Mock Quiz Bee

Basic Accounting
EASY ROUND
1
Financial accounting is concerned with

A. General-purpose reports on financial position and financial

performance.

B. Specialized reports for inventory management and control.

C. Specialized reports for income tax computation and recognition.

D. General-purpose reports on changes in stock prices and future

estimates of market position.
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 a

Financial accounting reports are general-purpose, whereas

managerial accounting reports are special-purpose.
2
A company has assets of P45,000, no liabilities, and stockholders’
equity of P45,000. It buys store fixtures worth P5,000 on credit.
What effect would this transaction have?

(a) both assets and stockholders’ equity increase by P5,000

(b) both assets and stockholders’ equity decrease by P5,000
(c) assets remain the same and stockholders’ equity increases by
P5,000
(d) both assets and liabilities increase by P5,000
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 d

JOURNAL ENTRY
Fixtures 5,000
Accounts Payable 5,000

Assets = Liabilities + Equity

(45,000 + 5,000) = (0 + 5,000) + 45,000

50,000 = 50,000
3
In accounting parlance, the sequence of the arrangements of the
accounts in a ledger – that is, assets first, followed by liabilities,
owner’s equity accounts, revenues and expenses – is called:

(a) financial statement order (c) double entry method

(b) account balance (d) accounting cycle
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 a
Chart of accounts is the list of the accounts in a ledger. The chart of accounts
is arranged in the financial statement order.

The double entry accounting system means the dual effect of each
transaction is recorded with a debit and a credit
4
The recording phase of accounting covers the following steps,
except:

(a) business documents are received and prepared.

(b) transactions are journalized.
(c) transactions are posted to the ledger.
(d) financial statements are prepared.
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 d

Following are four phases of accounting:

1. Recording - Recording in journal

2. Classifying - Classifying to ledgers
3. Summarizing - Summarizing to financial statements
4. Interpreting - Financial ratios etc.
5
An accrued expense is an expense:

(a) incurred but not paid (c) paid but not incurred
(b) incurred and paid (d) not reasonably estimable
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 a

An accrual occurs before a payment or receipt. A deferral occurs

after a payment or receipt.

An accrued expense is an expense incurred but not paid. Ex:

Salaries payable and Interest payable.
A deferred expense, prepayment or prepaid expense an expense
paid but not incurred.

An accrued revenue is an income recognized before cash is

received. Revenue is earned. Ex: Accrued interest revenue and
accounts receivable.
A deferred revenue or unearned revenue is a liability where cash is
received in advance. Revenue is not earned.
6
Balance sheet accounts that are not eliminated in the closing
entries are called:

(a) nominal (c) positive

(b) private (d) real
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 d

The nominal accounts are almost always the income statement

accounts such as the accounts for recording revenues, expenses, gains,
and losses. When the income statement accounts are closed at the end
of the accounting year (perhaps through an income summary account)
the net amount will ultimately end up in a balance sheet equity account
such as the proprietor's capital account or the corporation's retained
earnings account.

The real accounts are the balance sheet accounts such as the accounts
for recording assets, liabilities, and the owner's (or stockholders')
equity. However, the sole proprietor's drawing account, which is
reported on the balance sheet during the year, is a temporary account
because it is closed directly to the owner's capital account at the end of
the year.
7
Entries prepared, as a step in the accounting process, to bring the
books and accounts up-to-date, is known as:

(a) opening entries (c) closing entries

(b) adjusting entries (d) reversing entries
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 b
Temporary accounts include:
When a business starts the books 1. Revenue, Income and Gain
for a new year, it has to make what Accounts
is known as the opening entry in 2. Expense and Loss Accounts
the journal. 3. Dividend, Drawings or
Withdrawals Accounts
Closing entries are journal entries 4. Income Summary Account
made at the end of an accounting
period which transfer the balances Reversing entry - A journal entry
of temporary accounts to which is the exact opposite of a
permanent accounts. Closing related adjusting entry made at the
entries are based on the account end of the period.
balances in an adjusted trial
balance.
8
If a general partnership, whose partnership contract provides for
interest on partners‘ capital account balances, incurs a net loss,
the interest provision of the contract:

a. Must be enforced c. May be either enforced or disregarded

b. Must be disregarded d. Must be rescinded by the partners
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 a

A partnership is essentially a contract between those involved, and

the rights and obligations of the partners are governed by the
terms of the agreement between them.

