1.

Accounting has been given various definitions, which of the following is not one
of those definitions
a. 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 decisions:
b. 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 of at least, of a financial character and interpreting the results
thereof.
c. Accounting is a systematic process of objectively obtaining and evaluating
evidence regarding assertions about economic actions and events to
ascertain the degree of correspondence between these assertions and
established criteria and communicating the results to interested users.
d. Accounting is the process of identifying, measuring, and communicating
economic information to permit informed judgment and decisions by users
of information.
2. These are the principal means through which an entity communicates its
financial information to those outside it.
a. managerial reports
b. financial statements
c. segment reports
d. directors' statements
3. One objective of financial reporting is to provide information useful in assessing
the amounts, liming, and uncertainty of future cash flows. In regards to this
objective, which of the following is (are) correct?
I. The emphasis on "assessing cash flow prospects" means that the cash
basis is preferred over the accrual basis of accounting.
II. Information based on accrual accounting generally better indicates an
entity's present and continuing ability to generate favorable cash flows
than does information limited to the financial effects of cash receipts and
payments.
a. I only
b. II only
c. I and II
d. neither I nor II
4. Stewardship reporting focuses on:
a. Showing investors what sales revenues were
b. Showing the financial statement reader just how the resources entrusted
to the management's care were managed
c. Showing employees how high their raises will be
d. Showing the financial statement reader how many shop stewards are
employed (AICPA)
5. The following relate to financial reporting. Choose the correct statement(s).
I. Since financial statements are historical, they are of little use in making
decisions about the future.
 II. Financial accounting is based on the presumption that all statement users
need the same information.
III. Financial accounting is expressly designed to measure directly the value of a
business enterprise.
a. I, III
b. II, III
c. II only
d. none
6. Which of the following statements is not an objective of financial reporting?
a. Provide information that is useful in investment and credit decisions.
b. Provide information about enterprise resources, claims to those
resources, and changes to them
c. Provide information on the liquidation value of an enterprise.
d. Provide information that is useful in assessing cash flow prospects.
7. Which of the following statements is incorrect regarding the basic accounting
concepts?
a. Under the Residual equity theory objective is proper valuation of assets.
This is applicable when there are two classes of stockholders, common,
and preferred. This the equation is Assets – Liabilities + Preference
Shareholders Equity = Ordinary Shares Equity.
b. Under the Entity theory, the accounting objective is geared toward proper
income determination. Proper matching of cost against revenue is the
ultimate end. This is explained by the equation Assets = Liabilities +
Capital
c. Under the Proprietary theory the accounting objective is directed toward
proper valuation of assets. It is exemplified by the equation Assets –
Liabilities = Capital
d. Under the Fund theory, the accounting objective is neither proper income
determination nor proper valuation of assets but the custody and
administration of funds. The objective is directed toward cash flows
exemplified by the formula "cash inflows minus cash willows equals fund
(cash inflows – cash outflow = fund)” Government accounting and
fiduciary accounting are examples of the application of this concept
8. Choose the incorrect statement
a. An accounting information system is designed to collect data about each
transaction and even that should be recorded by an entity during a
reporting year
b. Posting is a transfer process which reclassifies chronological information
into account classification format in the ledger
c. In recording transactions, an external transaction is more likely to be
overlooked and not recorded than is an internal transaction.
d. A trial balance is prepared after adjusting entries are recorded but before
closing entries
9. Which of the following errors will be disclosed in the preparation of a trial
balance?
a. Recording transactions in the wrong account.
b. Duplication of a transaction in the accounting records,
 c. Posting only the debit portion of a particular journal entry.
d. Recording the wrong amount for a transaction to both the account
debited and the account credited
10.Receiving assets before they are earned creates a liability called
a. Unearned assets
b. deferred assets
c. unearned revenue
d. accrued revenue
11.While preparing the worksheet, the accountant made the following entry: Deba
Inventory-ending and Credit Income Summary. This entry can be properly termed
as a(n)
a. Adjusting entry
b. Reclassification entry
c. Closing entry
d. Correcting entry
12.Which of the following statements is false?
I. The chart of accounts is a listing of the accounts presently having
balances in the general lodger.
II. Some accounting software classifies some accounts as "income"
accounts, while accountants might refer to these accounts as "revenue"
accounts
III. The digits of the account numbers assigned to general ledger accounts
often have significance. For example, an account number beginning with
a "1" might signify that the account is an asset account; a "6" might
signify an operating expense, etc.
IV. In addition to the standard chart of accounts for a specific industry, you
will likely want to expand and/or modify the chart of accounts to fit your
business. One tool that would be helpful in determining the accounts for
your company would be your company's organization chart.
a. I only
b. I, IV
c. I, II, IV
d. II, III