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1.

Owner of a partnership
a. Stockholder
b. Partner
c. President
d. Board of Directors
2. There cannot be a partnership without contribution of money, industry, or property to a
common fund
a. Mutual Agency
b. Mutual Contribution
c. Unlimited Liability
d. Division of Profits and Losses
3. Partnerships that are exempted from the 30% tax rate of taxable income
a. General professional partnerships
b. Close Partnership
c. De facto Partnership
d. Public Partnership
4. How is a partnership formed?
a. By agreement
b. By operation of law
c. By force
d. None of the above
5. How is a corporation formed?
a. By force
b. By operation of law
c. By agreement
d. None of the above
6. All partners are liable to the extent of their separate properties
a. De jure Partnership
b. De facto Partnership
c. General Partnership
d. Limited Partnership
7. There shall be at least one general partner
a. De jure Partnership
b. De facto Partnership
c. General Partnership
d. Limited Partnership
8. Has complied with all the legal requirements for its establishments
a. De jure Partnership
b. De facto Partnership
c. General Partnership
d. Limited Partnership
9. Failed to comply with all the legal requirements for its establishment
a. De jure Partnership
b. De facto Partnership
c. General Partnership
d. Limited Partnership
10. Contributes money/property to the common fund
a. Capitalist Partner
b. Liquidating Partner
c. Managing Partner
d. Industrial Partner
11. Contributes his knowledge or personal service; not liable for losses
a. Capitalist Partner
b. Liquidating Partner
c. Managing Partner
d. Industrial Partner
12. Appointed to manage the partnership
a. Capitalist Partner
b. Liquidating Partner
c. Managing Partner
d. Industrial Partner
13. Designated to wind up or settle the affairs of the partnership
a. Capitalist Partner
b. Liquidating Partner
c. Managing Partner
d. Industrial Partner
14. Does not take active part in the business and not known to be a partner
a. Nominal Partner
b. Silent Partner
c. Dormant Partner
d. Secret Partner
15. Does not take active part in the business but is known to be a partner
a. Nominal Partner
b. Silent Partner
c. Dormant Partner
d. Secret Partner
16. Takes active part in the business but not known as a partner by outside parties
a. Nominal Partner
b. Silent Partner
c. Dormant Partner
d. Secret Partner
17. Not a partner but represents himself as one
a. Nominal Partner
b. Silent Partner
c. Dormant Partner
d. Secret Partnership
18. Estimated amount that a willing seller would receive from a financially capable buyer for the
sale of the asset in a free market
a. Fair market value
b. Current Cost
c. Present Value
d. Historical Cost
19. Change in the relation of the partners caused by any partner ceasing to be associated in the
carrying on as distinguished from the winding up of the business of the partnership
a. Liquidation
b. Dissolution
c. Admission
d. Termination
20. Sum of the capital balances of the old partners and the actual investment of the new partner
a. Total agreed capital
b. Bonus
c. Total contributed capital
d. Share capital
21. Total capital of the partnership after considering the capital credits given to each of the partner
a. Total agreed capital
b. Bonus
c. Total contributed capital
d. Share capital
22. The amount of capital or equity transferred by one partner to another partner
a. Total agreed capital
b. Bonus
c. Total contributed capital
d. Share capital
23. Winding up of its business activities characterized by the sale of non-cash assets, settlement of
liabilities, and distribution of the remaining cash
a. Liquidation
b. Termination
c. Dissolution
d. Admission
24. Conversion of non-cash assets to cash
a. Dissolution
b. Realization
c. Conversion
d. Transformation
25. Excess of a partner’s share of losses over the capital credit balance
a. Capital Premium
b. Capital Overage
c. Capital Deficiency
d. Capital Excess
26. Legal right of a partner to apply part or all his loan account balance against his capital deficiency
resulting from losses in the realization of the partnership assets
a. Right of offset
b. Right to Redeem
c. Right to Compensate
d. Right to Neutralize
27. All non-cash assets are realized, gains and losses distributed, all liabilities are paid before a
single final cash distribution is made to the partners
a. Schedule of Safe Payments
b. Installment Method
c. Cash Priority Program
d. Lump-sum method
28. Realization of non-cash assets is accomplished over an extended period of time
a. Schedule of Safe Payments
b. Installment Method
c. Cash Priority Program
d. Lump-sum method
29. Prepared at the start of the liquidation process that will help the partners project when they can
expect to be included in the cash distribution
a. Schedule of Safe Payments
b. Installment Method
c. Cash Priority Program
d. Lump-sum
30. Assumes possible losses due to the inability of the partnership to dispose of part or all the
remaining non-cash assets and failure of the partner’s capital deficiencies to make additional
contribution
a. Schedule of Safe Payments
b. Installment Method
c. Cash Priority Program
d. Lump-sum method

