Term 1 Reviewer

Multiple Choice: Select the correct answer for each questions.

1. Accounting principles are "generally accepted" only when
A. an authoritative accounting rule-making body has established it in an official pronouncement.
B. it has been accepted as appropriate because of its universal application.
C. both a and b.
D. neither a nor b.

2. A common set of accounting standards and procedures are called
A. financial accounting standards
B. generally accepted accounting principles.
C. objectives of financial reporting.
D. statements of financial accounting concepts.

3. When making decisions, investors are interested in assessing
A. the company’s ability to generate net cash inflows.
B. management’s ability to protect and enhance the capital providers’ investments.
C. Both a and b.
D. the company’s ability to generate net income.

4. Accrual accounting is used because
A. cash flows are considered less important.
B. it provides a better indication of ability to generate cash flows than the cash basis.
C. it recognizes revenues when cash is received and expenses when cash is paid.
D. none of the above.

5. What is meant by consistency when discussing financial accounting information?
A. Information that is measured and reported in a similar fashion across points in time.
B. Information is timely.
C. Information is measured similarly across the industry.
D. Information is verifiable.

6. Which of the following is an ingredient of relevance?
A. Verifiability. C. Timeliness.
B. Neutrality. D. Materiality

7. The characteristic that is demonstrated when a high degree of consensus can be secured among
independent measurers using the same measurement methods is
A. relevance. C. verifiability.
B. faithful representation. D. neutrality.

8. In classifying the elements of financial statements, the primary distinction between revenues and
gains is
A. the materiality of the amounts involved.
B. the likelihood that the transactions involved will recur in the future.
C. the nature of the activities that gave rise to the transactions involved.
D. the costs versus the benefits of the alternative methods of disclosing the transactions
involved.

9. Which of the following is not a basic element of financial statements?
A. Assets. C. Losses.
B. Balance sheet. D. Revenue.

10. Which basic assumption may not be followed when a firm in bankruptcy reports financial
results?
A. Economic entity assumption.
B. Going concern assumption.
C. Periodicity assumption.
D. Monetary unit assumption

11. The allowance for doubtful accounts, which appears as a deduction from accounts receivable on
a balance sheet and which is based on an estimate of bad debts, is an application of the
A. consistency characteristic.
B. expense recognition principle.
C. materiality constraint.
D. revenue recognition principle.

12. What is prudence or conservatism?
A. Understating assets and net income.
B. When in doubt, recognizing the option that is least likely to overstate assets and income.
C. Recognizing the option that is least likely to overstate assets and income.
D. Recognizing revenue when earned and realized.

13. Which of the following statements about materiality is not correct?
A. An item must make a difference or it need not be disclosed.
B. Materiality is a matter of relative size or importance.
C. An item is material if its inclusion or omission would influence or change the judgment of a
reasonable person.
D. All of these are correct statements about materiality.

14. Which of the following is not a required component of financial statements prepared in
accordance with generally accepted accounting principles?
A. President's letter to shareholders.
B. Balance sheet.
C. Income statement.
D. Notes to financial statements

15. Limitations of the income statement include all of the following except
A. items that cannot be measured reliably are not reported.
B. only actual amounts are reported in determining net income.
C. income measurement involves judgment.
D. income numbers are affected by the accounting methods employed.

16. Which of the following would represent the least likely use of an income statement prepared for
a business enterprise?
A. Use by customers to determine a company's ability to provide needed goods and services.
B. Use by labor unions to examine earnings closely as a basis for salary discussions.
C. Use by government agencies to formulate tax and economic policy.
D. Use by investors interested in the financial position of the entity.

