LICEO del VERBO DIVINO

Avenida Veteranos, Tacloban City

BASIC EDUCATION DEPARTMENT –SENIOR HIGH SCHOOL

S.Y. 2020-2021

FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 1

FINAL EXAMINATION

TEST I. MULTIPLE CHOICE

Directions: Read and understand the following. Choose the letter of the correct answer.

1. Every adjusting entry affects?

A. Balance sheet account only C. Both A & B
B. Income statement account only D. None
2. This estimates doubtful accounts based on a percentage of outstanding accounts receivable.
A. Aging the accounts receivable
B. Percentage of accounts receivable
C. Percentage of services rendered on account
D. None of the above
3. This estimates doubtful accounts based on a percentage of credit income.
A. Aging the accounts receivable
B. Percentage of accounts receivable
C. Percentage of services rendered on account
D. None of the above
4. This estimates doubtful accounts based on outstanding accounts receivable, but it considers the
time period that an account is past due.
A. Aging the accounts receivable
B. Percentage of accounts receivable
C. Percentage of services rendered on account
D. None of the above
5. This is an expense that refers to the portion of accounts receivable that is in doubt of being
collected.
A. Depreciation
B. Prepaid expenses
C. Doubtful accounts
D. Accrued expenses
6. These are expenses that have been incurred but not yet paid.
A. Depreciation
B. Prepaid expenses
C. Doubtful accounts
D. Accrued expenses
7. These are expenses that have been paid but not yet incurred.
A. Depreciation
B. Prepaid expenses
C. Doubtful accounts
D. Accrued expenses
8. This is the systematic and rational allocation of the depreciable cost of an asset over its useful life
and represents the future economic benefit that has been used in the period.
A. Depreciation
B. Prepaid expenses
C. Doubtful accounts
D. Accrued expenses
9. These are revenues that have been earned but not yet collected.
 A. Service revenues C. Unearned revenues
B. Accrued revenues D. None of the choices
10. These are revenues that have been collected but not yet earned.
A. Service revenues C. Unearned revenues
B. Accrued revenues D. None of the choices
11. On July 1, a client paid an advance payment of ₱5,000 to cover future legal services. During the
period, the company completed ₱3,500 of the agreed-on services for the client. Based on the
information provided, how will the company record the transaction on July 1 using the liability
method?
A. Cash 5,000
Legal Service Revenues 5,000
B. Unearned Legal Service Revenues 5,000
Legal Service Revenues 5,000
C. Cash 5,000
Unearned Legal Service Revenues 5,000
D. Legal Service Revenues 5,000
Unearned Legal Service Revenues 5,000
12. The same transaction with question 11, but this time the company used the revenue method. What
will be the journal entry on July 1?
A. Cash 5,000
Legal Service Revenues 5,000
B. Unearned Legal Service Revenues 5,000
Legal Service Revenues 5,000
C. Cash 5,000
Unearned Legal Service Revenues 5,000
D. Legal Service Revenues 5,000
Unearned Legal Service Revenues 5,000
13. The same transaction with question 11. What will be the adjusting entry at the end of the
accounting period under the liability method?
A. Cash 3,500
Legal Service Revenues 3,500
B. Unearned Legal Service Revenues 3,500
Legal Service Revenues 3,500
C. Cash 3,500
Unearned Legal Service Revenues 3,500
D. Legal Service Revenues 3,500
Unearned Legal Service Revenues 3,500
14. The same transaction with question 11. What will be the adjusting entry at the end of the
accounting period under the revenue method?
A. Cash 1,500
Legal Service Revenues 1,500
B. Unearned Legal Service Revenues 1,500
Legal Service Revenues 1,500
C. Cash 1,500
Unearned Legal Service Revenues 1,500
D. Legal Service Revenues 1,500
Unearned Legal Service Revenues 1,500
15. Reviewing payroll records indicates that employee salaries that are due to be paid on January 3
include ₱3,575 in wages for the last week of December. What will be the adjusting entry on
December 31?
A. Salaries Expense 3,575
Cash 3,575
B. Accrued Salaries Expense 3,575
 Salaries Expense 3,575
C. Salaries Expense 3,575
Accrued Salaries Expense 3,575
D. None of the above
16. Fatima Law Office rendered legal services last December 15, 2015. The contract price amounted
to Ᵽ45,000. Assume that as of December 31, 2015, the end of the accounting period, no payment
had been received yet. The following adjusting entry will be made on December 31, 2015:
A. Cash 45,000
Legal Services Revenues 45,000
B. Accrued Legal Services Revenues 45,000
Legal Services Revenues 45,000
C. Legal Services Revenues 45,000
Accrued Legal Services Revenues 45,000
D. None of the above
17. On December 31, 2020, Gray Electronic Repair Services rendered Ᵽ300 worth of services to a
client. However, the amount has not yet been collected. It was agreed that the customer will pay
the amount on January 15, 2021. The transaction was not recorded in the books of the company
as of 2020. What will be the adjusting entry on December 31, 2020?
A. Cash 300
Repair Services Revenues 300
B. Accrued Repair Services Revenues 300
Repair Services Revenues 300
C. Repair Services Revenues 300
Accrued Repair Services Revenues 300
D. None of the above
18. Company ABC leases its building space to a tenant. The tenant agreed to pay monthly rental fees
of Ᵽ2,000 covering a period from the 1st to the 30th or 31st of every month. On December 31,
2020, ABC Company did not receive the rental fee for December yet and no record was made in
the journal. What will be the adjusting entry on December 31, 2020?
A. Cash 2,000
Rent Income 2,000
B. Rent Receivable 2,000
Rent Income 2,000
C. Rent Income 2,000
Rent Receivable 2,000
D. None of the above
19. For the month of December 2020, Gray Electronic Repair Services used a total of Ᵽ1,800 worth of
electricity and water. The company received the bills on January 10, 2021. When should the
expense be recorded, December 2020 or January 2021?
A. December 2020
B. January 2021
C. Either December 2020 or January 2021
D. Neither December 2020 nor January 2021
20. VIRON Company entered into a rental agreement to use the premises of DON's building. The
agreement states that VIRON will pay monthly rentals of Ᵽ1,500. The lease started on December
1, 2020. On December 31 of the same year, the rent for the month has not yet been paid and no
record for rent expense was made. What will be the adjusting entry on December 31, 2020?
A. Rent Expense 1,500
Cash 1,500
B. Accrued Rent Expense 1,500
Rent Expense 1,500
C. Rent Expense 1,500
Accrued Rent Expense 1,500
 D. None of the above
21. Unearned revenues are treated as _____________.
A. Assets C. Revenues
B. Liabilities D. Both B and C
22. Accrued revenues are treated as ____________.
A. Assets C. Revenues
B. Liabilities D. Both A and C
23. Prepaid expenses are treated as _____________.
A. Assets C. Expenses
B. Liabilities D. Both A and C
24. Accrued expenses are treated as _____________.
A. Assets C. Expenses
B. Liabilities D. Both B and C
25. Depreciation only applies to tangible non-current assets, except _____________.
A. Land C. Machinery
B. Building D. Equipment

