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WorksheetsBasic Accounting and Financial Reports
Total questions: 10
Worksheet time: 5mins
A company's balance sheet shows total assets of Php1,000,000 and total liabilities of Php600,000. If the company declares and pays a cash dividend of Php50,000, what will be the impact on the accounting equation?
Assets will decrease by Php50,000, and liabilities will increase by Php50,000.
Assets will decrease by Php50,000, and equity will decrease by Php50,000.
Liabilities will decrease by Php50,000, and equity will increase by Php50,000.
There will be no change in the total amounts of assets, liabilities, or equity.
Which of the following scenarios would MOST likely result in a decrease in a company's retained earnings?
An increase in revenue due to a successful marketing campaign.
The issuance of new shares of common stock to investors.
The declaration and payment of dividends to shareholders.
The acquisition of a new piece of equipment financed entirely by a bank loan.
When preparing a statement of cash flows, which of the following activities would be classified under 'Investing Activities'?
Cash received from the sale of a long-term asset.
Cash paid to suppliers for inventory purchases.
Cash received from customers for services rendered.
Cash paid to employees for salaries.
A company uses the accrual basis of accounting. In December 2024, they provided services worth Php80,000 to a client on credit. Payment is expected in January 2025. How will this transaction MOST appropriately be reflected in the company's financial statements for the year ended December 31, 2024?
Revenue of Php80,000 will be recognized on the income statement, and an accounts receivable of Php80,000 will be recorded on the balance sheet.
No revenue or accounts receivable will be recorded until cash is received in January 2025.
Cash of Php80,000 will be recorded on the balance sheet, and no revenue will be recognized on the income statement.
An expense of Php80,000 will be recognized on the income statement, and an accounts payable of Php80,000 will be recorded on the balance sheet.
A company purchased inventory for Php100,000 on credit. Later, they sold half of this inventory for Php75,000 in cash. Assuming a perpetual inventory system, what is the immediate impact of this sale on the company's gross profit?
Gross profit increases by Php75,000.
There is no immediate impact on gross profit until the remaining inventory is sold.
Gross profit decreases by Php25,000.
Gross profit increases by Php25,000.
Which of the following is the PRIMARY purpose of the statement of owner's equity (or statement of changes in equity for a corporation)?
To report the financial position of a company at a specific point in time.
To summarize the revenues and expenses of a company over a period of time.
To explain the changes in the equity accounts of a business over a period of time.
To detail the cash inflows and outflows of a company over a period of time.
A company's current ratio is 2:1. If they use cash to pay off a portion of their short-term liabilities, what will be the MOST likely effect on their current ratio?
The current ratio will decrease.
The current ratio will increase.
The current ratio will remain unchanged.
The effect on the current ratio cannot be determined without more information.
When analyzing a company's financial statements, a consistently increasing debt-to-equity ratio over several periods might indicate:
The company is becoming more profitable and efficient in its operations.
The company is relying more heavily on debt financing relative to equity financing, potentially increasing financial risk.
The company's asset base is expanding rapidly due to sound investment decisions.
The company is effectively managing its working capital and liquidity.
Which of the following accounting principles or concepts BEST dictates when revenue should be recognized?
The revenue recognition principle.
The going concern assumption.
The matching principle.
The cost principle.
Why is it crucial for companies to prepare accurate and reliable financial reports?
To ensure that employees receive their salaries on time.
To minimize the amount of paperwork required by the accounting department.
To guarantee that the company's stock price will increase.
To comply with tax regulations and provide information for decision-making.
