1. 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.
c. 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.
2. Accounting is described in various ways. Which of the following is not one of those descriptions?
a. Accounting is a process and a service activity.
b. Accounting is a social science and a practical art.
c. Accounting is the “language of business” because it is fundamental to the communication of financial
information.
d. Accounting is the art of professionally stealing money and other evil purposes.
3. 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.
4. An advantage of a sole proprietorship over the other forms of a business organization is
a. you are the only boss and you keep all the profits.
b. although it is easier to form, it may be more difficult to raise financing.
c. it has unlimited life.
d. it has limited liability.
5. Which of the following is not an advantage of a partnership over the other forms of business organization?
a. Compared to a sole proprietorship, risks are spread out over more than one owner.
b. Compared to a cooperative, the business organization is driven more towards the earning of profit.
c. Compared to a corporation, it is easier to form because of fewer legal requirements.
d. Compared to a corporation, it has an unlimited life and an unlimited liability.
6. Under this concept, a business is not expected to end its operations in the near term.
a. Separate entity concept
b. Going concern
c. Stable monetary unit
d. Materiality
7. Transactions and other events are recorded in the periods in which they occur, not when they affect cash.
a. Going concern
b. Accrual basis
c. Reporting period
d. Consistency
8. Which of the following relates to the concept of consistency?
a. Treating the business as a separate entity from its owner.
b. Recording sales revenue when a sale occurs rather than when the sale price is collected.
c. Measuring assets at their acquisition cost.
d. Using the same accounting treatment for similar items from period to period.
9. The cost of providing or using information should not exceed the information’s usefulness.
a. Materiality
b. Cost-benefit or Cost constraint
c. Going concern
d. Relevance
10. 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

11. 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
b. ₱870,000 ₱310,000 ₱240,000 ₱470,000 ₱150,000
c. ₱890,000 ₱240,000 ₱240,000 ₱600,000 ₱190,000
d. ₱740,000 ₱530,000 ₱170,000 ₱1,900,000 ₱1,860,000
12. A business incurs total expenses of ₱630,000 and reports loss of ₱270,000. How much is the total income?
a. 900,000
b. 320,000
c. 380,000
d. 360,000
13. Which of the following would result to total expenses of ₱480,000?
a. Total income of ₱360,000 and profit ₱120,000
b. Total income of ₱580,000 and loss of ₱100,000
c. Total income of ₱630,000 and profit of ₱150,000
d. Total income of ₱630,000 and loss of ₱150,000
14. Entity A had total assets, liabilities, and equity of ₱130M, ₱80M and ₱50M, respectively, at the beginning of
the period. During the period, Entity A’s total liabilities decreased by ₱20M, while its profit was ₱25M. There
were no other transactions or events that affected equity during the period. How much is Entity A’s ending
total assets?
a. ₱95M
b. ₱135M
c. ₱85M
d. ₱125M
15. Entity A had total assets and total liabilities of ₱150M and ₱80M, respectively, at the beginning of the period.
During the period, Entity A earned total income of ₱60 and incurred total expenses of ₱40. Entity A’s total
assets decreased to ₱130M by year-end. There were no additional contributions by, or distributions to, the
owner during the period. How much is Entity A’s ending total liabilities?
a. ₱60M
b. ₱80M
c. ₱70M
d. ₱40M
16. It is the aggregate of estimated losses from uncollectible accounts receivable.
a. Bad debts expense
b. Allowance for bad debts
c. Accounts receivable
d. Notes receivable
17. Revenues earned from rendering services are recorded in this account.
a. Sales
b. Service fees
c. Interest income
 d. Gains
18. An increase to an account is recorded
a. in the debit side of that account.
b. in the credit side of that account.
c. in the side of that account that represents its normal balance.
d. beside the account.
19. Which of the following statements is correct?
a. A contra-asset account is increased through credit.
b. Accounts receivable is increased through credit.
c. Owner’s equity is increased through debit.
d. Accounts payable is decreased through credit.
20. At the beginning of the period, a business has a cash balance of ₱20,000. During the period, total cash
collections and total cash payments amounted to ₱100,000 and ₱70,000, respectively. How much is the
ending balance of cash?
a. 10,000
b. 30,000
c. 50,000
d. 70,000

“Be joyful in hope, patient in affliction, faithful in prayer.” (Romans 12:12)

WILSON & CO.

CHART OF ACCOUNTS
BALANCE SHEET ACCOUNTS
Acct. No. ASSETS
CURRENT ASSETS INCOME STATEMENT ACCOUNTS
110 Cash
120 Petty Cash Fund Acct. No. REVENUE
130 Accounts Receivable 410 Sales
140 Notes Receivable 420 Sales Discounts
145 Allowance for Bad Debts 430 Sales Returns
150 Office Supplies COSTS
160 Merchandise Inventory 510 Freight-In
170 Prepaid Rent Expense EXPENSES
NONCURRENT ASSETS 610 Bad Debts Expense
180 Property, Plant, Equipment 620 Depreciation Expense
185 Accumulated Depreciation 630 Rent Expense
LIABILITIES 640 Insurance Expense
210 Accounts Payable 650 Salaries and Wages
220 Notes Payable 660 Advertising Expense
230 Accrued Salaries Payable 670 Utilities Expense
240 Interest Payable 680 Interest Expense
OWNER’S EQUITY 690 Freight-Out
310 Wilson, Capital
320 Wilson, Drawing
330 Income & Expense Summary
You have been hired as the senior bookkeeper of a well-known company. The following events and transactions
occurred during the month of September for Wilson & Co., a sole proprietorship owned by Mr. Wilson.
Sep. 1, 20x1 Owner contributed ₱600,000 cash, and machinery costing ₱500,000 to the business.
Sep. 3, 20x1 The business obtained a loan of ₱400,000 from Rubia Bank.
Sep. 4, 20x1 Purchase of inventory worth ₱500,000 on account.
Sep. 8, 20x1 Issued a note to Zeus Enterprises, its supplier, amounting to ₱286,498 in exchange for supplies.
Sep. 14, 20x1 Sale of goods for ₱900,000, on account. The cost which was ₱400,000.
Sep. 19, 20x1 Payment of ₱400,000 as settlement of accounts payable.
Sep. 21, 20x1 Collected ₱500,000 of accounts receivable.
Sep. 24, 20x1 Purchased equipment worth ₱480,000 on account.
Sep. 24, 20x1 Drawings of owner amounted to ₱10,000.
Sep. 28, 20x1 Paid for interest expense of ₱5,000.