Accounting and Its Environment | 51 NAME: SCORE: SECTION: PROFESSOR: Fill in the Blanks 1. Accounting is a process of recording, analyzing, and reporting of financial information to the stakeholders of the businesses. 2. An activity carried out by a business to provide goods and services in exchange for money is known as a 3. Only business activities that can be measured in dollars and cents are recorded. This is in accordance with the STABLE montoky concept. 4. Personal financial activities of the owner of a business are not recorded in the books of the business. This complies with the _Entity. concept. 5. Transactions are recorded based on reliable and verifiable information. This is in accordance with the . OBJECTIVITY concept. 6. Transactions should be recorded in the accounts at their original cost shown in the source documents. This practice complies with the HISTORICal COST, concept.Multiple Choice 1. The concept assumes that the business has an indefinite economic life. a. accounting entity b. accounting period C. going concern d. objectivity 2. Which form of business organization is characterized by limited liability? a. Sole Proprietorship b. Partnership C. Corporation d. Both sole proprietorship and partnership 3. Which of the following processes best defines accounting? a. Measuring economic activities b. Communicating results to interested parties C. Preventing fraud d. Both a and b. 4. To which area of accounting are generally accepted accounting principles primarily relevant? a. Managerial Accounting Financial Accounting C. Tax Accounting d. Financial Reporting To all Regulatory Agencies 5. Which of the following is not one of the three types of business activities? a. Investing b. Financing C. Marketing d. Operating6. Which of the following processes is considered bookkeeping? a. Analyzing b. Reporting (C.) Recording d. Summarizing 7. Krishna started a speech therapy center. He also sells profesclean! books on speech development. What is the nature of his business? Support your answer with a reason. a. . manufacturing b. service C. trading d. service and trading 8. Which of the following is a trading business? a. a clinic b. a law firm c. a pharmacy d. a telecommunications company 9. Which of the following statements is false? A sole proprietor has limited risk with respect to the amount of resources he invests in his business. b. A sole proprietorship has only one owner. C. A sole proprietorship is easy to set up. d. A sole proprietorship may not be able to obtain loans easily. 10. A business which prepares financial statements every year is following the concept. accounting entity b.)-periodicity C. . going concern d. objectivityMultiple Choice 1. Assets are usually valued under which becks? a. Replacement cost b. Historical cost C. Net realisable value 2. Which of the following best explain the feature of consistency of presentation? a. When preparing the accounts of a firm, one should normally account for similar items in the same way from one accounting period to the next. b. Firms in the same industry must account for similar items in the same way. C. Firms must comply with accounting standards and regulations. d. None of the above. 3. . Which of the following statements about accounting concepts and the characteristics of financial reporting information is not correct? (i) Entities may exclude information that is relevant in financial statements because it is too difficult for the users to understand. (ii) The historical cost concept means that only items capable of being measured in monetary terms can be recognized in the financial statements. (ili) Consistency in use of the same accounting policies for the same or similar items from one period to the next is essential to enhance comparability among the entities. a. (i) and (ii) b. (1) and (iii) c. (ii) and (iii) d. 'All of the above 4. Which type of business organization is owned by its stockholders? a.) Corporation b. _Partnership C. Proprietorship d. All the above are owned by stockholders5. Which of the following are true of partnerships? 1. The partners' individual exposure to debt is limited. 2. Financial statements for the partnership by law must be produced and made public. 3. A partnership is not a separate legal entity from the partners themselves. a. 1 and 2 only b. 2 only C. 3 only d. 1 and 3 only 6. Which accounting concept should be considered if the owner of a business takes goods from inventory for his personal use? a. The substance over form concept b. The accrual concept c. The going concern concept The business entity concept 7. Which accounting concept states that omitting or misstating this information could influence users of the financial statements? a. The consistency concept b. The accrual concept The materiality concept d. The going concern concept, 8. Which of the following accounting concepts means that similar items should receive a similar accounting treatment? a.. Going concern b. Accrual C. Substance over form ConsistencyMultiple Choice 1. Proponents of historical costs maintain that in comparison with all other valuation alternatives for general purpose financial reporting, statements prepared using historical costs are more a. . objective. b. relevant. c. indicative of the entity's purchasing power. d. conservative. 2. The records of properties acquired and services availed of by a business are maintained in accordance with the a. business entity concept. b. cost principle. c. proprietorship principle. d. matching principle. 3. This principle requires relevant information to form part of financial statements for decision-making purposes. a. objectivity materiality C. adequate disclosure d. accounting entity 4. The principle of objectivity includes the concept of a. summarization. b. verifiability. c. classification. d. conservatism. 5. The concept of matching is best demonstrated by (a, not recognizing any expense unless some revenue is realized. b. recognizing prepaid rent received as revenue. C. associating effort with accomplishment. d. establishing an allowance for possible market decline in inventory account.6. Accounting changes are often made and the monetary impact is reflected in the financial statements of an entity even though, in theory, this may be a violation of the accounting concept of a. materiality. b. objectivity. C. conservatism. consistency. 7. The periodicity concept 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. involves dividing the life of a business entity into accounting periods of equal length thus enabling the financial users to periodically evaluate the results of business operations. 