UNIVERSITY OF MINDANAO – BANSALAN
Fundamentals in Accounting Part 1 (Acctg1A)
First Exam
SCORE:
LAST NAME FIRST NAME MI.
Course/Year:
General Instructions: 1. ALL answers must be reflected in the answer sheet provided.
2. NO ERASURES are allowed.
I. MULTIPLE CHOICE. Choose the letter of the correct answer.
1. The basic purpose of accounting is
a. to provide quantitative financial information about a business enterprise that is useful on
making rational economic decision.
b. to measure the periodic income of the economic entity.
c. to provide the information that the managers of an economic entity need to control its
operations.
d. to provide information that the creditors of an economic entity can use in deciding
whether to make additional loans of the entity.
2. The concept of accounting entity is applicable
a. only to the legal aspects of business organizations.
b. only to the economic aspects of business organizations.
c. only to business organizations.
d. whenever accounting is involved.
3. Statement 1: A partnership is always owned by two individuals.
Statement 2: One characteristic of a corporation is that its owners are personally liable for
any debts incurred by the business.
a. True;True
b. False;False
c. True;False
d. False;True
4. The financial statements should be stated in terms of a common financial denominator.
a. Accrual
b. Going concern
c. Stable monetary unit
d. Time period
5. Which of the following accounting concepts states that an accounting transaction should be
supported by sufficient evidence to allow two or more qualified individuals to arrive at
essentially similar conclusion?
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a. Periodicity
b. Matching
c. Stable monetary unit
d. Objectivity
6. This principle requires relevant information to form part of financial statements for decision-
making purposes.
a. Accounting entity
b. Adequate disclosure
c. Materiality
d. Objectivity
7. The principle of objectivity includes the concept of
a. summarization.
b. classification.
c. verifiability.
d. conservatism.
8. Statement 1: For reporting purposes, the personal assets and debts of business owners
should be combined with the assets and debts of the business.
Statement 2: The separation of the owner and his business is only an accounting
assumption which is not true in real situation.
a. True;True
b. False;False
c. True;False
d. False;True
9. Accountants employed by a particular business firm or not-for-profit organization, perhaps as
chief accountant, controller, or financial vice president, are said to be engaged in
a. practice in commerce and industry
b. independent accounting
c. general accounting
d. public accounting
10. Carrying out professional responsibilities diligently and in accordance with applicable
technical and professional standards is descriptive of the principle of
a. objectivity.
b. professional competence and due care.
c. independence.
d. integrity.
11. A professional accountant should be straightforward and honest in all professional and
business relationships. This is in consonance with the fundamental principle of
a. integrity.
b. objectivity.
c. confidentiality.
d. professional competence and due care.
12. The periodicity concept
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a. requires that all companies prepare monthly, quarterly, and annual financial statements.
b. results from the Bureau of Internal Revenue requirement that taxable income be reported
on an annual basis.
c. requires all companies to use a fiscal year ending December 31.
d. involves dividing the life of business entity into accounting periods of equal length thus
enabling the financial users to periodically evaluate the results of business operation.
13. The communication phase of accounting is accomplished by
a. storing data.
b. recording data.
c. reporting to decision makers.
d. processing data.
14. They have an interest in information about the continuance of an enterprise, especially when
they have a long-term involvement with, or are dependent on, the enterprise.
a. Customers
b. Employees
c. Government and their agencies
d. Public
15. Statement 1: All members of the accountancy profession are Certified Public Accountants.
Statement 2: The terms bookkeeping and accounting are synonymous.
a. True;True
b. False;False
c. True;False
d. False;True
16. Financial reports communicated after an accounting decision has been made defeat the
primary purpose of which characteristics?
a. Materiality
b. Timeliness
c. Conservatism
d. Adequate disclosure
17. Financial reporting is concerned only with information that is significant enough to affect
evaluation or decision.
a. Materiality
b. Timeliness
c. Comparability
d. Cost and benefit
18. Accounting is a service activity. Its function is to provide
a. quantitative and qualitative information.
b. qualitative information.
c. quantitative information.
d. None of the above.
19. Those who lend money or deliver goods and services before being paid are called
a. investors.
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b. creditors.
c. underwriters.
d. debtors.
