Name: ________________________________________ Date:___________________

Year/Section: _______________________

SET B
I. True or False.
1. The first step in analyzing a transaction is to determine what accounts are involved.
2. Capital represents the owner's investment, or equity, in a business.
3. Liabilities represent amounts owed to creditors.
4. In the fundamental accounting equation, assets are added to liabilities.
5. Both sides of the fundamental accounting equation must always be equal.
6. The liability created when supplies are bought on account is called an account payable.
7. The owner’s withdrawals account is listed with the other expenses of a business.
8. The liability of corporate stockholders is limited to the amount of their investment.
9. Accounts payable is a duty or responsibility that an entity has no practical ability to avoid.
10. Right is the ability to prevent other parties from directing the use of the economic resource and from
obtaining the economic benefits that may flow from it.
11. In fundamental accounting equation, assets are added to the sum liabilities and owner’s equity.
12. For reporting purposes, the personal assets of the owner should be combined with the assets of the
business.
13. Business transactions are expressed in terms of money.
14. Accounts Receivable is considered an asset.
15. An owner can invest cash or other assets of value in the business.

II. Identification.
____________________1. It expects to be realized, or intends to sell or consume it, in its normal operating cycle.
____________________2. A journal entry with two accounts affected (one debit and one credit).
____________________3. The information presented in this statement are the balances as of the period from the date of
the formation of the entity rather than only the total during the period.
____________________4. This concept allows timely evaluation of the entity’s performance of the owner.
____________________5. It is prepared to check the equality of debit and credit in the balances of the accounts in the
ledger.
____________________6. Time between the acquisition of assets for processing and their realization in cash or cash
equivalents.
____________________7. It includes identification of specific accounts affected, determination of the effects on the
accounts, and determining the amount of the effect.
____________________8. It is the value of a currency expressed in terms of the number of goods or services that one unit
of money can buy.
____________________9. The occurrence of an event or of a condition that must be recorded.
____________________10. The decreases in assets, or increases in liabilities, that result in decreases in equity, other than
those relating to distributions to holders of equity claims.
____________________11. It includes identification of specific accounts affected, determination of the effects on the
accounts, and determining the amount of the effect.
____________________12. An economic unit that is legally separate from its owners.
____________________13. These type of business buy raw materials, convert them into products and then sell the
products to other companies or to final consumers.
____________________14. It is the simplest form of journal.
____________________15. These accounts accumulate information or amounts from the beginning of the business until
the financial statement date

III. Multiple Choice.

1. The measurement phase of accounting is accomplished by
a. Reporting to decision makers
b. Recording data
c. Processing data
d. Storing data
2. Which accounting process is the recognition or non-recognition of business activities as accountable events
a. Identifying
b. Communicating
c. Recording
d. Measuring
3. The entity concept means that
a. Accounts must be prepared for every firm.
b. Because a firm is separate and distinct from its owners, those owners cannot have access to its assets unless the firm
ceases to trade.
c. The financial affairs of a firm and its owner are always kept separate for the purpose of preparing accounts.
d. None of the above.
4. In which columns of a worksheet would the adjusted balance of Accumulated Depreciation appear?
a. Adjusted Trial Balance Credit, Balance Sheet Debit
b. Adjusted Trial Balance Credit, Income Statement Credit
c. Adjusted Trial Balance Debit, Balance Sheet Debit
d. Trial Balance Credit, Adjustments Credit, Adjusted Trial Balance Credit, and Balance Sheet Credit
e. Trial Balance Debit, Adjusted Trial Balance Debit
5. Worksheets are prepared because.
a. they aid in the preparation of the financial statements, adjusting entries, and closing entries.
b. they are necessary for the preparation of the financial statements.
c. they are required by generally accepted accounting principles.
d. they constitute a permanent record of all adjusting entries made for the period.
6. Which of the following is correct if the sole proprietor of an entity borrows P45,000 in the name of the entity and
deposits it into the entity’s bank account.
a. The assets of the entity increase by P45,000
b. The liabilities of the entity decrease by P45,000
c. The capital of the entity increases by P45,000
d. The drawings of the entity increase by P45,000
7. Which of the following is not an example of current asset?
a. Finished goods inventory ready for sale
b. Treasury bills
c. Cash deposits on bank
d. Trust fund
8. Suppose a debtor repays his debt of P100,000 by transferring the money into bank account of the business. The effect
of the transaction on the accounting equation would be:
a. Both assets and liabilities increase by P100,000
b. Both assets and liabilities decrease by P100,000
c. Only assets decrease by P100,000
d. Assets and liabilities remain unchanged
9. Which of the following transactions affects the total value of the liabilities of a firm?
a. Goods purchased from suppliers by cash
b. Interest received from bank
c. Office equipment bought on credit
d. Goods sold to customers on credit
10. Which of the following is not a part of owner’s equity?
a. Prepaid Expenses b. Drawings c. Profit d. Investments

ANSWER KEY
I. TRUE OR FALSE
1. True II. Identification 14. General Journal
2. True 1. Current Asset 15. Permanent accounts
3. True 2. Simple Journal Entry
4. False 3. Statement of Financial Position III. Multiple Choice
5. True 4. Periodicity 1. b
6. False 5. Trial Balance 2. a
7. False 6. Operating Cycle 3. c
8. True 7. Identification of Business Events 4. d
9. False 8. Purchasing power 5. a
10. False 9. Business Transaction 6. a
11. False 10. Expense 7. d
12. False 11. Identification of Business 8. b
13. True Events 9. c
14. True 12.Corporation 10. a
15. True 13. Manufacturing