The advantages of the partnership form of business organization, compared to corporations, include

a) Ease of raising capital


b) Single taxation
c) Difficulty of formation
d) Limited liability
e) Mutual agency

Which of the following is not an advantage of a partnership over a corporation?

a) Unlimited liability
b) Ease of formation
c) All of the above
d) The elimination of taxes at the entity level

A partnership in which one or more of the partners are general partners and one or more are not is
called a(n)

a) joint venture
b) unlimited partnership
c) general partnership
d) limited partnership

The doctrine of marshaling of assets

a) is applicable if either the partnership is insolvent or individual partners are insolvent


b) allows partners to first contribute personal assets to unsatisfied partnership creditors
c) provides that when the Uniform Partnership Act is adopted, amounts owed to personal
creditors and to the partnership for debit capital balances are shared
d) proportionately from the personal assets of the partners
e) is applicable only if the partnership is insolvent

Which of the following statements is true concerning the treatment of


salaries in partnership accounting?

a) Partner salaries are equal to the annual partner draw.


b) Partner salaries may be used to allocate profits and losses; they are not considered expenses of
the partnership
c) Partner salaries are directly closed to the capital account.
d) The salary of a partner is treated in the same manner as salaries of corporate employees.

Which of the following results in dissolution of a partnership?

a) withdrawal of a partner from a partnership


b) contribution of additional assets to the partnership by an existing partner
c) winding up of the partnership and the distribution of remaining assets to the partners
d) receipt of a draw by an existing partner

In a partnership, interest on capital investment is accounted for as a(n)

a) expense
b) reduction of capital
c) return on investment
d) allocation of net income

Which of the following best describes the use of interest on invested capital as a means of allocating
profits?

a) Invested capital balances are never affected by drawings of the partnerships


b) If interest on invested capital is used, it must be used for all partners
c) Interest is allocated only if there is partnership net profit
d) Use of beginning or ending measures of invested capital may be subject to manipulation that
distorts the measure of invested capital

For financial accounting purposes, assets of an individual partner contributed to a partnership are
recorded by the partnership at

a) Historical cost
b) Lower of cost or market
c) Book value
d) Fair market value

The disadvantages of double taxation for an entity with two owners may not be avoided if the entity is

a) organized as a Subchapter S corporation


b) organized as a partnership
c) distributing all of its income in the form of dividends
d) None of the above

For tax purposes, assets of an individual partner that are contributed to a partnership are recorded by
the partnership at

a) book value
b) the individual partner's tax basis
c) historical cost
d) fair market value

Which of the following statements is correct regarding the admission of a new partner?

a) A new partner always pays book value.


b) The right of co-ownership in the business property can be transferred to a new partner without
the consent of other existing partners
c) The right to participate in management of the business can be conveyed without the consent of
other existing partners.
d) The right to share in profits and losses can be sold to a new partner without the consent of
other existing partners
e) A new partner must purchase a partnership interest directly from the business

A partnership is a (n):

a. Accounting entity
b. Taxable entity
c. Both a and b
d. None of the above

A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus
allocation, interest on capital, with any remainder to be allocated by preset ratios. If a partnership has a
loss to allocate, generally which of the following procedures would not be applied?

a) Any salary allocation criteria would not be used


b) Any loss would be allocated equally to all partners
c) The loss would be allocated using the profit and loss ratios, only
d) The bonus criteria would be used

In an advance plan for installment distributions of cash to partners of liquidating partnership, each
partner’s loss absorption potential is computed by

a) Multiplying each partner’s capital account balance by the percentage of that partner’s capital
account balance to total partners’ capital
b) Dividing the total of each partner’s capital account less receivables from the partner plus
payables to the partner by the partner’s profit and loss percentage
c) Dividing each partner’s capital account balance by the percentage of that partner’s capital
account balance to the total partners’ capital
d) Some other method

