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WorksheetsFABM1 ETA Review Concept
Total questions: 99
Worksheet time: 50mins
What is the main purpose of accounting?
To keep a systematic record of financial transactions and provide useful financial information.
To monitor the number of employees in a business.
To help businesses create marketing strategies.
To produce goods and services for customers.
Which statement best describes the nature of accounting?
Accounting only deals with recording business transactions.
Accounting is a process that involves recording, summarizing, and interpreting financial information.
Accounting is only used by large businesses and corporations.
Accounting focuses only on computing business profits.
Who is known as the "Father of Accounting" for developing the double-entry bookkeeping system?
Albert Einstein
Luca Pacioli
Isaac Newton
Adam Smith
Which of the following branches of accounting focuses on recording and summarizing financial transactions for external users like investors and creditors?
Cost Accounting
Financial Accounting
Managerial Accounting
Tax Accounting
How does managerial accounting differ from financial accounting?
Managerial accounting focuses on providing information to external users, while financial accounting is for internal decision-making.
Financial accounting follows strict rules like GAAP, while managerial accounting is more flexible and used for internal decision-making.
Managerial accounting deals only with tax reports, while financial accounting prepares budgets.
Financial accounting is mainly used by company managers, while managerial accounting is for investors and government agencies.
Who are considered external users of accounting information?
Company managers and employees
Investors, creditors, and government agencies
Department heads and business owners
Internal auditors and accountants
Which of the following best explains why external users need accounting information?
Investors use it to assess a company's financial health, while creditors evaluate its ability to repay debts.
Employees rely on it to make business decisions and manage operations.
It helps internal managers create strategies for daily operations.
Business owners use it to train employees and handle company policies.
Who are considered internal users of accounting information?
Investors and suppliers
Government agencies and creditors
Managers, owners, and employees
Customers and external auditors
How do internal users benefit from accounting information?
Managers use it to make business decisions, while employees analyze it for investment opportunities.
Business owners and managers use it to plan, control, and evaluate company operations.
Customers and suppliers use it to determine product pricing and payment terms.
Government agencies use it to regulate and tax businesses.
Which form of business organization is owned by a single person who has full control and responsibility?
Partnership
Corporation
Sole Proprietorship
Cooperative
How does a corporation differ from a partnership?
A corporation is owned by shareholders and has a separate legal identity, while a partnership is owned by two or more individuals and is not a separate legal entity.
A partnership requires government registration, while a corporation does not.
A corporation is managed by all owners equally, while a partnership has a board of directors.
A partnership has unlimited liability, while a corporation has no liability at all.
Which of the following is an example of an asset?
Loan Payable
Cash
Service Revenue
Owner’s Capital
Which major account represents the business’s earnings from its operations?
Revenue
Expense
Liability
Asset
Which of the following correctly matches the five major accounts with their normal balances?
Assets, Drawings, and Equity - Credit; Liabilities, Expenses, and Revenue- Debit
Assets, Drawings, and Equity - Debit; Liabilities, Expenses, and Revenue - Credit
Assets, Drawings, and Expenses - Debit; Liabilities, Equity, Revenue - Credit
Assets, Drawings, and Expenses - Credit; Liabilities, Equity, Revenue - Debit
Which account represents a company’s financial obligation to suppliers or creditors?
Accounts Receivable
Accounts Payable
Service Revenue
Owner’s Capital
Which of the following correctly matches an account with its type?
Equipment - Liability
Utilities Expense - Revenue
Salaries Payable - Liability
Owner’s Capital - Expense
Which of the following transactions would be recorded under the revenue account?
The business purchases office supplies on account.
The business receives payment for services rendered to a client.
The business pays rent for the office space.
The owner withdraws cash for personal use.
What are the two main books of accounts used in accounting?
Ledger and Trial Balance
Journal and Ledger
Income Statement and Balance Sheet
Cash Flow Statement and Journal
How does the journal differ from the ledger?
The journal summarizes account balances, while the ledger records transactions chronologically.
The journal records transactions in chronological order, while the ledger classifies and summarizes them by account.
The journal is used only for cash transactions, while the ledger is used for credit transactions.
The journal is prepared at the end of the year, while the ledger is updated daily.
Which business document serves as proof of payment received from a customer?
Delivery Receipt
Official Receipt
Purchase Order
Sales Invoice
Which of the following best describes the nature of transactions in a service business?
Buying and selling physical goods to customers.
Providing intangible services in exchange for a fee.
Manufacturing products for distribution.
Importing and exporting goods internationally.
