Basic Acc CFAS ANSWERS
Basic Acc CFAS ANSWERS
2. Accounting has been given various definitions, which of the following is not one of those
definitions
a. Accounting is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in making economic
decisions.
b. Accounting is the art of recording, classifying, and summarizing in a significant manner and
in terms of money, transactions and events which are, in part of at least, of a financial
character and interpreting the results thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating evidence
regarding assertions about economic actions and events to ascertain the degree of
correspondence between these assertions and established criteria and communicating the
results to interested users.
d. Accounting is the process of identifying, measuring, and communicating economic
information to permit informed judgment and decisions by users of information.
4. The branch of accounting that deals with providing financial information to external decision
makers is
a. Public accounting.
b. Government accounting.
c. Financial accounting.
d. Managerial accounting.
6. External users of general-purpose financial statements include all of the following except
a. Creditors
b. Investors
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c. Owners who are directly involved in managing the business
d. Lenders
11. Which of the following is not one of the enhancing qualitative characteristics?
a. Comparability
b. Faithful representation
c. Verifiability
d. Understandability
12. Mr. Van owns a butcher shop, a restaurant, and a catering business. Separate financial
statements are prepared for each business independent of the other businesses. What accounting
principle or assumption is being applied in this situation?
a. Time period assumption
b. Separate entity assumption
c. Full-disclosure principle
d. Matching
13. A business exported goods and collected the sale price in U.S. dollars. Whenfinancial statements
are prepared, the business translates the dollars into pesos. The business is applying which of
the following accounting principles?
a. Stable monetary unit
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b. Going concern
c. Matching
d. Materiality
14. A business acquires inventory and records it as an asset. When the inventory is sold, the
business recognizes the cost as an expense. This is an application of which of the following
accounting principles?
a. Stable monetary unit
b. Going concern
c. Matching
d. Materiality
15. While making a delivery, the driver of Fastrac Courier collided with another vehicle causing
both property damage and personal injury. The party sued Fastrac for damages which could
exceed Fastrac's insurance coverage. Existence of the lawsuit was reported in the notes to
Fastrac's financial statements. What accounting principle, assumption or constraint is being
applied in this situation?
a. Full-disclosure principle
b. Conservatism constraint
c. Matching principle
d. Unit-of-measure assumption
16. When uncertainty exists, the convention of conservatism or prudence uses estimates of a
conservative nature in an attempt to ensure which of the following?
a. Assets, income, liabilities, and expenses are not overstated
b. Assets, income, liabilities, and expenses are not understated
c. Assets and income are not understated; liabilities and expenses are not overstated
d. Assets and income are not overstated; liabilities and expenses are not understated
17. Under this concept, the life of the business is divided into series of reporting periods. Thus,
businesses normally prepare financial statements at least annually.
a. Time period
b. Conservatism constraint
c. Matching principle
d. Unit-of-measure assumption
18. Under this concept, the cost of processing and communicating information should not exceed
the benefits to be derived from it.
a. Time period
b. Conservatism
c. Materiality
d. Cost-benefit
19. Which accounting principle charges low-cost capital items such as waste baskets directly to an
expense?
a. The historical cost principle
b. The materiality principle
c. The expense recognition principle
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d. The matching principle
20. Which of the following is a result of applying the prudence or conservatism principle?
a. Assets are minimized and liabilities are minimized.
b. Assets are minimized and liabilities are maximized.
c. Revenues are minimized and expenses are minimized.
d. Revenues are maximized and liabilities are maximized.
21. This government regulatory body is tasked with regulating corporations, including
partnerships. It requires corporations and partnerships to file audited financial statements.
a. Securities and Exchange Commission
b. Cooperative Development Authority
c. Department of Trade and Industry
d. Department of Corporations and Partnerships
22. The process of identifying, measuring, analyzing, and communicating financial information
needed by management to plan, evaluate, and control an organization’s operations is called
a. financial accounting.
b. tax accounting.
c. management accounting.
d. auditing.
