1. What is the effect in performing services on account on the basic accounting equation?

a. Increase assets and decrease owners equity

b. Increase assets and increase owners equity
c. Increase assets and increase liabilities
d. Increase liabilities and increase owners equity

2. As of Dec. 31, 2006, Stonewall Company has assets of P3,500 and owners equity of P2,000. What are the liabilities of Stonewall Company
as of Dec. 31, 2006?
a. P2,500
b. P2,000
c. P1,500
d. P1,000

3. Which of the following statements about an account is TRUE?
a. In its simplest form, an account consist of two parts
b. An account is an individual accounting record of increases and decreases in specific asset, liability and owners equity items.
c. There are separate accounts for specific assets and liabilities but only one account for owners equity items.
d. The left side of an account is the credit or decrease side.

4. What are debits?
a. Debits increase both assets and liabilities
b. Debits decrease both assets and liabilities
c. Debits increase assets and decrease liabilities
d. Debits decrease assets and increase liabilities

5. What is the nature of revenue account?
a. Revenue account is increased by debits
b. Revenue account is decreased by credits
c. Revenue account has a normal balance of a debit
d. Revenue account is increased by credits

6. Which of the following statement about a journal is FALSE?
a. It is not a book of original entry
b. It provides a chronological record of transactions
c. It helps to locate errors because the debit and credit amounts for each entry can be readily compared
d. It discloses in one place the complete effect of a transaction

7. The trial balance shows Supplies P1,350 and Supplies Expense P0. If P600 of Supplies are on hand at the end of the period, what is the
adjusting entry?
a. Dr. Supplies P750, Cr. Supplies Expense P750
b. Dr. Supplies P600, Cr. Supplies Expense P600
c. Dr. Supplies Expense P750, Cr. Supplies P750
d. Dr. Supplies Expense P600, Cr. Supplies P600




8. What is a ledger?
a. It contains only asset and liability accounts
b. It shows accounts in alphabetical order
c. It is a collection of the entire group of accounts maintained by an entity
d. It is a book of original entry

9. What is posting?
a. It normally occurs before journalizing
b. It transfers ledger transaction data to the journal
c. It is an optional step in the recording process
d. It transfers journal entries to ledger accounts

10. What account will have a zero balance after closing entries have been journalized and posted?
a. Service Revenue
b. Allowance for Bad Debts
c. Prepaid Insurance
d. Accumulated Depreciation

11. What SALES accounts have a normal debit balance?
a. Sales Discounts
b. Sales Returns and Allowances
c. Both A and B
d. Neither A nor B

12. When are postings from the purchase journal to the subsidiary ledger made?
a. Yearly
b. Monthly
c. Weekly
d. Daily

13. What is a trial balance?
a. It is a list of accounts with their balances at a given time
b. It proves mathematical accuracy of journalized transactions
c. It will not balance if a correct journal entry is posted twice
d. It proves that all transactions have been recorded

14. When is the trial balance NOT balance?
a. It will not balance if the correct journal entry is posted twice
b. It will not balance if the purchase of supplies on account is debited to Supplies and credited to cash
c. It will not balance if a P100 cash drawing by the owner is debited to Owners Drawing for P1,000 and credited to Cash for P100
d. It will not balance if a P450 payment on account is debited to Accounts Payable for P45 and credited to Cash for P45

15. Which of the following statements is INCORRECT?
a. The worksheet is essentially a working tool of the accountant
b. The worksheet is distributed to managers and other interested parties
c. The worksheet cannot be used as a basis for posting to ledger accounts
d. Financial statements can be prepared directly from the worksheet before journalizing and posting the adjusting entries.