Corporation

1. Corporation where no part of its income is distributable as dividends to its members, trustees,
officers
a. Stock Corporation
b. Non-stock Corporation
c. Publicly-held Corporation
d. Open Corporation
2. Created for public charity
a. Ecclesiastical Corporation
b. Charitable Corporation
c. Eleemosynary Corporation
d. De facto Corporation
3. Corporation whose share ownership is limited to selected persons or members of a family not
exceeding 20 persons
a. Limited Corporation
b. General Corporation
c. Close Corporation
d. Open Corporation
4. Corporation with a class of equity securities listed on an exchange or with assets in excess of
P50,000,000 and having 200 or more holders, at least 200 of which are holding at least 100
shares of a class of its equity securities
a. Open Corporation
b. Private Corporation
c. Stock Corporation
d. Publicly-held Corporation
5. Those who compose a corporation whether as shareholder or members at any time
a. Corporator
b. Incorporator
c. Member
d. Shareholder
6. Persons who have agreed to take and pay for original, unissued shares of a corporation formed
or to be formed
a. Member
b. Subscriber
c. Promoter
d. Shareholder
7. Shares that entitle the holder to certain advantages or benefits over the holders of ordinary
shares
a. Ordinary shares
b. Treasury shares
c. Par value shares
d. Preference shares
a. Shares that has been issued by the corporation as fully paid and later reacquired but not retired
a. Treasury Shares
b. Non-par value shares
c. Ordinary Shares
d. Promotional Shares
8. Responsible for the formulation of the overall policies for the corporation and for the exercise of
corporate powers
a. Secretary
b. President
c. Chairperson
d. Board of Directors
9. Reflects the amount of resources received by a corporation as a result of investment by
shareholders, donations, or other share capital transactions
a. Legal Capital
b. Share Premium
c. Share Discount
d. Share Capital
10. Portion of the contributed capital or the minimum amount of paid-in capital, which must
remain in the corporation for the protection of corporate creditors
a. Legal Capital
b. Share Premium
c. Share Discount
d. Share Capital
11. Portion of the paid-in capital representing amounts paid by shareholders in excess of par
a. Legal Capital
b. Share Premium
c. Share Discount
d. Share Capital
12. Amount of capital accumulated and retained through profitable operations of the business
a. Authorized Share Capital
b. Legal Capital
c. Share Premium
d. Retained Earnings
13. Maximum number of shares the corporation can issue as specified in the articles of
incorporation
a. Authorized Share Capital
b. Legal Capital
c. Share Premium
d. Retained Earnings
14. Gives the issuing corporation the right to purchase (retire) the shares from its holders at a
specified price
a. Convertible Ordinary Shares
b. Callable Ordinary Shares
c. Convertible Preference Shares
d. Callable Preference Shares
15. Preference shares that can be exchanged by the holder for a specified number of shares of
common stock of the same company
a. Convertible Ordinary Shares
b. Callable Ordinary Shares
c. Convertible Preference Shares
d. Callable Preference Shares
16. Deficit – a debit balance in the Retained Earnings account resulting from accumulated losses
17. Retained earnings not available for dividends
a. Unrestricted Retained Earnings
b. Restricted Retained Earnings
c. Unappropriated Retained Earnings
d. Reserved Retained Earnings
18. A distribution of part of a corporation's past profits to its stockholders
a. Shares
b. Dividends
c. Cash
d. Stock
19. Reduces the par or stated value of its share capital and issues additional shares to its
shareholders
a. Share Split
b. Reverse Split
c. Cash Split
d. Dividends Split
20. Cash price or other consideration that can be received in a forced sale of assets such as the
occurring when a firm is in the process of going out of business
a. Book value
b. Futures Value
c. Liquidation value
d. Par value
21. Technique for evaluating a series of financial statement data over a period of time; to determine
the increase or decrease that has taken place
a. Ratio analysis
b. Horizontal analysis
c. Vertical Analysis
d. Diagonal analysis
22. Method of analyzing financial statements in which you can compare individual line items to a
baseline item
a. Ratio analysis
b. Horizontal analysis
c. Vertical Analysis
d. Diagonal analysis
23. Expresses the relationship among selected items of financial statement data
a. Ratio analysis
b. Horizontal analysis
c. Vertical Analysis
d. Diagonal analysis
24. Measure of the liquid resources that management will control in the short term; current assets
minus current liabilities
a. Current Ratio
b. Current Assets
c. Working Ratio
d. Working Capital
25. Tells whether the entity could pay all its current liabilities even if none of its inventory is sold;
quick assets divided by current liabilities
a. Acid Test Ratio
b. Solvency Ratio
c. Current Ratio
d. Working Ratio
26. Assets that could be converted into cash within a short period of time
a. Current Assets
b. Quick Assets
c. Noncurrent Assets
d. All of the above
27. Measure of management’s efficiency in using its assets to earn profits; profit plus interest
expense divided by average total assets
a. Debt in total Assets Ratio
b. Return on Total Assets
c. Equity in Total Assets Ratio
d. Quick Ratio
28. Measures the ability of the entity to survive over a long period of time
a. Solvency Ratio
b. Liquidity Ratio
c. Quick Ratio
d. Current Ratio
29. Shows the percentage of the entity’s assets financed by debt; total liabilities divided by total
assets
a. Debt in total Assets Ratio
b. Equity in Total Assets Ratio
c. Return on Total Assets
d. Quick Ratio
30. Shows the percentage of the firm’s assets financed by shareholders; total equity divided by total
assets
a. Debt in total Assets Ratio
b. Return on Total Assets
c. Equity in Total Assets Ratio
d. Quick Ratio

