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Introduction to Accounting

Fundamentals of Accounting
Fundamentals

of Accounting
Practice Test 1

Name:
School:
I.
Direction:

Date:
Score:
Read each problem carefully. Select the letter of your answer from the choices
given after each problem.

_________1.

The accounting process involves mainly the following, except:


a. Interpreting financial information.
b. Classifying data into organized groups.
c. Summarizing the information gathered.
d. Computing assets and liabinlities.

_________2.

Accounting can be described as all of the following, except:


a. An information system.
b. An art.
c. A process.
d. An mathematical tool.

_________3.

As a service activity, the function of accounting is to provide:


a. quantitative information.
b. qualitative information.
c. quantitative and qualitative information.
d. none of the above.

_________4.

The communication of financial statements to decision makers is part of what


phase of accounting?
a. Interpreting
b. Summarizing
c. Recording
d. Classifying

_________5.

Identifying transactions that affects the financial position and results of


operations of a business belongs to the _________ phase of accounting.
a. Recording
b. Classifying
c. Summarizing
d. Interpreting

_________6.

The process of preparing financial statements fall under the ________ phase of
accounting.
a. Summarizing
b. Classifying
c. Interpreting
d. Recording
Sycip, Gorres & Velayo, one of the top firms in its field, performs services to its
clients by issuing a statement regarding the fairness of the presentation of their
clients financial statements. SGVs services falls under:
a. Tax Accounting
b. External Auditing
c. Internal Accounting

_________7.

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Introduction to Accounting

Fundamentals of
d. Accounting
Financial Accounting

_________8.

SGV caters another kind of service to its clients. They help clients comply with
existing tax statutes at the same time gives them assistance in finding legal
means to minimize tax obligations of their clients.
a. Tax Accounting
b. External Auditing
c. Internal Accounting
d. Financial Accounting

_________9.

__________ primarily deals with the recording, classifying, summarizing and


interpreting the government's financial undertakings. It follows generally
accepted accounting principles in the preparation of general-purpose financial
statements.
a. Auditing
b. Tax Accounting
c. Government Accounting
d. Management Accounting

_________10
.

_________11
.

Anthony Gil and the rest of his team uses accounting information in setting up
their companys budgets and cost control programs to improve their companys
performance in future periods. The management employs a. Cost Accounting
b. Management Accounting
c. Financial Accounting
d. Bookkeeping
a.
b.
c.
d.

External Auditing
Internal Auditing
Tax Accounting
Financial Accounting

_________12
.

Richard Palacio, MBA, CPA, is a university professor. As such, he ensures that he


gets to impart the necessary knowledge needed for his students to understand
the vast body of knowledge of accounting. He updates them about the recent
developments in the accounting practice. Moreover, he helps them in
developing their skills and abilities to make his students competent and ready
in the accounting profession. Richard Palacio belongs to what field in
accounting?
a. Accounting Education
b. Accounting Research
c. Financial Accounting
d. Responsible Accounting

_________13
.

Cost accounting involves the following except:


a. It can serve as an internal tool by management.
b. Aids management in making decisions.
c. Used to determine reasonable prices of a companys products and
services.
d. Process costing and job order costing are some of the methods.

_________14
.
1. ___________ analyzes financial statements in monitoring management's
decisions.
a. Chief Executive Officer

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Introduction to Accounting

Fundamentals of
b. Accounting
Employees

_________15
.

c. Investors
d. Board of Directors
Financial information is relevant to suppliers and other creditors to aid them in
__________.
a. issuing a statement about the fairness of a company's set of financial
statements.
b. making expansion decisions.
c. judging the company's ability to meet its obligations.
d. patronizing its products and services.

_________16
.

Tino Castro, is a leader of a labor union. He refers to the financial reports of the
company in lobbying to the management the unions concerns. T. Castro is a
member of which group of users of accounting information?
a. Employees
b. Suppliers
c. Government
d. Shareholders

_________17
.

___________ use/s information found in the companys financial statements


primarily to help protect the public. Securities and Exchange Commission is
among these type of users.
a. Government
b. Auditing firms
c. Regulatory Agencies
d. Board of Directors

_________18
.

They analyze the financial position and performance of an entity mainly to


determine the status of their stakes in the company.
a. Shareholders
b. Creditors
c. Management
d. Board of Directors

_________19
.

Customers are interested to know the financial position of the company and the
result of its operations for the following reason:
a. Afa
b. Daf
c. If

II.
Direction:

Identify what accounting concept or principle is being described or applied on


each item. Select your answer from the choices given below and write it on the
blank provided before each number.
A. Adequate Disclosure
D. Consistency
G. Conservatism
J.

Materiality

M. Going-concern
_______ __1.
_______ __2.

B. Business Entity
E. Matching
H. Expense
Recognition
K. Revenue
Recognition

C. Periodicity
F. Monetary Unit
I. Historical Cost
L. Objectivity

A business entity will continue its operations for an indefinite period of time.
Choosing between two acceptable alternatives of reporting that will result in
less net income and/or less asset amount.
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Introduction to Accounting

Fundamentals
of Accounting
_______
__3. A business
enterprise should be accounted for separately from other business
entities, including its owner.
_______ __4. Accounting information must be supported by independent, unbiased evidence.
_______ __5. The assumption of expressing transactions and events of an enterprise should
in monetary or money units.
_______ __6. Once an enterprise adopts an accounting principle or method, it should
continue using the same until a demonstrably better principle or method comes
along or the standards prescribe an adoption of another.
_______ __7. It is applied together with the concept of relativity. In this principle, transactions
that will significantly influence users decision should be reported.
_______ __8. Assets, liabilities, and equity investments should be recorded initially at their
original purchase cost.
_______ __9. Reporting expenses in the period to which the related revenue is earned.
______ __10. Reporting the economic activities of an enterprise in relatively short, distinct
time intervals.

III.
Direction:

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