Which of the following best describes the nature of transactions in a merchandising business?
Buying goods and reselling them to customers for a profit.
Providing professional services like consulting or repairs.
Manufacturing raw materials into finished products.
Lending money to individuals or businesses.
How does the service provided by a managerial accounting firm differ from that of an auditing firm?
Managerial accounting focuses on preparing financial reports for external users, while auditing firms help businesses with internal budgeting and forecasting.
Auditing firms review financial records for compliance and accuracy, while managerial accounting provides financial analysis for internal decision-making.
Both firms perform the same function of ensuring tax compliance and government reporting.
Managerial accounting firms only work with large corporations, while auditing firms serve small businesses.
Which decision is typically made by external users of accounting information, such as investors?
Whether to hire new employees for the company.
Whether to invest in or lend money to the business.
How to allocate company resources for production.
What price to set for the company's products.
Which type of information is most important for external users, such as investors and creditors?
Internal company policies and employee records.
Financial statements showing profitability and financial position.
Daily task lists and operational schedules.
Personal opinions of business owners about the market.
Which of the following is an advantage of a sole proprietorship?
The owner has full control and keeps all profits.
The business has unlimited access to capital from shareholders.
The business has limited liability, protecting personal assets.
Decision-making is shared among many owners.
Which of the following best describes the difference between a merchandising business and a service business?
A merchandising business provides services, while a service business sells goods.
A merchandising business buys and sells goods, while a service business provides intangible services.
A merchandising business manufactures products, while a service business distributes them.
A merchandising business does not earn revenue, while a service business does.
Why might an entrepreneur choose to form a corporation instead of a partnership?
A corporation offers limited liability protection and easier access to capital, while a partnership requires personal liability for business debts.
A corporation is easier to establish and has fewer legal requirements than a partnership.
A corporation allows owners to have full control over decision-making, unlike a partnership.
A corporation does not have to follow government regulations, while a partnership does.
Which accounting principle states that a business’s financial transactions should be recorded separately from those of its owner?
Going Concern Principle
Business Entity Concept
Matching Principle
Revenue Recognition Principle
How does the Matching Principle affect the preparation of financial statements?
It requires businesses to recognize revenue only when cash is received.
It ensures that expenses are recorded in the same period as the revenues they help generate.
It states that business transactions should be recorded separately from personal transactions
It assumes that a business will continue to operate indefinitely.
If a business purchases office supplies on account, how will this transaction affect the accounts using the rules of debit and credit?
Debit Office Supplies, Credit Accounts Payable
Debit Accounts Payable, Credit Office Supplies
Debit Cash, Credit Office Supplies
Debit Office Supplies, Credit Cash
A company provides services to a customer on credit. Using the rules of debit and credit, how should this transaction be recorded?
Debit Service Revenue, Credit Accounts Receivable
Debit Cash, Credit Service Revenue
Debit Accounts Receivable, Credit Service Revenue
Debit Service Revenue, Credit Cash
A business owner invested ₱50,000 cash into the business. How will this transaction be recorded?
Debit Cash ₱50,000, Credit Owner’s Capital ₱50,000
Debit Owner’s Capital ₱50,000, Credit Cash ₱50,000
Debit Cash ₱50,000, Credit Service Revenue ₱50,000
Debit Accounts Payable ₱50,000, Credit Cash ₱50,000
A customer returned defective merchandise worth ₱5,000, and the company issued a refund. What is the correct journal entry?
Debit Sales Returns and Allowances ₱5,000, Credit Cash ₱5,000
Debit Sales ₱5,000, Credit Accounts Payable ₱5,000
Debit Cash ₱5,000, Credit Sales ₱5,000
Debit Inventory ₱5,000, Credit Sales Returns and Allowances ₱5,000
A merchandising business paid ₱15,000 to a supplier for a previous purchase on account. What is the correct journal entry?
Debit Accounts Payable ₱15,000, Credit Cash ₱15,000
Debit Cash ₱15,000, Credit Accounts Payable ₱15,000
Debit Inventory ₱15,000, Credit Accounts Payable ₱15,000
Debit Purchases ₱15,000, Credit Cash ₱15,000
A company paid ₱3,000 for freight charges on merchandise purchased. The terms were FOB Shipping Point. How should this be recorded
Debit Freight In ₱3,000, Credit Cash ₱3,000
Debit Accounts Payable ₱3,000, Credit Freight In ₱3,000
Debit Freight Out ₱3,000, Credit Cash ₱3,000
Debit Cash ₱3,000, Credit Freight In ₱3,000
What is the purpose of posting transactions from the journal to the ledger?