The essence of partnership is that each partner must share in the

profits or losses of the venture. The profits or loss shall be
distributed in conformity with the agreement.
9
A partner by estoppel:
a. Ostensible partner c. Dormant partner
b. Secret partner d. Nominal partner
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 d

Nominal partner or partner by estoppel - A partner in a partnership who is

not really a partner, not being a party to the partnership agreement but is
made liable as a partner for the protection of innocent third persons
Dormant partner is one who does not take active part in the business and is
not known or held out as partner.
Silent partner is one who does not take any active part in the business
although he may be known to be a partner.
Secret partner is one who takes active part in the business, but is not known
to be a partner by outside parties
OSTENSIBLE PARTNER: A partner whose name is made known and appears to
the world as a partner, and who is in reality such
10
The theory which viewed the assets of a business as belonging to the
owner or proprietor, the liabilities as debts of the owner, and the
income of the business as an increase in the owner’s net worth or
capital.

a. Proprietary theory c. Entity theory

b. Equity theory d. Funds theory
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 a Residual equity theory. This is
applicable where there are two
classes of shareholders, ordinary and
Accounting concepts: preference. Thus, the equation is:
Assets - Liabilities - Preference
Entity theory emphasizes the Shareholders’ Equity= Ordinary
importance of the income statement. Shareholders’ Equity
This is explained by the equation:
Assets = Liabilities + Capital Fund theory- emphasizes the custody
and administration of funds. The
Proprietary theory emphasizes the objective is directed toward cash
importance of the balance sheet. It is flows exemplified by the formula
exemplified by the equation: Assets - “cash inflows minus cash outflows
Liabilities = Capital equals fund.”
AVERAGE ROUND
1
The income summary account:

(a) generally has a credit balance after all the accounts that
should be closed have closed.

(b) summarizes revenues, expenses, and net earnings or loss

for the accounting period.

(c) summarizes changes in assets, liabilities, and net earnings

or loss for the accounting period.

(d) is used to close the retained earnings account.

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 b

Income summary account is a ledger account used in the closing

stage of the accounting cycle. It holds all income and expense
balances and helps in determining net income or net loss for the
period. The net balance of the income summary account is
transferred to the retained earnings account.
2
Reversing entries apply to:

(a) all adjusting entries. (c) all accruals.

(b) all deferrals. (d) all closing entries.
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 c

The reversing entry typically occurs at the beginning of a reporting

period.

A reversing entry is commonly used in situations when either

revenue or expenses were accrued in the preceding period, and
you do not want the accruals to remain in the accounting system
for another period.

It typically removes an accrual-type adjusting entry that had been

recorded in the preceding accounting period.
3
Which of the following combinations of trial balance totals does
not indicate a transposition?

(a) P65,470 debit and P64,570 credit

(b) P32,540 debit and P35,420 credit

(c) P25,670 debit and P26,670 credit

(d) P14,517 debit and P15,471 credit

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 c

transposition - A recording error caused by the erroneous

rearrangement of digits, such as writing P627 as P672

When two adjacent numbers are transposed, the resulting

mathematical error will always be divisible by 9 (e.g., (72-27)/9 =
5)

slide - An error that occurs when a decimal point is moved by

mistake, such as writing $542.00 as $54.20 or $5,420.00
4
Which of the following errors would cause unequal totals in the
trial balance?

(a) The company records a payment of P20,000 in advance of

delivery of goods as a debit of P2,000 to purchases and a credit of
P2,000 to cash.

(b) The company fails to accrue salaries of P50,000 for the month
of December.

(c) Both a and b.

(d) None of the above.

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 d

Trial balance Is a statement of balances remaining in each and every ledger

account classified as to debit and credit entry balances. According to the
principle of double entry accounting system, the total of the debit side should
be equal to the total of credit side

Errors not revealed by the trial balance

1. Errors of omission – no debit and credit; transaction is ignored entirely
2. Errors of commission – correct debit and credit; but wrong account used
3. Errors of principle - correct debit and credit; but wrong account used
4. Compensating errors
5. Errors of original entry - correct debit and credit; but wrong amount not
account
6. Errors of complete reversal – correct amounts are entered on the wrong
side of each account
5
It presents an indication in conformity with GAAP of the financial status
of the enterprise at a particular point in time.
(a) balance sheet (c) statement of retained earnings
(b) statement of earnings (d) cash flow statement
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 a

Balance sheet or statement of financial position provides

information about the financial position of an entity at a specific
point in time

Income statement measures the financial performance of the

entity over a period of time best describes the income statement.

The statement of retained earnings shows how a period's profits

are divided between dividends for shareholders and retained
earnings, which are kept on the Balance sheet to accumulate
under owners equity.
6
Adjusting entries that should be reversed include those for
prepaid or unearned items that:

(a) create an asset or a liability account

(b) were originally entered in a revenue or expense account

(c) were originally entered in an asset or liability account

(d) create an asset or a liability account and were originally

entered in a revenue or expense account
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 c

A reversing entry is made on adjusting entries for:

A. Accrual of expense or revenue
B. Prepaid expenses originally recorded as expense or unearned
revenue originally recorded as revenue.
7
The primary responsibility of an independent auditor who is
a CPA is to:

(a) Verify the accuracy of the amounts determined by the

client.

(b) Assess whether the management is honest.

(c) Evaluate the “fair presentation” of the company’s eternal

financial statements.

(d) Prepare current financial reports for the client.