Basic Accounting

1. Operating Activities – The activities involved in earning revenues. For example, the purchase or
manufacturing of merchandise and the sale of the merchandise including marketing and
administration. In the statement of cash flows the operating activities section identifies the cash
flows involved with these activities by focusing on net income and the changes in the current
assets and current liabilities.
a. Financing Activities
b. Operating Activities
c. Investing Activities
d. Managing Activities
2. A quality of accounting information that facilitates comparing a company's reporting of one
accounting period to another
a. Consistency
b. Comparability
c. Conservatism
d. Confidentiality
3. The description and figures must match what really happened.
a. Faithful Representation
b. Materiality
c. Matching Principle
d. Relevance
4. Relevant information should be presented in a way that facilitates understanding and avoids
erroneous implication
a. Relevance
b. Faithful Representation
c. Neutrality
d. Completeness
5. A quality of accounting information that facilitates the comparison of financial reporting of one
company to the financial reporting of another company
a. Consistency
b. Conservatism
c. Comparability
d. Confidentiality
6. Independent observers must arrive with the same conclusion
a. Verifiability
b. Comparability
c. Consistency
d. Materiality
7. The older the information, the less useful
a. Periodicity Concept
b. Timeliness
c. Conservatism
d. Prudence
8. Information should be presented and expressed in terms a user understands
a. Accuracy
b. Verifiability
c. Understandability
d. None of the above
9. An accounting guideline which allows the readers of financial statements to assume that the
company will continue on long enough to carry out its objectives and commitments
a. Entity Concept
b. Going Concern
c. Conservatism
d. Materiality
10. Future amounts that have been discounted to the present
a. Book value
b. Historical Cost
c. Current Cost
d. Present Value
11. Fees earned from providing services and the amounts of merchandise sold
a. Gain
b. Revenue
c. Accounts Receivable
d. Cash
12. A record in the general ledger that is used to collect and store similar information
a. Entry
b. Account
c. Balance
d. Asset
13. A current asset resulting from selling goods or services on credit
a. Accounts Receivable
b. Accounts Payable
c. Inventory
d. Equipment
14. A current asset representing amounts paid in advance for future expenses
a. Accrued Expense
b. Cash
c. Prepaid Expense
d. Accounts Receivable
15. This current liability account will show the amount a company owes for items or services
purchased on credit and for which there was not a promissory note
a. Notes Payable
b. Bonds Payable
c. Accounts Payable
d. Mortgage Payable
16. Recording an entry in an account in the general ledger or in a subsidiary ledger
a. Posting
b. Recording
c. Writing
d. Balancing
17. A journal entry made on the first day of a new accounting period to undo the accrual type
adjusting entries made prior to the preparation of the financial statements dated one day earlier
a. Adjusting Entry
b. Reversing Entry
c. Closing Entry
d. Journal Entry
18. A listing of all of the accounts in the general ledger with account balances after the closing
entries have been posted
a. Trial Balance
b. Income Summary
c. Post-Closing Trial Balance
d. Balance Sheet
19. A contra revenue account that reports the discounts allowed by the seller if the customer pays
the amount owed within a specified time period
a. Sales Discount
b. Trade Discount
c. Purchase Discount
d. None of the above
20. The title to the goods usually passes to the buyer at the shipping point. This means that goods in
transit should be reported as a purchase and as inventory by the buyer. The seller should report
a sale and an increase in accounts receivable
a. FOB destination
b. Freight Collect
c. Freight Prepaid
d. FOB Shipping Point

