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Quick Tests

Quick Test 1

Which of the following is not a step in accounting


process?
a. Identification
b. Verification
c. Recording
d. Communication

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Quick Test 2

This section of the statement of financial position


presents its components in order of their liquidity
a. Current Liabilities
b. Current Assets
c. Non-Current Assets
d. Non-Current Liabilities

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Quick Test 3

The financial statement that reports assets, liabilities


and owner’s equity is the:
a. Income Statement
b. Statement of Changes in Equity
c. Statement of financial position or Balance Sheet
d. Statement of cash flows

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Quick Test 4

Which of the following is not a characteristic


applicable to the statement of financial
position/Balance Sheet?
a. It covers a given period of time
b. It covers a specific point in time
c. It shows the entity’s financial condition
d. It shows the resources owned by the entity,
alongside with the obligations it owes and the
owner’s residual interest in the business.

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Quick Test 5

Mark, the accountant of David’s Salon has always


made it a point to record utility bills in the same
month the corresponding cost has been incurred,
even though payment is yet to be made. Which
accounting principle applies to this situation?
a. Expense Recognition
b. Objectivity
c. Revenue Realization
d. Periodicity

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Quick Test 6

Providing an allowance for uncollectible accounts in


relation with the total accounts receivable balance
adheres to what specific accounting principle?
a. Matching principle
b. Revenue Recognition
c. Disclosure
d. Conservatism

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Quick Test 7

All official receipts, invoices and other supporting


documents evidencing a business transaction are
being filed by the entity’s accountant, in support for
a business activity made by the entity. What
accounting principle is being complied by the
accountant?
a. Subjectivity
b. Objectivity
c. Disclosure
d. Completeness

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Quick Test 8

For a given period of time, when expenses exceeded


revenues reported by an entity, a ________ is
reported in the income statement
a. Net Profit
b. Net Loss
c. Breakeven
d. None of the above

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Quick Test 9

Profits will result during a time period when:


a. Assets exceed liabilities
b. Assets exceed income
c. Expenses exceed revenues
d. Revenue exceeds expenses

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Quick Test 10

Which of the following statements does not relate to


the income statement?
a. It reports the results of an entity’s operations for a
given period of time
b. It reports the profitability of an entity for a specific
period
c. It reports capital transactions that occurred in a
specific period.
d. It presents all revenues and expenses incurred for
a period of time.
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Quick Test 11

•This represents the owner’s residual interest in the


business’ assets after claims against those assets
were satisfied
•a. Capital or Equity
•b. Withdrawal
•c. Interest
•d. Ownership Share

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Quick Test 12

Which of the following statements about


users of accounting information is true?
a. Present creditors are internal users.
b. External users of financial information are
generally employed by the organization.
c. Tax authorities are external users.
d. The Chief Operating Officer is an external user.

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Quick Test 13

As of December 31, 2013, ZEE CO. has


assets of P780,000 and owner’s equity
of P480,000. What is the amount of
the liabilities for ZEE CO. as at
December 31, 2013?
a. P300,000
b. P400,000
c. P640,000
d. P1,260,000

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Quick Test 14

The effect of an investment by a sole


proprietor into the business is:
a. A decrease in owner’s equity
b. An increase in owner’s equity
c. A decrease in expenses
d. An increase in expenses

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Quick Test 15

The effect of a drawings by a sole proprietor


into the business is:
a. A decrease in owner’s equity
b. An increase in owner’s equity
c. A decrease in expenses
d. An increase in expenses

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Quick Test 16

The effect of a net income/(net loss)of a sole


proprietorship business is:
a. A decrease/increase in owner’s equity
b. An increase/decrease in owner’s equity
c. A decrease/increase in revenue
d. An increase/decrease in revenue4

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Quick Test 17

•The Entity Concept states that:


a. Assets should be initially recorded at cost and
adjusted when their fair value changes.
b. Activities of an entity are to be kept separate and
distinct from its owner.
c. Assets should be recorded at their cost.
d. Only transaction data capable of being expressed
in terms of money be included in the accounting
records.

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Quick Test 18

•This concept requires that only


transaction data that can be expressed
in terms of money be included in the
accounting records.
a. Entity Concept
b. Going concern assumption
c. Materiality
d. Monetary unit assumption

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Quick Test 19

Services provided by a public accountant


include:
a. Auditing, taxation and management
consulting
b. Auditing, budgeting, and management
consulting
c. Auditing, budgeting and cost accounting
d. Internal auditing, budgeting and
management consulting
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Quick Test 20 (True or False)

1. The matching principle implies a cause-and-effect


relationship between incurring expenses and
earning revenues.
2. Revenue is only recognized as earned whenever
cash has been received for services.
3. Adherence to the conservatism principle requires
accountants to exercise care and caution in order
to create unreasonable expectations on the part of
financial statement users.
4. The going concern assumption assumes that the
business, notwithstanding the presence of
evidence to the contrary, will continue to operate
indefinitely. 21
Quick Test 20 (True or False)