17. Balance sheet information is useful for all of the following except to
A. compute rates of return
B. analyze cash inflows and outflows for the period
C. evaluate capital structure
D. assess future cash flows

18. The net assets of a business are equal to
A. current assets minus current liabilities.
B. total assets plus total liabilities.
C. total assets minus total stockholders' equity.
D. none of these

19. This branch of accounting deals with the preparation of general purpose financial statements.
A. General Accounting C. Financial Accounting
B. Management Accounting D. Auditing

20. General purpose financial statements are intended to meet
A. All the information needs of all users – external and interenal alike.
B. The common needs of both external users.
C. The common needs of external users, primarily investors, lenders, and other creditors.
D. Both the common and specific needs of external users.

21. This type of business organization is created by a contractual agreement between two or more
individuals.
A. Corporation C. Partnership
B. Cooperative D. Sole proprietorship

22. Which of the following refers to a manufacturing business?
A. Buying and selling of goods in their original form.
B. Sale of a skill-set and not necessarily physical object.
C. Ability or potential to mass-produce
D. Absence of ability to stock goods for future sale.

23. When making judgments and estimates under conditions of uncertainty, the accountant chooses
the potentially unfavorable outcome over the favorable one. This concept refers to
A. Separate entity C. Prudence/Conservatism
B. Going concern D. Reporting period

24. The official accounting standard-setting body in the Philippines, as promulgated by law, is the
A. PICPA C. ASC
B. FRSC D. KKP

25. The main purpose of accounting is
A. To account for money so it will not be lost.
B. To provide information that is useful in making economic decisions.
C. To safeguard the assets of a company.
D. To provide a clear view of the state of the industry’s economy.

26. In accounting, the term “recording” is also called
A. Journalizing C. Debiting
B. Communicating D. Crediting

27. This process refers to the reporting of the information processed in the accounting system to
interested users.
A. Measuring C. Communicating
B. Identifying D. Classifying

28. Which of the following statements is correct?
A. Financial accounting is the branch of accounting that deals with the specific needs of an
entity’s management.
B. The internal users of accounting information include management, owners and creditors.
C. The external users of accounting information include potential and existing investors and lenders
and other creditors.
D. Government accounting is the branch of accounting that deals with the analysis of the costs of
products and services.

29. Which of the following statements is incorrect?
A. Erroneous financial statements can lead to bad financial decisions.
B. Internal users of financial information refer to the entity’s management personnel.
C. Tax accounting refers to the branch of accounting that deals with tax computations, filing of tax
returns, and tax planning.
D. Accounting education is the branch of accounting that deals with the teaching of accounting and
related subjects in order to produce competent and responsible business professionals.

30. If income exceeds expenses,
A. Loss is incurred. C. Total equity is not affected.
B. Total equity is decreased. D. Profit is earned

31. You recorded a ₱21,000 amount as ₱2,100. You committed an accounting error called
A. Transplacement C. Transformation
B. Transposition D. Transmutation

32. The main purpose of preparing a trial balance is
A. to determine whether the debits and credits in the journal are equal.
B. to try if total debits equal total credits in the ledger.
C. to determine whether transposition or transplacement errors have been committed.
D. to annihilate the accounts.

33. Which is of the following is a correct sequence of the steps in the accounting cycle?
A. Posting, Journalizing, Identifying and analyzing, Trial balance
B. Identifying and analyzing, Journalizing, Posting, Trial balance
C. Journalizing, Identifying and analyzing, Trial balance, Posting
D. Left, right, up and down

34. Which of the following will be closed in the closing entry phase?
A. Unused supplies C. Prepaid expense
B. Unearned income D. Bad debts expense

35. Which of the following will not be closed in the closing entry phase?
A. Allowance for Bad debts C. Used supplies
B. Doubtful accounts expense D. Rent consumed

36. The Board of Accountancy shall be composed of how many members?
A. 1 B. 5 C. 6 D. 7

37. Under this concept, amounts in the financial statements are stated in Philippine pesos and
changes in the purchasing power of the Philippine peso due to inflation are generally ignored.
A. Prudence C. Stable monetary Unit
B. Materiality D. Ignoring Concept

38. Which of the following accounts will not be seen in a purely service type of business?
A. Professional Revenue C. Cost of Goods Sold
B. Accumulated Depreciation D. Interest Income

39. When information about two different entities has been prepared and presented in a similar
manner, the information exhibits the characteristic of
A. relevance. C. consistency
B. reliability. D. comparability.

