Central Mindanao University

College of Business and Management

Accountancy Department

1. An example of an asset is
a. Machinery owned by the firm
b. Money owed by the firm to one of its suppliers for goods purchased
c. An overdrawn bank balance
d. The capital of the firm

2. Which of the following are true for partnerships?

A. The partners individual exposure to debt is limited.
B. Financial statements for the partnership by law must be produced and made public.
C. A partnership is not a separate legal entity from the partners themselves.

a. A and B only c. C only

b. B only d. A and C only

3. Accountants employed by a particular business form or not-for-profit organizations as chief accountant, controller,
or financial vice president are said to be engaged in
a. General accounting c. Private accounting
b. Public accounting d. Independent accounting

4. During the lifetime of the entity, accountants produce financial statements at arbitrary points in time in accordance
with which basic accounting concept?
a. Objectivity c. Conservatism
b. Periodicity d. Matching

5. It is a branch of accounting that focuses on the recording of business transactions and the periodic preparation of
reports on financial position and results of operations.
a. Auditing c. Financial Accounting
b. Bookkeeping d. Financial Management

6. It refers to the residual interest in the assets of the enterprise after deducting all its liabilities.
a. Expenses c. Current liability
b. Current assets d. Owners equity

7. It refers to a listing of all the accounts and their account numbers in the ledger is known as
a. Chart of Accounts c. Ledger
b. Journal d. Posting

8. Which of the following accounts could not be credited in an adjusting entry?

a. Interest Receivable c. Prepaid Rent
b. Office Supplies d. Service Revenues

9. The options below reflect the definition of compound entry, except

a. Contains one debit item and one credit entry
b. Contains one debit and two credit entries
c. Contains two debit items and three credit items
d. Contains two items in both sides

10. It is the assigning of peso or monetary values involved in a transaction.

a. Classifying c. Measuring
b. Identifying d. Summarizing

11. Business transactions are analyzed from the viewpoint of the

a. Creditor c. Owner
b. Business d. Investors

12. Which of the following describes the classification and normal balance of the Service Revenues account?
a. Capital, debit c. Asset, credit
b. Revenue, credit d. Asset, debit

13. Which of the following statements best explain the feature of consistency of presentation?
a. One should normally account for similar items in the same way from period to period.
b. Firms in the same industry must account for similar items in the same way.
c. Firms must comply with accounting standards and regulations.
d. Items capable of being measured in monetary terms should be recognized in the financial statements.

14. The concept of accounting entity is applicable

a. Only to the legal aspects of business organizations.
b. Only to the economic aspects of business organizations.
c. Only to business organizations.
d. Whenever accounting is involved.
15. Which of the following accounting concepts states that an accounting transaction should be supported by
sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion?
a. Matching c. Periodicity
b. Objectivity d. Stable monetary unit.

16. Identify whether the following statements are true or false.

Statement 1: A partnership must be owned by two individuals only.
Statement 2: A corporation is a separate legal entity owned by its incorporators only.

a. True; True c. False; True

b. True; False d. False; False

17. An account is said to have a debit balance when

a. Total debit and total credit are equal.
b. Total credit exceeds total debit.
c. Total debit exceeds total credit.
d. When they are in balance.

18. Identify the following statements as true or false.

Statement 1: Government accounting deals solely with the identification of the sources of resources consistent
with the laws.
Statement 2: A partnership cannot be a corporator in a corporation in , but a corporation can be a partner in a
partnership.

a. True; True c. False; True

b. True; False d. False; False

19. They are interested in information in information about the continuance of an enterprise especially when they
have long term involvement with, or are dependent on the enterprise.
a. Customers c. Government and their agencies
b. Employees d. Public

20. This is a collective term that refers to individuals and others that have current or potential interest in the reporting
entity but are not involved in the daily operations of the entity.
a. Customers
b. External users
c. Government and their agencies
d. Internal users

21. It arises it the course of the ordinary activities of the enterprise and is referred to a variety of names including
sales, fees, interest, dividends, royalties, and rent.
a. Gains c. Revenues
b. Income d. Owners capital

22. The following equation properly reflects the accounting equation, except:
a. Assets = Equities + Liabilities c. Assets Liabilities = Equity
b. Assets Equity = Liabilities d. Equity Liabilities = Assets

23. It refers to the reference book of the accounting system and is used to classify and summarize transactions, and
to prepare data for basic financial statements.
a. General Journal c. Special Journal
b. General Ledger d. Subsidiary Ledger

24. Which of the following steps in the accounting cycle are listed in logical order?
a. Prepare the income statement, prepare the balance sheet, and then prepare the worksheet
b. Post the journal entries to the ledger accounts, prepare a worksheet, and then take a trial balance
c. Journalize the closing entries, post the closing entries, and then take a post-closing trial balance
d. Post the closing entries, take a post-closing trial balance, then journalize the closing entries

