BASIC ACCOUNTING CUP
BASIC ACCOUNTING (PART 1)
1. This account title includes stocks of companies listed in the stock exchange and is readily
convertible into cash.
a. Cash
b. Trading Account Securities
c. Accounts Receivable
d. Stockholder’s Equity
2. What liability is created by a purchase on account?
a. Contingent Liability
b. Accounts Receivable
c. Accounts Payable
d. Purchases
3. What is the objective of most business?
a. Profit
b. Revenues
c. Asset
d. Capital
4. What is the effect of expenses on stockholder’s equity?
a. Increase
b. Decrease
c. No effect
d. None of the above
5. What is the formula of the Accounting Equation?
a. Assets = Liabilities - Stockholder’s Equity
b. Assets + Liabilities = Stockholder’s Equity
c. Assets = Liabilities + Stockholder’s Equity
d. Assets / Liabilities = Stockholder’s Equity
6. The balance sheet:
a. Reports the amounts of assets, liabilities, and withdrawals
b. Reports the revenue and expenses for a period of time
c. Reports the changes in the retained earnings for a period of time
d. None of the above
7. What are two claims against the assets of a business? (Select 2 answers)
a. Liabilities
b. Owner’s Equity
c. Revenue
d. Expenses
8. Under Cost Concept:
a. Amounts are recorded at the end of the year
b. Amounts are recorded every month
c. Amounts are recorded at the date of transaction
d. Amounts are recorded at the beginning of the year
9. Stockholder’s equity represents:
a. The balance of the capital and retained earnings account
b. The balance of the capital and income
c. The balance of the dividends and retained earnings account
d. The balance of current assets minus current liabilities
10. What is the normal balance of an asset account?
a. Credit
b. Debit
c. Both
d. None of the above
11. What is liquidity?
a. Ability of a business to pay its debt
b. Ability to convert assets into cash
c. Ability of a business to meet its long-term debts and financial obligations
d. All of the above
12. Financial statements must be prepared at least
a. Annually
b. Quarterly
c. Semiannually
d. Every two years
13. The personal assets of the owner of a company will not appear on the company's balance sheet
because of which principle/guideline?
a. Cost
b. Monetary unit
c. Fair presentation
d. Economic Entity
14. Accountants might recognize losses but not gains in certain situations. For example, the
company might write-down the cost of inventory, but will not write-up the cost of inventory.
Which principle/guideline is associated with this action?
a. Conservatism
b. Monetary Unit
c. Economic Entity
d. None of the above
15. The accounts shown in the chart of accounts can be broadly classified into two categories:
balance sheet accounts and __________ accounts.
a. Cost of Goods Sold
b. Cash flows Statement
c. Income Statement
d. Retained Earnings
16. When an owner draws Php 5,000 from a sole proprietorship or when a corporation declares
and pays a Php 5,000 dividend, the asset Cash decreases by Php 5,000. What is the other effect
on the balance sheet?
a. Owner’s Equity Decreases
b. Asset Increases
c. Liabilities Decreases
d. Owner’s Equity Increases
17. The company receives cash from a bank loan.
Asset
Liabilities
Owner’s Equity
a.
+
+
No Effect
b.
No Effect
c.
No Effect
+
+
d.
+
No Effect
+
18. Assets are usually reported on the balance sheet at which amount?
a. Cost
b. Current Market Value
c. Expected Selling Price
d. None of the above
19. Some accounting software will classify some accounts as "income" accounts, while
accountants might refer to these accounts as "revenue" accounts.
a. True
b. False
20. The generally accepted accounting principles used in the financial statements of U.S
corporations are researched and developed by which organization?
a. American Accounting Association (AAA)
b. Financial Accounting Standards Board (FASB)
c. Internal Revenue Service (IRS)
d. Accounting Institute of Certified Public Accountants (AICPA)
21. The concept of the accounting entity is applicable
a. Only to the legal aspects of the business organizations
b. Only to the economic aspects of the business organizations
c. Only to the business organizations
d. Whenever accounting is involved
22. John Acting Studio has liabilities of Php.150,000 and owner’s equity of Php.200,000. What is
the missing element and its amount?
a. Asset – Php.250,000
b. Asset – Php. 50,000
c. Expense – Php. 200,000
d. None of the above
23. Rhakim Clavano Realtor has assets of Php 250,000 and owner’s equity of Php 200,000. What
is the missing element and its amount?
