Financial Accounting & Reporting First Grading Examination: Name: Date: Professor: Section: Score
Financial Accounting & Reporting First Grading Examination: Name: Date: Professor: Section: Score
Financial Accounting & Reporting First Grading Examination: Name: Date: Professor: Section: Score
2. Accounting can be used as a tool in doing evil things, like embezzling of funds. All of the
following can guide the accountant so that he/she will not misuse accounting, except
a. the strict adherence to generally accepted accounting standards and practices.
b. the adherence to a code of ethical conduct.
c. proper education and the inculcation of a sense of integrity on the accountant.
d. the regular use of social media and the strict adherence to the values promoted by TV shows
and Hollywood movies.
4. 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.
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d. To produce accountants.
6. The branch of accounting that deals with providing financial information to external decision
makers is
a. Public accounting.
b. Government accounting.
c. Financial accounting.
d. Managerial accounting.
8. External users of general-purpose financial statements include all of the following except
a. Creditors
b. Investors
c. Owners who are directly involved in managing the business
d. Lenders
9. You want to put up a business – a pizza parlor. However, you have this dilemma – you do not
want to put up the business alone but you also do not want to enter into business deals with
people you do not trust. At the most, you are only willing to accept one other individual to help
you put up your pizza business. You have in mind your best friend who is more than willing to
contribute resources in putting up the business. She is very excited about your business proposal
and even changed her Facebook status to “self-employed.” She just texted you that she is willing
to quit her day job in order to help you put up the pizza business. What type of business
organization best suits your need?
a. Sole proprietorship
b. Partnership
c. Corporation
d. Cooperative
11. Mang Kulas Company sells “balut,” “penoy,” “taho,” and barbeque. At the same time, Mang
Kulas Company also offers spa, manicure, pedicure, and armpit hair removal to its customers.
Mang Kulas Company is referred to as a
a. high breed business.
b. hybrid business.
c. jack of all trades business.
d. hard-working business.
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12. Accounting concepts and principles can be derived from
a. the Standards (i.e., IFRS or PFRS).
b. the Conceptual Framework.
c. long-time use in the profession and have been proven to be most useful.
d. All of these are sources of accounting concepts and principles used in practice.
13. When uncertainty exists, the convention of conservatism or prudence uses estimates of a
conservative nature in an attempt to ensure which of the following?
a. Assets, income, liabilities, and expenses are not overstated
b. Assets, income, liabilities, and expenses are not understated
c. Assets and income are not understated; liabilities and expenses are not overstated
d. Assets and income are not overstated; liabilities and expenses are not understated
14. Which of the following does not form part of the accounting standards used in the Philippines?
a. Philippine Financial Reporting Standards (PFRSs)
b. Philippine Accounting Standards (PASs)
c. Interpretations
d. Philippine Auditing Practice Statements
15. Under this concept, the life of the business is divided into series of reporting periods. Thus,
businesses normally prepare financial statements at least annually.
a. Time period
b. Conservatism constraint
c. Matching principle
d. Unit-of-measure assumption
16. Under this concept, the cost of processing and communicating information should not exceed
the benefits to be derived from it.
a. Time period
b. Conservatism
c. Materiality
d. Cost-benefit
17. While making a delivery, the driver of Fastrac Courier collided with another vehicle causing
both property damage and personal injury. The party sued Fastrac for damages which could
exceed Fastrac's insurance coverage. Existence of the lawsuit was reported in the notes to
Fastrac's financial statements. What accounting principle, assumption or constraint is being
applied in this situation?
a. Full-disclosure principle
b. Conservatism constraint
c. Matching principle
d. Unit-of-measure assumption
18. The official accounting standard setting body in the Philippines is the
a. Accounting Standards Committee (ASC).
b. Financial Reporting Standards Council (FRSC).
c. Bureau of Internal Revenue (BIR).
d. Financial Accounting Standards Board (FASB).
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19. Information has this qualitative characteristic if two different users could reach a general
agreement as to what the information intends to represent.
a. Relevance
b. Comparability
c. Faithful representation
d. Verifiability
20. Mr. Juan Batumbakal is an accountant in the Philippines while Mr. John Stonesteel is an
accountant in a foreign country that uses the International Financial Reporting Standards. Which
of the following statements is correct?
a. Mr. John’s accounting standards are superior to those of Mr. Juan’s.
b. Mr. John is more intelligent than Mr. Juan because Mr. John uses better accounting
standards.
c. Mr. Juan is an inferior accountant compared to Mr. John because Mr. John is a foreigner and
Filipinos give higher regard to foreigners compared to their fellow countrymen.
d. Mr. Juan and Mr. John use essentially the same accounting standards.
