Accounting 1 Prelim Quiz 2

University of Perpetual Help System laguna – Isabela Campus
Minante 1, Cauayan City, Isabela
College of Business and Accountancy

Principles of Accounting 1
1st Semester, A.Y. 2017 - 2018
Preliminary Term
Quiz 2
Name: ________________________________________ Date: ___________

Course Year & Section: _____________________ Score: __________
Instruction: Answer the following questions. Strictly NO ERASURES are
allowed.
I. TRUE OR FALSE. Underline True if the statement is correct and False if the statement is
wrong.
1. Cost is the exchange of price associated with a business transaction at the time the
transaction is recognized.
True False
2. When a company hires, a new employee, a recordable event has occurred.

True False
3. Notes receivable are claims against debtors evidenced by a written promise to pay certain
sum of money at a definite time to the order of a specified person or to bearer.
True False
4. The double-entry system is possible because all business transactions have two equal and
opposite aspects.
True False
5. If equipment is bought by paying P20,000 as a down payment and the remaining P40,000 in
30 days, total liabilities are increase by P20,000.
True False
6. Investments by the owner are recorded in the owner’s Capital account, not in a revenue
account.
True False
7. When payment is received for services not yet rendered, no entry is recorded until that
service has been rendered.
True False
8. An expense may be recognized and recorded although no cash outlay has been made.
True False
9. Every business transaction affects a minimum of two accounts.

True False
10. Salaries payable is a type of expense.

True False
11. A basic storage unit of accounting data is the account.

True False
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12. Transactions are analyzed on basis of source documents.
True False
13. Income statement accounts are also known as temporary accounts.

True False
14. Another word for expense is debt.

True False
15. Office supplies are classified as expenses.

True False
16. When a company receives a product previously ordered, a recordable event has occurred.
True False
II. MULITPLE CHOICE. Encircle the letter of your choice.
1. Which of the following is an asset account?
a. Insurance Expense
b. Supplies Expense
c. Office Equipment
d. Sales
2. Which of the following accounts will not affect owner’s equity?
a. Owner’s withdrawals
b. Advertising expense
c. Revenues
d. Land
3. When owner’s equity decreases, one of the following must occur:
a. withdrawals decreases
b. an asset increases
c. an income increases
d. a liability increases
4. Which of the accounts is classified differently from the others listed?
a. Prepaid Rent
b. Cash
c. Accounts Receivable
d. Owner’s Capital
5. Which of the following accounts probably would be listed after the others in a chart of
accounts?
a. Unearned Art Fees

b. Prepaid Rent
c. Owner’s Capital
d. Art Revenues
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6. Which of the following does not directly or indirectly affect the owner’s Capital account?
a. Paying accounts payable

b. Withdrawals by the owner
c. Earning revenues
d. Incurring Expenses
7. The amount of cash received or paid during a period is not a adequate measure of the
economic consequences of an organization’s activities because
a. many activities may not involve the use of cash

b. cash inflows may represent the result of activities completed in a previous period.
c. cash outflows may precede or follow the activities with which they are associated
d. All of the above reasons are correct
8. Which of the following is a business event that is also considered a recorded transaction?
a. A company hires a new employee

b. A customer purchases merchandise
c. A company orders a product from a supplier
d. An employee sends a purchase requisition to the purchasing department
9. Which of the following accounts is classified differently from the others listed?
a. Notes Payable
b. Unearned Revenues
c. Mortgage Payable
d. Art Revenues
10. When an entity pays for goods or services before the actual receipt, the payment should be
recorded as a decrease in Cash and an increase in
a. an asset
b. an expense
c. an owner’s equity account
d. a liability
11. Payment of insurance premiums in advance gives rise to
a. prepaid expense
b. unearned income
c. accrued income
d. accrued expense
12. Balance sheet accounts are
a. permanent accounts
b. temporary accounts
c. accounts with debit balance only
d. adjusting accounts
13. The accrual basis of accounting recognizes
a. revenues when cash is received

b. expenses when cash is paid
c. revenues when products are produced as part of operating activities
d. expenses when resources are consumed as part of operating activities
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14. When a customer buys services on credit, the contract is regarded as complete when
a. the services are rendered

b. the bill is presented
c. the cash payment is received
d. the date in the contract is at hand
15. The primary purpose on an account in the accounting system is to
a. store accounting transactions until they are classified

b. identify the type of organization
c. accumulate accounting information
d. determine at what point a transaction should be recorded
16. Which of the following events would not be considered an accounting transaction?
a. payment of fees to a tax consultant

b. purchase of print advertising space for a new service
c. sales of a new product during the first month of operations
d. tabulation of the results of a customer satisfaction survey
17. When collections are made on accounts receivable
a. owner’s equity increases

b. total assets increase
c. total assets decrease
d. total assets remain the same
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University of Perpetual Help System laguna – Isabela Campus

Minante 1, Cauayan City, Isabela

College of Business and Accountancy

Name: ________________________________________ Date: ___________

2. When a company hires, a new employee, a recordable event has occurred.

9. Every business transaction affects a minimum of two accounts.

10. Salaries payable is a type of expense.

11. A basic storage unit of accounting data is the account.

13. Income statement accounts are also known as temporary accounts.

14. Another word for expense is debt.

15. Office supplies are classified as expenses.

II. MULITPLE CHOICE. Encircle the letter of your choice.

1. Which of the following is an asset account?

2. Which of the following accounts will not affect owner’s equity?

3. When owner’s equity decreases, one of the following must occur:

4. Which of the accounts is classified differently from the others listed?

a. Unearned Art Fees

a. Paying accounts payable

a. many activities may not involve the use of cash

a. A company hires a new employee

11. Payment of insurance premiums in advance gives rise to

12. Balance sheet accounts are

13. The accrual basis of accounting recognizes

a. revenues when cash is received

a. the services are rendered

15. The primary purpose on an account in the accounting system is to

a. store accounting transactions until they are classified

a. payment of fees to a tax consultant

17. When collections are made on accounts receivable

a. owner’s equity increases

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Name: ______________________________ Date: _