40. Statement 1: A general purpose financial statements generally consists of two periods.
Statement 2: An information is said to be relevant if it is confirmative but not predictive.
A. Both statements are True
B. Both statements are False
C. Only statement 1 is True
D. Only statement 2 is True

41. Statement 1: Balance sheet must be prepared first before the income statement.
Statement 2: A debit outstanding balance for Income and Expense summary account would result to an increase in
capital account.

42. Statement 1: Income and Expense Summary account has a normal debit balance.
Statement 2: A post-closing trial balance must not show a balance for ‘ABC Drawings’.
43. Statement 1: A business transaction is considered an accountable event if it affects assets,
liabilities, equity, income or expenses of the business.
Statement 2: A business is said to be profitable if its expenses exceed its income.

44. Statement 1: GAAP is rule based while IFRS is principle based.
Statement 2: Philippines has adopted the use of GAAP over IFRS since 2005.

45. Statement 1: Public Practice of Accountancy includes the preparation of internal reports for
management’s use.
Statement 2: To pass the CPA Licensure Exam, one must have three years of significant professional experience in
any fields of Accountancy.

46. Statement 1: A CPA must earn 15 Continuing Professional Development (CPD) units for the
renewal of PRC license.
Statement 2: A CPA must earn 120 units of CPD units to be accredited by the Board of Accountancy.

47. Statement 1: Net realizable value is calculated by deducting the accumulated depreciation from
the non-current fixed assets.
Statement 2: Carrying Value is calculated by deducting the Bad Debts Expense from the Accounts Receivable.

48. Statement 1: Accrued income includes transactions already collected and earned.
Statement 2: Accrued income includes uncollected but already earned income.

49. Statement 1: Merchandising and Manufacturing type of business both present ‘Sales’ in their
Income Statement.
Statement 2: Sole Proprietorship Businesses are required to be registered to SEC.

50. Statement 1: Passing the CPA Licensure Exam will automatically give privilege to the professional
to practice his/her profession as CPA overseas.
Statement 2: Bookkeeping process ends in the preparation of the financial statements.

PROBLEM SOLVING:

51-52. The Supplies account had a P2,800 debit balance at the end of the accounting period before adjustment for
supplies used, and an inventory of P600 worth of unused supplies was on hand. Which of the following is the
required adjusting entry?
A. Debit Supplies Expense P600 and credit Supplies P600.
B. Debit Supplies P600 and credit Supplies Expense P600.
C. Debit Supplies P2,200 and credit Supplies Expense P2,200.
D. Debit Supplies Expense P2,200 and credit Supplies P2,200.

53-54. A law firm began November with office supplies of P16,000. During the month the firm purchased supplies
of P29,000. On November 30, supplies on hand total P21,000. Supplies expense for the period is
A. P24,000. C. P45,000.
B. P29,000. D. P21,000.

55-56. Lorelei Corpuz entered into a one-year tenancy contract from Mar. 1, 2021 to Feb. 28, 2022. The monthly
rental was P90,000. For the year ended Dec. 31, 2021, Lorelei Corpuz paid P1,080,000 for the contract and
recorded it as rental expenses. The profit for the year ended Dec. 31, 2021 was ___________.
A. overstated by P900,000
B. overstated by P180,000
C. understated by P900,000
D. understated by P180,000

57-58. A business received cash of P30,000 in advance for revenue that will be earned later. The cash receipt entry
debited cash and credited unearned revenues for P30,000. At the end of the period, P11,000 is still unearned. The
adjusting entry for this situation will
A. debit revenues and credit unearned revenues for P19,000.
B. debit revenues and credit unearned revenues for P11,000.
C. debit unearned revenues and credit revenues for P19,000.
D. debit unearned revenues and credit revenues for P11,000.

