Republic of the Philippines

Department of Education
Region III
Division of Nueva Ecija
CUYAPO NATIONAL HIGH SCHOOL
Brgy. Bulala, Cuyapo, Nueva Ecija

Fundamentals of Accountancy, Business & Management 2

PRELIMINARY/DIAGNOSTIC TEST
Name: ___________________________________ Date: _________________
Grade & Section: __________________________ Score: ________________

Direction: Encircle the correct answer

1. Liabilities are classified as current
a. when they are expected to be settled within 12 months from the end of the reporting period.
b. when they are expected to be settled beyond 1 year from the end of the reporting period.
c. whenever management wants to classify them as current.
d. any of these.
2. Which of the following accounts is not a liability?
a. Accounts Payable b. Accounts Payable c. Salaries Payable d. Notes Payable
3. These are receivables that arise from the sale of goods or services in the ordinary course of business.
a. Accounts receivable b. Notes Receivable c. Trade Receivables d. Non-trade receivables
4. When are trade receivables presented as current assets?
a. Whenever they are collectible within 12 months from the end of the reporting period.
b. When they are collectible within the entity’s normal operating cycle, even if this extends beyond
12 months from the end of the reporting period.
c. When they are collectible within the entity’s normal operating cycle or within 12 months from the
end of the reporting period, whichever is shorter.
d. Trade receivables are always presented as current assets.
5. These are present obligations that have resulted from past events and are expected to require giving
up of resources when settling them.
a. Assets b. Expenses c. Liabilities d. Losses
6. Assets less liabilities is
a. Equity b. Net Assets c. Capital d. All of these
7. This type of balance sheet (statement of financial position) does not show distinctions between current
and noncurrent assets and liabilities.
a. Classified b. Unclassified c. Report form d. Account form
8. Which of the following is most likely to be a current asset?
a. Accounts payable b. Land c. Equipment d. Cash
9. Entity A is a merchandising business. It is engaged in buying and selling grocery items. Unsold
groceries at the end of the period will be presented in Entity A’s statement of financial position under
which of the following line items?
a. Prepaid supplies
b. Trade and other receivables
c. Property, plant and equipment
d. Inventory
10. The land on which Entity A’s building was constructed is classified in the statement of financial
position as
a. current asset b. Noncurrent asset c. Current liability d. Equity
11. Accumulated depreciation is most commonly reported in the statement of financial position as
a. a separate current asset.
b. a separate noncurrent asset.
c. a deduction to the related noncurrent asset account.
d. an addition to the related noncurrent asset account.
12. Which of the following is presented as a noncurrent liability in an entity’s statement of financial
position?
a. A/P b. N/P due in 6 mos. c. Income Tax Payable d. Loan Payable due after 5 years
13. Which of the following liabilities is presented as current liability even if it is due to be settled beyond
one year from the end of the reporting period but within the entity’s normal operating cycle?
a. Accounts receivable arising from sales of goods in the ordinary course of business

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 b. Notes payable issued in conjunction with the purchase of equipment. The notes payable is due
after 2 years
c. Accounts payable arising from purchases of inventory
d. None of these
14. For purposes of presenting items on the financial statements, assets, liabilities, equity, income and
expenses with similar nature and function within the business are grouped together. These groupings
are called
a. account titles b. line items c. Financial statements d. Notes
15. Accounts receivable is commonly presented in the statement of financial position under the heading
a. Property, plant and equipment
b. Cash and cash equivalents
c. Prepaid assets
d. Trade and other receivables
16. This is the most commonly used format of the balance sheet. It presents the entity’s assets, liabilities
and equity in a vertical manner.
a. Report form b. Account form c. Standing form d. Lying form
17. Entity A reports a loss of ₱60,000 and total expenses of ₱240,000. Entity A’s total income must be
a. 360,000 b. 300,000 c. 180,000 d. 400,000
18. The financial statements most frequently provided include all of the following except the
a. statement of profit or loss and other comprehensive income.
b. statement of financial position.
c. statement of cash flows.
d. statement of retained earnings.
19. An entity has the following assets:

