each time a transaction takes place and is journalized
Posts all closing entries to the appropriate general ledger account

After the accounts have been closed *

1 point

The revenue, expenses, and income summary accounts have zero balances
The revenue, expenses, income summary, and retained earnings have zero balances
The asset, liability, and stockholder's equity accounts have zero balances
All the accounts have zero balances

Accumulated depreciation is an example of *

1 point

real and contra account

nominal and adjunct account
nominal and contra account
real and adjunct account

Premium on bonds payable is an example of *

1 point

real and adjunct account

nominal and adjunct account
nominal and contra account
real and contra account

Which an example of a nominal and contra account? *

1 point

Purchases
Allowance for doubtful accounts
Sales discount
Freight in

Reversing entries *
1 point

Impact the income statements only

Impact the statement of financial position and the income statement
Are not allowed under Philippine Financial Reporting Standards
Change amounts reported in the financial statements of the preceding period

Which of the following statements regarding reversing entries is incorrect? *

1 point

Deferrals entered in statement of financial position accounts make reversing entries unnecessary
Adjusting entries for depreciation and bad debts are never reversed
All accruals should be reversed
Reversing entries change amounts reported in the statement of financial position for the previous
period

Which of the following adjusting entries cannot be subject to reversing entries? *

1 point

Accrual of income
Deferral of expense under the asset method
Accrual of expense
Deferral of income under the income method