WorksheetsTypes of Business: Service and Merchandising
Total questions: 20
Worksheet time: 10mins
Which statement best distinguishes a service business from a merchandising business?
Operates only online without physical locations
Buys finished goods and resells for profit
Provides intangible services, not physical goods
Transforms raw materials into finished products
A new company offers legal advice and charges fees for expertise. Which classification fits best, and why?
Manufacturing business, changes raw materials
Merchandising business, resells finished goods
Trading business, buys goods to mark up
Service business, earns revenue by expertise
Which statement best describes a manufacturing business as shown in the image?
Sells finished goods without processing
Transforms raw materials into finished goods
Distributes products from wholesalers
Provides services to end consumers
A shop plans to expand by stocking more consumer goods and profiting from buying low and selling high. Which business type fits this plan?
Service business using skilled workforce
Nonprofit organization focusing donations
Manufacturing business creating unique products
Merchandising business managing inventory
In the diagram, which concept states that revenues and expenses are recorded when they are earned or incurred, not when cash is received or paid?
Business Entity concept separates owners and business
Accrual concept recognizes when earned or incurred
Money Measurement records only monetary transactions
Going Concern assumes indefinite operations
A company records equipment at the price paid and keeps that amount on the books. Which principle is being applied?
Revenue Recognition records when cash is received
Historical Cost records assets at original cost
Consistency changes methods every reporting period
Materiality omits minor, insignificant details
ABC Company provided consulting services on December 15, 2024 and was paid on January 10, 2025. When should the revenue be recorded under accrual accounting?
January 10, 2025, when cash received
December 31, 2024, at year-end only
December 15, 2024, when services performed
January 1, 2025, start of new year
IVY Company spent Php5,000 on advertising in March to promote a product sold in April. When should the expense be recognized to follow matching?
March, when cash was spent
Evenly across March and April
April, when related sales occur
May, after revenue is collected
GHI Ltd. estimates 5% of credit sales will be uncollectible, creating a Php2,000 expected loss. What principle guides recording this expected loss now rather than waiting?
Consistency principle across accounting periods
Revenue recognition principle for earned income
Full disclosure principle about significant information
Objectivity principle requiring verifiable evidence
JKL Corporation faces a pending lawsuit that may cause a significant loss. What is the appropriate action regarding financial statements?
Disclose the contingent liability in notes
Record a gain to offset possible losses
Change inventory method to reduce expenses
Omit it until an actual cash payment occurs
MNO Retail used FIFO in 2023 and switched to LIFO in 2024 without explanation. Which principle is most directly violated?
Matching principle pairing costs with revenues
Objectivity principle ensuring neutral measurement
Consistency principle requiring method continuity
Full disclosure principle about material events
If significant doubt exists about continuing operations, how should the restaurant present its financial statements?
Accelerate all revenue recognition
Ignore uncertainty entirely
Assume indefinite going concern
Consider liquidation basis
Delivering laptops today with payment next month best illustrates which timing difference?
Matching versus materiality
Depreciation versus amortization
Accrual versus cash timing
Cost versus revaluation
Taking a bank loan changes the company’s leverage. Which ratio impact is immediate if cash increases equally with debt?
Current ratio decreases
Gross margin increases
Return on equity increases
Debt-to-assets increases
If going concern is uncertain, what disclosure is required?
No disclosure necessary
Material uncertainty explanation
Only future plans summary
Detailed asset list removal
Borrowing funds primarily affects which two sections of the balance sheet?
Assets and liabilities
Revenue and expenses
Liabilities and expenses
Equity and revenue
If payment is received on October 10 for September 5 delivery, when is accounts receivable settled?
When invoice is issued
At quarter-end only
On September 5, at delivery
On October 10, at receipt
Which assumption supports preparing statements under normal operations unless evidence suggests otherwise?
Going concern assumption
Accrual basis assumption
Matching principle assumption
Conservatism assumption
Immediately after taking the loan, how does the accounting equation balance?
Assets = Liabilities + Equity
Assets < Liabilities + Equity
Assets = Liabilities only
Assets = Equity only
What is the most appropriate revenue account affected by the laptop delivery transaction?
Sales revenue recognized
Unearned revenue created
Service revenue recognized
Other income recorded