25. Which pair of accounts follows the rules of debit and credit in the opposite manner?
a. Prepaid Insurance and Owners Withdrawal
b. Owners Withdrawals and Medical Revenues
c. Advertising Expense and Land
d. Interest Payable and Owners Capital

26. Which of the following is true about the double-entry system?

a. The total debits should be equal to the total credits.
b. Each transaction involves two parties.
c. Each transaction involves a debit entry and a corresponding credit entry in the ledger.
d. Each transaction should be entered into two accounts in the ledger.
27. The equality of debits and credits in the leger should be verified at the end of each accounting period by preparing
a. An accounting statement c. A trial balance
b. An account verification report d. A balance report

28. If Accounts Payable has a debit postings of P170,000, credit postings of P140,000, and a normal ending balance
of P60,000, which of the following was its beginning balance?
a. P30,000 Cr. c. P90,000 Dr.
b. P30,000 Dr. d. P90,000 Cr.

29. Which of the following transactions correctly maintains the equality in the accounting equation?
a. To record collections on accounts, cash and accounts receivable are increased by P160,000.
b. To record the purchase of computer equipment, computer equipment is increased and cash is decreased by
P46,000.
c. To record payment of notes, notes payable is decreased and cash is increased by P70,000.
d. To record payment of rent, rent expense and cash are increased by P8,000.

30. An entity pays rent quarterly in arrears on January 1, April 1, July 1, and October 1 each year. The rent was
increased from P900,000 per year to P1,200,000 per year starting October 1, 2014. What rent expense and rent
payable amounts should be included in the entitys financial statements for the year ended January 31, 2015?
Rent Expense Rent Payable

a. P1,000,000 P200,000
b. P1,000,000 P100,000
c. P975,000 P100,000
d. P975,000 P200,000

31. Which of the following does not affect the balance sheet totals?
a. Purchasing P650,000 supplies on account.
b. Collecting P40,000 from customers on account.
c. Paying a P300,000 note payable
d. Withdrawal of P80,000 by the firms owner

32. When a magazine entity receives an advance payment for a subscription, it

a. Debits Cash and credits Unearned Subscriptions Revenue
b. Debits Cash and credits Subscriptions Revenue
c. Debits Prepaid Subscriptions and credits Cash
d. Debits Unearned Subscriptions Revenues and credits Cash

33. Which of the following accounts would be credited in a proper journal entry?
a. Owners Withdrawals, when it has been increased
b. Accounts Receivable, when it has been decreased
c. Salaries Expense, when it has been increased
d. Salaries Payable, when it has been decreased

34. The following journal entry was made by Mountain Breeze Subdivisions accounting record:
Cash in Bank P250,000
Notes Receivable 50,000
Land P300,000

This transaction involves

a. Sale of land for P300,000
b. Purchase of land P300,000
c. Cash received from sale of land, P300,000
d. Cash paid for purchase of land, P300,000

35. A transaction caused a P50,000 decrease in both total assets and total liabilities. This transaction could have
been
a. Purchase of a delivery truck for P50,000 cash.
b. An asset with a cost P50,000 was destroyed by fire.
c. Repayment of a P50,000 bank loan.
d. Collection of a P50,000 accounts receivable.

36. An P800 credit item is accidentally posted as a debit. The trial balance column totals will therefore differ by
a. P0 c. P800
b. P400 d. P1,600

37. At the end of the accounting period, the equation does not necessarily balance. Which of the following actions
balances the equation?
a. Subtract revenues and add expenses to owners equity.
b. Subtract revenues from owners equity and add expenses to assets.
c. Add the difference between revenues and expenses to owners equity.
d. Add revenues and subtract expenses from assets.
38. Which of the following events would not be considered an accounting transaction?
a. Payment of fees to tax consultant.
b. Purchase of print advertising space for a new service.
c. Sales of a new product during the first month of operations.
d. Tabulation of the results of a customer satisfaction survey.

39. A company buys a P30,000 equipment on credit. This transaction will affect
a. Income Statement only
b. Balance Sheet only
c. Both the Income Statement and Balance Sheet
d. No effect on both statement

40. An account is said to have a debit balance when

a. Total debit and total credit are equal.
b. Total credit exceeds total debit.
c. Total debit exceeds total credit.
d. When they are in balance.

41. Debits to expense accounts signify

a. Increases in capital
b. Increases in assets
c. Increases in liabilities
d. Decreases in capital

42. When collections are made on Accounts Receivable

a. Owners equity increases
b. Total assets increase
c. Total assets decrease
d. Total assets remain the same

43. Which of the following accounts is decreased with a credit?

a. Advertising Revenues
b. Owners Capital
c. Unearned Art Revenues
d. Rent Expense

44. Which of the following transactions decreases both assets and owners equity?
a. Payment of a liability
b. Owner withdrawal of cash
c. Receipt of a phone bill, to be paid later
d. Advance payment made for insurance

45. A credit may result in

a. An increase in an asset account.
b. A decrease in a capital account.
c. An increase in a liability account.
d. A decrease in a liability account.