a. Revenue – Php 250,000
b. Capital – Php 50,000
c. Liabilities – Php 200,000
d. None of the above
24. Which of the following accounting equations are correct?
a. Non-current assets + Current assets = Non-current liabilities – Current liabilities + Capital
b. Assets – Liabilities = Capital - Revenue + Expenses
c. Capital + Non- Current liabilities = Non-current assets + Working Capital
d. None of the above
25. Which of the following statements is correct?
a. The total amount of liabilities can be greater than total amount of capital
b. Asset = Liabilities - Capital
c. The total amount of assets can be greater than the sum of liabilities and capital
d. None of the above
26. Paid rent for July
a. Decrease an asset, decrease owner’s equity
b. Increase an asset, increase a liability
c. Decrease an asset, decrease liability
d. None of the above
27. Lalabs Realtor has assets of Php 75,000 and liabilities of Php 50,000. What is the missing
element and its amount?
a. Liabilities – Php 25,000
b. Owner’s Equity – Php 20,000
c. Liabilities – Php 20,000
d. None of the above
28. Which of the following transactions affects the total value of liabilities of a firm?
a. Goods purchased from suppliers by cash
b. Interest received from bank
c. Office equipment bought on credit
d. Goods sold to customers on credit
29. John Acting Studio has liabilities of Php 150,500 and owner’s equity of Php 200,250. What is
the missing element and its amount?
a. Revenue – Php 250,750
b. Asset – Php 350,750
c. Asset – Php 49,750
d. None of the above
30. A chart of account is a (an)
a. Journal
b. Flowchart of all transactions
c. List of names of all transactions
d. Accounting procedure manual
31. The business consumed Php 1,000 of its supplies stacked in the storeroom. Which of the
following could best describe the effect of the transaction?
a. Debit asset, credit expense
b. Debit expense, credit asset
c. Debit purchases, credit asset
d. Debit asset, credit purchases
32. Determine the correct statement
a. The accounting cycle is part of the accounting process
b. The accounting system is part of the accounting process
c. The accounting process is part of accounting cycle
d. The accounting system is part of the accounting cycle
33. Which of the following accounts is affected by the closing entries?
a. Asset accounts
b. Liability accounts
c. Capital accounts
d. None of the above
34. The advance receipt of rental fee is recorded by debiting cash and crediting unearned rent, this
approach of recording is known as
a. Asset method
b. Expense method
c. Liability method
d. Income method
35. Accrued expenses is an expense that is
a. Already paid and incurred
b. Already paid but not yet incurred
c. Already incurred but not yet paid
d. Not yet incurred and not yet paid
36. Ink used in printing labels should consider as:
a. Direct materials cost
b. Direct labor cost
c. Manufacturing overhead cost
d. Selling and administrative cost
37. Which of the following documents does not initiate an entry to be made in the accounts?
a. Sales invoice
b. Credit memorandum
c. Purchase invoice
d. Purchase order
38. Which of the following does not represent GAAP here in the Philippines?
a. IFRS
b. PFRS
c. PAS
d. Interpretations by the PIC
39. Which does not belong to a complete set of financial statements?
a. Statement of financial position
b. Statement of other comprehensive income
c. Statement of cash flows
d. Statement of changes in equity
40. The statement of comprehensive income contains a/an:
a. Prepaid expense
b. Unearned rent
c. Unused supplies
d. Expired insurance
41. All of the following are adjustments based on estimate, except:
a. Bad debt expense
b. Depreciation
c. Amortization
d. Accrual
42. The following discounts are usually recorded in the journal and posted to the ledger, except:
a. Trade Discount
b. Cash Discount
c. Purchase Discount
d. Discount due to defect of products
43. Which of the following is the income representing the difference between the sales and cost of
sales?
a. Gross Profit
b. Operating Income
c. Net operating income
d. Net income before tax
44. In which of the following arrangements does the freight become the expense of the buyer?
a. FOB destination, collect
b. FOB shipping point, collect
c. FOB destination, prepaid
d. None of the above
45. One of the following accounts will not affect the amount of cost of goods available for sale
except:
a. Cost of goods sold
b. Freight-in
c. Merchandise inventory, ending
d. Undelivered purchases
BASIC ACCOUNTING (PART 2)
EASY
1. Which accounting process is the recognition or non-recognition of business activities as
accountable events?
