REVIEWER

Basic Accounting

Name: _________________________________________ Section_____________ Score: ______________

Instructions: Select the letter of the best answer. Write your answers in the answer sheet.
1. The accounting equation____________
a. is used to determine the amount of c. shows the claims on the entity’s assets by
liabilities owed. both the creditors and owner.
b. is used to determine the amount of d. shows the claims on the owner’s equity by
income earned during the period. the owner.
2. Another way of stating the accounting equation is____________.
a. Assets + Liabilities = Owner’s Equity c. Assets = Liabilities - Owner’s Equity
b. Assets - Liabilities = Owner’s Equity d. Owner’s Equity + Assets = Liabilities
3. In accounting equation, an increase in asset can be associated with______________
a. an increase in a liability. c. a decrease in owner’s equity.
b. a decrease in a liability. d. an increase in another asset.
4. The components of the balance sheet equation are_____________
a. assets, income and owner’s equity. c. income, expenses and profit.
b. assets, liabilities and owner’s equity. d. investments, withdrawals and profit.
5. The following can be found in an income statement, EXCEPT
a. income c. expenses
b. assets d. profit or loss
6. Which of the following is NOT subject to depreciation?
a. building c. equipment
b. land d. machinery
7. Which of the following is an intangible asset?
a. trademarks c. patents
b. copyrights d. all of the above
8. Expenses can be defined as ____________
a. increases in owner’s equity. c. decreases in owner’s equity.
b. decreases in economic benefits during the d. inflows of assets from delivering or
accounting period in the form of outflow producing goods or rendering services.
or depletion of assets.
9. All of the following affect the owner’s equity account, EXCEPT
a. net income earned c. additional investment
b. payment of a liability d. withdrawal by the owner
10. Which of the following is a liability of a firm?
a. A building owned by the firm. c. Money which the firm has borrowed and
b. Cash has not yet repaid.
d. Money owed to the firm by its debtors.
11. Fill in the amount of the missing element of financial position.
Assets Liabilities Owner’s Equity
760, 000 360, 000 ?
a. 1, 120, 000 b. 400, 000 c. 760, 000 d. 360, 000
12. Supply the missing element of performance.
Revenue Expenses Profit/ (Loss)
840, 000 ? (360, 000)
a. 480, 000 b. 1, 200, 000 c. (360, 000) d. 840, 000
13. Which between the two statements is correct?
 Statement 1: Unearned revenues are classified as liabilities on the balance sheet.
Statement 2: Income statement accounts are also known as temporary accounts.
a. Only Statement 1 is correct. c. Both statements are correct.
b. Only Statement 2 is correct. d. Neither statement is correct
14. The normal balance of an account is on the ________________.
a. debit side of the account c. credit side of the account
b. side represented by increases in the d. side represented by decrease in the
account balance account balance
15. Which of the following DOES NOT directly or indirectly affect the owner’s capital account?
a. Paying an accounts payable c. Earning of revenues
b. Withdrawals by the owner d. Incurring of expenses
16. Which of the following accounts is classified differently from the others listed?
a. Notes Payable c. Mortgage Payable
b. Unearned Revenue d. Art Revenues
17. Which between the two statements is correct?
Statement 1: Accumulated depreciation accounts may be referred to as contra-asset accounts.
Statement 2: A decrease in an expense account is the equivalent of decrease in owner’s equity.
a. Only Statement 1 is correct. c. Both statements are correct
b. Only Statement 2 is correct. d. Neither statement is correct
18. A prepaid expense is NOT an ___________.
a. asset c. unexpired cost
b. expired cost d. economic resource
19. Which of the following is a cash outflow from operating activities?
a. Payment to acquire property and c. Payment for interest expense.
equipment. d. Payment to owners in the form of
b. Payment or settle notes payable. withdrawals.
20. Which of the following is a cash inflow from financing activities?
a. Receipt from interest on notes receivable. c. Receipt from issuance of notes payable.
b. Receipt from collections on notes d. Receipt from sale of property and
receivable. equipment.
21. The statement of changes in equity would NOT show____________.
a. the owner’s initial capital balance c. the owner’s withdrawals for the period
b. revenues and expenses d. the owner’s ending capital balance
Use the following information to answer questions 22 to 23 below. Villanueva Realty Company had the following
balance sheet accounts and balances:
Accounts Payable ₱ 60, 000 Equipment ₱ 70, 000
Accounts Receivable 10, 000 Villanueva, Capital ?
Building ? Land 70, 000
Cash 30, 000
22. If the balance of the Villanueva, Capital account was ₱ 210, 000, what would be the balance of the Building
account?
a. ₱ 250, 000 b. ₱ 40, 000 c. ₱ 90, 000 d. ₱ 210, 000
23. If the balance of the Building account was ₱ 170, 000, what would be the total of liabilities and owner’s
equity?
a. ₱ 170, 000 b. ₱ 270, 000 c. ₱ 320, 000 d. ₱ 350, 000
Use the following information to answer questions 24 to 27 below:
Sales 2, 463, 500 Purchases Discounts 21, 360
Sales Returns and Allowances 27, 500 Transportation In 82, 360
Sales Discounts 42, 750 Selling Expenses 303, 400
Purchases 1, 264, 000 General and Administrative Expenses 282, 640
Purchases Returns and Allowances 56, 400
In addition, beginning merchandise inventory was ₱ 528, 000 and ending merchandise inventory was ₱ 483, 000.
24. Net sales for the period was _____________.
a. ₱ 2, 478, 750 c. ₱ 2, 533, 750
b. ₱ 2, 393, 250 d. ₱ 2, 448, 250
25. Net purchases for the period was______________.
a. ₱ 1, 228, 960 c. ₱ 1, 341, 760
b. ₱ 1, 299, 040 d. ₱ 1, 186, 240
26. Cost of goods sold for the period was_______________.
a. ₱ 1, 313, 600 c. ₱ 1, 064, 650
b. ₱ 1, 034, 650 d. ₱ 1 ,090, 650
27. Profit for the period was__________.
a. ₱ 450, 210
b. ₱ 425, 410
c. ₱ 485, 210
d. ₱ 455, 210
28. This is the capability of an entity to pay long term obligations as they fall due.
a. Liquidity c. Profitability
b. Solvency d. Efficiency
29. Which between the two statements is correct?
Statement 1: Liquidity ratios are groups of ratios that measure the ability of the business firm to pay off
short-term obligations as they mature.
Statement 2: The current ratio indicates the extent to which the current liabilities are covered by the current
assets.
a. Only Statement 1 is correct. c. Both statements are correct.
b. Only Statement 2 is correct. d. Neither statement is correct.
30. Which between the two statements is correct?
Statement 1: In vertical analysis, the previous period is the basis or the starting point of the comparison.
Statement 2: In horizontal analysis, the company compares their own financial statements for the current
period with their financial statements from the previous period.
a. Only Statement 1 is correct. c. Both statements are correct.
b. Only Statement 2 is correct. d. Neither statement is correct.

