TOPIC 1: INTRODUCTION TO ACCOUNTING

1. Which of the following refers to the recognition of accountable and non-accountable events of business
transactions?
A. Communicating
B. Identifying
C. Summarizing
D. Measuring
2. What law regulates the practice of accountancy profession in the Philippines?
A. RA 9892
B. RA 9298
C. RA 9293
D. RA 9891
3. Why is it accounting is considered as a language of business?
A. Because accounting information allows businesses to assess the efficiency and effectiveness of their
business operations
B. Because accounting information can be used in analyzing current trends and forecasting future sales
C. Because accounting information is the determinant of the how the business is doing.
D. All of these.
4. Desiree wants to put up a bakery business. She is in dilemma on how to start a business. In order to help
Desiree, which of the following questions would be the first consideration that Desiree should think in order to
start her bakery business?
A. Where can I get capital for my business?
B. How many employees should I'm going to hire?
C. How much equipment do I need to purchase?
D. No more considerations to be made.
5. Accounting follows certain standards and professional ethics. The statement is true by which of the
following nature of accounting?
A. Accounting is a store house of information
B. Accounting is a service activity
C. Accounting is a discipline
D. Accounting is a process.
6. Statement 1: Accounting starts when bookkeeping ends
Statement 2: Bookkeeping is a synonymous term for accounting
A. All statements are correct
B. All statements are incorrect
C. Statement 1 is correct while Statement 2 is incorrect
D. Statement 1 is incorrect while Statement 2 is correct
7. What branch of accounting deals with presenting accounting information primarily intended for external
users?
A. Tax Accounting
B. Management Accounting
C. Financial Accounting
D. Government Accounting
8. He is recognized as a Father of Accounting for his double-entry system contribution by which businesses are
using nowadays. Who is it?
A. Fra Luca Pacioli
B. Aristotle
C. Albert Einstein
D. Juan Ponce Enrile
9. This branch of accounting focuses on review of tax compliance of the business. What is it?
A. Cost Accounting
B. Management Accounting
C. Government Accounting
D. Tax Accounting
10. The following are the functions involve in managerial accounting, except which one?
A. Budgeting and Forecasting
B. Financial Statement Preparation
C. Evaluation of Business Decision
D. Cost Analysis
11. Which of the following statement below specifies the role of cost accounting?
A. XYZ company prepares a general purpose financial statements
B. Desirable Manufacturing company reports the cost of raw materials and labor used in the production.
C. Mrs. Carmelita Mercado, a CPA, teaches her students the basic principles of accounting
D. The Department of Budget and Management (DBM) presents the budget allocation for the year 2020.
12. What are the three essential elements of accounting?
A. Identifying, Recording and Communicating
B. Measuring, Classifying and Summarizing
C. Identifying, Classifying and Recording
D. Communicating, Recording and Summarizing
13. What refers to the moral principles that guide an individual in the practice of profession?
A. Ethics
B. Norms
C. Values
D. Moral
14. Why is it accounting considered as an art?
A. Because accounting is a systematic method that requires technical skills and expertise for a clearer
presentation of accounting reports.
B. Because one of the purpose of accounting is to communicate information to its various users so it must be
presented in an artistic and creative way.
C. Both A and B are correct
D. None of these.
15. If you are the owner of a Sari-Sari store, which of the following questions you may consider that an
accounting can support?
A. How much revenue have I earned for this period?
B. What is the value of my inventory?
C. How much is my receivables?
D. All of these.
16. What government agency is responsible for tax collection in the Philippines?
A. Bureau of Internal Revenue
B. Commission on Audit
C. Securities and Exchange Commission
D. Bureau of Customs
17. Which of the following is NOT an example of external users?
A. Department of Trade and Industry
B. Mr. Mark Lopez, one of the shareholders in ABC Inc.
C. National Appliances, one of the major suppliers of The Good Buy Trading Center
D. Deborah, one of the loyal customers of Aling Kikay Sari-Sari store.
18. What branch of accounting concerns with searching new knowledge that will address new business set-
up?
A. Accounting Technology
B. Accounting Research
C. Accounting Education
D. Accounting Information System
19. What are the two classification of users of accounting information?
A. Stakeholders and Stockholders
B. Strategic and Tactical
C. Internal and External
D. None of these
20. If a CPA decided to practice his/her profession in an academic institution, what branch of accounting will
he/she under to?