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 c

Opinion expressed by auditor

-is as to "fairness", not accuracy, exactness, etc.
-statement of opinion, not fact.
8
Loka and Moko formed a partnership on July 1, 2007 and
contributed the following assets:
Loka Moko
Cash P65,000 P100,000
Realty 300,000

The realty was subject to a mortgage of P25,000, which was

assumed by the partnership. The partnership agreement provides
that Loka and Moko will share profits and losses in the ratio of
one-third and two-thirds respectively. Moko’s capital account at
July 1, 2007 should be:

a. P400,000
b. P391,667
c. P375,000
d. P310,000
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 c

Cash 100,000
Realty 300,000
Mortgage Payable 25,000
Moko, Capital 375,000
9
 A, B and C are partners in an accounting firm. Their capital account
balances at year-end were: A, P90,000; B, P110,000; C, P50,000. They
share profits and losses in a 4:4:2 ratio, after the following special
terms:

a. Partner C is to receive a bonus of 10% of the net income after the

bonus.
b. Interest of 10% shall be paid on that portion of a partner’s capital in
excess of P100,000.
c. Salaries of P10,000 and P12,000 shall be paid to partners A and C,
respectively.

Assuming a net income of P44,000 for the year, the total profit share of
partner C would be:
a. P7,800 b. P16,800 c. P19,400 d. P19,800
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 c

NI before bonus 110%

NI after bonus 100%
bonus 10%

Bonus
= (44,000 / 1.10) * 0.10
= 4,000

Interest
= (110,000 – 100,000) * 0.10
= 1,000
10
The basic components of financial statements include (choose the
incorrect one):

(a) statement of changes in equity

(b) statement of recognized gains and losses
(c) statement of retained earnings
(d) cash flow statement
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 c

Complete set of financial statements comprises the ff. components

1. Statement of financial position
2. Income statement
3. Statement of comprehensive income
4. Statement of changes in equity
5. Statement of cash flows
6. Notes, comprising a summary of significant accounting policies
and other explanatory notes
DIFFICULT ROUND
1
Working capital is:
(a) the group assets which enables the business to operate profitably.
(b) capital which has been reinvested in the business.
(c) unappropriated retained earnings.
(d) current assets less current liabilities.
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d
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2
The following data were taken from the point-point Fast-food

Assets, beg. P 435,000

Assets, end. 501,000
Liabilities, beg. 100,500
Liabilities, end. 95,000
Withdrawal for the year was 25,000

How much was the net income for the period?

a. P46,500
b. P96,500
c. P66,000
d. P71,500
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 b

Equity-beg. = 435,000 – 100,500 = 334,500

Equity-end. = 501,000 – 95,000 + 25,000 = 431,000

Income = 431,000 – 334,500 = 96,500

3
Gross margin is calculated as

a. Gross sales less sales returns and discounts less merchandise

inventory at the end

b. Net sales less goods available for sale

c. Net sales less ( purchases+ freight-in + purchase returns and

discount – merchandise inventory, end)

d. Net sales less ( goods available for sale – merchandise inventory,

end)
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 d

Gross margin is also called gross profit.

4
An entry debiting Cost of Sales and Crediting Merchandise
inventory would be made when

a. Merchandise is sold and the periodic inventory method is used

b. Merchandise is returned and perpetual inventory method is

used

c. Merchandise is purchased and the perpetual inventory method

is used

d. Merchandise is sold and the perpetual inventory method is used

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b
5
The balancing figure in the worksheet is NET LOSS if

a. The total of the credits exceeds the total of the debits in the
income statement columns

b. In the statement of financial position columns, the total of the

debits exceed the total of the credits

c. The total of the credits is the same as the total of the debits in
the income statement columns

d. In the statement of financial position columns, the total of the

credits exceeds the total of the debits
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d
6
An unadjusted trial balance

a. Provides information that is helpful in making adjusting entries

b. Proves that no errors have been made in the accounting records

c. Usually contains the account balances that should appear in the

financial statements

d. Is a summary taken directly from the general journal

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a
8
You are given the data as follows for CHIN UP CORPORATION:

Net Assets at the beginning of the year P130,000

Net Assets at the end of the year 175,000
Dividends declared 8,000
Capital Stock Issued 70,000

The net income (loss) is:

(a) Net loss – P107,000 (c) Net income – P107,000
(b) Net income – P17,000 (d) Net loss – P17,000
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 d

Net assets at the end of the year P175,000

Net assets at the beginning of the year (130,000)
Increase in net assets P 45,000
Dividends declared 8,000
Capital Stock issued ( 70,000)
Net loss P 17,000
9
Which of the following items LEAST resembles a typical adjusting
entry?

a. Debit and asset and credit a revenue

b. Debit an expense and credit a liability
c. Debit revenue and credit liability
d. Debit an asset and credit liability
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 d
Adjusting entries involve at least one real (balance sheet) and one
nominal (income statement) account.
10
The bookkeeper of Wakowako Company recorded the payment of a
credit customer as a debut to cash and credit to accounts payable. This
erroneous recording transaction would result to:

a. Understatement of Accounts receivable and accounts payable

b. Overstatement of Accounts receivable and understatement accounts
payable
c. Understatement of Accounts receivable and overstatement accounts
payable
d. Overstatement of Accounts receivable and accounts payable
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d