a. Identifying
b. Communicating
c. Recording
d. Measuring
2. The following describe the double-entry bookkeeping, except
a. Based on principle of balance
b. Value received is always equal to value parted with
c. Based on dual aspect concept
d. Transactions are journalized in two books
3. Which of the following is not a noncurrent liability?
a. Loans payable – due next year
b. Bonds payable – due in two years
c. Loans Payable – noncurrent portion
d. Bonds Payable – due in three years
4. The principle of objectivity includes the concept of
a. Summarization
b. Verifiability
c. Classification
d. Conservatism
5. The overall objective of financial reporting is to provide information
a. That assesses performance of management
b. That is useful for decision making
c. About financial performance during a period
d. About assets, liabilities, and equity
6. Which of the following is an element of prime cost?
Direct Materials
Direct Labor
a.
Yes
Yes
b.
Yes
No
c.
No
Yes
d.
No
No
7. Which is an example of a nominal (temporary) and contra-account?
a. Accumulated Depreciation
b. Sales returns and allowances
c. Distribution costs
d. Discount on bonds payable
8. Accrual accounting is based on this principle/guideline.
a. Cost
b. Full Disclosure
c. Matching
d. Economic Entity
9. When total debit exceeds total credit in the balance sheet columns of the worksheet, this
indicates:
a. Net loss
b. Net income
c. Zero Profit
d. No meaningful amount
10. The financial statements should be stated in terms of a common financial denominator
a. Accrual
b. Going Concern
c. Time Period
d. Stable Monetary Unit
AVERAGE
1. Statement I - Adjusting entries are made to confirm to the matching principle of accounting.
Statement II - Accrual basis always results to greater income than cash basis.
a. Both statements are correct
b. Statement I is correct.
c. Statement II is correct.
d. Both statements are incorrect
2. Statement I – The use of special journal greatly changes the accounting cycle.
Statement II – When business uses special journals, it no longer needs the general journal.
a. Both statements are correct
b. Statement I is correct
c. Statement II is correct
d. Both statements are incorrect
3. Which of the following is considered valued by fact rather than by opinion?
a. Depreciation
b. Cost of Goods Sold
c. Discount on share capital
d. Retained Earnings
4. Cost of goods manufactured in a manufacturing company is analogous to:
a) Ending inventory in a merchandising company
b) Beginning inventory in a merchandising company
c) Cost of goods available for sale in a merchandising company
d) Cost of goods purchased in a merchandising company
5. A is using the periodic inventory system. For the year, its total purchases amounted to Php
250,000. Its unsold merchandise at the end of the year has a cost of Php 5,000 which is 80% of
its beginning inventory. A’s cost of sale is:
a. Php 250,000
b. Php 251,250
c. Php 245,000
d. Php 248,750
6. Statement I - Items of similar nature, if material, must be presented separately.
Statement II - Items of dissimilar nature or purpose, if material, must be presented separately.
Statement III - Immaterial items regardless of purpose or nature may be presented as on line
item.
a. Only Statement I is correct.
b. Both Statement I and III are correct.
c. Both Statement II and III are correct.
d. All Statements are correct.
7. Premium on bonds payable increased by 500
Normal Balance
Debit
Credit
a. Debit
✓
b. Debit
✓
c. Credit
✓
d. Credit
✓
8. Under the double entry system, what is the value of X if assets, current assets, current liabilities,
non-current liabilities, working capital, and capital are X, Php 150,000, Php 50,000, Php
50,000, Php 100,000 and Php 300,000 respectively?
a. Php. 250,000
b. Php, 300,000
c. Php. 400,000
d. Php. 350,000
9. At the beginning of the year, Shiela Calling Station had liabilities of Php. 10,000 and owner’s
equity of 9,600. If assets increased by Php. 4,000 and liabilities decreased by Php. 3,000, what
was the owner’s equity at the end of the year?
a. 16,000
b. 19,600
c. 16,600
d. 20,600
10. If a company has Php. 150,000 assets and 30% of the assets are liabilities, how much is the
company’s equity?
a. 105,000
b. 100,000
c. 150,000
d. 45,000
DIFFICULT
1. Statement I – Transportation expense under FOB shipping point paid by the buyer is an expense
of the buyer.