5. An expense represents an outflow of resources to


the entity, causing an increase in liability or a
decrease in asset.
6. Owner’s Equity represents a residual claim on the
entity’s asset after deducting liabilities
7. At all times, an increase in owner’s equity implies
that the entity earned a profit for such period.
8. Statement of cash flows reports the revenue and
expenses for a specific period of time.
9. Investment and withdrawal transactions between
the owner and the business are included in the
measurement of profit. 22
QUICK TEST 21

•The components of the statement of financial


position are:
a. assets, income and owner’s equity
b. Income, expenses and equity
c. Assets, liabilities and owner’s equity
d. Investments, withdrawals and profit
QUICK TEST 22

•The expectation of a future payment from a


customer for services sold is
a. A prepaid expense
b. A notes receivable
c. An accounts receivable
d. All of the above
QUICK TEST 23

•This account records long-term debt of the


business entity for which it has pledged
certain assets as security
a. Mortgage payable
b. Bonds payable
c. Notes Payable
d. Accounts Payable
QUICK TEST 24

•Which of the following statements is


concerned with the business at a point in
time:
a. Statement of financial position
b. Income Statement
c. Statement of changes in equity
d. Statement of cash flows
QUICK TEST 25

•Which of the following has no effect on


owner’s equity
a. Expense
b. Withdrawals
c. Land acquired
d. Revenue
QUICK TEST 26

•The owner’s withdrawals account appears


a. The statement of changes in equity only
b. The income statement only
c. The statement of financial position only
d. Both the income statement and the
statement of financial position
QUICK TEST 27

•The unearned revenue account is classified


as:
a. An asset
b. A liability
c. A revenue
d. An expense
QUICK TEST 28

•Which of the following is not a liability


account
a. Accounts payable
b. Owner’s withdrawals
c. Unearned revenue
d. Notes Payable
QUICK TEST 29 Classification of Accounts
(CA=Current Asset or NCA=Non-Current Asset,
Current Liability=CL or NCL=Non-current Liability;
OE=Owner’s equity, R=revenue, E=expense)
1. Cash CA 12.Land NCA
2. Accounts Receivable CA 13. Supplies Expense E
3. Lindo, Capital OE 14. Prepaid Insurance CA
4. Lindo, Drawings OE 15. Utilities Expense E
5. Service Revenue R 16. Unearned Revenues CL
6. Prepaid Rent CA 17. Office Equipment NCA
7. Accounts Payable CL 18. Rent Payable CL
8. Investment in Trading 19. Notes Receivable CA
Securities CA 21. Notes Payable CL
9. Bonds Payable NCL 22. Supplies CA
10. Interest Expense E 23. Rent Expense E
11. Interest Receivable CA
QUICK TEST 29

•The financial statements prepared at the end


of the period except:
a. The resources and obligations of the
business as of a reporting date.
b. The cash inflows and outflows during the
reporting period
c. The results of operations during the period
d. The contribution of the business to the
growth of the community.
QUICK TEST 30

Which of the following financial statements


does not report the events and activities that
occurred during a certain period of time?
a. Statement of financial position
b. Income Statement
c. Statement of changes in owner’s equity
d. Statement of cash flows
QUICK TEST 31

•The residual equity over the assets of a


business is also called
a. Owner’s interest
b. Capital
c. Net Assets
d. All of the above
QUICK TEST 32

Which financial statement is most useful in


assessing the profitability of the business?
a. Statement of Financial Position
b. Income Statement
c. Statement of changes in owner’s equity
d. Statement of cash flows
Classification of accounts: Assets (CA=Current or N
NCA=Non-current), Liabilities(CL=Current or
NCL=Non-current), OE=Equity, R=Revenue,
E=Expenses
Account Title Account title
1 Valero, Capital OE 13 Gain on sale of assets R
2 Deferred Income/Revenue CL 14 Accrued utilities expense CL
3 Notes due to suppliers CL 15 Notes due from customers CA
4 Land Improvements NCL 16 13th month pay of staff E
5 Service fees earned R 17 Depreciation expense E
6 Unexpired Insurance CA 18 Rent receivable CA
7 Unearned rent income CL 19 Bad Debts Expense E
8 Audit and Legal fees paid E 20 Interest Expense E
9 Pre-collected rent income CL 21 Accrued rent income CA
10 Insurance expense E 22 Advances to employees CA
11 Commission expense E 23 Bonus and allowances E
12 Investment in Trading Securities 24 Loss on sale of assets E
CA
Problem Solving:

1. As of the end of the year,


Solution
Daisy Reyes has a capital
balance of P245,670.
Capital, end of year P 245,670
During the year, the
Less: Net Income 168,700
business had a total service
Sub-total P 76,970
revenue of P814,600, and
Add: Drawings 150,000
total expenses of P645,900.
Capital, beginning P 226,970
Withdrawals for family use
amounted to P150,000
Check:
during the whole year.
Capital, beg P 226,970
Add: Net income 168,700
How much is the balance of Sub-total P 395,670
Reyes capital as of the Less: Drawings 150,000
Capital, end P 245,670
beginning of the current year?
Problem Solving:

1. As of the beginning of the


Solution
year, Daisy Reyes has a
capital balance of P226,970.
Capital, beginning P 226,970
During the year, the
Add: Net Income 168,700
business had a total service
Sub-total P 395,670
revenue of P814,600, and
Capital, ending (245,670)
total expenses of P645,900.
Drawings P 150,000
Capital at the end of the
year total P245,670.
Check:
Capital, beg P 226,970
How much was withdrawn by Add: Net income 168,700
Daisy Reyes for her personal Sub-total P 395,670
use? Less: Drawings 150,000
Capital, end P 245,670
Problem Solving:

2. Total Income P 325,000 2. A small accounting firm has


Less: Expenses 237,000 income of P325,000 and
Net Income P 88,000 expenses of P237,000.
3. An advertising agency has
3. Net Profit P 42,000
expenses of P163,000 and a
Add: Expenses 163,000
profit of P42,000.
Total Income P 205,000
4. A computer-training
4. Expenses P 153,000 business has expenses of
Less: Net Loss 27,500 P153,000 and loss of
Total Income P 125,500 P27,500.
5. A medical practitioner has
5. Total Income P 737,000 income of P737,000 and
Less: Profit 168,000 profit of P168,000
Expenses P 569,000
Required: Determine the
missing element of
performance.
Exercise 1
Case1 Case2 Case3 Case4 Case5
Owmer's Equity, Jan 1 $ 311,750 $ 223,445 $ 123,456 $ 246,800
Additional Investment 80,000 50,000 75,000 $ 100,000
Withdrawals 60,000 120,000 90,000 75,000
Net Income(Loss) 91,340 35,660 (5,645) (50,675)
Owner's Equity, Dec 31 285,665 180,750 225,670 465,907
Case 1
Owner's Equity, Jan 1 $ 311,750
Add: Additional Investment $ 80,000
Net Income 91,340 171,340
Sub-total $ 483,090
Less: Withdrawals 60,000
Owner's Equiity, Dec 31 $ 423,090

Case 2
Owner's Equity Jan 1 $ 223,445
Add: Additional Investment 50,000
Sub-total $ 273,445
Less: Drawings $ 120,000
Owner's Equity, Dec 31 285,665 405,665
Net Income $ 132,220

Case 3
Owner's Equity, Jan 1 $ 123,456
Add: Addional Investment $ 75,000
Net Income 35,660 110,660
Sub-total $ 234,116
Owner's Equity, Dec 31 180,750
Withdrawals $ 53,366
Case 4
Owner's Equity, Jan 1 $ 246,800
Less: Net Loss $ 5,645
Drawings 90,000 95,645
$ 151,155
Owner's Equity, Dec 31 225,670
Additional investment $ 74,515

Case 5
Owner's Equity, Dec 31 $ 465,907
Add: Net Loss $ 50,675
Drawings 75,000 125,675
Sub-Total $ 591,582
Less: Additional Investment 100,000
Owner's Equity, Jan 1 $ 491,582
Exercise 2

Total liabilities, end $ 543,650


Capital balance, end 450,800
During the year:
Total assets increased by 124,440
Total liabilities, increased by 165,670
Total drawings 66,600
Net Income during the period 25,370

1. Total assets, end


2. Total assets, beginning
3. Total liabilities, beginning
4. Capital balance, beginning
1. Total Assets, End 2. Total Assets, beg
Total Liabilities, end $ 543,650 Total assets,end $ 994,450
Capital end 450,800 Increased in assets (124,440)
Total Assets, end $ 994,450 Total Assets, beg $ 870,010
3. Total liabilities, beg 4. Capital, beginning
Total liabilities, end $ 543,650 Total assets, beg $ 870,010
Increased in liabilities (165,670) Less: Liabilities, beg 377,980
Total liabilities,beg $ 377,980 Capital, beginning $ 492,030
5. Capital, end
Total capital, beg $ 492,030
Net Income 25,370
Drawings (66,600)
Capital end $ 450,800
Exercise 3
July 1, 2013 June 30, 2014
Current Assets $ 145,822 $ 125,780
Non-Current Assedts 324,733 345,700
Current Liabilities 135,776 142,055
Non-Current Liabilities 175,800 180,500

The owner made $12,000 monthly withdrawals for personal use.

1. Owner's equity at the beginning of the reporting period


2. Owner's equity at the end of the reporting period
3. Profit or loss during the reporting period.
Solution
July 1 2013 June 30 2014
Current Assets $ 145,822 $ 125,780
Non-Current Assedts 324,733 345,700
Total Assets $ 470,555 $ 471,480
Current Liabilities $ 135,776 $ 142,055
Non-Current Liabilities 175,800 180,500
Total Liabilities $ 311,576 $ 322,555
Equity $ 158,979 $ 148,925

Capital, July 1, 2013 $ 158,979


Drawings 144,000
Sub total $ 14,979
Capital, June 30, 2014 148,925
Net ncome $ 133,946
QUICK TESTS
End