Cash 20,000
Accounts receivable 40,000
Notes receivable (nontrade) - ₱60,000 due within 1 yr. 100,000
Inventory 130,000
Prepaid supplies 10,000
Land 200,000
Building 800,000
Accumulated depreciation (240,000)
Total assets 1,060,000
How much is the total current assets?
a. 200,000 b. 260,000 c. 300,000 d. 360,000
20. An entity has the following liabilities:

Accounts payable 60,000

Notes payable (nontrade) - ₱200,000 due within 1 yr. 1,000,000
Rent payable (due within 1 yr.) 20,000
Utilities payable 10,000
Interest payable 200,000
Salaries payable 800,000
Unearned income 240,000
Total liabilities 2,330,000
How much is the total current liabilities?
a. 1,330,000 b. 1,530,000 d. 1,830,000 d. 1,930,000
21. Entity A has a capital balance of ₱3,400,000 at the start of the period. During the period, Entity A earned
income of ₱8,800,000 and incurred expenses of ₱4,500,000. The sole proprietor of Entity A made
additional investments of ₱1,200,000 to the business but made a withdrawal of ₱960,000 at the end of
the period. How much is the capital balance of Entity A at the end of the period?
a. 7,849,000 b. 8,497,000 c. 8,740,000 d. 7,940,000
Use the following information for the next three questions:
Entity A’s post-closing trial balance on December 31, 20x1 shows the following account balances:

Accounts Dr. Cr.

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 Cash 20,000
Accounts receivable 122,000
Allowance for bad debts 30,000
Notes receivable (Trade) 8,000
Inventory 200,000
Prepaid supplies 15,000
Prepaid rent 25,000
Prepaid insurance 10,000
Land 1,000,000
Building 2,000,000
Accumulated depreciation - Bldg. 1,600,000
Equipment 800,000
Accumulated depreciation – Equipment 250,000
Accounts payable 100,000
Notes payable - short term loan 200,000
Notes payable - long term loan
(₱50,000 due within 1 yr.) 1,450,000
Interest payable 65,000
Salaries payable 105,000
Utilities payable 8,000
Unearned income 35,000
Owner’s capital 357,000
Totals 4,200,000 4,200,000

22. How much is the total current assets?

a. 340,000 b. 370,000 c. 362,000 d. 480,000
23. How much is the total noncurrent liabilities?
a. 1,450,000 b. 1,400,000 c. 1,465,000 d. 1,515,000
24. How much is the total equity?
a. 434,000 b. 392,000 c. 387,000 d. 357,000
25. Which of the following statements is correct regarding the statement of comprehensive income?
a. The “Statement of profit or loss and other comprehensive income” and the “Income statement” are
the same.
b. Both the “Income statement” and the “Statement of profit or loss and other comprehensive income”
show profit or loss and “other comprehensive income.”
c. Comprehensive income and profit or loss are the same.
d. “Statement of comprehensive income” is another term used to describe the “Statement of profit or
loss and other comprehensive income.”
26. A time deposit is normally evidenced by a(an)
a. pass book b. Bank Statement c. Cert. of Time deposit d. ATM Card
27. If you want to put money to your bank account, which of the following documents should you prepare?
a. Deposit slip b. Bank Statement c. Withdrawal slip d. Debit Card
28. It is a report that is prepared for the purpose of bringing the balances of cash per records and per bank
statement into agreement.
a. Bank statement
b. Check Disbursement Voucher
c. Bank reconciliation
d. Bank deposit slip
29. These are deposits made but not yet credited by the bank to the depositor’s bank account.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)
30. These taxpayers are taxed on all income they derive from sources within and without (outside) the
Philippines.
a. Resident citizens
b. Non-resident citizens
c. Resident alien
d. a and b

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