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b. Qualitative information
c. Quantitative information
d. All of these
28. Entity A purchased inventories for ₱100,000. Entity A expects to sell the inventories for ₱120,000
and therefore records the inventories at ₱120,000 rather than at ₱100,000. Which of the following
accounting principles is violated?
a. Matching
b. Relevance
c. Historical cost
d. Materiality
29. Accounting isa body of knowledge which has been systematically gathered, classified and
organized.
a. Accounting as a practical art
b. Accounting as the language of business
c. Accounting as a social science
d. Accounting as an information system
33. Which of the following is most likely not considered a merchandising business?
a. Pharmacy
b. Rice wholesaler
c. Movie theater
d. Department store
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d. San Miguel Pure Foods
38. Which of the following does not form part of the accounting standards used in the Philippines?
a. Philippine Financial Reporting Standards (PFRSs)
b. Philippine Accounting Standards (PASs)
c. Interpretations
d. Philippine Auditing Practice Statements
39. Mr. Juan Batumbakal is an accountant in the Philippines while Mr. John Stonesteelis an
accountant in a foreign country that uses the International Financial Reporting Standards. Which
of the following statements is correct?
a. Mr. John’s accounting standardsare superior to those of Mr. Juan’s.
b. Mr. John is more intelligent than Mr. Juan because Mr. John uses better accounting
standards.
c. Mr. Juanis an inferior accountant compared to Mr. John because Mr. John is a foreigner and
Filipinos give higher regard to foreigners compared to their fellow countrymen.
d. Mr. Juan and Mr. John use essentially the same accounting standards.
40. This type of business organization has the tendency to become monopolistic. It can hamper a
country’s development by restricting the entrance of other smaller businesses but with much
better products to the market; thereby, leaving members of the society with no other choice but
to buy the inferior products of those monopolistic businesses.
a. Cooperative
b. Sole proprietorship
c. Partnership
d. Corporation
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41. The process of providing financial information to external decision makers is referred to as:
a. Public accounting.
b. Government accounting.
c. Financial accounting.
d. Managerial accounting.
42. This account is used to record payments received from customers prior to the delivery of goods
or rendering of services.
a. Accrued income
b. Unearned income
c. Prepaid asset
d. Accounts receivable
45. AlingNena’s Sari-sari Store’s total sales during the period were ₱100M. Of that amount, ₱60M
was on credit. If the total business expenses were ₱70M, how much is the profit (loss)?
a. 30M
b. (30M)
c. 10M
d. (10M)
46. The beginning equity is ₱5,000. If total income for the period is ₱8,000 while total expenses are
₱6,000, how much is the ending balance of equity?
a. 7,000
b. 5,000
c. 3,000
d. 1,000
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Solution:
Equity, beginning(squeeze) 12,000
Add: Income 5,000
Less: Expenses (8,000)
Equity, ending(start) 9,000
48. If thebeginningequityis ₱50,000 while theending equity is ₱70,000, how much is the profit (loss)
for the period?
a. 20,000
b. (20,000)
c. 10,000
d. (10,000)
Solution:
Equity, beginning 50,000
Add: Profit (or Less: Loss) 20,000 (squeeze)
Equity, ending 70,000
49. Entity A’s total assets, liabilities and equity were₱10,000, ₱7,000 and ₱3,000, respectively, at the
beginningof the period. During the period, total liabilities decreased by₱4,000 while profit was
₱5,000. How much is the ending total assets of Entity A?
a. 12,000
b. 11,000
c. 9,000
d. 7,000
Solution:
Assets = Liabilities + Equity
Beg. 10,000 = 7,000 + 3,000
Decrease in liabilities/ Profit (4,000) 5,000
End. ? = 3,000 + 8,000
Answer: Ending total assets = (3,000 liabilities, end. + 8,000 equity, end.) = 11,000
50. At the start of the period, a business has total assets of ₱500,000 and total liabilities of ₱300,000.
During the period, the business earned total income of ₱1,000,000 and total expenses of ₱640,000.
No additional investments or withdrawals were made by the owner. Total assets at the end of
the period were ₱830,000. How much is the total liabilities at the end of the period?
a. 280,000
b. 270,000
c. 260,000
d. 240,000
Solution:
500,000 – 300,000 = 200,000 + 1,000,000 – 640,000 = 560,000 equity, end.
