Professional Documents
Culture Documents
General Instructions: Write all your answers in the answer sheet provided. You may use the questionnaire as scratch. Do not write any
unnecessary markings on the answer sheet. Erasure or any form of alteration is not allowed. Use of friction pen is prohibited. Write the
CAPITAL LETTER corresponding to your answer.
Part 1. True or False. Write “True” if the statement is correct and write “False” if the statement is incorrect. (1pt.)
1. A sole proprietor owns and manages his own business. Thus, he may not separate his personal transactions from those of the
entity’s.
2. The concept of Going Concern assumes that an entity has neither the intention nor the need to enter liquidation or to cease
trading.
3. Assets acquired are recorded at fair value because such measurement would communicate the actual worth of an asset at a
point in time.
4. An entity is allowed to depart from the principle of consistency in presentation when another presentation will provide reliable
and more relevant information to users.
5. An asset is an economic resource that should be owned by the business, a result of past events that has potential to produce
future benefits.
6. Liabilities represent creditors’ claims against a company’s assets.
7. Income represents increases in assets, causing increases in equity. The owner’s contributed cash, therefore, can be regarded
as an income, because there is an increase in asset.
8. Expenses can be recognized even without an outflow in cash.
9. The basic summary device of accounting is the ledger.
10. An asset can be current even if it will be used for more than one year.
11. Double-entry bookkeeping denotes that an increase or decrease in an asset only corresponds to an increase or decrease in a
liability.
12. The normal balance of prepaid expense is debit, because it is an expense account.
13. Rendering services on account means that an entity has accrued revenues.
14. A firm can recognize income even without cash receipt.
15. The fair representation requirement implies that the financial statements are absolutely correct in presenting the monetary
values of different accounting elements.
16. Financial statements shall be prepared on the basis of going concern notwithstanding the intention of the management to
liquidate the entity.
17. Omissions of items are considered material if they could collectively but not individually influence the economic decision of
users.
18. Inappropriate accounting policies cannot be rectified even by means of disclosure in the notes.
19. Owner’s equity is otherwise known as net assets.
20. Only real accounts are closed at year-end.
21. The owner’s withdrawal account has the same normal balance with expenses. Thus, owner’s drawing should be included in
expenses.
22. Adjusting entries affect cash flows in a certain period.
23. Failure to record the adjusting entry for unearned revenue would understate liabilities.
24. Book value is the original cost of an equipment less depreciation for the year.
25. The adjusting entry to recognize earned commission revenues not previously recorded or billed will cause total assets to
increase.
26. Accrued revenue indicates a receivable.
27. The totals of debits and credits in a trial balance can still be erroneous even if there is equality in amounts.
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28. There is income if there is a derecognition of an asset, or a decrease in its carrying amount.
29. Deferral is the postponement of the recognition of an expense already incurred but not paid, or of revenue already earned but
not yet collected.
30. Failure to record an adjusting entry for interest expense would overstate profit.
Part 2. Multiple Choice Theory Write the CAPITAL LETTER corresponding to your answers. (1pt.)
1. Statement 1. When complying with a specific requirement in PFRS would be misleading and would be in conflict with the
objective of financial statements, an entity may depart from that requirement.
Statement 2. An entity may correct inappropriate accounting policies through proper disclosure of the policy or by
explanatory remarks.
a. Only the first statement is correct.
b. Only the second statement is correct.
c. Both statements are correct.
d. Neither statement is correct.
