Problem 1-1 Multiple Choice

(ACP)
1. Accounting is a service activity and its function is to provide
quantitative information, primarily financial in nature, about
economic entities, that is intended to be useful in making
economic decision. This accounting definition is given by
a. Accounting Standard Council
b. AICPA Committee on Accounting Terminology
c. American Accounting Association
d. Board of Accountancy

Answer: a. ASC
2. All of the following describe accounting, except

a. A service activity
b. An information system
c. A universal language of business
d. An exact science rather than art

Answer: d. An exact science rather than art

3. The important points made in the definition of accounting
include all of the following, except

a. Accounting information is quantitative.

b. Accounting information is both quantitative and qualitative.
c. Accounting information is financial in nature.
d. Accounting information is useful in decision making.

Answer: b. Accounting information is both quantitative and

qualitative.
4. This accounting process is the recognition or the
nonrecognition of business activities as accountable events.

a. Identifying
b. Measuring
c. Communicating
d. Reporting

Answer: a. Identifying
5. The events that affect the entity and in which other entities
participate are known as

a. Internal events
b. External events
c. Current events
d. Obligating events

Answer: External events

6. Which of the following statements is incorrect to relation to
accountable event?

a. An event is accountable when it has an effect on asset,

liability or equity.
b. The subject matter of accounting is the measurement of
economic resources and obligations.
c. Only economic activities are emphasized and recognized in
accounting.
d. Sociological and psychological matters are quantifiable.

Answer: d. Sociological and psychological matters are

quantifiable.
7. Which is the “measuring” component in the definition of
accounting?

a. The recognition or nonrecognition of business activities as

accountable events.
b. The assigning of peso amounts to the accountable events.
c. The preparation and distribution of accounting reports to
users of accounting information.
d. The preparation of audit report by CPAs.

Answer: b. The assigning of peso amounts to the accountable

events.
8. The most common financial attribute used in measuring
financial information is

a. Historical cost
b. Current cost
c. Realizable value
d. Present value

Answer: a. Historical cost

9. The “communicating” process of accounting includes all of the
following, except

a. Recording
b. Classifying
c. Summarizing
d. Interpreting

Answer: d. Interpreting
10. What is the overall objective of accounting?

a. To provide the information that the managers of an

economic entity need to control the operations.
b. To provide information that the creditors can use in deciding
whether to grant loans to an entity.
c. To measure the periodic income of the economic entity.
d. To provide quantitative financial information about an entity
that is useful in making economic decision.

Answer: d. To provide quantitative financial information about

an entity that is useful in making economic decision.