830,000 – 560,000 = 270,000
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51. The generally accepted accounting principles (GAAP) in the Philippines are represented by the
PFRSs which are issued by
a. Pinoy Accounting Standards
b. KapisananngmgaKontadorsa Pilipinas
c. Financial Reporting Standards Council
d. International Accounting Standards Board
52. Which of the following assumptions means that money is the common denominator of economic
activityand provides an appropriate basis for accounting measurement and analysis?
a. Going concern
b. Periodicity
c. Stable monetary unit
d. Economic entity
53. This branch of accounting focuses on catering to the information needs of internal users.
a. Management accounting
b. Financial accounting
c. Auditing
d. External accounting
54. You want to put up a business – a pizza parlor. However, you have this dilemma – you do not
want to put up the business alone but you also do not want to enter into business deals with
people you do not trust. At the most, you are only willing to accept one other individual to help
you put up your pizza business. You have in mind your best friend who is more than willing to
contribute resources in putting up the business. She is very excited about your business proposal
and even changed her Facebook status to “self-employed.” She just texted you that she is willing
to quit her day job in order to help you put up the pizza business. What type of business
organization best suits your need?
a. Sole proprietorship
b. Partnership
c. Corporation
d. Cooperative
56. MangKulas Company sells “balut,” “penoy,” “taho,” and barbeque. At the same time,
MangKulas Company also offers spa, manicure, pedicure, and armpit hair removal to its
customers. MangKulas Company is referred to as a
a. high breed business.
b. hybrid business.
c. complicated business.
d. hard-working business.
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a. a boss.
b. An entrepreneur.
c. Chinese.
d. all of these
59. The communicating process of accounting includes all of the following except
a. Recording
b. Summarizing
c. Classifying
d. Controlling
60. Which of the following best describes the basic purpose of accounting?
a. To provide information about a reporting entity that is useful in making economic decisions.
b. To provide all the information needed by management in managing the operations of a
reporting entity.
c. To provide information that the creditors can use in deciding whether to make additional
loans.
d. To provide accountants something to do.
64. It is a record of the increases and decreases in a specific item of asset, liability, equity, income or
expense.
a. Journal
b. Account
c. Accountant
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d. Notes
66. Theseare assigned to each account to facilitate recording, cross-referencing, and retrieval of
information.
a. Account titles
b. Account numbers
c. Mobile numbers
d. Hashtags
67. Entity A’s equipment was lost due to theft. How will Entity A record this event?
a. Recognize the carrying amount of the lost equipment as gain.
b. Charge the carrying amount of the lost equipment as loss.
c. Go to the police station and record the event in the police officer’s logbook.
d. This event is not recorded.
68. Entity A has an interest-bearing note payable. At the end of the period, Entity A would most
probably recognize which of the following?
a. Interest income
b. Interest expense
c. Gain
d. Bad debts expense
69. This represents the value of inventories that have been sold during the accounting period.
a. Interest Expense
b. Travel expense
c. Rent expense
d. Cost of sales
71. This account is used to record the cost of purchased goods that are intended for resale.
a. Building
b. Inventory
c. Accounts receivable
d. Owner’s capital
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72. The business acquires equipment. The business allocates the equipment’s cost over the
equipment’s useful life, instead of expensing it right away. The portion of the equipment’s cost
that is expensed during the period is recorded as
a. Bad debts expense.
b. Equipment.
c. Allowance for bad debts.
d. Depreciation expense.
73. This account is used when a business purchases inventory on account (on credit).
a. Cash
b. Accounts receivable
c. Accounts payable
d. Prepaid supplies
74. Payments to employees as compensation for the services they have rendered during a period are
recorded in this account.
a. Rent expense
b. Cost of sales or Cost of goods sold
c. Freight-out
d. Salaries expense
75. This account is used to record the investments of the business owner to the business.
a. Owner’s capital
b. Owner’s drawings
c. Salaries expense
d. Loss
Solution: 360,000 – 40,000 = 320,000 income (checking: 320,000 income – 360,000 expenses = -40,000 loss)
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Solution: 630,000 – 150,000 = 480,000 expense (checking: 630,000 income – 480,000 expenses = 150,000
profit)
79. A business has total assets, liabilities, and equity of ₱10,000, ₱7,000 and ₱3,000, respectively, at
the beginningof the period. During the period, total liabilities decreased to₱4,000 while profit
was₱5,000. How much is the ending total assets?
a. 12,000
b. 11,000
c. 9,000
d. 7,000
Solution:
Assets = Liabilities + Equity
Beg. Irrelevant = Irrelevant + 3,000
Profit Irrelevant 5,000
End. ? = 4,000 + 8,000
Answer: Ending total assets = (4,000 liabilities, end. + 8,000 equity, end.) = 12,000
“Samahan nawaa!”
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