Cordillera Career Development College

College of Accountancy
First Grading Examination

Instructions:
This is a multiple choice question (MCQ). Read each question and answer choice
carefully and choose the ONE best answer.

Try to answer all the questions. In general, if you have some knowledge about a
question, it is better to try to answer it. You will not be penalized for guessing.

1. 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.

2. An event is considered an accountable event if

a. it has an effect on the assets, liabilities, equity, income or expenses of the
entity.
b. it cannot be measured reliably.
c. it cannot be expressed in terms of a unit of measure.
d. it involves sociological and psychological matters.

3. Which of the following is not a characteristic of an asset?

a. It is expected to provide future economic benefits.
b. It is a resource controlled by the entity.
c. It causes an outflow of economic benefits when it is settled.
d. It has resulted from a past event.

4. It is the left side of an account.

a. Debit
b. Credit
c. Date
d. Account title

5. 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
d. Notes

6. Which of the following is not a balance sheet account?

a. Cash
b. Accounts payable
c. Owner’s drawings
 d. Salaries expense

7. These are assigned to each account to facilitate recording, cross-referencing,

and retrieval of information.
a. Account titles
b. Account numbers
c. Mobile numbers
d. Hashtags

8. CCDC’s equipment was lost due to theft. How will CCDC 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.

9. SM Company has an interest-bearing note payable. At the end of the period, SM

Company would most probably recognize which of the following?
a. Interest income
b. Interest expense
c. Gain
d. Bad debts expense

10.This account is used to record sales on credit.

a. Accounts receivable
b. Accounts receivable
c. Cash
d. Cost of sales

11.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

12.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.

13.This account is used when a business purchases inventory on account (on

credit).
a. Cash
b. Accounts receivable
c. Accounts payable
d. Prepaid supplies
14.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

15.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

16.Revenues earned from rendering services are recorded in this account.

a. Sales
b. Service fees
c. Interest income
d. Gains

17.Which of the following would result to income of ₱320,000?

a. Total expenses of ₱280,000 and loss of ₱40,000
b. Total expenses of ₱360,000 and profit of ₱40,000
c. Total expenses of ₱220,000 and loss of ₱100,000
d. Total expenses of ₱360,000 and loss of ₱40,000

18.Which of the following would result to total expenses of ₱480,000?

a. Total income of ₱360,000 and profit ₱120,000
b. Total income of ₱580,000 and loss of ₱100,000
c. Total income of ₱630,000 and profit of ₱150,000
d. Total income of ₱630,000 and loss of ₱150,000

19.A business has total assets, liabilities, and equity of ₱10,000, ₱7,000 and
₱3,000, respectively, at the beginning of 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

20.The business makes a ₱1.5M sale to a customer who orally promises to pay for
the purchase price after 15 days.
a. Accounts receivable c. Cash
Sales Sales
b. Accounts receivable d. Cost of sales
Owner’s capital Accounts receivable

21.The business pays ₱3M rent in advance.

a. Rent expense b. Prepaid rent
Rent payable Accounts payable
 c. Prepaid rent d. Rent expense
Cash Owner’s drawings

22.The business spends ₱2M in marketing and promoting the products.

a. Advertising expense c. Accounts receivable
Owner’s capital Equipment
b. Advertising expense d. Accounts payable
Cash Cash

23.The business collects ₱2.5M accounts receivable from a customer.

a. Cash c. Accounts receivable
Accounts receivable Sales
b. Cash d. Cash
Accounts payable Sales

24.The business purchases inventory costing ₱200,000.00 on account or on credit.

a. Cash c. Inventory
Accounts payable Accounts payable
b. Inventory d. Accounts payable
Cash Owner’s capital

25.The business pays accounts payable of ₱55,000.00.

a. Cash c. Inventory
Sales Accounts payable
b. Inventory d. Accounts payable
Cash Cash

26. Obtaining a loan results to

a. an increase in asset but a decrease in liability.
b. a decrease in asset but an increase in liability.
c. increase in both asset and liability.
d. decrease in both asset and liability.

27. Liabilities, owners' equity, and income are

a. increased by credits and decreased by debits.
b. decreased by debits and increased by credits.
c. decreased by both debits and credits
d. its depends on the situation

28. The general ledger account that summarizes the detailed information in a
subsidiary ledger is known as a
a. summary account. c. balance sheet
b. controlling account d. any of these

29. If total assets is ₱100 while total liabilities is ₱80, owner’s equity must be
a. ₱180 c. ₱20
b. ₱120 d. My calcu says syntax error

30. A business sells goods in Year 1 but collects the sale price only in Year 2.
According to the accrual basis and time period concepts, the business should
include the sale in its income statement in
 a. Year 1 c. Year 3
b. Year 2 d. Every year

31. Debit and debit result to

a. addition. c. multiplication.
b. deduction. d. two debits.