31. A depository institution account that pays higher than savings account interest rates but imposes conditions
on the amount, frequency, and period of withdrawals is called____________.
a. Checking Account c. Foreign Currency Bank Account
b. Time Deposit d. Savings Deposit
32. Which of the following statements is NOT TRUE?
a. The depositor may not authorize a representative if he cannot attend personally to withdraw the funds.
b. A withdrawal slip and deposit slip are written orders to the bank.
c. A withdrawal slip is a bank document in which a person writes necessary information to withdraw from a
bank.
d. The bank provides deposit slip that the depositor will fill up every time the depositor will credit money to
his account.
33. Statement 1: The bank statement shows the cumulative balance of cash in the account and net of all the
preceding transactions.
Statement 2: Debit memo indicates additional amount on the account.
What can you observe from the statements?
a. Both statements are false. c. Only the 1st statement is true.
b. Both statements are true. d. Only the 2nd statement is true.
34. Statement 1: Bank reconciliation statement is prepared to reconcile the difference between cash book and
bank balance.
Statement 2: Bank reconciliation statement detects errors which have been committed.
 What can you observe from the statements?
a. Both statements are false. c. Only the 1st statement is true.
b. Both statements are true. d. Only the 2nd statement is true.
35. Which of the following statements is NOT TRUE?
a. Credit memos are items that are already added by the bank but have not been added by the book as of
the cut-off date.
b. Debit memos are amounts that have been deducted by the bank but have not been deducted per book.
c. Examples of debit memo include accounts receivable collected by the bank in favour of the company and
loan proceed directly credited by the bank to the account of the customer.
d. Reciprocal accounts should have the same balance after all adjustments have been made.
36. The following are items recorded by the bank but not yet recorded by the entity, EXCEPT
a. Bank Collections c. Service Charge
b. Bank return checks when drawn against d. Deposits in Transit
uncleared deposits
37. These are cash receipts already recorded in the cash receipts journal that reached the bank too late to be
credited in the current statement.
a. Deposits in Transit c. Bank Collections
b. Outstanding Checks d. Bank return checks
38. These checks are already issued by the entity but not yet cleared or paid by the bank.
a. Bank Collections c. Outstanding Checks
b. Deposits in Transit d. Bank return checks
39. Deposit in transit should be ____________.
a. added to book balance c. deducted from book balance
b. added to bank balance d. deducted from bank balance
40. The bank collected a Note Receivable for the company and credited the company's bank account for ₱
1,000.00. What adjustment should be made?
a. add to book balance c. deduct from book balance
b. add to bank balance d. deduct from bank balance
41. A company recorded its check #2754 in its accounting records as ₱ 98.00 However, check #2754 was written
for ₱ 89.00 and it cleared the bank as ₱ 89.00. What adjustment is needed to the Cash balance per books?
a. decrease by ₱ 9.00 c. increase and decrease by ₱ 9.00
b. increase by ₱ 9.00 d. no need for adjustment

42. Which trial balance lists all the business accounts before year-end adjusting journal entries are made?
a. adjusted trial balance c. post-closing trial balance
b. unadjusted trial balance d. pre-closing trial balance
43. Which accounting principle or concept does keeping the records of the business separate from the personal
records of the owner of the business adhere to?
a. continuing-concern concept c. business entity concept
b. realization principle d. objectivity principle
44. Which of the following would typically be considered a source document?
a. chart of accounts
b. general journal
c. general ledger
d. invoice from a seller