Armando Ordinanza Challenge

Elimination Round

TEST I

TEST II

1. It is a progress report showing a list of assets and liabilities.

A. Income Statement

B. Statement of Financial Position

C. Statement of Owner's Equity

D. Trial Balance

2. All are advantages of sole proprietorship except:

A. Ease of formation

B. Operations are managed easily by the proprietor

C. It is a more stable form of business

D. The owner gets all the profit

3. Accounting is defined as a service activity whose function is to prepare financial reports that will
provide relevant information about the economy.

A. True

B. False

4. Under the accrual basis of accounting, revenues are reported in the accounting period when the

A. Cash is received

B. Services or goods have been delivered

C. Amount can be reliably measured

D. None of the above

5. Under the accrual basis of accounting, expenses are reported in the accounting period when the

A. Cash is paid

B. Expenses can be reliably measured

C. Expenses matches the revenue or is used up

D. None of the above

6. Assets are usually reported on the balance sheet at which amount?

A. Cost

B. Current Market Value

C. Expected Selling Price

D. None of the above

7. Unearned Revenues is what type of account?

A. Asset

B. Liability

C. Owner's Equity

D. None of the above

8. Which term is associated with "left" or "left-side"?

A. Debit

B. Credit

C. Neither debit nor credit

D. Either debit or credit

9. When cash is received, the account Cash will be

A. Debited

B. Credited

10. What will usually cause an asset account to increase?

A. Debit

B. Credit

11. Entries to expenses such as Rent Expense are usually

A. Debits

B. Credits

12. What is the normal balance of a capital account?

A. Debit

B. Credit

C. Neither debit nor credit

D. Either debit or credit

13. What is the normal balance of an unearned revenue account?

A. Debit

B. Credit

C. Neither debit nor credit

D. Either debit or credit

14. The owner invests personal cash in the business, assets will

A. Decrease

B. Increase

C. Remain the same

D. None of the above

15. The accounting equation should remain in balance because every transaction affects how many
accounts?

A. Only one

B. Only two

C. Two or more

D. None of the above

16. The chart of accounts is a listing of the accounts presently having balances in the general ledger.

A. True

B. False

C. None of the above

17. The digits of the account numbers assigned to general ledger accounts often have significance. For
example, an account number beginning with a "1" might signify that the account is an asset account, a
"6" might signify an operating expense, etc.

A. True

B. False

C. None of the above

18. The personal assets of the owner of a company will not appear on the company's balance sheet
because of which principle/guideline?
A. Cost

B. Economic Entity

C. Monetary Unit

D. All of the above

19. Which principle/guideline requires a company's balance sheet to report its land at the amount the
company paid to acquire the land, even if the land could be sold today at a significantly higher amount?

A. Cost

B. Economic Entity

C. Monetary Unit

D. None of the above

20. Which principle/guideline is associated with the assumption that the company will continue on long
enough to carry out its objectives and commitments?

A. Economic Entity

B. Going Concern

C. Time Period

D. Accrual Principle

21. A very large corporation's financial statements have the dollar amounts rounded to the nearest
$1,000. Which accounting principle/guideline justifies not reporting the amounts to the penny?

A. Economic Entity

B. Materiality

C. Monetary Unit

D. None of the above

22. Accountants might recognize losses but not gains in certain situations. For example, the company
might write-down the cost of inventory, but will not write-up the cost of inventory. Which
principle/guideline is associated with this action?

A. Materiality

B. Conservatism

C. Monetary Unit

D. Cost Principle
23. Which principle/guideline directs a company to show all the expenses related to its revenues of a
specified period even if the expenses were not paid in that period?

A. Cost

B. Monetary Unit

C. Time Period

D. Matching

24. A company sold merchandise of $8,000 to a customer in December. The company's sales terms
require the customer to pay the company in 30 days. The company's income statement reported the sale
in December. This is proper under which accounting principle/guideline?

A. Monetary Unit

B. Accrual

C. Revenue Recognition

D. None of the above

25. Accrual accounting is based on this principle/guideline.

A. Full Disclosure

B. Matching

C. Cost

D. None of the above

26. The book of original entry is the definition of a

A. Journal

B. Ledger

C. Trial Balance

D. None of the above

27. The balance sheet heading will specify a

A. Period of time

B. Point in time

C. None of the above

28. Which of the following is a category or element of the balance sheet?

A. Gains
B. Losses

C. Liabilities

D. Expenses

29. Client Jay pays ABC Co. $1,000 in December for ABC to perform services for Jay in 45 days. ABC uses
the accrual basis of accounting. In December ABC will debit Cash for $1,000. What will be the other
account involved in the December accounting entry prepared by ABC (and what type of account is it)?

A. Accounts Receivable (asset)

B. Prepaid Services (asset)

C. Service Revenues (revenue)

D. Unearned Revenue (liability)

30. ABC Co. has current assets of $50,000 and total assets of $150,000. ABC has current liabilities of
$30,000 and total liabilities of $80,000. What is the amount of ABC's owner's equity?

A. 20, 000

B. 70, 000

C. 90, 000

D. 120, 000

31. Which of the following will be included in the adjusting entry to accrue interest expense?

A. Debit to cash

B. Credit to interest payable

C. Debit to interest payable

D. Debit to prepaid interest

32. The adjusting entry that reduces the balance in Prepaid Insurance will also include which of the
following?

A. Credit to cash

B. Credit to insurance expense

C. Debit to insurance expense

D. Debit to insurance payable

33. The ending balance in the account Prepaid Insurance is expected to report which of the following?

A. The Accrued Amount Of Insurance Expense

B. The Original Amount Of The Insurance Premiums Paid

C. The Expired Portion Of The Insurance Premiums Paid

D. The Unexpired Portion Of The Insurance Premiums Paid

34. An item retailing for P10, 000, subject to trade discount of 25%, is paid for within the discount period
in terms of 2/10, n/30. What is the amount of payment?

A. 10,000

B. 7,500

C. 7,400

D. 7,350

35. The cost of sale is P250,000. Total purchases amounted to 300,000 which increased the total goods
available for sale is 310,000. The ending inventory is

A. 10,000

B. 70,000

C. 50,000

D. 60,000

36. O sold merchandise at list price of P150,000; 10%; 1/10; n/30. If the account is collected 8 days from
the invoice date, O will receive

A. 148,500

B. 133,650

C. 135,000

D. 133,500

37. The purchase invoice shows the amount of P250,000, 2/10, 1/20, n/30; FOB destination, collect,
P200. If the account is paid 15 days after the invoice date, the net payment should be

A. 245,000

B. 247,500

C. 247,300

D. 244,800

38. Kaya Mo Pa Ba Co. purchased merchandise for P5,000 and paid P200 for freight. FOB destination,
collect. The merchandise was sold at 120% of cost. The gross profit is
A. 1,000

B. 1,040

C. 6,000

D. 6,240

39. A debit entry for P6,750 was posted as P7,650. This error is called

A. Slide

B. Transposition

C. Transplacement

D. Misposting

40. The following are information provided by the basic accounting reports, except

A. Profitability

B. Liquidity

C. Feasibility

D. Stability/Solvency