32. Which of the following accounts is increased by debiting it?

a. Accounts payable c. Sales
b. Equipment d. Accumulated depreciation

33. At the beginning of the period, Entity A’s notes payable had a balance of ₱1,200.
During the period, Entity A obtained an additional loan of ₱800 and made total
payments of ₱500. How much is the ending balance of Entity A’s notes payable?
Show your solutions.
a. 1,800 c. 1,200
b. 1,500 d. 900

34. Which of the following is not a special journal?

a. General Journal c. Purchase Journal
b. Sales Journal d. Cash Receipts Journal

35. A business sells goods on cash basis. This transaction is most likely recorded in
which of the following special journals?
a. Sales journal c. Cash receipts journal
b. Purchases journal d. Diary journal

36. Which of the following special journal is used when a business purchases
inventory on cash basis?
a. Cash disbursements journal c. Inventory journal
b. Purchases journal d. Cash receipts journal

37. The beginning balance of “Cash” is placed on which side of the T-account?
a. Left side
b. Right side
c. Bottom side
d. Every side

38.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.

39.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
40.A chart of accounts is
a. a listing of all accounts and their balances.
b. a subsidiary ledger.
c. a special journal.
d. a listing of all account titles.

41.How is profit or loss calculated?

a. It is the difference between net assets at the beginning and end of the
accounting period irrespective of transactions with owners.
b. It is the difference between net liabilities at the beginning and end of the
accounting period.
c. It is the difference between assets and liabilities.
d. It is the difference between income and expenses.

42. ABC Company’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)

43.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

44.The ending equity is ₱9,000. If total income for the period is ₱5,000 while total
expenses are ₱8,000, how much is the beginning balance of equity?
a. 12,000
b. 9,000
c. 6,000
d. 0

45.If the beginning equity is ₱50,000 while the ending 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)

46. XYZ Company’s total assets, liabilities and equity were ₱10,000, ₱7,000 and
₱3,000, respectively, at the beginning of the period. During the period, total
liabilities decreased by ₱4,000 while profit was ₱5,000. How much is the ending
total assets of XYZ Company?
a. 12,000
b. 11,000
c. 9,000
 d. 7,000

47.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

48.The generally accepted accounting principles (GAAP) in the Philippines are

represented by the PFRSs which are issued by
a. Pilipinas Accounting Standards
b. Kapisanan ng mga Akawntant sa Pilipinas
c. Financial Reporting Standards Council
d. International Accounting Standards Board

49.Which of the following assumptions means that money is the common

denominator of economic activity and provides an appropriate basis for
accounting measurement and analysis?
a. Going concern
b. Periodicity
c. Stable monetary unit
d. Economic entity

50.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

51.The following are decisions made by internal users except

a. To analyze the profitability of product lines
b. To impose taxes
c. To decide whether to continue or discontinue product lines
d. To decide whether to build new production facilities

52.A person who is engaged in business is called

a. a boss.
b. an entrepreneur.
c. Tsikwa
d. all of these

53.This refers to information that is expressed in words or descriptive form.

a. Qualitative information
b. Financial information
c. Quantitative information
d. Information System
54.The communicating process of accounting includes all of the following except
a. Recording
b. Summarizing
c. Classifying
d. Controlling

55. Accounting means recording of

a) Transactions b) Events
c) Both (a) and (b) d) Neither (a) nor (b)

56. Following is not the example of external users

a) Government b) Management
c) Investors d) Suppliers and other creditors

57. The system of recording transactions based on dual aspect concept is called
a) Double account system
b) Double entry system
c) Single entry system

58. The convention of conservatism is applicable

a) In providing for discount on creditors
b) In making provision for bad and doubtful debts
c) Providing for depreciation

59. The convention of conservatism, when applied to balance sheet, result in

a) Understatement of assets
b) Understatement of liabilities
c) Overstatement of capital

60. All the following are fundamental accounting concepts except

a) Duel aspect b) Going concern
c) Full disclosure d) Business entity

61. Which of the following is correct?

a) Capital is equal to assets plus liabilities
b) Assets is equal to liabilities minus capital
c) Liabilities is equal to capital plus assets
d) Capital is equal to assets minus liabilities

62. Capital brought by the proprietor is an example of

a) Increase asset and increase in liability
b) Increase liability and decrease in asset
c) Increase asset and decrease in liability
d) Increase in one asset and decrease in another asset

63. Fundamental accounting assumptions are

a) Materiality
b) Business Entity
c) Going concern
d) Dual aspect
64. The accounting equation is based on
a) Dual aspect
b) Business entity
c) Going concern
d) All of the above