20. Which of the following is an appropriate definition of accounting?
a. A means of recording transactions and keeping records
b. The interconnected network of subsystems necessary to operate a business
c. Electronic collection, organization and communication of vast amounts of information
d. The measurement, processing, and communication of financial information about an
identifiable economic entity.
21. It is the capacity of information to make a difference in decision by helping users evaluate
past, present or future events, or confirming, or correcting, their past evaluations.
a. Understandability
b. Comparability
c. Relevance
d. Neutrality
22. Statement 1: Manufacturing companies buy raw materials, convert them into products and
then sell the products to other companies or to final consumers.
Statement 2: A service concern business generates revenue from selling of goods.
a. True;True
b. False;False
c. True;False
d. False;True
23. To be a perfectly faithful representation, a depiction should have these characteristics,
except:
a. Completeness
b. Materiality
c. Freedom from error
d. Neutrality
24. It is the ability to bring together for the purpose of noting similarities and dissimilarities.
a. Comparability
b. Understandability
c. Consistency
d. Relevance
25. The financial information must be comprehensible or intelligible if it is to be useful.
a. Completeness
b. Comparability
c. Understandability
d. Relevance
26. According to the conceptual framework, the usefulness of providing information in financial
statements is subject to the constraint of
a. Representational faithfulness
b. Consistency
c. Timeliness
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d. Cost
27. Statement 1: Expenses should be recognized in the accounting period in which the goods or
services were actually used to produce revenue.
Statement 2: Revenue is recognized when goods have been delivered or services have
been performed.
a. True;True
b. False;False
c. True;False
d. False;True
28. All of the following are enhancing qualitative characteristics, except
a. Comparability
b. Verifiability
c. Relevance
d. Understandability
29. An item that meets the definition of an element should be recognized if the following criteria
are met.
I. It is probable that any future economic benefit associated with the item will flow to or
from the enterprise; and
II. The item has a cost or value that can be measured with reliability.
a. I only
b. II only
c. Both I and II
d. Either I and II
30. It is the result of the standard of adequate disclosure
a. Understandability
b. Faithful representation
c. Neutrality
d. Relevance
31. Which of the following statements is incorrect?
a. In accordance with the unit of measure assumption, accountants normally revise the
amounts to reflect the changing purchasing power of money due to inflation or deflation.
b. Expenses are matched with revenues, not the reverse.
c. In accordance with the going concern assumption, the life of a business is presumed to
be indefinite.
d. The accrual method, which builds directly on the revenue and matching principles,
ignores the timing of cash receipts and payments when determining when to recognize
revenue and expenses.
32. Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the
consideration given to acquire them at the time of their acquisition.
a. Current cost
b. Present value
c. Historical cost
d. Realizable value
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33. They need information about the resources and claims against the resources of the entity to
assess how the effectively and efficiently management has discharged their responsibilities
to use the existing resources.
a. Other users
b. Primary users
c. Management
d. Public
34. The attributes of relevance include all except
a. Predictive value
b. Feedback value
c. Materiality
d. Neutrality
35. Statement 1: The set of guidelines and procedures that constitute acceptable accounting
practice at a given time is GAAP, which stands for generally accepted accounting practices.
Statement 2: A business transaction is the occurrence of an event or of a condition that must
be recorded.
a. True;True
b. False;False
c. True;False
d. False;True
II. IDENTIFICATION. Under the “business entity concept” which of the following are considered as
business transactions and events? Place a “check” mark on the space provided, otherwise,
place an “X” mark.
1. repair of a car owned by business
X 2. tuition fees for the children
X 3. salaries paid to housekeepers
4. salaries paid to employees
5. cash withdrawn from the business
6. salaries paid to a company driver
X 7. repair of house owned by manager
X 8. payment of family’s medical expenses
X 9. payment of a personal loan to a bank
10. gasoline withdrawn for company’s used
X 11. payment of supplies for her child
12. payment of building rental of the business
X 13. payment of manager’s personal tax
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15. payment of business loan
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“Have confidence in yourself. You have studied and know the answers to the questions. This exam
is just the next step in your life, not the last one. GOD BLESS to you as you take this step.”
- KEEP FIGHTING -
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