2. The following information are provided by a general purpose financial statement, except
a. Cash flows
b. Financial performance
c. Financial marketability
d. Financial position
3. When the financial statements are prepared under this basis of recording, the users are informed not only of past transactions
involving receipt and payment of cash but also obligations to pay cash in the future.
a. Cash basis
b. Hybrid basis
c. Future basis
d. Accrual basis
4. An accounting principle that requires that presentation and classification of items in the financial statements shall be retained
from one period to the next is called
a. Comparability of presentation
b. Consistency of presentation
c. Substance over form
d. Trade-off between relevance and reliability
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b. Classifying
c. Summarizing
d. Reporting
8. The financial statements should be stated in terms of a common financial denominator. Which assumption is this anchored
on?
a. Accrual basis
b. Periodicity
c. Going Concern
d. Stable monetary unit
9. Which of the following transactions would increase the total assets of a firm?
a. Collection of payment from customers on account
b. Recognition of depreciation
c. Rendering service for cash
d. Acquisition of equipment using cash
10. A firm’s failure to recognize depreciation expense for the year would
a. overstate assets, understate expenses, overstate net income
b. overstate assets, overstate expenses, overstate net income
c. understate assets, overstate expenses, no effect on net income
d. understate assets, understate expenses, understate net income
12. Allowing entities to estimate rather than physically count inventory at interim periods is an example of a trade-off between
a. Verifiability and comparability
b. Timeliness and comparability
c. Timeliness and verifiability
d. Neutrality and consistency
15. An equipment costs P150,000, has an accumulated depreciation of P30,000, and a market value of P90,000. What is its book
value?
a. P150,000
b. P60,000
c. P120,000
d. P90,000
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16. An increase in asset can be associated with
a. A decrease in liability
b. An increase in liability
c. An increase in another asset
d. An increase in expense
18. In journalizing the expiration of the rent for a month, the entries would be
a. Debit Rent Expense, credit cash
b. Debit rent expense, credit prepaid rent
c. Debit prepaid rent, credit rent expense
d. Debit cash, credit prepaid rent
19. Which of the following statements regarding adjusting entries is/are incorrect?
a. Each adjusting entry affects a balance sheet account and an income statement account.
b. Accrual adjustments increase both a balance sheet and an income statement account.
c. Deferral adjustments decrease both a balance sheet and an income statement account.
d. All of the above
24. This quality means that different knowledgeable and independent observers could reach consensus, although not necessarily
complete agreement, that a particular depiction is a faithful representation:
a. Understandability
b. Comparability
c. Verifiability
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d. Consistency
Part 3. Multiple Choice Problems Write the CAPITAL LETTER corresponding to your answer. If you think the answer is not in the
choices given, write your answer on the space provided in the answer sheet. (3pts.)
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d. P100,000
2. If the balance of the Cameron, Withdrawals account was P120,000 and the balance of the Salaries Expense account was
P50,000, what would be the amount of B?
a. P600,000
b. P400,000
c. P370,000
d. P430,000
3. If the trial balance showed a balance of P70,000 in the Cameron, Withdrawals account and a balance of P50,000 in the
Salaries Expense account, what would be the amount of Advertising Revenues for the period?
a. P120,000
b. P550,000
c. P350,000
d. P200,000
5. If the Salaries Expense totalled P80,000, and the Advertising Revenue account showed a balance of 350,000, how much
would A be?
a. P430,000
b. P860,000
c. P550,000
d. P350,000
6. If the balances of Salaries Expense and Advertising Revenue are P40,000 and P300,000 respectively, how much would be
Cameron, Withdrawal account?
a. P30,000
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b. P260,000
c. P340,000
d. P190,000
7. Kingsman Clothing began operations in May 2019, and purchased office supplies of P12,345. During the month, the business
purchased equipment costing 23,456, and office supplies worth 6,789. On May 31, supplies on hand amounted to P9,876.
How much is the month’s supplies expense?
a. P19,134
b. P9,258
c. P32,714
d. P29,010
8. As a newly hired accountant of the Barden Bellas, you reviewed the unadjusted prepaid expense account at December 31,
2019, and revealed the following:
The ledger for prepaid insurance has an opening balance of P15,000 as of January 1, 2019. The record showed that the
insurance was purchased on July 1, 2018 for P30,000.