8. They encompass the conventions, rules, and procedures necessary to define what is accepted accounting practice. a. Accounting assumptions b. Accounting concepts C. Conceptual frameworks d. Generally accepted accounting principles 9. The Filipino accountants should possess knowledge to enable them to compete internationally, they are: a. General knowledge b. Organizational and Business Knowledge C. Information Technology Knowledge d. Accounting Knowledge e. All of the above. 10. Which of the following best describes the attributes of a partnership? a. Limited ability to raise capital; unlimited personal liability of owners. b. Limited ability to raise capital; limited personal liability of owners. C. ' Ability to raise to raise large capital; unlimited personal liability of owners. d. ' Ability to raise large amounts of capital; limited personal liability of owners. 11. The concept of the accounting entity is applicable a, only to the legal aspects of business organizations. b. only to the economic aspects of business organizations.Accounting and Its Environment | 59 c. only to business organizations. d. whenever accounting is involved. 12. The measurement phase of accounting is accomplished by a. storing data. b. reporting to decision makers. C. recording data. d. processing data. 13. A person applying for examination shall establish the following requisites to the satisfaction of the Board that he: a. is a Filipino citizen; b. Is of good moral character; c. is a holder of the degree of Bachelor of Science in Accountancy conferred by a school, college, academy or institute duly recognized and/or accredited by the Commission on Higher Education (CHED] or other authorized government offices; and d. has not been convicted of any criminal offense involving moral turpitude. e. "a" and "c" only. "a", "b" and "c". E. All of the above. 14. The main function is to establish and improve accounting standards that will be generally accepted in the Philippines. Ca. Financial Reporting Standards Council b. Professional Regulation Commission C. Philippine Institute of CPAs d. Board of Accountancy 15. Which area of public accounting means the examination of financial statements by a CPA for the purpose of expressing an opinion as to the fairness of the statements? a. Management advisory services b. Taxation c. Internal auditing External auditing 16. Accountants do not recognize that the value of the peso changes over time. This concept is called the stable monetary unit concept. b. going concern concept. c. cost principle. d. entity concept.60 | Basic Financial Accounting and Reporting 2021 Edition by Prof, WIN Ballada 17. The following documents shall be submitted in support of the requirements in the previous question except the a. Certificate of Live Birth in National Statistics Office (NSO) security paper. b. Marriage Contract in N50 security paper for married female applicants. College diploma with date of graduation and Special Order Number. . School Identification Card. e. Baccalaureate Transcript of Records with date of graduation and Special Order Number. F. National Bureau of Inve tigation (NBI) Clearance. 18. The basic purpose of accounting is a. To provide the information that the managers of an economic entity need to control its operations. b. To provide information that the creditors of an economic entity can use in deciding whether to make additional loans to the entity. To measure the periodic income of the economic entity. d. To provide quantitative financial information about a business enterprise that is useful in making rational economic decision. 19. During the lifetime of an entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept? objectivity periodicity C. conservatism matching 20. The skills needed to be developed by Filipino accountants include the following a. Intellectual skills. b. Interpersonal skills. C. Communication skills. d. "a" and "c" only. "a", "b" and "C". 21. 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? a. matching b. objectivity c.periodicity d. stable monetary unit22. The financial statements should be stated in terms of a common financial denominator. a. Accrual b. Going concern C. Time period d. Stable monetary unit 23. Stating assets and liabilities and changes in them in terms of a common financial denominator is a prerequisite in measuring financial position and periodic net income. a. unit of measure b. measurement of economic resources and obligations c. exchange price d. accrual 24. Carrying out professional responsibilities diligently and in accordance with applicable technical and professional standards is descriptive of the principle of professional competence and due care. b. objectivity. C. independence. d. integrity. 25. 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. 26. Which of the following is an appropriate definition of accounting? The measurement, processing, and communication of financial information about an identifiable economic entity b. A means of recording transactions and keeping records c. The interconnected network of subsystems necessary to operate a business d. Electronic collection, organization, and communication of vast amounts of information 27. 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. general accounting. b. public accounting.62 Basic Financial Accounting and Reporting 2021 Edition by Prof. WIN Balladda C. practice in commerce and industry. d. independent accounting 28. The entity concept means that Because a firm is separate and distinct from its owners, those owners cannot have access to its assets unless the firm ceases to trade. b. Accounts must be prepared for every firm. The financial affairs of a firm and its ownes are always kent separate for the purpose of preparing accounts. None of the above. 29. The financial accounting process provides information about economic activities of an enterprise for a specified accounting period that is shorter than the life of the enterprise. time period going concern measurement of economic resources and obligations d, measurement in terms of money 30. The consistency concept means that a. When preparing the accounts of a firm, one should normally account for similar Items in the same way from one accounting period to the next. b. Firms in the same industry must account for similar items in the same way. C. Firms may never change the way in which they prepare their accounts. None of the above. 31. The consistency standard of reporting requires that a. expenses be reported as charges against the period in which they are incurred. the effect of changes in accounting upon income be properly disclosed. C. extraordinary gains and losses should not appear on the income statement. d. accounting procedure: be adopted which give a consistent rate of return. 32 Which accounting process is the recognition or non-recognition of business activities as accountable events? Identifying Communicating C. Recording Measuring