21. The title to the goods usually passes from the seller to the buyer at the destination. This means
that goods in transit should be reported as inventory by the seller, since technically the sale
does not occur until the goods reach the destination
a. FOB destination
b. Freight Collect
c. Freight Prepaid
d. FOB Shipping Point
22. The inventory system where purchases are debited to the inventory account and the inventory
account is credited at the time of each sale for the cost of the goods sold. Hence, the balance in
the inventory account is constantly or perpetually changing. Under this system there is a general
ledger account Cost of Goods Sold.
a. Specific Inventory System
b. Periodic Inventory System
c. Average Inventory System
d. Perpetual Inventory System

23. The system where the general ledger account Inventory is not updated during the year. Rather,
the merchandise purchased is recorded in temporary purchases accounts. At the time a balance
sheet is presented, the inventory account is adjusted to reflect the cost of the inventory
a. Specific Inventory System
b. Periodic Inventory System
c. Average Inventory System
d. Perpetual Inventory System
24. The largest expense on the income statement of a company selling products or goods
a. Cost of Raw Materials
b. Cost of Sales
c. Cost of Conversion
d. Cost of Labor
25. A special or specialized journal to record sales of merchandise to customers
a. Sales Journal
b. Special Journal
c. Purchase Journal
d. Cash Receipts Journal
26. Raw materials that are a traceable component of a manufactured product
a. Indirect materials
b. Direct Labor
c. Direct Materials
d. Manufacturing Overhead
27. Manufacturing costs other than direct materials and direct labor
a. Indirect materials
b. Direct Labor
c. Direct Materials
d. Manufacturing Overhead
28. The products in a manufacturer's inventory that are completed and are awaiting to be sold
a. Factory Supplies Inventory
b. Raw Materials Inventory
c. Finished Goods Inventory
d. Work In Process Inventory
29. That part of a manufacturer's inventory that is in the production process and has not yet been
completed and transferred to the finished goods inventory
a. Factory Supplies Inventory
b. Raw Materials Inventory
c. Finished Goods Inventory
d. Work In Process Inventory
30. That component of a product that has not yet been placed into the product or into work-in-
process inventory
a. Factory Supplies Inventory
b. Raw Materials Inventory
c. Finished Goods Inventory
d. Work In Process Inventory
31. Prime Costs - The combination of direct materials and direct labor.
a. Prime Cost
b. Conversion Cost
c. Historical Cost
d. Current Cost
32. Conversion Costs - The combination of a manufacturer's direct labor and factory overhead
a. Prime Cost
b. Conversion Cost
c. Historical Cost
d. Current Cost
33. Bank Statement - a statement from the bank showing the activity in a company's checking
account
a. Bank Statement
b. Bank Service Charge
c. Bank Overdraft
d. Bank Reconciliation
34. Bank Reconciliation - The process of comparing the amounts in the Cash account in the general
ledger to the amounts appearing on the bank statement.
a. Bank Differentiation
b. Bank Reconciliation
c. Bank Overdraft
d. Window Dressing
35. A company's receipts that appear on the company's records but do not yet appear on the bank
statement
a. Deposit in Transit
b. Debit Memos
c. Credit Memos
d. Outstanding Checks
36. Checks which have been written, but have not yet cleared the bank on which they were drawn.
In the bank reconciliation, outstanding checks are deducted from the balance per bank
a. Deposit in Transit
b. DAIF
c. Outstanding Check
d. Bank Overdraft
37. A formal, written promise to pay interest and to repay the principal amount
a. Notes Payable
b. Letter
c. Promissory Note
d. Contract
38. Contingent Liability - A potential liability dependent upon some future event occurring or not
occurring