22. Mr. Van owns a butcher shop, a restaurant, and a catering business. Separate financial
statements are prepared for each business independent of the other businesses. What accounting
principle or assumption is being applied in this situation?
a. Time period assumption
b. Separate entity assumption
c. Full-disclosure principle
d. Matching
23. It is an economic resource controlled by the entity that has resulted from past events and has a
potential to produce economic benefits.
a. Asset
b. Equity
c. Liability
d. Income
24. This financial statement element is defined in terms of increases or decreases in assets or
liabilities during the period resulting in changes in equity, but excluding contributions from, or
distributions to, the business owner.
a. Income
b. Expense
c. Profit
d. a and b
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25. If income exceeds expenses,
a. a loss is incurred.
b. total equity is decreased.
c. total equity is not affected.
d. profit is earned.
28. In which of the following cases would you have a present obligation?
a. You have a strong desire to purchase a new electronic gadget next year.
b. You promised all your friends that you will treat them for a snack tomorrow and, as a
consequence, you will have to honor your promise.
c. You told a supplier of your desire in (a) above, but you did not make any commitment hence
you can always purchase from another supplier.
d. You purchased a can of sardines from the store, on credit. Upon opening the can, you found
out that the sardines were spoiled. The store owner agreed not to collect the purchase price.
29. In which of the following cases would you have a present obligation?
a. You intend to enrol in a school but you don’t have money for tuition fee.
b. Your Mama gave you money for tuition fee but you have not yet enrolled.
c. You enrolled in school and were assessed tuition fee. However, because you qualified for a
100% scholarship, your school cancelled your tuition fee, including miscellaneous fees. Your
school even committed on giving you monthly allowance.
d. You enrolled in school and paid in full your tuition fee.
31. It is a present obligation that has resulted from past events and has the potential to cause a
transfer of an economic resource in its settlement.
a. asset.
b. liability.
c. expense.
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d. income.
32. At the start of the period, a business has total assets of ₱500,000 and total liabilities of ₱300,000.
During the period, the business earned total income of ₱1,000,000 and incurred total expenses of
₱640,000. No additional investments or withdrawals were made by the owner. How much is the
total equity at the end of the period?
a. 480,000
b. 520,000
c. 560,000
d. 640,000
33. The start-up capital of a business consisted of ₱1,000,000 cash provided by the business owner
and an additional ₱250,000 from a bank loan. The total start-up assets of the business therefore is
a. ₱1,250,000
b. ₱1,000,000
c. ₱750,000
d. ₱250,000
34. You are a business owner. Which of the following would you most likely consider as a favorable
event?
a. Your total liabilities increased, while your total assets decreased.
b. Your business earned income of ₱10M and incurred expenses of ₱40M.
c. Your total equity increased despite the fact that you did not make any contributions to the
business during the period.
d. Your business becomes a liquidating concern.
35. Entity A had total assets, liabilities, and equity of ₱120M, ₱75M and ₱45M, respectively, at the
beginning of the period. During the period, Entity A’s total liabilities decreased by ₱20M, while
its profit was ₱25M. There were no other transactions or events that affected equity during the
period. How much is Entity A’s ending total assets?
a. ₱70M
b. ₱85M
c. ₱95M
d. ₱125M
36. Entity A had total assets, liabilities, and equity of ₱140M, ₱90M and ₱50M, respectively, at the
beginning of the period. During the period, Entity A’s total liabilities decreased to ₱40M, while
its profit was ₱25M. There were no other transactions or events that affected equity during the
period. How much is Entity A’s ending total assets?
a. ₱75M
b. ₱95M
c. ₱115M
d. ₱125M
37. Entity A had total assets of ₱100M and total liabilities of ₱60M at the beginning of the period. If
at the end of the period, total assets increased by ₱30M, while total liabilities remained the same,
Entity A’s total equity at the end of the period would be
a. ₱70M
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b. ₱60M
c. ₱90M
d. ₱80M
38. Entity A had total assets and total liabilities of ₱120M and ₱75M, respectively, at the beginning
of the period. During the period, Entity A earned total income of ₱60 and incurred total expenses
of ₱45. How much is Entity A’s ending total equity?
