HISTORY AND NATURE OF ACCOUNTING
What branch of accounting is responsible for the independent examination of financial reports to ensure their fairness and reliability for users outside the business entity?
A. Auditing C. Accounting Education
B. Tax Accounting D. Cost Accounting
AUDITING
Which accounting principle requires that accounting records and financial statements be based on reliable and unbiased evidence to ensure accuracy and usefulness?
A. Consistency Principle C. Materiality Principle
B. Objectivity Principle D. Adequate Disclosure
Objectivity Principle
What is the primary purpose of a Chart of Accounts?
A. To classify and organize all financial transactions
B. To prepare the income statement
C. To track company inventory
D. To determine the company's tax obligations
To classify and organize all financial transactions
Which of the following is the correct sequence of recording transactions in accounting?
A. Trial Balance → Journal → Ledger → Financial Statements
B. Journal → Ledger → Trial Balance → Financial Statements
C. Ledger → Journal → Trial Balance → Financial Statements
D. Financial Statements → Journal → Ledger → Trial Balance
Journal → Ledger → Trial Balance → Financial Statements
Why is accounting referred to as a service activity according to the Accounting Standards Council (ASC) and Financial Reporting Standards Council (FRSC)?
A. Because it records only past business transactions
B. Because it provides financial information useful for economic decision-making
C. Because it focuses mainly on auditing services
D. Because it prepares tax reports for the government
Because it provides financial information useful for economic decision-making
After recording transactions in the cash receipts and cash payments journals, the accountant transfers the amounts to individual accounts. Which step of the accounting cycle is illustrated?
A. Posting to the ledger C. Preparing worksheet
B. Identifying transactions D. Preparing financial statements
Posting to the ledger
Julia is analyzing their company’s financial statement. She is trying to identify the account that reflects the owner's share in the business after all liabilities have been settled. Which account is classified as owner’s equity?
A. Cash C. Accounts Payable
B. Capital D. Equipment
Capital
Which of the following statements best describes the purpose of journalizing in accounting?
A. To analyze the accuracy of financial transactions
B. To transfer data from the Journal to the Ledger for organization C. To balance the accounts after year-end closing
D. To calculate taxes based on transaction data
To transfer data from the Journal to the Ledger for organization
Jack is reviewing their company’s resources, including equipment, cash, and inventory, which are expected to generate future revenue. Which of the following is an example of an asset?
A. Outstanding loan payments C. Owner's investment
B. Inventory available for sale D. Net profit from last quarter
Inventory available for sale
Which criterion of an accounting principle refers to the usefulness and meaningfulness of information to users of financial statement? A. Objectivity C. Relevance B. Feasibility D. Reliability
Relevance
Fred is reviewing its financials and needs to identify its obligations that need to be paid in the future. Which of the following would be considered a liability?
A. Cash C. Accounts Payable
B. Inventory D. Equipment
Accounts Payable
Which accounting worksheet shows the financial position of a business at a specific date by listing assets, liabilities, and owner’s equity?
A. Income Statement C. Statement of Changes in Owner’s Equity B. Balance Sheet D. Statement of Cash Flow
Balance Sheet
Maria is planning to apply for a long-term loan to expand her business. The bank carefully examines her company’s financial statements to determine if the loan and interest can be paid on time. Which user of accounting information is mainly involved in this situation?
A. Tax Investors C. Lenders B. Owners D. Government
LENDERS
A local company wants its financial statements to be easily understood and compared by foreign investors. Which purpose of PFRS is being applied in this situation?
A. To reduce the cost of preparing financial reports
B. To ensure globally aligned standards
C. To eliminate the need for professional judgment internationally D. To focus only on internal management decisions
To ensure globally aligned standards
Which of the following accounts would be classified under “Liabilities” in a chart of accounts?
A. Cash C. Sales Revenue
B. Accounts Payable D. Retained Earnings
Accounts Payable
A manager needs information about cash received from customers and cash paid for expenses, equipment, and loans during the year. Which financial statement should be used?
A. Balance Sheet C. Statement of Changes in Owner’s Equity
B. Income Statement D. Statement of Cash Flow
Statement of Cash Flow
An archaeologist discovers clay tablets used to record harvests, taxes, and trade in an ancient civilization. These records were mainly used to keep track of economic activities. Which historical period or civilization best explains this early accounting practice?
A. Ancient Greece C. Mesopotamian civilization
B. Ancient Rome D. Industrial Revolution
Mesopotamian civilization
A Philippine-based corporation prepares its financial statements to comply with local laws such as the Revised SRC Rule 68. Which set of standards should the company use?
A. Generally Accepted Accounting Principles (GAAP)
B. International Financial Reporting Standards (IFRS)
C. Philippine Financial Reporting Standards (PFRS)
D. Management Accounting Standards
Philippine Financial Reporting Standards (PFRS)
Which of the following statements is true regarding the Journal and Ledger?
A. The journal is used to classify transactions into categories, while the ledger is used to record the details of each transaction. B. The journal records transactions by account, while the ledger records transactions in chronological order.
C. The journal contains summaries of transactions, while the ledger contains individual transaction details.
D. The journal records transactions in chronological order, while the ledger organizes those transactions by account.
The journal records transactions in chronological order, while the ledger organizes those transactions by account.
Which step in the accounting cycle involves recording transactions in chronological order using appropriate journals?
A. Posting to the ledger C. Journalizing transactions
B. Preparing trial balance D. Preparing adjusting entries
Journalizing transactions