Statement II – Transportation expenses on the sale of merchandise are recorded as freight-out
and reported as part of cost of sales.
a. Both statements are correct
b. Statement I is correct
c. Statement II is correct
d. Both statements are incorrect
2. Statement I – An owner’s cash investment is recorded in the general journal.
Statement II – Payment of the rent for two months would be recorded in the cash payments
journal.
a. Both statements are correct
b. Statement 1 is correct
c. Statement 2 is correct
d. Both statements are incorrect
3. Which of the following cannot be considered fair presentation of financial statements?
a. To present information in a manner that provides relevant and faithfully represented
financial information.
b. To provide additional disclosures when compliance with specific PFRS is insufficient
to understand the financial position and financial performance.
c. To select and apply accounting policies either by disclosure of the accounting policies
used by notes or explanatory information.
d. To rectify inappropriate accounting policies either by disclosure of the accounting
policies used or by notes or explanatory information.
4. Lee Company reported the following data for the current year:
Legal and audit fees
1,700,000
Rent for office space
2,400,000
5.
6.
7.
8.
9.
Interest on inventory loan
2,100,000
Loss on abandoned data processing equipment
350,000
The office space is used equally by the sales and accounting departments.
What amount should be classified as general and administrative expenses?
a. 2,900,000
b. 3,250,000
c. 4,100,000
d. 5,000,000
The liabilities of Pagal Company equal one-third of the total assets, and the owner’s equity is
Php 240,000. What is the amount of the liabilities?
a. Php 720,000
b. Php 360,000
c. Php 120,000
d. Php 80,000
Dell Company provided the following information for the current year:
Purchases
5,300,000
Purchase Discounts
100,000
Beginning Inventory
1,600,000
Ending Inventory
2,150,000
Freight Out
400,000
What is the cost of goods sold for the current year?
a. 4,650,000
b. 4,750,000
c. 5,050,000
d. 5,850,000
The prime cost is P 1,550,000 and the conversion cost is P 1,450,000. The factory incurred an
overhead of P 950,000 with a 30% indirect labor and 30% indirect materials. What is the total
manufacturing cost?
a. P 2,000,000
b. P 2,050,000
c. P 2,500,000
d. P 3,000,000
Accord Corporation has two production departments, A and B, that incurred the following
manufacturing cost during the month:
Department A
Department B
Direct Materials
700,000
100,000
Direct Labor
200,000
800,000
Factory Overhead
600,000
400,000
How much is the prime cost?
a. 1,800,000
b. 2,800,000
c. 2,000,000
d. 2,870,000
Statement I – The other term for cash receipts journal is cash disbursement journal.
Statement II – Subsidiary ledgers are special journals.
a. Statement I is correct.
b. Statement II is correct.
c. Both Statements are correct.
d. Both Statements are incorrect.
10. Statement I – All costs of indirect materials and indirect labor shall be classified as overhead
costs.
Statement II – The transportation costs in bringing in the raw materials for conversion into
finished products is not part of manufacturing costs.
a. Statement I is correct.
b. Statement II is correct.
c. Both Statements are correct.
d. Both Statements are incorrect.
Tie – Breaker Questions
1. This system of recording goods intended for sale maintains the merchandise inventory account
in every transaction
Answer: Perpetual Inventory System
2. What is the adjusting entry to accrue a salary incurred but yet to be paid?
Answer: Dr. Expense
Cr. Liability
3. What is the adjusting entry if the prepayment is initially recorded as asset, part of the year-end
adjustment?
Answer: Dr. Expense
Cr. Asset
4. What is the current standard setting body in the Philippines?
Answer: FRSC (Financial Reporting Standard Council)
5. Who is the father of modern accounting?
Answer: Luca Pacioli
6. The present law governing the practice of accounting in the Philippines is The Philippine
Accountancy Act of 2004, also known as what Republic Act?
Answer: R.A. 9298
7. The national organization of CPAs in the Philippines is called?
Answer: PICPA (Philippine Institute of CPAs)
8. What function do accounting ledgers serve in the accounting process?
Answer: Classifying
9. The following are the balances of the existing accounts:
Accounts receivable 150,000
Account payable
100,000
Cash
50,000
Equipment
100,000
O, Capital
200,000
What is the amount of the working capital?
Answer: 100,000
10. The total assets of the business amount to 210,000. The claim of the owner is 1/3 of the total
assets. The working capital during the year is 40,000. The liabilities falling due within 12
months is 70,000. What is the amount of current assets?
Answer: 110,000