QUIZ NO.

1
Financial Accounting and Reporting Part 1
First Semester A.Y. 2019-2020
NAME: Date:
Professor: Section: Score:

Part I. TRUE OR FALSE. Write TRUE if the statement is correct and FALSE if otherwise. NO
ERASURES. NO FRICTION PENS.
1. Only accountable events are recorded in the accounting books.
2. Accounting is a service activity.
3. Although bookkeeping and accounting are interrelated, they are not the same.
4. The purpose of accounting is to provide information that is useful in making
economic decisions.
5. Accounting is often referred to as the “language of business” because it is
fundamental to the communication of financial information.
6. 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.
7. Accounting can be traced as far back as the prehistoric times.
8. Bookkeeping normally ends with the preparation of the trial balance.
9. Accounting is as old as civilization and has evolved in response to economic and
social needs of men.
10. Fra Luca Pacioli is the father of single-entry bookkeeping system.
11. The internal users of accounting information include management, owners, and
customers.
12. The external users of accounting information include potential and existing
investors and lenders and other creditors.
13. Erroneous financial statements can lead to bad financial decisions.
14. External users of financial information refer to the entity’s management
personnel.
15. Cost accounting refers to the branch of accounting that deals with tax
computations, filing of tax returns, and tax planning.
16. Financial accounting is the branch of accounting that deals with the preparation
of general-purpose financial statements.
17. A grocery store is most likely to be considered a service business.
18. Businesses that engage in more than one type of business activity, such as selling
goods and at the same time offering services, are referred to as hybrid
businesses.
19. A school is most likely to be considered a manufacturing business – the raw
materials are the students and the finished products are responsible and
competent business professionals.
20. A car dealer, one who buys cars from car producers and sells them in their
original state and without further modifications, is most likely to be considered a
trading business rather than a manufacturing business.

Part II. Choose the letter that represents the best answer. WRITE YOUR ANSWER BEFORE
EACH NUMBER. USE CAPITAL LETTERS.
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 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. I only
b. I, II and IV
c. I and II
d. 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 main purpose of accounting is
a. to account for money so it will not be lost.
b. to provide information that is useful in making economic decisions.
c. to safeguard the assets of a company.
d. to provide a clear view of the state of the industry’s economy.
12. This process refers to the reporting of the information processed in the accounting system to
interested users.
a. Measuring
b. Identifying
c. Communicating
d. Classifying
13. In accounting, the term “recording” is also called
a. journalizing
b. communicating
c. debiting
d. videoing
14. Which of the following statements regarding the recording of events is valid?
a. Only non-accountable events are recorded in the accounting books
b. Only accountable events are recorded in the accounting books
c. Both non-accountable and accountable events are recorded in the accounting books
d. Neither non-accountable nor accountable events are recorded in the accounting books
15. The business owner inappropriately included his personal expenses with the expenses of the
business. Which of the following concepts is violated?
a. Historical cost
b. Separate entity concept
c. Accrual concept
d. Time period
16. 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
b. Relevance
c. Faithful representation
d. Predictive value
17. 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
18. 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
19. 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.
20. 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
21. 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
22. 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
23. 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
24. 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
25. The following are the conditions in passing the CPA Board Examinations, except:
a. The candidate must have an average grade of 75% in the six subjects.
b. The candidate must not have a grade lower than 65%.
c. The candidate must enroll in an accredited review center for CPA Examinees and must pass
the preboard examination and final board examination to qualify for the CPALE.
d. The candidate must complete the examination until the last schedule of the exam and must
wait for the results to be released by PRC-BOA within three days after the conclusion of the
exam.