a. ₱60M
b. ₱80M
c. ₱90M
d. ₱120M
39. Entity A had total assets and total liabilities of ₱120M and ₱70M, respectively, at the beginning
of the period. During the period, Entity A earned total income of ₱60 and incurred total expenses
of ₱40. Entity A’s total assets increased to ₱130M by year-end. There were no additional
contributions by, or distributions to, the owner during the period. How much is Entity A’s
ending total liabilities?
a. ₱60M
b. ₱70M
c. ₱80M
d. ₱90M
40. Entity A has ending total assets of ₱60M and ending total liabilities of ₱45M. Entity A had a
beginning equity of ₱10M. If Entity A earned total income of ₱25M during the year, how much
were the total expenses?
a. ₱0
b. ₱15M
c. ₱20M
d. ₱25M
41. Entity A has ending total assets of ₱160M and ending total liabilities of ₱90M. Entity A had a
beginning equity of ₱30M. If Entity A incurred total expenses of ₱50M during the year, how
much was the total income?
a. ₱70M
b. ₱80M
c. ₱90M
d. ₱120M
42. At year-end, Entity A’s total assets and total liabilities are ₱180M and ₱70M, respectively. If
Entity A had a beginning equity of ₱75M and there were no contributions from, or distributions
to, the owner during the period, how much profit (loss) did Entity A earn (incur) during the
year?
a. ₱35M
b. (₱35M)
c. ₱25M
d. (₱25M)
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43. In which of the following instances would it be acceptable for the accounting equation to not be
balanced?
a. When the accountant is feeling sad and lonely.
b. When there is a strong typhoon and classes are suspended.
c. When the accountant’s calculator is “lowbat.”
d. None. The accounting equation should be balanced at all times.
44. Which of the following account numberings would most likely connote an expense account?
a. 110
b. 210
c. 410
d. 510
46. It refers to money held and bank deposits that are available for unrestricted use by the business.
a. Cash
b. Accounts receivable
c. Income
d. Inventory
48. The beginning balance of “Cash” is placed on which side of the T-account?
a. Left side
b. Right side
c. Bottom side
d. Every side
49. When a customer buys goods from your business and promises orally to pay for the sale price
next week, you will
a. debit accounts receivable.
b. credit accounts receivable.
c. not give him the goods.
d. ignore the customer.
50. When the customer in #49 above pays the sale price, you will
a. debit cash.
b. credit cash.
c. say “Thank you.”
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d. a and c
51. If your business uses special journals, where will you record the transactions in #’s 49 and 50
above?
Transaction in #1 Transaction in #2
a. Sales journal Cash receipts journal
b. General journal General journal
c. General journal Cash receipts journal
d. Not recorded Cash receipts journal
57. A journal entry with more than one debit or more than one credit is called a
a. simple journal entry.
b. compound journal entry.
c. complicated journal entry.
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d. sophisticated journal entry.
60. It is the step in the accounting cycle where the identified accountable events are recorded in the
journals.
a. Analyzing
b. Journalizing
c. Accounting
d. Posting
61. These are transactions that involve the business and another external party.
a. Outside transactions
b. External events
c. Internal events
d. External events other than transfers
62. This type of journal entry contains only a single debit and a single credit.
a. Single entry
b. Compound entry
c. Simple entry
d. One-sided entry
63. This source document is prepared each time goods are sold.
a. Sales journal
b. Cost of goods sold
c. Deposit slip
d. Sales invoice
64. This represents the steps or procedures used to record transactions and prepare financial
statements. It implements the accounting processes of identifying, recording, and
communicating economic information.
a. Accounting cycle
b. Analyzing
c. Journalizing
d. Posting
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65. It is a document issued by a buyer to a seller indicating the types, quantities and agreed prices
for products or services that the buyer intends to purchase.
a. Buyer document
b. Purchase invoice
c. Purchase order
d. Sales order
66. It is a document signed by the receiver of a shipment indicating that the goods have been
received by the intended recipient.
a. Official receipt
b. Delivery receipt
c. BIR receipt
d. Shipment receipt
67. If you pay your tuition fee in school, the school will issue you this document.
a. Official receipt
b. Sales invoice
c. Thank you note
d. Change
Instruction for next ten (10) questions: Choose the letter corresponding to the correct account
titles used in recording each of the transactions described.