39. A cost flow assumption where the first (oldest) costs are assumed to flow out first. This means
the latest (recent) costs remain on hand.
a. FIFO
b. LIFO
c. Physical count
d. Specific Identification
40. A method of finding out ending inventory cost. It requires a detailed physical count, so that the
company knows exactly how many of each goods brought on specific dates remained at year-
end inventory
a. FIFO
b. LIFO
c. Physical Count
d. Specific Identification
41. The difference between the balance of a fixed asset account and the related accumulated
depreciation is termed as?
a. Book Value
b. Contra Asset
c. Historical Cost
d. Market Value
42. If the effect of the debit portion of an adjusting entry is to increase the balance of an expense
account, what is the effect of the credit portion of the entry?
a. Increase the balance of a liability account
b. Increases the balance of an asset account
c. Decreases the balance of an expense account
d. Decreases the balance of an stockholder’s equity
43. Which of the following is an example of an accrued expense?
a. Supplies on hand
b. Fees received but not yet earned
c. Salary owed but not yet paid
d. A two-year premium paid on fire insurance policy
44. Which account would normally not require an adjusting entry?
a. Accounts Receivable
b. Wages Expense
c. Capital Stock
d. Accumulated Depreciation
45. At the end of the fiscal year, the usual adjusting entry to Prepaid Insurance to record expired
insurance was omitted. Which of the following statements is true?
a. Net income for the year will be overstated
b. Stockholders’ equity at the end of the year will be understated
c. Insurance expense will be overstated
d. Total assets at the end of the year will be understated
46. If the effect of the credit portion of an adjusting entry is to increase the balance of a liability
account, which of the following describes the effect of the debit portion of the entry?
a. Increases the balance of a contra asset account
b. Decreases the balance of an stockholder equity account
c. Increases the balance of an expense account
d. Increases the balance of an asset account
47. The adjusting entry to adjust supplies was omitted at the end of the year. This would affect the
income statement by having
a. Expenses overstated; net income understated
b. Expenses understated; net income understated
c. Revenues understated; net income understated
d. Expenses understated; net income overstated
48. Which of the following is NOT true regarding depreciation?
a. Depreciation expense reflects the decrease in market value each year
b. Depreciation expense does not measure changes in market value
c. Depreciation is an allocation not a valuation method
d. Depreciation allocates the cost of a fixed asset over its estimated life
49. Which of the following is not a characteristic of accrual basis of accounting?
a. Supports the matching concept
b. Revenues and expenses are reported in the period in which cash is received or paid
c. Revenues are reported in the income statement in the period in which they are earned
d. All are correct
50. Adjusting entries are:
a. Rarely needed in large companies
b. Needed to bring accounts up to date and match revenue and expense
c. Optional under generally accepted accounting principles
d. The same as correcting entries
51. When is the adjusted trial balance prepared?
a. Before adjusting entries are posted
b. After adjusting entries are posted
c. After preparing the post-closing trial balance
d. After the income summary
52. One of the accounting concepts upon which deferrals and accruals are based is
a. Conservatism
b. Cost
c. Matching
d. Price-level adjustment
53. Which of the following supports the accrual basis of accounting?
a. Matching concept
b. Revenue recognition concept
c. Cash concept
d. Revenue recognition and matching concepts
54. This concept determines that expenses related to revenue be reported at the same time the
revenue is reported.
a. Cost Principle
b. Matching Concept
c. Entity Concept
d. None of the above
55. This verifies that the debits and credits balance.
a. Adjusted Trial Balance
b. Trial Balance
c. Income Summary
d. Balance Sheet
56. Accrued revenues would appear on the balance sheet as
a. Liability
b. Equity
c. Asset
d. Prepaid expenses
57. It is a method of allocating the cost of a tangible asset over its useful life.
a. Depreciation
b. Amortization
c. Depletion
d. Revaluation