FABM1 (Fundamentals of Accounting, Business, c.

Accounts Payable
and Management 1) d. Accounts Receivable
NAME: 10. What does the term “posting” refer to in
Grade Level: the accounting cycle?
DIRECTION: Read each question a. Recording entries in the journal
carefully and choose the letter that b. Transferring journal entries to the ledger
c. Preparing financial statements
corresponds to the correct answer. d. Calculating trial balances
Write your answers on a separate 11. Which account is used to record a
sheet of paper. business owner’s withdrawal of assets?
a. Capital
1. Which of the following is the main b. Drawing
objective of accounting? c. Retained Earnings
a. To maximize profit d. Revenue
b. To provide information for decision- 12. Which of the following is considered a
making non-current asset?
c. To minimize tax liabilities a. Cash
d. To maintain records for legal compliance b. Inventory
2. What is the primary financial statement c. Accounts Receivable
that shows a company’s financial position d. Land
at a specific point in time? 13. What type of account is “Utilities
a. Income Statement Expense”?
b. Statement of Cash Flows a. Asset
c. Balance Sheet b. Liability
d. Statement of Changes in Equity c. Equity
3. Which of the following represents the d. Expense
accounting equation? 14. Which principle states that financial
a. Assets + Liabilities = Equity statements should be prepared using
b. Assets = Liabilities + Equity consistent accounting methods?
c. Liabilities = Assets - Equity a. Conservatism
d. Assets - Liabilities = Revenue b. Consistency
4. What is the term for the process of c. Materiality
recording transactions in the journal? d. Going Concern
a. Posting 15. What does a credit entry in an account
b. Journalizing signify?
c. Summarizing a. Increase in assets
d. Balancing b. Decrease in liabilities
5. Which type of account is debited when a c. Increase in revenues
business purchases office supplies on d. Decrease in equity
account? 16. Which of the following is an example of
a. Asset account an intangible asset?
b. Liability account a. Inventory
c. Expense account b. Equipment
d. Revenue account c. Trademark
6. Which financial statement shows the d. Accounts Receivable
performance of a business over a period 17. What does the term “accrual basis” refer
of time? to in accounting?
a. Balance Sheet a. Recording transactions only when cash is
b. Income Statement received or paid
c. Statement of Cash Flows b. Recognizing revenue and expenses when
d. Trial Balance they are earned or incurred
7. What principle requires that revenue be c. Ignoring non-cash transactions
recognized when it is earned, regardless d. Adjusting entries for errors
of when payment is received? 18. Which account is typically closed at the
a. Matching Principle end of an accounting period?
b. Revenue Recognition Principle a. Cash
c. Cost Principle b. Retained Earnings
d. Full Disclosure Principle c. Revenue
8. What is the normal balance of a liability d. Accounts Payable
account? 19. What is the purpose of a trial balance?
a. Debit a. To identify errors in the journal entries
b. Credit b. To ensure that total debits equal total
c. Zero credits
d. Either debit or credit c. To prepare financial statements
9. Which of the following is NOT an d. To close accounts at the end of the period
example of an asset? 20. Which of the following represents the
a. Cash proper order of the accounting cycle?
b. Equipment a. Journalizing, Posting, Trial Balance,
 Adjustments, Financial Statements B. Matching Principle
b. Posting, Adjustments, Journalizing, C. Full Disclosure Principle
Financial Statements, Trial Balance D. Going Concern Principle
c. Trial Balance, Journalizing, Financial 30. What type of account is "Accounts
Statements, Adjustments, Posting Payable"?
d. Adjustments, Posting, Journalizing, Trial A. Asset
Balance, Financial Statements B. Liability
21. It contains all the accounts (assets, C. Expense
liabilities, owner’s equity, revenues, and D. Equity
expenses) maintained by the business. 31. What is the normal balance of an expense
A. Journal account?
B. Worksheet A. Debit
C. Ledger B. Credit
D. Receipt C. Zero
22. It pertains to the initial recording of D. Either debit or credit
transactions that occurred. This includes 32. Which of the following is NOT an
the date, the account debited or credited, external user of financial information?
and its short description written A. Investors
chronologically. B. Creditors
A. Ledger C. Management
B. Worksheet D. Government Agencies
C. Journal 33. What is the term used for debts owed by
D. Trial Balance the business?
23. Which financial statement shows the A. Assets
company’s revenues and expenses for a B. Liabilities
specific period? C. Revenues
A. Balance Sheet D. Expenses
B. Cash Flow Statement 34. Which account is closed at the end of the
C. Income Statement accounting period?
D. Statement of Equity A. Capital
24. What is the double-entry accounting B. Revenue
principle? C. Equipment
A. Every transaction affects two or more D. Accounts Receivable
accounts 35. What does the "Matching Principle"
B. Every transaction involves cash state?
C. Every transaction is recorded twice in the A. Revenue should be recognized when
ledger earned
D. Every transaction occurs in chronological B. Expenses should be matched with
order revenues they help to generate
25. What is the term used for the resources C. Assets should match liabilities in the
owned by a business? balance sheet
A. Liabilities D. Transactions should match supporting
B. Equity documents
C. Assets 36. What is the purpose of adjusting entries?
D. Expenses A. To close temporary accounts
26. What is the purpose of a trial balance? B. To correct errors in the ledger
A. To calculate net profit C. To update accounts before preparing
B. To ensure debits equal credits financial statements
C. To determine tax liability D. To record cash transactions
D. To prepare invoices 37. What type of business is owned and
27. Which account is increased by a credit operated by one individual?
entry? A. Corporation
A. Cash B. Sole Proprietorship
B. Revenue C. Partnership
C. Expenses D. Cooperative
D. Inventory 38. Which document records cash inflows
28. What is the term for the process of and outflows?
transferring amounts from the journal to A. Income Statement
the ledger? B. Statement of Changes in Equity
A. Journalizing C. Balance Sheet
B. Posting D. Cash Flow Statement
C. Adjusting 39. What is the primary purpose of the
D. Reconciling Balance Sheet?
29. What do you call the principle that A. To show a company’s profitability
requires accountants to report financial B. To report a company’s financial position
information in a way that reflects at a specific date
economic activity accurately? C. To reconcile cash accounts
A. Consistency Principle D. To record transactions chronologically
 40. Which account category does "Owner’s
Capital" belong to?
A. Liability
B. Asset
C. Revenue
D. Equity

DIRECTION: Write FINANCIAL if the

transaction is a financial
transaction. Write NONFINANCIAL if
the transaction is not.

. The owner paid the salaries of the

employees.
2. The owner conducted an orientation to
newly hired employees.
3. The owner paid electric, water, and
telecommunication bills.
4. The owner received payment from
customers.
5. The owner post advertisements in the
city.
6. The owner awarded Employee of the
Month to a deserving employee.
7. The owner purchased a furniture and
paid it in cash.
8. The owner received payment from
customers on account.
9. The owner signed the contract to new
supplier.
10. The owner withdrew cash from the
business.