Accounting Concepts and Principles
NAME:
Quiz No 1
Section:
Date:
Score:
MULTIPLE CHOICE
1. Under this concept, the business is treated separately from its owners.
a. Separate entity concept
b. Historical cost concept
c. Going concern
d. Matching principle
2. Under this concept, the business is assumed to continue to exist for an indefinite
period of time.
a. Separate entity concept
b. Historical cost
concept c. Going
concern
d. Matching principle
3. Under this concept, some costs are initially recognized as assets and recognized only
as expenses when the related revenue is recognized.
a. Separate entity concept
b. Historical cost concept
c. Going concern
d. Matching principle
4. It is the official accounting standard setting body in the Philippines.
a. Philippine Institute of Certified Public
Accountants b. Financial Reporting Standards
Council
c. Accounting Standards Council
d. American Accounting Association
5. Businesses are required by to law to file tax returns with this government agency.
a. Security and Exchange
Commission b. Bureau of Internal
Revenue
c. Cooperative Development Authority
d. Bangko Sentral ng Pilipinas
6. Under this concept, assets are initially recorded at their acquisition cost.
a. Single entity
concept b. Historical
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cost concept
c. Going concern concept
d. Matching principle
7. Which of the following are considered enhancing qualitative characteristics?
I. Comparability
II. Verifiability
III. Materiality
IV. Understandability
a.
b.
c.
d.
I only
I, II and IV
I and II
I, II, III and IV
8. This qualitative characteristic means that financial statements are neither
materially misstated nor important information is omitted.
a. Completeness
b. Neutrality
c. Free from Error
d. None of the above
9. This qualitative characteristic enables users to make comparisons to identify and
understand the similarities in, and the differences among, reported information.
a. Comparability
b. Timeliness
c. Verifiability
d. Understandability
10. The accounting standards used in the Philippines are specifically referred to as the
a. Generally Acceptance Accounting
Principles b. Philippine Financial
Reporting Standards
c. International Accounting Standards
d. Philippine Accounting Standardizations
11. The business owner inappropriately included his personal expenses with the
expenses of the business. Which of the following concepts is violated?
Historical cost
Separate entity concept
Accrual concept
Time period
a.
b.
c.
d.
12. The income of the business during the current year is low. To report profit, the owner
deliberately did not recognize depreciation expense. Which of the following
qualitative characteristics is violated?
a. Materiality
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b. Relevance
c. Faithful representation
d. Predictive value
13. Inventories acquired for ₱100,000 are deliberately valued at a selling price of
₱300,000. Which of the following principles is most likely not violated?
a. Historical
cost b.
Materiality
c. Faithful representation
d. Free from error
14. A business sells goods to a customer who promises to pay for the purchase price next
year. The business records the sale this year, when the transaction has occurred, rather
than waiting until next year when the sale price is collected. This is an application of
which of the following accounting principles?
a. Accrual basis
b. Stable monetary unit
c. Credit principle
d. Utang concept
15. Right now, the business owner does not expect that its business will end in the
foreseeable future. This accounting assumption is called
a. Prudence.
b. Cost-benefit.
c. Going concern.
d. Liquidating concern.
16. A business purchased a small stapler. The stapler is expected to be used for a long
period of time. However, the business immediately expensed the cost of the stapler
rather than recognizing it as an asset to be depreciated over the stapler’s useful life.
The business is invoking which of the following accounting concepts?
a. Cost-benefit
b. Accrual basis
c. Full disclosure
d. Matching
17. A business acquired goods that are held for resale. Instead of expensing immediately
the cost of the goods, the business initially recognized them as assets. As each good is
sold, the business recognizes the cost of the good sold as expense. This is an
application of which of the following accounting concepts?
a. Completeness
b. Relevance
c. Full
disclosure d.
Matching
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18. This accounting principle entails trade-offs to be made between the level of detail and
the conciseness of information presented in the financial statements, keeping in mind
the costs of preparing the information.
a. Comparability
b. Relevance
c. Full disclosure
d. Matching
19. This concept requires a business to apply the same accounting policies for like
items and retain those accounting policies from period to period.
a. Consistency
b. Verifiability
c. Going concern
d. Matching
20. Big companies often round-off peso amounts when presenting financial statements.
This practice is acceptable because of which of the following concepts?
a. Historical
cost b.
Materiality
c. Faithful representation
d. Rounding principle
21. Which of the following statements regarding accounting is incorrect?
a. All business transactions and events are recorded in the accounting books.
b. Although bookkeeping and accounting are interrelated, they are not the same.
The purpose of accounting is to provide information that is useful in
making economic decisions.
d. A transaction or event is recorded in the accounting records only if it has an effect
on the assets, liabilities, equity, income or expenses of the business.
c.
22. Which of the following statements is correct?
a. Financial accounting is the branch of accounting that deals with the specific
needs of an entity’s management.
b. The internal users of accounting information include management, owners and
creditors.
c. The external users of accounting information include potential and existing
investors and lenders and other creditors.
d. Government accounting is the branch of accounting that deals with the analysis of
the costs of products and services.
