Name Date

Section Scores

True or False
1. The liability created when supplies are bought on account is called an Accounts Payable.
2. Equipment is listed as an asset because it is used up in a relatively long period of time.
3. The owner’s Withdrawal account is listed with the other expenses of a business.
4. An owner can invest cash or other assets of value in the business.
5. Both sides of the fundamental accounting equation must always be equal.
6. A withdrawal by the owner is recorded as deduction from assets and an increase in expenses.
7. Assets are things of value owned by a business entity.
8. Every transaction is recorded in terms of increase and/or decreases in two or more accounts.
9. Business transactions are expressed in terms of money.
10. Accounts Receivable is concerned as asset.
11. The first step in analyzing a transaction is to determine what accounts are involved.
12. Capital represents the owner’s investment, or equity, in a business.
13. When a business receives cash, it is always recorded as an increase to cash and a decrease to an Expenses.
14. Liabilities represent amounts owed to creditors.
15. In the fundamental accounting equation, assets are added to liabilities.
16. Income increases owner’s equity and is recorded by a credit.
17. For every transaction, there is at least one account affected.
18. A debit entry always decreases the balance of an account.
19. A cash acquisition of a laptop computer will cause total assets to increase.
20. According to the balance sheet equation, the assets of a business entity must always equal the liabilities and owner’s
equity.
21. The basic summary device of accounting is the accounting equation.
22. Asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are
expected to flow to the enterprise.
23. Accounts that appear on the left side of the accounting equation usually have credit balances.
24. An accounting information system is the combination of personnel, records and procedures that a business uses o
meet its need for financial information.
25. Expenses represent the cash paid for goods sold or services in the process of generating revenue.
26. Payment of a liability will not affect total assets but will cause total liabilities to decrease.
27. In a partnership, an owner’s equity and are recorded by credits.
28. Expenses cause decreases in owner’s equity and are recorded by credits.
29. Income is increases economic benefits during the accounting period that increases equity which may have resulted
from the sale of goods or rendering of services by the business.
30. Owner’s equity is the excess of an entity’s capital over its liabilities.
31. Not all financial transactions can be analyzed in terms of the basic accounting model.
32. The liability of corporate stockholders is limited to the amount of their investment.
33. The personal liability of as partner is limited to the amount of his investment.
34. Ownership is easily transferred in a partnership.
35. Expenses has debit side.
36. Revenue has debit side.
37. In a contract of partnership, two or more persons bind themselves to contribute money, property or industry to a
common fund, with the intention of dividing the profit among themselves.
38. Auditing is the lifeblood of the government.
39. Accounts Receivable has credit balances.
40. Accumulated depreciation is a contra asset account.
41. The accounting formula is describes as Asset = Owner’s Equity + Labilities.
42. Cash and Cash Equivalent has a debit balances.
43. Notes payable has a debit balances.
44. Accounts Payable is a contra asset account.
45. Withdrawal has a debit balances.
46. Copyright and trademarks is best example of intangible assets.
47. Notes Receivable has a credit balances.
48. Depreciation Expenses has debit balances.
49. The term debit means increase and the term credit means decrease.
50. External Users are one of the users of accounting.
51. Accounting is the language of business.
52. Financial Accounting is different from Management Accounting.
53. The four phases of accounting are recording, summarizing, classifying and planning.
54. One of the disadvantages of sole proprietorship is unlimited liability.
55. Notes Payable has debit balances.
56. It is easy to form partnership rather than corporation.
57. Partnership can be dissolved by the death of a partner.
58. Revenue Recognition Principle states that revenue should recognized in the accounting period when goods are
delivered or services are rendered or performed.
59. In every transaction there is always two or more account recorded.
60. Purchases of equipment on accounts means debit equipment, credit cash.
61.
1. A business received P6,000 cash from charge
customers to apply on account. The effect of the a. Cash and Accounts Receivable
transaction is: b. Cash and Withdrawals
a. An increase in an asset and an increase in c. Cash and Capital
revenue. d. Cash and Accounts Payable
b. An increase in an asset and a decrease in e. Cash and Rent Expense
capital. 7. Amounts owed by a business are referred to as
c. An increase in an asset and a decrease in
liability. a. Assets
d. An increase in an asset and a decrease in an b. Equities
asset. c. Liabilities
e. An increase in an asset and an increase in d. Capital
capital. e. Expenses