Barden Bellas renewed the above insurance for P36,000 on July 1, 2019.
9. Auradon Company has P1,500 of supplies on hand at the end of 2018. During 2019, P2,750 of supplies were purchased.
Supplies expense at the end of the year totalled P3,375. How much is the Supplies, Beginning for January 2020?
a. P875
b. P3,375
c. P4,250
d. P1,500
A review of the assets of Harry Hart & Co. disclosed the following:
On January 1, 2018, the company purchased machinery for P160,000. The machinery has an estimated useful life of
3 years with a P10,000 salvage value.
Office equipment was purchased on March 1, 2018 for P270,000. The expected life is 8 years with no salvage value.
The building was constructed, finished, and occupied on September 1, 2018. The cost of the building is P1,500,000
and is estimated to have a useful life of 10 years. The salvage value is estimated to be P200,000.
10. For the year ended, how much is the depreciation expense for the office equipment?
a. P28,125
b. P33,750
c. P30,938
d. P25,313
11. For the year ended, how much is the total depreciation expense?
a. P136,839.34
b. P213,750
c. P94,583.33
d. P121,458.33
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12. On December 31, 2019, how much is the total accumulated depreciation for the non-current assets presented?
a. P100,000
b. P61,875
c. P335,208.33
d. P251,458.33
13. The ending capital balance of Treblemakers Company is P820,725 at December 31, 2018. The company began its operations
in January 1, 2016, during which the investment was P796,248. It earned net income of P56,926 on 2016, incurred a net loss
of P76,927 on 2017, and earned another income of P120,725 on 2018. Assuming that no withdrawals and additional
contributions were made in 2018, how much were the withdrawals in 2017?
a. P76,472
b. P76,247
c. P700,000
d. P165,203
14. The following transactions were taken from Eggsy Delivery Service, owned by Taron Egerton.
a. Taron transferred P40,000 to the business from his personal savings account.
b. Bought delivery trucks on account, P25,000
c. Advertising bill received but unpaid, P800
d. Bought office equipment for cash, P2,500
e. Received cash for delivery services rendered, P13,000
f. Paid salaries expense, P1,850
g. Paid gas expense for company trucks, P750
h. Billed customers for delivery services rendered, P5,500
i. Paid telephone bill, P400
j. Received P1,600 as partial payment of transaction H
k. Taron paid her home telephone bill from company check book, P88.
After posting these transactions, how much is the balance of the cash account?
a. P49,012
b. P48,212
c. P48,300
d. P49,100
15. Based on Eggsy’s Delivery Service transactions in item #14, which of the following statements is true?
a. Transaction K will not affect the books of the business, because it is a personal transaction of the owner.
b. The business’ receivable at year-end is P5,500.
c. Transaction D will not affect the total balance of the assets.
d. Transaction C is treated as a prepaid expense.
16. If total liabilities decreased by P25,000 during a period of time and owner’s equity increased by P30,000 during the same
period, the amount if increase (decrease) of the period’s change in total assets is
a. P65,000 increase
b. P5,000 increase
c. P5000 decrease
d. P65,000 decrease
Use the following information to answer questions 17-20.
At the beginning of the year, the capital of DSM Laundry Shop was P150,000 and total liabilities were P50,000. During the
year, the owner withdrew P10,000 and added P45,000 as additional investment. Total expenses reported were P75,000. At
the end of the year, total assets were P400,000 and total liabilities were P100,000.
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17. How much was the total assets at the beginning of the year?
a. P100,000
b. P235,000
c. P300,000
d. P200,000
18. How much was the Owner’s Equity at the end of the year?
a. P150,000
b. P300,000
c. P185,000
d. P500,000
19. How much was the revenue earned during the period?
a. P390,000
b. P190,000
c. P75,000
d. P40,000
20. How much was the net income (net loss) during the year?
a. 0
b. (35,000)
c. 315,000
d. 115,000
END OF EXAMINATION