16. What type of accounts will appear in the post closing trial balance?
a. Permanent (Real) accounts
b. Temporary Accounts
c. Accounts shown in the income statement columns of a worksheet
d. Nominal accounts

17. What is an adjusted trial balance?
a. Trial Balance after journal entries have been prepared
b. First Trial Balance
c. Trial Balance after adjusting entries are journalized and posted
d. Trial Balance after closing entries have been journalized and posted

18. Which of the following statements is TRUE regarding net income?
a. Assets exceeds Liabilities
b. Assets exceeds Revenues
c. Expenses exceeds Revenues
d. Revenues exceeds Expenses

19. On the last day of the period, Jim Alas Company buys a P9,000 machine on credit. What financial statement/s will be affected by this
transaction?
a. Income statement only
b. Balance sheet only
c. Income statements and statement of changes in equity only
d. Income statement, statement of changes in equity and balance sheet

20. What is the financial statement that reports assets, liabilities and owners equity?
a. Income statement
b. Statement of changes in equity
c. Balance sheet
d. Statement of cash flow

21. How assets are usually classified in a balance sheet?
a. Current assets; long-term assets; property, plant and equipment; and intangible assets
b. Current assets; long-term assets; property, plant and equipment; and other assets
c. Current assets; long-term assets; tangible and intangible assets
d. Current assets and non-current assets

22. How are current assets listed on the balance sheet?
a. By liquidity
b. By importance
c. By longevity
d. By alphabetizing

23. Internal control is used in an entity to enhance the accuracy and reliability of its accounting records. What else is another purpose of
internal control from the list provided below?
a. Safeguard Assets
b. Prevent Fraud
c. Produce correct financial Statements
d. Deter employee dishonesty

24. What is NOT included as part of physical controls?
a. Safes and vaults to tore cash
b. Independent bank reconciliation
c. Locked warehouse for inventories
d. Bank safety deposit boxes for important paper


25. Which of the following items in a cash drawer at November 30 is not considered CASH?
a. Money Orders
b. Coins and Currency
c. Check from a customer dated Dec. 1
d. Check from a customer dated Nov. 28

26. What principle of internal control is used when pre-numbered checks are used whenever cash is disbursed?
a. Establishment of Responsibility
b. Segregation of Duties
c. Physical, Mechanical and Electronic Controls
d. Document Procedures

27. What principle of internal control is used whenever an entity permits only designated personnel to handle cash receipts?
a. Establishment of Responsibility
b. Segregation of Duties
c. Physical, Mechanical and Electronic Controls
d. Document Procedures

28. Which of the following is not reported under additional paid-in capital?
a. Paid-in capital in excess of par value
b. Common stock
c. Paid-in capital in excess of stated value
d. Paid-in capital from treasury stock

29. What is Retained Earnings?
a. A subdivision of paid-in capital
b. Net income retained in the corporation
c. Reported as an expense in the income statement
d. Closed to capital stock

30. What body issues the Philippine Accounting System?
a. Philippine Accounting Standards Board
b. Philippine Accounting Standards Committee
c. Accounting Standards Council
d. Financial Reporting Standards Council

31. What is Full Disclosures?
a. Financial statements should disclose all assets at their cost
b. Financial statements should disclose only those events that can be measured in pesos
c. Financial statements should disclose all events and circumstances that would matter to users of financial statements
d. Financial statements should not be relied on unless an auditor has expressed an unqualified opinion on them.

32. What is the primary criterion by which accounting information can be judged?
a. Consistency
b. Predictive value
c. Decision-usefulness
d. Comparability


33. What is Depreciation?
a. Valuation
b. Cost allocation
c. Cash accumulation
d. Appraisal

34. MM Company purchased equipment on Jan. 1, 2005, at a total invoice cost of P400,000. The equipment has an estimated salvage value
of P10,000 and an estimated useful life of 5 years. What is the amount of accumulated depreciation at Dec. 31, 2006, if the straight-line
method of depreciation is used?
a. P160,000
b. 156,000
c. 80,000
d. 78,000

35. Blinka Retailers accepted P50,000 of Citibank VISA credit card changes for merchandise sold on Jul. 1. Citibank charges 4% for its credit
card use. The entry to record this transaction by Blinka Retailers will include a credit to Sales of P50,000 and what are the debit account
title/s and amount/s?
a. Cash P48,000 and Service Charge Expense P2,000
b. Accounts Receivable P48,000 and Service Charge Expense P2,000
c. Cash P50,000
d. Accounts Receivable P50,000