2. The owner of a business invested P50,000 in the 8. If an owner invests her laptop computer and printer
business. What are the effects on the fundamental in the business, there us ab increase to
accounting equation?
a. Cash and Capital
a. Asset increase P50,000; Liabilities, no effect; b. Computer Equipment and Withdrawals
Owner’s Equity increases P50,000. c. Cash and Withdrawals
b. Asset increase P50,000; Liabilities, decreases d. Computer Equipment and Capital
P50,000; Owner’s Equity increases P50,000. e. Computer Equipment and Cash
c. Asset increase P50,000; Liabilities, increase
P50,000; Owner’s Equity, no effect. 9. The purchase of an asset on account will
d. Asset increase P50,000; Liabilities, no effect;
Owner’s Equity, decreases P50,000. a. Increase total liabilities and decrease total
e. Asset decreases P50,000; Liabilities, no effect; assets.
Owner’s Equity increases P50,000. b. Have no effect on total assets or liabilities.
c. Increase total assets and increase total
3. Which of the following transactions does not include liabilities.
an increase to expenses? d. Increase total assets and increase owner’s
equity.
a. Received and paid the phone bill. e. Increase total assets and decrease owner’s
b. Bought office supplies on account. equity.
c. Received cash for services performed.
d. Paid the week’s salaries. 10. Which of the following is a form of Revenue?
e. Bought medical supplies for cash.
a. A check paying a mortgage
4. When the rent for the business is paid with a check, b. A credit purchase invoice
c. Credit sales to charge customers.
a. Cash is decreased and Rent Expense is d. A cash purchase invoice
decreased. e. A check paying utilities
b. Cash is decreased and Rent Income is
increased. 11. The purchase of supplies for cash will
c. Cash is decreased and Rent Expense is
expense. a. Increase Supplies and decrease Cash.
d. Cash is decreased and Accounts Payable is b. Increase Supplies Expense and decrease
decreased. Cash.
e. Cash is increased and Rent Expense is c. Decrease Cash and increase Accounts
decreased. Payable.
d. Increase Supplies Expense and increase
5. Over a period of time, id total assets increase by P Accounts Payable.
270,000 and the total liabilities increase by e. Decrease Cash and increase Capital.
P70,000, then the owner’s equity will be increased
by?

a. P70,000
b. P340,000 12. Which of the following equations is the
c. 270,000 Fundamental Accounting Equation?
d. P200,000
a. Assets- Liabilities= Owner’s Equity
b. Assets= Liabilities + Owner’s Equity
c. Assets+ Liabilities = Owner’s Equity
6. When an owner deposits cash in an account in the d. Assets- Liabilities = Owner’s Equity
name of the business, it is an increase to e. Assets+ Liabilities = Owner’s Equity
13. The purchase of an asset for cash will

a. Increase total assets and decrease total

liabilities
b. Have no effect on total assets or total liabilities
c. Increase total assets and increase total
liabilities
d. Increase total assets and increase total
owner’s equity
e. Increase total assets and decrease total
owner’s equity

14. Which of the following is not considered an

account?

a. Equipment
b. Revenues
c. Accounts Payable
d. Cash
e. Accounts Receivable

15. Business activities have the following

characteristics, except
a. Intended for profit
b. Regularly undertaken
c. Financial in character
d. Transactions undertaken by the owner

16. Profit can be maximized by the following, except

a. Increasing sales volume
b. Decreasing cost of production
c. Increasing cost of production
d. Improving market share

17. Which of the following business organization is

most advantageous in terms of management and
operation?
a. Sole proprietorship
b. Partnership
c. Corporation
d. Government

18. Sole Proprietorship has an advantage over

partnership because the
a. Business undertakings are done with consent.
b. Business has bigger capitalization
c. Business owner has greater control in
management
d. Business creditors can go after the owner’s
personal assets.

19. The following are the classification of business

according to its nature, except
a. Agriculture c. Service Concern
b. Charity d. Merchandising

20. It is an independent verification and examination

that assures fairness of presentation of financial
statements.
a. External audit
b. Internal audit
c. Forensic audit
d. Compliance audit