Final Round - 1ST - Q

1 If a transaction causes total liabilities to decrease but does not affect the owner’s equity,
what change, if any, will occur in total assets?

a assets will be increased
b assets will be decreased
c no change in total assets
d none
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
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
b account balance
c double entry method
d accounting cycle
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.
5 An accrued expense is an expense:

a incurred but not paid
b incurred and paid
c paid but not incurred
d not reasonably estimable
6 Balance sheet accounts that are not eliminated in the closing entries are called:
a nominal
b private
c positive
d real
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
b adjusting entries
c closing entries
d reversing entries
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
b Must be disregarded
c May be either enforced or disregarded
d Must be rescinded by the partners
9 A partner by estoppel:
a Ostensible partner
b Secret partner
c Dormant partner
d Nominal partner
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
b Equity theory
c Entity theory
d Funds theory
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.
2 Reversing entries apply to:
a all adjusting entries.
b all deferrals.
c all accruals.
d all closing entries.
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
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 debitof 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.
5 Which of the following errors would cause unequal totals in the trial balance?
a The firm records P21,000 received from a customer in advance of delivery of goods as a debit
of P1,000 to cash and a credit of P21,000 to sales.
b The firm fails to enter the cost of electric current used during the month as an expense and fails
to recognize the P22,000 owed to DLPC.
c All these errors will cause unequal trial balance totals.
d None of these errors will cause unequal trial balance totals.
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
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.
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 lcapital account at July 1, 2007 should
be:
a P400,000
b P391,667
c P375,000
d P310,000
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
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
1 What is the law regulating the practice of accountancy in the Philippines?

Answer: RA No. 9298
2 It is the capacity of the information to influence a decision?
Answer: RA Relevance
3 It is defined as the removal of all or part of a recognized asset or liability from the statement of
financial position
Answer: Derecognition
4 Inventory method assumes that the goods first purchased are first sold
Answer: First In First Out
5 It is a short-term highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
Answer: Cash equivalents
6 Which of the followingterms is normally not associated with extinguishing an obligation through the
process of novation?
Answer: Remission
7 The Coronet Company has a cost card in relation to an item of goods manufactured as follows:
Materials 70
Storage costs of finished goods 18
Delivery to customers (Freight out) 4
Non-recoverable purchase taxes 6
According to PAS 2, at what figure should the item be valued in inventory?
Answer: 76
8 Entity A, a trading entity, buys and sells Product Z. Movements in the inventory of Product Z during
the period are as follows:
Date Transaction Units Unit cost Total cost
Feb. 1 Beginning inventory 100 ₱15 ₱1,500

7 Purchase 300 18 5,400
12 Sale 320
21 Purchase 200 21 4,200
How much is the ending inventory under the Weighted Average cost formula? (The average is
calculated on a periodic basis.)
Answer: 5,180
9. Sun Company provided the following data for the preparation of the statement of cash flows for the
current year:
Increase in accounts receivable 300,000

Decrease in income tax payable 170,000
Depreciation 1,000,000
Net income 250,000
Gain on sale of equipment 440,000
Loss on sale of building 210,000
What amount should be reported as net cash provided by operating activities?
Answer: D
10. What is FRSC?

Final Round - 1ST - Q

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Final Round - 1ST - Q

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1 If a transaction causes total liabilities to decrease but does not affect the owner’s equity,

what change, if any, will occur in total assets?

4 The recording phase of accounting covers the following steps, except:

5 An accrued expense is an expense:

1 The income summary account:

7 The primary responsibility of an independent auditor who is a CPA is to:

1 What is the law regulating the practice of accountancy in the Philippines?

2 It is the capacity of the information to influence a decision?

Answer: First In First Out

Answer: Cash equivalents

According to PAS 2, at what figure should the item be valued in inventory?

Date Transaction Units Unit cost Total cost

Feb. 1 Beginning inventory 100 ₱15 ₱1,500

Increase in accounts receivable 300,000

What amount should be reported as net cash provided by operating activities?

10. What is FRSC?

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