To summarize and classify financial transactions into individual accounts
To record business transactions in chronological order
To prepare financial statements directly
To calculate the total profit or loss of the business
After posting all transactions to the ledger, what is the next step in the accounting cycle?
Prepare the trial balance
Record transactions in the journal
Prepare the financial statements
Adjust the accounts
If the debit and credit columns of a trial balance do not match, what is the most likely cause?
A transaction was recorded in the wrong journal
An entry was posted to the wrong ledger account but with correct amounts
A debit or credit entry was omitted or incorrectly posted
The business had too many transactions in the period
Which of the following scenarios requires an adjusting entry?
A company paid rent in advance for six months. At the end of the first month, an adjustment is needed to recognize the rent expense.
A business owner withdraws cash for personal use.
A company purchases office supplies and pays in cash immediately.
A customer buys a product and pays in cash at the time of purchase.
A business provides services worth ₱15,000 to a client on December 28 but will not receive payment until January 10 of the following year. Which adjusting entry should be made on December 31?
Debit Accounts Receivable ₱15,000, Credit Service Revenue ₱15,000
Debit Cash ₱15,000, Credit Service Revenue ₱15,000
Debit Unearned Revenue ₱15,000, Credit Service Revenue ₱15,000
No adjusting entry is needed since payment is received next year.
Which type of journal is used to record all cash payments in a merchandising business?
Sales Journal
Cash Receipts Journal
Cash Payments Journal
General Journal
A merchandising business purchased inventory on account from a supplier. In which journal should this transaction be recorded?
Sales Journal
Cash Receipts Journal
Purchases Journal
General Journal
Why is completing the accounting cycle important for a business?
It ensures that all financial transactions are recorded, adjusted, and summarized accurately for decision-making.
It helps businesses avoid paying taxes and financial obligations.
It allows companies to skip preparing financial statements.
It eliminates the need for adjusting and closing entries.
How do the State of Financial Performance (Income Statement) and Statement of Financial Position (Balance Sheet) work together to help business owners make decisions?
The Income Statement shows the financial position of the business, while the Balance Sheet reports only cash transactions.
The Income Statement shows profitability, while the Balance Sheet provides a snapshot of assets, liabilities, and equity, helping owners assess financial health.
The Balance Sheet reports revenue and expenses, while the Income Statement tracks cash inflows and outflows.
The Income Statement and Balance Sheet are unrelated and do not affect each other.
A merchandising company had the following account balances at the end of the period:
Sales Revenue: ₱100,000
Cost of Goods Sold: ₱60,000
Operating Expenses: ₱20,000
Which closing entry correctly closes the revenue account?
Debit Sales Revenue ₱100,000, Credit Income Summary ₱100,000
Debit Income Summary ₱100,000, Credit Sales Revenue ₱100,000
Debit Retained Earnings ₱100,000, Credit Sales Revenue ₱100,000
Debit Sales Revenue ₱100,000, Credit Retained Earnings ₱100,000
A service business had a net income of ₱25,000 after closing revenues and expenses into the Income Summary account. What is the correct closing entry for transferring net income to capital?
Debit Owner’s, Capital ₱25,000, Credit Income Summary ₱25,000
Debit Income Summary ₱25,000, Credit Owner’s, Capital ₱25,000
Debit Dividends ₱25,000, Credit Owner’s, Capital ₱25,000
Debit Owner’s, Capital ₱25,000, Credit Dividends ₱25,000
A merchandising business purchased ₱20,000 worth of inventory on account under FOB Shipping Point terms. The freight cost of ₱2,000 was paid in cash. Which journal entry correctly records this transaction?
Debit Purchases ₱20,000; Debit Freight-Out ₱2,000; Credit Accounts Payable ₱20,000; Credit Cash ₱2,000
Debit Inventory ₱20,000; Debit Freight-Out ₱2,000; Credit Accounts Payable ₱20,000; Credit Cash ₱2,000
Debit Inventory ₱22,000; Credit Accounts Payable ₱20,000; Credit Cash ₱2,000
Debit Inventory ₱20,000; Credit Accounts Payable ₱20,000
A merchandising company sold ₱50,000 worth of merchandise on account with terms FOB Destination Point, 2/10, n/30. The shipping cost of ₱3,000 was paid by the seller. What is the correct journal entry for the sale?