TEST II. TRUE OR FALSE

Direction: Read and understand the following. Write TRUE if the statement is correct and FALSE if the
statement is wrong.

26. Prepaid expenses are treated as assets.

27. Unearned revenues are treated as liabilities.
28. Every adjusting entry affects balance sheet accounts only.
29. Prepaid expenses are expenses that have been paid but not yet incurred.
30. Accrued expenses are expenses that have been incurred but not yet paid.
31. The two major classifications of adjusting entries are accruals and deferrals.
32. Accrued revenues are revenues that have been earned but not yet collected.
33. Unearned revenues are revenues that have been collected but not yet earned.
34. Doubtful accounts are the portion of accounts receivable that is in doubt of being collected.
35. For unearned revenues, the receipt of cash can be recorded either through liability or revenue
method.
36. For prepaid expenses, the payment of cash can be recorded either through asset or expense
method.
37. Unlike accruals, deferrals require an initial journal entry; that is, a journal entry referring to the date
when cash was collected or paid.
38. Percentage of accounts receivable is the tool used to estimate doubtful accounts based on a
percentage of outstanding accounts receivable.
39. Aging of accounts receivable is the tool used to estimate doubtful accounts based on outstanding
accounts receivable, but it considers the time period that an account is past due.
40. Depreciation is the systematic and rational allocation of the depreciable cost of an asset over its
useful life and represents the future economic benefit that has been used in the period.

TEST III. ESSAY

Directions: Read and understand the following. Write your answer on a sheet provided.

41 – 45. Distinguish accrued revenues from unearned revenues.

46 – 50. Explain briefly the importance of preparing adjusting journal entries.

Rubric for the Essay

5 4 3 2
Organization Information in Student presents Reader has difficulty Sequence of
logical, interesting information in logical following work because information is difficult to
sequence which sequence which reader can student jumps around. follow.
reader can follow. follow.
Content Student Student is at ease with Student is uncomfortable Student does not have
Knowledge demonstrates full content, but fails to with content and is able grasp of information;
knowledge (more elaborate. to demonstrate basic student cannot answer
than required). concepts. questions about
subject.
Grammar Presentation has no Presentation has no more Presentation has three Work has four or more
and Spelling misspellings or than two misspellings misspellings and/or spelling errors and/or
grammatical errors. and/or grammatical errors. grammatical errors. grammatical errors.

“May the Holy Triune God live in our hearts and in the hearts of all people.” – St. Arnold
Janssen

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