ACCT 1A&B: Fundamentals of Accounting

BCSV

Fundamentals of Accounting I
Introduction to Accounting
Multiple Choice.
Choose the letter of the best answer.

Use the following choices to answer nos. 1 – 3:

A. Defined by the Accounting Standards Council (ASC)
B. Defined by the American Institute of Certified Public Accountants (AICPA) Committee on
Accounting Terminology
C. Defined by the Board of Accountancy (BOA)
D. Defined by the American Accounting Association (AAA)

1. Accounting is the art of recording, classifying and summarizing in a significant manner and in
terms of money, transactions and events which are in part at least of a financial character and
interpreting the results thereof.

2. Accounting is a service activity. Its function is to provide quantitative information, primarily

financial in nature, about economic entities, that is intended to be useful in making economic
decision.

3. Accounting is the process of identifying, measuring and communicating economic information to

permit informed judgment and decision by users of the information.

4. All of the following describe accounting, except

A. A service activity
B. An information system
C. An exact science rather than an art
D. A universal language of business

5. The important points made
A. Accounting information
B. Accounting information
C. Accounting information
D. Accounting information
in the definition of accounting include all of the following, except
is both quantitative and qualitative.
is quantitative.
is financial in nature.
is useful in decision making.

6. The overall objective of accounting is

A. To provide the information that the managers of an entity need to control the operations.
B. To provide information that the creditors can use in deciding whether to make additional
loans.
C. To measure the periodic income of the entity.
D. To provide quantitative financial information about an entity that is useful in making
economic decisions.

7. What is the law regulating the practice of accountancy in the Philippines?

A. R.A. 9892
B. R.A. 9298
C. R.A. 9928
D. R.A. 9982

8. It is the body authorized by law to promulgate rules and regulations affecting the practice of the
accountancy profession in the Philippines.
A. Board of Accountancy (BOA)
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B. Philippine Institute of Certified Public Accountants (PICPA)

C. Securities and Exchange Commission (SEC)
D. Financial Reporting Standards Council (FRSC)

9. What are the three main areas in the practice of the accountancy profession?
A. Public accounting, private accounting and government accounting
B. Public accounting, private accounting and managerial accounting
C. Auditing, taxation and managerial accounting
D. Financial accounting, managerial accounting and corporate accounting

10. What is the primary service of CPAs in public practice?

A. Auditing
B. Taxation
C. Controllership
D. Managerial accounting

11. Accountants employed in entities in various capacity as accounting staff, chief accountant or
controller are said to be engaged in
A. Public accounting
B. Private accounting
C. Government accounting
D. Financial accounting

12. It is the area of the accountancy profession that encompasses the process of analyzing,
classifying, summarizing and communicating all transactions involving the receipt and disposition
of government funds and property and interpreting the results thereof.
A. Internal auditing
B. External auditing
C. Government accounting
D. Private accounting

13. Financial accounting is concerned with

A. General-purpose reports on financial position and financial performance.
B. Specialized reports for inventory management and control.
C. Specialized reports for income tax computation and recognition.
D. General-purpose reports on change in share prices and future estimate of market position.

14. Financial accounting can be broadly defined as the area of accounting that prepares
A. General purpose financial statements to be used by parties internal to the entity.
B. Financial statements to be used by investors.
C. General purpose financial statements to be used by parties both internal and external to the
entity.
D. Financial statements to be used primarily by management.

15. Managerial accounting is the area of accounting that emphasizes

A. Reporting financial information to external users.
B. Reporting to the Securities and Exchange Commission (SEC).
C. Combining accounting knowledge with an expertise in data processing.
D. Developing accounting information for use within an entity.

16. The following information is provided by the basic accounting reports, except
A. Profitability
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B. Liquidity
C. Stability
D. Feasibility

17. Statement 1: The primary function of accounting is to prepare the financial reports and
provide them for the economic decision makers.
Statement 2: The purpose of accounting is to help financial users see the true picture of the
business in social and psychological terms.
A. Only statement 1 is correct.
B. Only statement 2 is correct.
C. Both statements are correct.
D. Both statements are not correct.

18. This work in accounting is performed after the work of accountant is complete.
A. Bookkeeping
B. Recording
C. Reporting
D. Auditing

19. The field of accounting which is directly involved in the preparation of financial statement is
A. Cost accounting
B. Managerial accounting
C. Internal auditing
D. General accounting

20. The field of accounting which deals on ensuring adherence to prescribed management policies is
A. General accounting
B. Cost accounting
C. Managerial accounting
D. Internal auditing

“Don't limit yourself. Many people limit themselves to what they think they can do. You can go as far as your mind lets you. What
you believe, remember, you can achieve.”
~Mary Kay Ash

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Suggested Key
1. B 11. B
2. A 12. C
3. D 13. A
4. C 14. C
5. A 15. D
6. D 16. D
7. B 17. A
8. A 18. D
9. A 19. D
10. A 20. C

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