Debit Accounts Receivable ₱50,000, Credit Sales Revenue ₱50,000; Debit Freight-Out ₱3,000, Credit Cash ₱3,000
Debit Accounts Receivable ₱50,000, Credit Sales Revenue ₱50,000
Debit Accounts Receivable ₱53,000, Credit Sales Revenue ₱50,000, Credit Freight-Out ₱3,000
Debit Accounts Receivable ₱47,000, Credit Sales Revenue ₱47,000
A merchandising company purchased ₱30,000 worth of inventory on account with terms 3/10, n/30. If they paid on the 8th day, what is the correct journal entry for the payment?
Debit Accounts Payable ₱30,000, Credit Cash ₱30,000
Debit Accounts Payable ₱30,000, Credit Cash ₱29,100, Credit Inventory ₱900
Debit Accounts Payable ₱30,000, Credit Cash ₱29,700, Credit Purchase Discounts ₱30
Debit Accounts Payable ₱30,000, Credit Cash ₱30,000, Credit Discount Lost ₱0
What is the primary objective of accounting?
To record personal financial transactions.
To provide useful financial information for decision-making.
To prepare tax returns.
To increase a company's profit.
Which of the following is NOT a function of accounting?
Marketing and advertising.
Recording financial transactions.
Preparing financial statements.
Analyzing business performance.
What is the full name of the "Father of Accounting"?
Luca Pacioli.
Adam Smith.
Benjamin Franklin.
Karl Marx.
Which accounting branch focuses on tax laws and tax returns?
Tax Accounting.
Financial Accounting.
Cost Accounting.
Auditing.
Which of the following users would be classified as an external user of accounting information?
Creditors.
Managers.
Employees.
Business owners.
Which business organization type is owned by two or more individuals?
Sole Proprietorship.
Partnership.
Corporation.
Cooperative.
Which principle states that businesses should report financial information separately from the owner’s personal finances?
Matching Principle.
Business Entity Concept.
Going Concern Principle.
Accrual Principle.
The principle that requires revenue to be recognized when earned, not when received, is called:
Business Entity Concept.
Revenue Recognition Principle.
Matching Principle.
Consistency Principle.
The main purpose of the accrual basis of accounting is:
To record cash transactions only.
To recognize revenues and expenses when they are incurred, regardless of cash flow.
To record only major transactions.
To eliminate financial statements.
Which concept assumes that a business will continue operating indefinitely?
Going Concern Concept.
Accrual Principle.
Revenue Recognition Principle.
Matching Principle.
Which of the following is an example of an asset?
Cash.
Accounts Payable.
Owner’s Capital.
Service Revenue.
The normal balance of liabilities is:
Credit.
Debit.
Either debit or credit.
None of the above.
Which of the following increases the owner’s equity?
Revenues.
Expenses.
Owner’s withdrawals.
Liabilities.
How is the purchase of office equipment on account recorded?
Debit Equipment, Credit Accounts Payable.
Debit Accounts Payable, Credit Equipment.
Debit Cash, Credit Equipment.
Debit Equipment, Credit Cash.
A customer pays a company for a service that will be provided next month. What account is affected?
Unearned Revenue.
Service Revenue.
Accounts Receivable.
Accounts Payable.
Which of the following is NOT a financial statement?
Trial Balance.
Balance Sheet.
Income Statement.
Statement of Cash Flows.
A business pays rent for three months in advance. This is recorded as:
Prepaid Rent.
Rent Expense.
Unearned Revenue.
Accounts Payable.
If a business purchases inventory on credit, what is the correct journal entry?
Debit Inventory, Credit Accounts Payable.
Debit Cash, Credit Inventory
Debit Accounts Payable, Credit Inventory.
Debit Inventory, Credit Cash.
When an expense is paid immediately, what accounts are affected?
Debit Expense, Credit Cash.
Debit Cash, Credit Expense.
Debit Expense, Credit Accounts Payable.
Debit Accounts Payable, Credit Expense.
When an owner withdraws cash for personal use, the correct entry is:
Debit Drawings, Credit Cash.
Debit Cash, Credit Owner’s Equity.
Debit Owner’s Equity, Credit Cash.
Debit Drawings, Credit Owner’s Equity.
Adjusting entries are necessary to:
Ensure financial statements reflect correct revenues and expenses.
Avoid preparing financial statements.
Increase company profits.
Eliminate liabilities.
Which account requires an adjusting entry at the end of the accounting period?
Prepaid Expenses.
Owner’s Capital.
Cash.
Accounts Payable.
What is the correct adjusting entry for supplies used during the month?
Debit Supplies Expense, Credit Supplies.
Debit Supplies, Credit Supplies Expense
Debit Cash, Credit Supplies.