A. Financial Accounting
B. Auditing
C. Tax Accounting
D. Accounting Education
 TOPIC 2: FORMS OF BUSINESS ORGANIZATION
1. What form of business organization is created by a contractual agreement between two or more
individuals?
A. Corporation
B. Partnership
C. Sole Proprietorship
D. Cooperative
2. Which of the following is a disadvantage of a partnership?
A. Unlimited life
B. Unlimited Liabilities of the partners
C. Better decision-making because "two heads are better than one"
D. Voluntary agreement
3. Alexa tells to her friends that she is a stockholder. This means that Alexa is
A. A part owner of the corporation
B. A co-owner of the partnership
C. An owner of a sole proprietorship business
D. raising chickens and other livestocks
4. What refers to an artificial being created under the existence of the law?
A. Cooperative
B. Sole Proprietorship
C. Partnership
D. Corporation
5. Which of the following is NOT an advantages of sole proprietorship?
A. The owner keeps all the profit
B. The life of the business is limited to the life of the owner.
C. It is easy to form and operate
D. The owner makes all the decision
6. The owners of the cooperative are called?
A. Shareholders
B. Partners
C. Members
D. Proprietor
7. Where does the single proprietorship registered?
A. Department of Trade and Industry
B. Cooperative Development Authority
C. Securities and Exchange Commission
D. Local Government Unit
8. The transfer of ownership in a partnership can be accomplished by which of the following assumptions?
A. Selling the business as it will form a new entity under a new owner
B. Selling the stocks of the business
C. Selling the interest to one or more partners but with the consent of all partners.
D. Cannot be transferred the ownership
9. What form of business organization is characterized by an association of persons with common bond of
interest, voluntarily joined together to meet economic, social and cultural needs?
A. Cooperative
B. Corporation
C. Partnership
D. Incorporation
10. Which of the following statement falls under advantages of having corporation?
A. Can raise additional funds by selling shares/stocks to the public
B. It is complicated to set-up
C. Shareholders are not personally liable for the debts of the corporation
D. A and C are correct.
11. This type of business is characterized by buying and selling of finished goods to customers. What is it?
A. Manufacturing Business
B. Merchandising Trading
C. Service Business
D. All of these.
12. Which of the following is an example of service business
A. Aling Kikay's Grocery
B. Angela's Pharmacy
C. Shoeport Manufacturing Inc.
D. Atty. LaiLaw Firm
13. What refers to the type of business by which more than one type of business according to nature of
operation are performed?
A. Business combination
B. Hybrid business
C. Coordinating business
D. Special business
14. What type of business organization is characterized by offering professional skills, advice and
consultations?
A. Merchandising Business
B. Service Business
C. Manufacturing Business
D. Partnership
15. ABS-CBN and GMA are one of the largest broadcasting networks in the Philippines. What is the major type
of activity that these companies are provided?
A. Service Activity
B. Buying and Selling Goods
C. Processing Goods
D. None of these
16. The following are examples of merchandising business except which one?
A. Alma's Secret Salon
B. Ken Super Store
C. AC Generika Drug Store
D. Desiree's BakeShop
17. This type of business is characterized by combining raw materials, labor and expenses in the product for a
sale later on. What is it?
A. Partnership
B. Service Business
C. Merchandising Trading
D. Manufacturing Business
18. Which of the following statement falls under merchandising business?
A. XYZ Company sells furnitures to customers in a form of cash or credit
B. Mang Tasyo offers massage therapy for his customers with 20% discount
C. Toyota Manufacturing Inc. produces variety of cars based on customer's preference.
D. Atty. Gagbo offers legal consultation to the public.
19. Which of the following businesses below is an example of manufacturing business?
A. Gail and Alexa Barber Shop
B. Shoeport Manufacturing Inc.
C. Lady's Pharmacy
D. Aling Nena Sari-Sari Store
20. The statement of comprehensive income of a service business is in what format?
A. Multi-Step
B. Single-Step
C. Under-Step
D. No-step