69. During the year, you started a sole proprietorship business. You invested ₱10M cash to the
business.
a. Accounts receivable Owner’s drawings
b. Cash Owner’s capital
c. Cash Investment expense
d. Owner’s capital Owner’s drawings
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72. The business purchases inventories for ₱2M cash.
a. Inventory Owner’s capital
b. Inventory Sales
c. Inventory Cash
d. Cost of sales Freight out
73. The business makes a ₱3M sale to a customer who orally promises to pay for the purchase price
after 30 days.
a. Accounts receivable Sales
b. Accounts receivable Owner’s capital
c. Cash Sales
d. Cost of sales Accounts receivable
75. The business spends ₱1M in marketing and promoting the products.
a. Advertising expense Owner’s capital
b. Advertising expense Cash
c. Accounts receivable Equipment
d. Accounts payable Cash
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80. Liabilities, owners' equity, and income are
a. decreased by credits and increased by debits.
b. decreased by debits and increased by credits.
c. decreased by both debits and credits
d. its depend on the situation
81. The general ledger account that summarizes the detailed information in a subsidiary ledger is
known as a
a. summary account.
b. controlling account.
c. balance sheet.
d. any of these
82. This refers to process of transferring the amounts of debits and credits in a recorded journal
entry to the ledger accounts.
a. Analyzing
b. Journalizing
c. Posting
d. Trial balancing
84. The balance of an accounts receivable from a certain customer at any given point of time can be
determined by referring to the
a. general journal.
b. general ledger.
c. subsidiary ledger.
d. financial statements.
87. Which of the following statements regarding the trial balance is correct?
a. Trial balances are prepared to check the equality of debits and credits in the accounts.
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b. The accounts are presented on the trial balance according to magnitude, i.e.., in order of size.
c. A contra asset account would appear in the debit column of the trial balance.
d. A trial balance is one of the components of a complete set of financial statements. As such,
financial reporting requires the preparation of a trial balance.
88. Entity A had a cash balance of ₱310,000 at the beginning of the period. During the period Entity
A had the following transactions:
Rendered services worth ₱420,000, on account.
Obtained a ₱500,000 loan.
Collected ₱270,000 accounts receivable.
Paid total expenses of ₱680,000.
Paid half of the loan.
89. You recorded a ₱21,000 amount as ₱2,100. You committed an accounting error called
a. Transplacement error.
b. Transposition error.
c. Transformation error.
d. Transgender error.
91. If you get the balances of the accounts in the general ledger and place them on a single report,
that report would be
a. financial statements.
b. ledger report.
c. trial balance.
d. chart of accounts.
92. Which is of the following is a correct sequence of the steps in the accounting cycle?
a. Posting, Journalizing, Identifying and analyzing, Trial balance
b. Identifying and analyzing, Journalizing, Posting, Trial balance
c. Journalizing, Identifying and analyzing, Trial balance, Posting
d. Left, right, up and down
93. Which of the following statements regarding the trial balance is most likely to be invalid?
a. The purpose of preparing a trial balance is to determine whether the total debits and total
credits in the ledger are equal.
b. If total debits and credits are not equal, an error surely exists in the accounts.
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c. The trial balance is a prerequisite in preparing financial statements.
d. The preparation of the trial balance creates a starting point for the preparation of the
financial statements.
94. This trial balance is prepared before adjusting entries are made.
a. Unadjusted trial balance c. Post-closing trial balance
b. Adjusted trial balance d. Pre-closing trial balance
95. The heading of a trial balance does not include which of the following?
a. Name of the business
b. Title of the report
c. Type of activity that the business is engaged with
d. Date of the report
97. Aling Nena’s Sari-sari Store’s total sales during the period were ₱100M. Of that amount, ₱60M
was on credit. If the total business expenses were ₱70M, how much is the profit (loss)?
a. 30M c. 10M
b. (30M) d. (10M)
99. Entity A received a 12%, ₱200,000, one-year, note receivable on October 1, 20x1. Entity A uses a
calendar year period. The principal and interest on the note are due on October 1, 20x2. The
adjusting entry to take up accrued interest income on December 31, 20x1 includes a
a. debit to interest income for ₱6,000.
b. credit to interest income for ₱12,000.
c. credit to interest receivable for ₱12,000.
d. debit to interest receivable for ₱6,000.
“He will have no fear of bad news; his heart is steadfast, trusting in the Lord. His heart is secure, he will have
no fear; in the end he will look in triumph on his foes.”
(Psalm 112:7-8)
- END -
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