Recap Test

School of Business and Management Recap Test
Graduate Studies – MBA Program September 2020

Financial Accounting
1. Which of the following best describes liquidity?

A. The ability to increase the value of retained earnings
B. The ability to pay the debts of the company as they become due.
C. Being able to buy everything the company requires for cash.
D. Purchasing everything the company requires on credit.
2. Equity in a business increases as a result of which of the following?

A. Payments of cash to the owners.
B. Losses from unprofitable operation of the business.
C. Earnings from profitable operation of the business.
D. Borrowing from a commercial bank.
3. Which of the following is the primary objective of financial statements?

A. Providing managers with detailed information tailored to managers' specific info needs.
B. Providing people outside the business organization with information about the company's
financial position and operating results.
C. Reporting to the tax authority the company's taxable income.
D. Indicating to investors in a particular company the current market values of their investments.
4. The valuation of assets in the balance sheet is based primarily upon:

A. What it would cost to replace the assets.
B. Cost, because cost is usually factual and verifiable.
C. Current fair market value as established by independent appraisers.
D. Cost, because in the event of liquidation, the assets would be sold at an amount equal to their
original cost.
5. Each year the accountant for Southern Real Estate Company adjusts the recorded value of
each asset to its market value. Using these market value figures on the balance sheet violates:
A. The accounting equation. C. The business entity concept.
B. The stable-dollar assumption. D. The cost principle.
6. Which of the following is correct if at the end of Crystal Imports' first year of operations,
assets are Php800,000 and equity is Php720,000?
A. The owner must have invested Php720,000 to start the business.
B. The business must be operating profitably.
C. Liabilities are Php80,000.
D. Liabilities are Php1,520,000.
7. During the current year, the assets of Wheatley's increased by Php362,000, and the liabilities
increased by Php260,000. The equity in the business must have:
A. Decreased by Php102,000.
B. Decreased by Php622,000.
C. Increased by Php102,000.
D. Increased by Php622,000.
8. A transaction caused a Php60,000 increase in both assets and total liabilities. This transaction
could have been which of the following?
A. Purchase for office equipment for Php60,000 cash.
B. Purchase of office equipment for Php120,000, paying Php60,000 cash and issuing a note
payable for the balance.
C. Repayment of a Php60,000 bank loan.
D. Investment of Php60,000 cash in the business by the owner.
9. The price of the goods sold or services rendered during a given accounting period is called:
A. Net income B. Profit C. Revenue D. Equity
10. The sequence of accounting procedures used to record, classify and summarize accounting
information is called the:
A. Accounting cycle
B. Accounting period
C. Accrual accounting
D. Double entry bookkeeping
11. The collection of accounts receivable is recorded by a:

A. Debit to Cash and a debit to Accounts Receivable.
B. Credit to Cash and a credit to Accounts Receivable.
C. Debit to Cash and a credit to Accounts Receivable.
D. Credit to Cash and a debit to Accounts Receivable.
12. What type of account will normally contain a debit balance?

A. Asset. B. Liability. C. Equity. D. Revenue.
13. Posting is the process of:

A. Transferring debit and credit entries from the journal into the appropriate ledger accounts.
B. Determining that the dollar amount of debit entries recorded in the ledger is equal to the dollar
amount of credit entries.
C. Entering information into a computerized data base.
D. Preparing journal entries to describe each business transaction.
14. Adjusting entries are prepared

A. Before financial statements and after a trial balance has been prepared.
B. After a trial balance has been prepared and after financial statements are prepared
C. After posting but before a trial balance is prepared.
D. Anytime an accountant sees fit to prepare the entries.
15. Unearned revenue may also be called

A. Profit B. Deferred revenue C. Unexpired revenue D. Services rendered
16. The United Shipping Co. made an adjusting entry accruing interest on a note payable for the
month of January for Php800. The note required 12% per annum on the principal. The principal
amount of the note payable must have been
A. Php7,000 B. Php9,600 C. Php80,000 D. Php10,800

17. Rose Corp. has a note receivable from Jewel Co for Php80,000. The note matures in 5 years
and bears interest of 6%. Rose is preparing financial statements for the month of June. Rose
should make an adjusting entry
A. Debiting Interest Revenue for Php400 and crediting Interest Receivable for Php400.
B. Debiting Interest Receivable for Php400 and crediting Interest Revenue for Php400
C. Debiting Interest Revenue for Php4,800 and crediting Interest Receivable for Php4,800.
D. Crediting Interest Payable for Php400 and debiting Interest Expense for Php400.
18. Depreciation is:
A. An exact calculation of the decline in value of an asset.
B. Only an estimate of the decline in value of an asset.
C. Only recorded at the end of a year and never over a shorter time period.
D. Management must know the exact life of an asset in order to calculate an acceptable
depreciation expense.
19. Adjustingentries are needed:

A. Whenever revenue is not received in cash.
B. Whenever expenses are not paid in cash.
C. Only to correct errors in the initial recording of business transactions.
D. Whenever transactions affect the revenue or expenses of more than one accounting period.

Recap Test

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Recap Test

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School of Business and Management Recap Test

Graduate Studies – MBA Program September 2020

1. Which of the following best describes liquidity?

2. Equity in a business increases as a result of which of the following?

3. Which of the following is the primary objective of financial statements?

4. The valuation of assets in the balance sheet is based primarily upon:

11. The collection of accounts receivable is recorded by a:

12. What type of account will normally contain a debit balance?

13. Posting is the process of:

14. Adjusting entries are prepared

15. Unearned revenue may also be called

19. Adjustingentries are needed:

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