59-60. The financial year of Divina Cayabyab ends on December 31 each year. On May 30, 2022. Divina Cayabyab
received an annual service fee of P600,000 from a customer for a service commencing on June 1. On Dec. 31, 2022,
___________.
A. P250,000 should be treated as unearned revenues
B. P300,000 should be treated as unearned revenues
C. P600,000 should be treated as unearned revenues
D. P600,000 should be treated as revenues for the current financial year

61-62. Alahoy Enterprise uses the periodic inventory system. At the start of the period, it has beginning inventory
of P300,000. During the period, it made the total purchases of P1,000,000. It also paid freight-in worth P40,000 on
the purchases. Alahoy had total credit sales of P960,000 during the period, the mark up is 30% base on sales.
61-62. Prior to physical count of inventories, how much is the balance of Alahoy’s “Inventory” account?
A. P1,340,000 C. P300,000
B. P668,000 D. P221,538 (round off)

63-64. If Alahoy will use “Perpetual Method”, prior to physical count of inventories, how much is the balance of
Alahoy’s “Inventory” account?
A. P1,340,000 C. P300,000
B. P668,000 D. P221,538 (round off)

Baliwag Company recently received P1,000,000 worth of promissory note from Cattleya Company in exchange of
professional service performed by the former to the latter.
The note was issued on May 31, 2017 and has a term of 18 months. Annual rate for the note is 13%. Baliwag
Company uses calendar year-end while Cattleya Company uses fiscal year end of February 28.

65-66. The amount of accrued income Cattleya Company shall record on February 28, 2018 is
A. P97,500 C. P108,333
B. P130,000 D. Answer is not given

67-68. The total amount of cash payment or collection on due date is
A. P1,130,000 C. P1,000,000
B. P1,195,000 D. Answer is not given

69-70. Should Baliwag Company fail to record adjusting entry on December 31, 2017, there will be
A. An overstatement of liability amounting to P78,833
B. An overstatement of expense amounting to P78,833
C. An understatement of income amounting to P78,833
D. An understatement of receivable amounting to P78,333

Ondoy Company acquired the following non-current assets during the year:
 July 1, 2015- Machinery at P250,000 with useful life of 10 years and salvage value of P10,000
 September 30, 2015- Equipment at P120,000 with no salvage value and has useful life of 5 years
 August 1, 2015- Vehicle at P320,000 with no salvage value and useful life of 16 years
 October 1, 2015- Land at P900,00 in which a building with useful life of 30 years will built after 2 years

71-72. How much is the total depreciation expense to be recorded on December 31, 2015?
A. P68,000 C. P20,667

73-74. What is the carrying value of the Machinery on December 31, 2016?
A. P240,000 C. P192,000

75-76. What is the carrying value of the Vehicle on December 31, 2017?
A. P313,333 C. P273,333

Amparo Enterprise paid Bulon Company P222,000 for one year of rent on November 1, 2017. Amparo uses fiscal
year end of June 30 while Bulon uses fiscal year end of September 30.

77-78. Assuming Amparo used asset method in the recording of the rent, his adjusting entry at year end would
include:
A. A debit of Prepaid rent expense, P148,000
B. A credit of Prepaid rent expense, P148,000
C. A debit of Rent Expense, P74,000
D. A credit of Rent Expense, P74,000

Halasir Anghirap Company started operation at the start of February. The following transactions transpired:

2/1 H.A. invested P450,000 cash to the business.
2/1 H.A. paid registration fees amounting to P2,090
2/1 H.A. paid P120,000 as rent for the business office for the next six months starting on the date of payment
2/4 H.A. issued promissory note amounting to P140,000 in exchange of 2 computer equipment.
2/10 H.A. billed a customer for service rendered amounting to P12,500.
2/15 H.A. received P20,000 from walk-in customers who availed the company’s service.
2/16 H.A. presented an employment contract to a candidate for a managerial position showing P20,000 monthly
salary and other benefits amounting to P6,000. The candidate however declined.
2/20 H.A. bought supplies amounting to P90,000
2/25 H.A. paid marketing expense amounting to P12,000.
2/25 H.A. received P7,500 from the customer with outstanding receivable balance
2/26 H.A. decided to withdraw P8,700 cash from the business.
2/27 H.A. paid P1,900 for internet expense