36. BB Company on Jun. 15 sells merchandise on account to Chaz Co. Or P1,000, terms 2/10, n/30. On Jun. 20, Chaz Co. returns merchandise
worth P300 to BB Company. On Jun. 24, payment is received from Chaz Co. for the balance due. What is the amount of cash received?
a. P700
b. P686
c. P680
d. None of the above

37. Which of the following represent techniques used by the financial analyst?
a. Peso and percentage changes on financial statements
b. Common-size statements
c. Ratios
d. All of the above

38. Which is NOT included as part of Trend Analysis?
a. It is also known as horizontal analysis
b. Shows changes between years in both dollars and percentage form
c. It is simple to identify trends by looking at the raw data alone
d. The percentages often relate several years of financial data in terms of a base year

39. What is the financial statement that shows both peso and percentages in the report?
a. Balance Sheet
b. Common-size statement
c. Proportional financial statement
d. Relative statement of equity

40. Which of the following is the representative of vertical analysis?
a. In the income statement causes all accounts to be related as a percentage of net income
b. In the balance sheet causes all accounts to be related as a percentage of total assets
c. Percentages used in vertical analysis make identifying trends difficult
d. Percentages can be used in the balance sheet without being associated with the numbers they present
41. The income statement for Nadeen inc. Shows income before income taxes P700,000, income tax expense P210,000, and net income
P490,000. If Nadeen has P100,000 shares of common stock outstanding throughout the year, what is earnings per share?
a. P7.00
b. P4.90
c. P2.10
d. No correct answer is given

42. Which of the following is incorrect concerning subsidiary ledgers?
a. The purchases ledger is a common subsidiary ledger for creditor accounts
b. The accounts receivable ledger is a subsidiary ledger
c. A subsidiary ledger is a group of accounts with a common characteristics
d. An advantage of the subsidiary ledger is that it permits a division of labor in posting

43. Which of the following statement is INCORRECT?
a. The sales discount column is included in the cash receipts journal
b. The purchases journal records all purchases of merchandise whether for cash or on account
c. The cash receipts journal records sales on account
d. Merchandise returned by the buyer is recorded by the seller in the purchase journal

44. Which statement is INCORRECT regarding he general journal?
a. Only transactions that cannot be entered in a special journal are recorded in the general journal
b. Dual postings are always required in the general journal
c. The general journal may be used to record acceptance of a note receivable in payment of an account receivable
d. Correcting, adjusting, and closing entries are made in the general journal

45. What are special journals?
a. All purchase transactions are recorded in the purchase journal
b. All cash received, except from cash sales, is recorded in the cash receipts journal
c. All cash disbursements are recorded in the cash payments journal
d. A general journal is not necessary

46. Which of the following should not be included in the physical inventory of a company?
a. Goods held on consignment from another company
b. Goods shipped on consignment to another company
c. Goods in transit from another company shipped FOB shipping point
d. None of the above

47. Which sales accounts have normally a debit balance?
a. Sales discount b. Sales returns and allowances
c. Both A and B d. Neither A nor B

48. Which is NOT shown in a multi-step income statement?
a. Gross profit
b. Cost of goods sold
c. A sales revenue section
d. Investing activities section


49. What is gross profit, if sales revenues are P400,000, cost of goods sold is P310,000, and operating expenses are P60,000?
a. P400,000
b. P340,000
c. P90,000
d. P30,000

50. What is cost of goods sold?
a. Purchase discounts are deducted from net purchases
b. Freight-out is added to net purchases
c. Purchase returns and allowances are deducted from net purchases
d. Freight-in is added to net purchases

b c d c b
c d a d c
b a a a a
c c b b b
d b c b d
a a c b a
c c b d c
c d b c d
d d b b c
a c d d d