FUNDAMENTALS OF ACCOUNTANCY, BUSINESS AND MANAGEMENT 1
4th Quarter
LONG TEST
Part I Multiple Choice
1.The primary function of accounting is
A. to provide quantitative, primarily financial information about economic entities that is useful in
making economic decisions.
B. to provide information that the creditors of an entity can use in deciding whether to make
additional loans to the entity
C. to measure the resources owned by economic entities and the financial obligations of the
entities.
D. to provide information that managers of an entity need to control its operations.
2.It is a series of steps accountants perform during accounting period relating to analyzing,
recording, classifying, summarizing and reporting useful financial information.
A. accounting
B. accounting cycle
C. business cycle
D. business plan
3. Current assets are arranged according to
A. liquidity C. longevity
B. importance D. alphabetical order
4. Residual interest after deducting all its liabilities.
A. Asset C. Equity
B. Liabilities D. Income
5. The purchase of office supplies (or any other asset) on account will
A. increase in an asset and increase in owner’ equity
B. increase in one asset and decrease in another asset
C. increase an asset and increase a liability
D. increase an asset and decrease a liability
6. The performance of service for a customer or client and immediate receipt of cash will
A. increase one asset and decrease another asset
B. increase in an asset and increase in owner’s equity
C. decrease an asset and decrease a liability
D. increase an asset and increase a liability
7. The payment of accounts payable (or any other liability) will
A. decrease an asset and decrease owner’s C. decrease one asset and decrease a
equity liability
B. increase one asset and decrease another D. increase an asset and increase a liability
asset
8. G-Shock is famous for fashion and sports watches. At the end of the recent year, G-Shock’s
total assets add up to P19,050,000 and owner’s equity was P13,200,000. How much did G-Shock
owe creditors?
A. cannot be determined from the data given C. P19,050,000
B. P13,200,000 D. P 5,850,000
9. Assume G-Shock paid expenses totaling P17,500. How does this transaction affect Omega’s
accounting equation?
A. Decreases both assets and owner’s equity C. Increases both assets and owner’s equity
B. Decreases assets and increases liabilities D. Increases assets and decreases liabilities
10. Sunset Company has P90,000 in revenues, P198,000 in expenses, P54,000 owner’s
investment, P13,500 owner’s withdrawals, and P67,500 in liabilities paid off. Owner’s equity
changed by:
A. P108,000 increase C. P67,500 decrease
B. P135,000 decrease D. no change
11. Which of the following statements is NOT TRUE?
A. Reliable data must be supported by an objective supporting evidence.
B. The informed opinion of owners is a vital source of an objective evidence.
C. An independent appraiser’s opinion usually considered reliable.
D. Reliable data are verifiable
12. Equities are legal and economic claims to the assets of a business. The owner’s claims on
the business assets are also known as
A. account payable C. outsider claims
B. liabilities D. capital
13. The branch of accounting that is concerned primarily with providing information for internal
user.
A. auditing C. financial accounting
B. income tax accounting D. managerial accounting
14. These are structured representation of the financial position of and the transactions
undertaken by an enterprise during a particular reporting period.
A. financial reports C. annual reports
B. financial statements D. financial plans.
15. Each of the following statement about an account is true except:
A. There are separate accounts for specific assets and liabilities but only one account for owner’s
equity items.
B. the left side of an account is the credit or decrease side.
C. An account is an individual accounting record if increase and decreases in specific asset,
liability and owner’s equity items.
D. in the simplest form, an account consists of two parts.
16. A revenue account:
A. is decrease by credits. C. has a normal balance of debit.
B. is increase by credits. D. is increased by debits.
17. Which of the following accounts have normal debit balances?
A. Assets, expenses, and revenues D. Assets, liabilities, and owner’s drawing
B. Assets, owner’s drawings, and expenses
C. Assets, expenses, and owner’s capital
18. Each of the following statements about a journal is true except:
A. it provides a chronological record of transactions.
B. it helps to locate errors because the debit and credit amounts for each entry can be readily
compared
C. it discloses in one place that complete effect of a transaction.
D. it is not a book of original entry
19. Which of the following pertains to a ledger?
A. contains only asset and liability accounts
B. is a book of original entry
C. should show accounts in alphabetical order
d. is a collection of the entire group of accounts maintained by a company
20. The Trial Balance will be out of balance if:
A. P1,000 cash drawing by the owner is debited to Owner’s Drawing for P10,000 and credited to
Cash for P1,000.
B. The purchase of supplies on account is debited to Supplies and credited to Cash
C. A P4,500 payment on account is debited
to Accounts Payable for P450 and credited to
Cash for P450.
D. A correct journal entry is posted twice
PART II TRUE OR FALSE
21. The accounting cycle begins with the recording the transactions and ends with the trial
balance.
22. Debit means decrease and credit means increase.
23. Transactions are analyzed on the basis of the source documents.
24. Every business transaction affects a minimum of two accounts.
25. A journal entry may include debits to more than one account and credits to more than one
account.
26. The double-entry system means that transactions are recorded both in the journal and in the
ledger.
27. A credit entry to expense account will increase it.
28. Normally, income accounts have debit balances.
29. An expense may be recognized and recorded although no cash outlay has been made.
30. An account titled Unearned Revenue is a liability account.
31. The T-account is sometimes called as the book of original entry.
32. In some transactions, the accounting equation may not be maintained.
33. Income statement accounts are also known as temporary accounts.
34. Amounts entered on the left side of account, regardless of the title, are called credits.
35. The chart of accounts is a system of organizing and numbering the accounts in the general
ledger.
36. A trial balance may balance but may not be correct.
37. Double posting of a transaction causes the debits and credits not to balance.
38. Notes receivable are claims against debtors evidenced by a written promise to pay a certain
sum of money at a definite time to the order of a specified person or to bearer.
39. The process of recording a transaction in a journal is called journalizing.
40. The journal is a chronological record of the entity’s transactions.
“Don't cheat if you don't want to be cheated.”
Part II True or False
26.
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