Debit Supplies, Credit Cash.
Depreciation is recorded as:
Debit Depreciation Expense, Credit Accumulated Depreciation.
Debit Accumulated Depreciation, Credit Depreciation Expense.
Debit Cash, Credit Equipment.
Debit Equipment, Credit Accumulated Depreciation.
Which account is closed at the end of an accounting period?
Revenue.
Accounts Receivable.
Cash.
Equipment.
What type of business buys and sells goods rather than providing services?
Merchandising Business.
Service Business.
Manufacturing Business.
Sole Proprietorship.
Which account records the purchase of goods for resale?
Inventory.
Cost of Goods Sold.
Sales Revenue.
Prepaid Expenses.
A company receives payment from a customer for a sale made on credit. The correct entry is:
Debit Cash, Credit Accounts Receivable.
Debit Accounts Receivable, Credit Cash.
Debit Sales, Credit Accounts Receivable.
Debit Accounts Payable, Credit Sales.
In FOB Shipping Point, who pays for the freight charges?
Buyer.
Seller.
Supplier.
Customer.
Which journal is used to record inventory purchases on credit?
Purchases Journal.
Sales Journal.
Cash Receipts Journal.
General Journal.
The Balance Sheet reports:
Assets, Liabilities, and Owner’s Equity.
Revenues and Expenses.
Cash Inflows and Outflows.
Business Transactions.
Net income is calculated as:
Revenues - Expenses.
Assets - Liabilities.
Cash Inflows - Cash Outflows.
Sales - Cost of Goods Sold.
What does the Income Statement show?
Profitability of the business.
Financial position.
Total cash on hand.
Accounts receivable balances.
The statement that summarizes cash inflows and outflows is
Statement of Cash Flows.
Income Statement.
Balance Sheet.
Owner’s Equity Statement.
Which financial statement is prepared first?
Income Statement.
Balance Sheet.
Statement of Cash Flows.
Trial Balance.
Which financial statement shows a company’s financial position at a specific date?
Balance Sheet.
Income Statement.
Statement of Cash Flows.
Trial Balance.
What type of account is "Accumulated Depreciation"?
Asset.
Contra Asset.
Liability.
Expense.
A business sells goods on credit. What is the correct journal entry?
Debit Accounts Receivable, Credit Sales Revenue.
Debit Sales Revenue, Credit Accounts Receivable.
Debit Cash, Credit Sales.
Debit Accounts Payable, Credit Sales.
If total assets are PHP 500,000 and total liabilities are PHP 200,000, what is the owner’s equity?
PHP 200,000
PHP 300,000
PHP 500,000
PHP 700,000
The principle that requires expenses to be recorded in the same period as the related revenue is called:
Matching Principle.
Revenue Recognition Principle.
Going Concern Concept.
Consistency Principle.
If salaries of PHP 15,000 are unpaid at the end of the period, what is the correct adjusting entry?
Debit Salaries Expense, Credit Salaries Payable.
Debit Salaries Payable, Credit Salaries Expense.
Debit Cash, Credit Salaries Expense.
Debit Salaries Expense, Credit Cash.
The purpose of depreciation is to:
Allocate the cost of an asset over its useful life.
Reduce cash flow.
Report the asset at market value.
Increase net income.
The adjusted trial balance is prepared:
Before adjusting entries.
After closing entries.
After adjusting entries but before financial statements.
Before recording transactions.
Which accounts are closed at the end of an accounting period?
Revenue and expense accounts.
Asset accounts.
Liability accounts.
Owner’s capital account.
A business earns PHP 20,000 in service revenue but has not yet received payment. What is the correct entry?
Debit Accounts Receivable, Credit Service Revenue.
Debit Cash, Credit Service Revenue.
Debit Unearned Revenue, Credit Cash.
Debit Service Revenue, Credit Accounts Receivable.
A customer returns defective goods. What is the correct entry for the seller?
Debit Sales Returns and Allowances, Credit Accounts Receivable.
Debit Accounts Receivable, Credit Sales.
Debit Inventory, Credit Cost of Goods Sold.
Debit Accounts Payable, Credit Inventory.
In a periodic inventory system, when is inventory updated?
At the end of the accounting period.
After each sale.
Before each sale.
Every week.
Which term means a discount given for early payment?
Cash Discount.
Trade Discount.
Quantity Discount.
Credit Discount.
What does "2/10, n/30" mean in credit terms?
A 2% discount if paid within 10 days; full payment due in 30 days.
A 10% discount if paid within 2 days.
Payment is due within 2 days.
No discount is given.