TOPIC 3: ACCOUNTING PRINCIPLES AND CONCEPT

1. What accounting concept applies when the cash withdrawn by the owner from the business is recorded as
"owner's personal drawings"?
A. Going-concern
B. Accounting Entity
C. Matching Principle
D. Stable monetary-unit
2. What best describes the term "going concern"?
A. When current liabilities exceeds current assets
B. The expenses exceed income
C. The ability of the entity to continue in operation for the foreseeable future.
D. The potential to contribute to the flow of cash and cash equivalent to the entity.
3. Which basic accounting assumption is threatened by severe inflation in the economy?
A. Going-concern assumption
B. Monetary-unit assumption
C. Periodicity assumption
D. Economic entity assumption
4. Timeliness is an element of this basic qualitative characteristic of the financial statement. What is it?
A. Understandability
B. Reliability
C. Relevance
D. Comparability
5. Statement 1: A fiscal year is inclusive of 12-month period that ends in the month of December.
Statement 2: An interim accounting period could be shorter or longer than 12-months.
A. Only statement 1 is correct
B. Both statements are correct
C. Only statement 2 is correct.
D. Both statements are not correct
6. This is the most common financial attribute used in measuring financial information. What is it?
A. Realizable values
B. Historical cost
C. Current cost
D. Present value
7. What concept of accounting requires a business to apply accounting policies consistently and present
information consistently from one period to another?
A. Going-concern assumption
B. Consistency assumption
C. Economic entity assumption
D. Monetary-unit assumptio
8. What refers to the set of standards or principles followed by an accountants to indicate how to report
economic events?
A. Philippine Financial Reporting Standards
B. Philippine Accounting Standards
C. International Financial Reporting Standards
D. Generally Accepted Accounting Principles
9. What accounting principle indicates the presentation of financial statements at specific time-interval?
A. Periodicity assumption
B. Economic entity assumption
C. Conservatism or Prudence
D. Monetary-unit assumption
10. It is the official accounting standard body in the Philippines patterned with IFRS that indicates the
standards followed by the country are similar to those countries worldwide. What is it?
A. Philippine Accounting Standards
B. Philippine Financial Reporting Standards
C. International Financial Reporting Standards
D. Generally Accepted Accounting Principles
11. Desirable Distributors engaged in the buying and selling of goods. The business initially treat the cost of
goods purchased as asset and recognize it as an expense only when the goods are sold. What accounting
principle is being applied to the given situation?
A. Full-Disclosure Principle
B. Matching Principle
C. Going-concern assumption
D. Consistency Principle
12. Which of the following statements is NOT correct regarding the basic accounting concepts?
A. Rounding off of large amounts when presenting financial statements is acceptable under the concept of
materiality
B. An entity that is going out of business is a going-concern
C. Applying the separate entity concept allows the reporting of a true and fair picture of business financial
affairs
D. Applying the same accounting treatment for similar items from one period to another relates to
"Consistency"
13. When making judgments and estimates under conditions of uncertainty, the accountant chooses the
favorable one. What accounting concept is being applied to the given statement?
A. Economic entity assumption
B. Monetary-unit assumption
C. Prudence/Conservatism
D. Time-Period Concept
14. Monica's General Merchandise purchased goods with an original price of 10,000 at discounted price of
8,000. The business recorded the goods at 8,000. What accounting concept did Monica's General Merchandise
apply?
A. Discounted price concept
B. Going-concern concept
C. Accrual Basis concept
D. Historical Cost concept
15. Today, Desiree went to Kuya J's restaurant and ordered "Fried Chicken and Halo-halo". Desiree told Jasper,
the owner, that she will pay him next week. Jasper records immediately the sale today, rather than next week
after collecting Desiree's due. What accounting concept did Jasper apply?
A. Liquidating concern
B. Historical cost concept
C. Stable-monetary unit
D. Accrual basis concept
16. Angela's Educational Supply purchases two staplers costing 300 each. The business charges the cost of one
of staplers as expense but recognizes the cost of the other stapler as asset. Which of the following concept is
violated?
A. Materiality concept
B. Going-concern concept
C. Consistency concept
D. Stapler concept
17. Under accrual basis of accounting, a business records sale when?
A. When the sale price is collected
B. When the sale occurs
C. At the point in time when (a) and (b) above are satisfied
D. Either A or B, as an accounting policy choice
18. Which of the following statements is INCORRECT regarding the accounting standards used in the
Philippines?
A. The accounting standards used in the Philippines consist of the Philippine Financial Reporting Standards
(PFRS)
B. The PFRSs are derived from the International Financial Reporting Standards (IFRS)
C. The accounting standards used in the Philippines are similar to those used in other countries worldwide
D. The accounting standards used in the Philippines are inferior compared to international standards.
19. Statement 1: A calendar year method indicates that the accounting period ends in December 31
Statement 2: In cash basis of accounting, revenues are recognized when it is earned rather than when cash
is collected
A. Only statement 1 is correct
B. Only statement 2 is correct
C. Both statements are correct
D. Both statements are incorrect
20. Due to bankruptcy and losses incurred, ABC Company decided to terminate their business. Which of the
following concept applies the given situation?
A. Going-concern concept
B. Accounting entity concept
C. Liquidating concern concept
D. Consistency concept