23. In which of the following did a loss occur?
ASSETS = LIABILITIES + EQUITY + INCOME - EXPENSES
a. ₱920,000
₱710,000
₱290,000
₱440,000
₱520,000
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b. ₱870,000
c. ₱890,000
d. ₱740,000
₱310,000
₱240,000
₱530,000
₱240,000
₱240,000
₱170,000
₱470,000
₱600,000
₱1,900,000
₱150,000
₱190,000
₱1,860,000
24. Which of the following statements is correct?
I. Accounting provides qualitative information, financial information, and quantitative
information.
II. Qualitative information is found in the notes to the financial statements only.
III. Accounting is considered an art because it is supported by an organized body of
knowledge
IV. Accounting is considered a science because it involves the exercise of skill and
judgment.
V. Measurement is the process of assigning numbers to objects such inventories or plant
assets and to events such as purchases or sales.
VI. All quantitative information is also financial in nature.
VII. The accounting process of assigning peso amounts or numbers to relevant objects and
events is called identification.
a. I and V
b. I, II, VI and V
c. I, II, III, IV and V
d. II, VI and V
Explanation: II – not only in the notes but also on the face of the financial statements. III
and IV are
inter-changed. VI – all financial information are quantitative. VII – measuring not
identification.
25. What is the authoritative status of the Conceptual Framework?
a. It has the highest level of authority. In case of a conflict between the Conceptual
Framework and a Standard, the Conceptual Framework overrides that Standard.
b. If there is a Standard that specifically applies to a transaction, that Standard overrides the
Conceptual Framework. In the absence of such a Standard, the requirement of the Conceptual
Framework should be followed.
c. If there is a Standard that applies to a transaction, that Standard overrides the Conceptual
Framework. In the absence of such a Standard, the entity’s management should consider the
applicability of the Conceptual Framework in developing and applying an accounting policy
that will result in useful information.
d. The Conceptual Framework applies only to the IASB when developing or amending
Standards. A reporting entity should never use the Conceptual Framework.
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True or False
1. A fiscal period must begin on January 1.
2. An asset’s book value represents the true market value of the asset.
3. Accounts that are partly income statement amounts and partly balance sheet amounts
are
called mixed accounts.
4. The expiration of usefulness of equipment during an accounting period is called
depreciation.
5. In recording the adjusting entries for depreciation, both accounts involved are increased
6. As equipment is depreciated, its book value increases and its accumulated depreciation
increases.
7. In recording the adjusting entry for accrued salaries, all the accounts involved are
decreased.
8. Failure to record the adjusting entries entry for depreciation results I assets and owner’s
equity being overstated on the balance sheet.
9. If the adjustment for accrued salaries is omitted, liabilities and expenses will be
understated.
10. Failure to record the adjusting entry for accrued salaries results in the current year’s
profit
being overstated.
11. Failure to record the adjusting entry for depreciation will overstate assets on the
balance
sheet.
12. The owner’s personal withdrawals for the year cause a decrease in profit.
Matching Type
A. Accrual Basis H. Property and Equipment
B. Cash Basis I. Accrued Expense
C. Adjusting Entries J. General Ledger
D. Deferral K. Worksheet
E. Depreciation L. Closing Entries
F. Contra-account M. Expense Recognition Principle
G. Book value of the asset
Required:
1. An accounting method in which revenues are reported in the period in which they are
earned,
and expenses are reported in the period in which they are incurred.
2. The entry required at the end of the accounting period to bring the accounts up to date
to
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ensure the proper matching of income and expenses.
3. The allocation of the cost of property and equipment to expense over its useful life.
4. An account which is “offset against” another account.
5. An expense that is unpaid and unrecorded.
6. A postponement of the recognition of an expense already paid, or of revenues already
received
in advance.
7. A working paper often used by accountants to summarize adjusting entries.
8. The difference between the accumulated depreciation account and the related property
and
equipment account.
9. It is used to classify and summarize transactions, and to prepare data for financial
statements.
10. Expenses are recognized in the income statement when it is probable that a decrease in
economic benefits related to a decrease in an asset or an increase of a liability has arisen,
and that
the decrease in economic benefits can be measured reliably.
Mr. A opened a management consulting firm called “Alpha Consulting” on October
1, 20x1. The following were the transactions during the first week of operations:
Oct
.
1
2
4
5
7
Transactio
ns
Provided ₱300,000 cash as initial investment to the business.
Acquired furniture and fixture for ₱200,000 cash.
Purchased supplies for ₱30,000 cash.
Rendered services worth ₱20,000 on cash basis.
Paid ₱10,000 salaries of employees.
Requirements:
a. Provide the journal entries.
b. Post the entries to the ledger (use T-accounts).
c. Prepare the unadjusted trial balance on October 7, 20x1.
“Gold there is, and rubies in abundance, but lips that speak knowledge are a rare jewel.”
(Proverbs 20:15)
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