QUIZ 1

Question 1

The role of accounting is to provide different users with financial information to make economic
decisions

Answer 1

TRUE

Question 2

Some users of the financial information of a business are employed by the business while others
are independent, outside parties

Answer 2

TRUE

Question 3

Verifiability is having information available to decision makers in time for them to make business
decisions

Answer 3

FALSE
Timeliness

Question 4

When a business is organized as a sole proprietorship, the owner may combine his personal
financial information with the business financial information given that he is the same person who
owns the business

Answer 4

FALSE
Entity - Should not combine personal financial information with business financial information

Question 5

Assets are recorded at cost when they are purchased, but the asset accounts are adjusted each
year to reflect changes in market value for valuation purposes

Answer 5

FALSE
As per historical cost basis principle, generally, an asset is recorded and remains in the account at
its original (historical) cost

Question 6

Going concern assumes that a business will continue to operate until it can sell its assets to pay
its creditors

Answer 6

FALSE
The assumption of going concern is on the premise that the business will continue to operate
normally unless conditions contrary to such premise exists such as filing for bankruptcy or
termination of the business.

Question 7

Accrual assumes that revenue is reported when it’s earned, regardless of when collection is
actually received while expense is reported when it’s incurred, regardless of when payment is
actually made.

Answer 7

TRUE

Question 7

Prepaid salaries are cash advances given to employees to be liquidated in the form of service

Answer 7

FALSE
Advances to Employees

Question 8

The status of a company’s financial strength as of a specific date is known as its financial position

Answer 8

TRUE

Question 9

The summary of the changes that occurred in the owner’s equity of the entity during a specific
time period is shown in the Statement of Changes in Owner’s Equity

Answer 9

TRUE

Question 10

Accounting is used to communicate financial information and therefore is sometimes called the

Answer 10

Language of business

Question 10

Which of the following is NOT one of the major types of services provided by public accounting
firms?:
A. Auditing
B. Bookkeeping
C. Tax accounting
D. Management advisory services

Answer 10

Bookkeeping

Question 11

How many owners does a partnership have?

Answer 11

Two or more

Question 11

It refers to the capability of information to make a difference in the decisions made by the user.

Answer 11

Relevance

Question 12

A company opts to have financial statements prepared at the end of each year to monitor business
activities. This is an adherence with

Answer 12

Time period assumption

Question 13

“You have to spend money to make money” most closely resembles which accounting principles?

Answer 13

Matching

Question 13

Which principle requires important facts that would have an effect on an investor’s decisions be
included in the financial statements?

Answer 13

Full disclosure principle

Question 14

GAAP must be followed by publicly owned companies and are changed and refined in response to
changes in the environment in which businesses operate. What does GAAP stand for?

Answer 14

Generally accepted accounting principles

Question 15

The form of Statement of Profit or Loss that is normally prepared by a service business

Answer 15

Natural form

Question 15

When the total revenues of a company exceeds its total expenses, the result will be known as

Answer 15

Net income

Question 16

The form of the statement which shows the liabilities and owner’s equity below the total assets is called the account form of the Statement of Financial Position.

Answer 16

False
Report Form

Question 17

According to the Conceptual Framework, the primary users of financial statements are the owner/s and managers.

Answer 17

False
Investors, Lenders and other creditors

Question 18

Cost-Benefit Test is not difficult to determine as both cost and benefits are easy to measure.

Answer 18

false
Benefits are not easily determinable.

Question 19

Notes to a company’s financial statements
- Document the source of financial statement facts, like literary footnotes.
- Are irrelevant facts that are immaterial in amount.
- Are an integral part of a company’s financial statements.
- Are relatively unimportant facts that do not belong in the basic financial statement

Answer 19

Are an integral part of a company’s financial statements.

Question 20

Which of the following is not considered a type of business ownership?
Partnership
One person corporation
Retail
Sole proprietorship

Answer 20

Retail