TOPIC 4: ELEMENTS OF FINANCIAL STATEMENTS (TYPES OF MAJOR ACCOUNTS)

1. Which of the following is NOT an example of real accounts?

A. Accounts Receivable
B. Owner's, Capital
C. Prepaid Expenses
D. Interest Income
2. Which of the following is reported correctly?
A. Profit = Revenue > Expenses
B. Revenue < Expenses = Profit
C. Loss = Expenses < Revenue
D. Revenue > Expenses = Loss
3. It is considered as the most liquid asset. What is it?
A. Notes Receivable
B. Cash
C. Prepaid Expenses
D. Accounts Receivable
4. It refers to the list of account titles used in the preparation of financial statements arranged according to its
liquidity. What is it?
A. Accounts
B. Chart of accounts
C. Financial statements
D. None of these
5. The following are examples of non-current assets except which one?
A. Furnitures and Fixtures
B. Automobiles
C. Merchandise Inventory
D. Office Equipment
6. What refers to an asset without physical substance?
A. Liquid Assets
B. Tangible Assets
C. Current Assets
D. Intangible Assets
7. Which of the following is NOT a liability account?
A. Accrued expenses
B. Unearned income
C. Accrued income
D. Interest Payable
8. Which of the following is an example of asset account?
A. Unearned Interest
B. Prepaid Insurance
C. Supplies Expense
D. AC, Capital
9. What refers to the owner's claim in the business?
A. Revenues
B. Expenses
C. Owner's Equity
D. Liabilities
10. Which of the following is NOT true about chart of accounts?
A. The chart of accounts is the foundation of financial statements
B. The chart of accounts is arranged alphabetically
C. The chart of accounts help to identify where the money is coming from and where it is going
D. The chart of accounts is list of account titles used by the companies in their financial records.
11. It is a written promise from the customers to pay his/her receivables at certain future date. What is it?
A. Accounts Receivable
B. Notes Receivable
C. Loans Receivable
D. Interest Receivable
12. What refers to the resources owned by the business?
A. Assets
B. Revenues
C. Liabilities
D. Expenses
13. What refers to the decrease in economic benefits during the year in a form of outflows of assets or
incidence of liabilities resulting in the decrease in equity?
A. Expenses
B. Revenues
C. Liabilities
D. Assets
14. The National Telecommunications Commission (NTC) released a "cease and desist" order against the ABS-
CBN due to unavailability of franchise. Franchise is what kind of asset?
A. Non-Current Assets
B. Intangible Assets
C. Current Assets
D. Fixed Assets
15. Wash and Fold Super Clean Laundry bought columnar notebooks, official receipts and ballpens. These
items are recorded in what specific account title?
A. Miscellaneous expenses
B. Office Supplies expenses
C. Laundry Supplies expense
D. SSS and Philhealth Premium expense
16. Which of the following is an example of non-current liabilities?
A. Notes Payable (due in 6 months)
B. Accounts Payable
C. Loans Payable (due in 9 months)
D. Mortgage Payable
17. What refers to the increase in economic benefit during the accounting period in a form of inflow of assets
and decrease in liabilities resulting in the increase in equity?
A. Revenues
B. Expenses
C. Liabilities
D. Assets
18. Which of the following is NOT arranged properly?
A. Cash, Accounts Receivable, Supplies, Accounts Payable
B. Accounts Payable, Notes Payable, Revenues
C. Cash, Inventory, PPE, Salaries Expense
D. Cash, Prepaid Expenses, Accounts Receivable, PPE
19. It is recognized as an asset at the time of payment and later on, recognized as an expense when it is
already incurred. What is it?
A. Accrued Expenses
B. Deferred Expenses
C. Other Expenses
D. Losses
20. It is the primary source of revenue in a merchandising business. What is it?
A. Sales Revenue
B. Service Revenue
C. Interest Income
D. Commission Income