Other information:
1. Computer equipment has a useful life of 7 years and junk value of P2,000.
2. The promissory note has annual rate of 2% and has term of 1 year
3. H.A. decided to use asset and liability method in any deferral transactions.
4. H.A. failed to accrue utilities expense amounting to P8,370 at year end
5. H.A. uses fiscal year end June 30 in the company reporting

Chart of Accounts:
Cash, Accounts Receivable, Allowance for Doubtful Accounts, Note Receivable,Accrued Interest Income, Supplies,
Prepaid Rent, Computer Equipment, Accumulated Depreciation-Computer Equipment, Accounts Payable, Note
Payable, Accrued Interest Expense, Utilities payable, Unearned Service Income, H.A. Capital, H.A. Drawings, Service
Income, Interest Income, Salary Expense, Utilities Expense, Internet Expense, Taxes and licenses, Marketing
Expense, Supplies Expense, Rent Expense

79-80. How much is the total debit and credit per Preliminary Trial Balance?
A. P622,500 C. 648,500

81-82. How much is the net income/loss for the month of February based on preliminary TB?
A. P16,510 net income C. P9,490 net income
B. P16,510 net loss D. P9,490 net loss

83-84. How much is the total assets per preliminary trial balance?
A. P477,810 C. P597,810
B. P387,810 D. P457,810

85-86. How much is the depreciation expense to be recorded as of the fiscal period?
A. P6,571.43 C. P7,142.86
B. P8,214.29 D. P5,714.29

87-88. What is the estimated accrued interest to be recorded as of the year-end?
A. P11,66.67 C. P2,800.00
B. P933.33 D. Answer is not given

89-90. If Halasir Anghirap Company decided to prepare financial statements for the month of February, what is the
ending value of the capital?
A. P433,490 C. P440,510
B. P466,510 D. P459,490

Sirpaex Ten Ng Thyme had the following information at the beginning of the year:

Accounts receivable Php 12,000
Allowance for Doubtful Accounts 800
Sales -

During first half of the year, STNT sold 34,000 units at P13.75 each. During the second half of the year, the sales
decreased by 30%.

Of the total sales for the year, 55% was on account while the rest was in cash. Accounts receivable from current
year sale remained outstanding throughout the year.

91-92. What is the value of the accounts receivable at the end of the year?
A. P437,112.50 C. P514,250.00
B. P449,112.50 D. P526,250.00

93-94. Should STNT decide to estimate doubtful accounts at 6% of sales, what is the doubtful accounts expense to
be recorded at the end of the year?
A. P46,875.00 C. P26,226.75
B. P56,100.00 D. P47,865.00

95-96. In relation to 93-94, what is the value of the allowance for doubtful accounts at the end of the year?
A. P47,675.00 C. P27,026.75
B. P56,900.00 D. P48,665.00

97-98. Should STNT decide to estimate doubtful accounts at 6% of accounts receivable, what is the doubtful
accounts expense to be recorded at the end of the year?
A. P25,426.75 C. P30,055.00
B. P26,146.75 D. P30,775.00

99-100. In relation to 97-98, what is the value of the net realizable value at the end of the year?
A. P410,885.75 C. P483,395.00
B. P422,165.75 D. P494,675.00

Term 1 Reviewer

Uploaded by

Copyright:

Available Formats

Term 1 Reviewer

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Term 1 Reviewer

Uploaded by

Copyright:

Available Formats

Multiple Choice: Select the correct answer for each questions.

You might also like