San Beda College Alabang

Midterm Examination 1st semester AY2019-2020

ACEFIAR Financial Accounting and Reporting – Prof. M. Cullano

Accountancy Department

Name: _______________________________________ Date: __________ Section:________

GENERAL INSTRUCTION:
Identify the letter of the choice that best answers the question. Kindly shade your final answers
in the answer sheet provided. Use only black pen or pencil. Strictly NO ERASURES.
You can also write your answers and solutions in this questionnaire. Cheating is strictly
prohibited, this will constitute an automatic failure on this subject. GOOD LUCK!

1. The __________ concept assumes that the business has an indefinite economic life.
A. Accounting entity
B. Accounting period
C. Going concern
D. Objectivity

2. Which of the following is not one of the three types of business activities?
A. Investing
B. Financing
C. Marketing
D. Operating

3. Which area of public accounting means the examination of financial statements by a

CPA for the purpose of expressing an opinion as to the fairness of the statements?
A. Management advisory services
B. Taxation
C. Financial accounting
D. External auditing

4. Which accounting concept states that omitting or misstating this information could
influence users of the financial statements?
A. The consistency concept
B. The accrual concept
C. The materiality concept
D. The going concern concept

5. This principle requires relevant information to form part of financial statements for
decision-making purposes.
A. Objectivity C. Adequate disclosure
B. Materiality D. Accounting entity

6. Which of the following is a service type of business.

A. Convenience Store C. Laundry Shop

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 B. Pharmacy D. Bakery

7. It refers to the recording phase of accounting.

A. Bookkeeping C. Auditing
B. Financial Reporting D. Financial Statement Analysis

8. The following are external users of financial information except:

A. Government C. Investors
B. Top Management D. Suppliers
9. The main function is to establish and improve accounting standards that will be
generally accepted in the Philippines.
A. Financial Reporting Standards Council C. Board of Accountancy
B. Philippine Institute of CPAs D. Professional Regulation
Commission

10. An activity carried out by a business to provide goods and services in exchange for
money is known as a
A. Trading activity C. Servicing activity
B. Manufacturing activity D. Business transaction

11. Identify the correct expanded accounting equation.

A. Asset = Liability + Capital + Income + Expense
B. Asset - Expense = Liability + Capital + Income
C. Asset = Liability + Capital + Income - Expense
D. Asset + Income = Liability + Capital + Expense

12. It is the resources controlled by the entity as a result a past event and from which future
economic benefits are expected to flow to the entity.
A. Equity
B. Liability
C. Asset
D. Income

13. If assets total P700,000 and liabilities total P400,000, how much are the net assets?
A. P300,000 C. P700,000
B. P400,000 D. P1,100,000

14. Which of the following accounts has a normal debit balance?

A. Accounts payable C. Consulting revenues
B. Notes payable D. Advertising expense

15. Which of the following accounts is increased by a credit?

A. Accounts receivable C. Withdrawals
B. Sales D. Advertising Expense

16. Which of the following is true?

A. A debit will increase a liability account.

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 B. A credit will increase an asset account.
C. A credit will increase a revenue account.
D. A debit will decrease an expense account.

17. In applying the rules of debits and credits, which of the following statements is correct?
A. The word “debit” means to increase, and the word “credit” means to decrease.
B. Asset, expense and capital accounts are debited for increases.
C. Liability, revenue and capital accounts are debited for increases.
D. Asset, expense and withdrawals are debited for increases.

18. Which of the following is not an example of non-current assets?

A. A second-hand computer used in the office
B. A van that is purchased through installments the total amount of which is not fully
settled
C. P40,000 cash
D. A building bought by the entity

19. Which of the following is not an example of additional capital?

A. A sole proprietor purchases a car through the bank account of the entity.
B. A sole proprietor brings a second-hand computer from his home to the office.
C. A sole proprietor transfers P1,000 from his own bank account to the entity’s
account.
D. A sole proprietor uses his own building as an office without receiving any rent.

20. Which of the following statements regarding the double-entry system is incorrect?
A. An increase in asset means a credit entry in assets account.
B. A decrease in liability means a debit entry in liabilities account.
C. An increase in drawings means a debit entry in capital account.
D. A decrease in non-current asset means a credit entry in assets account.

21. Which of the following transactions affects the total value of liabilities of a firm?
A. Goods purchased from suppliers by cash
B. Interest received from bank
C. Office equipment bought on credit
D. Goods sold to customers on credit

22. On Apr. 1, 2019, Jerome Marquez sets up a firm and brings in office equipment of
P50,000 and inventory of P30,000 to the business. Jerome Marquez puts P80,000 into
the firm’s cash box and P100,000 into the firm’s bank account. Meanwhile, the firm
lends P50,000 cash to SJ and Associates and borrows P200,000 from the bank to acquire
a piece of premises.

What is the amount of the firm’s capital on Apr. 1, 2019?

A. P510,000 C. P260,000
B. P210,000 D. P460,000

23. Which of the following is correct under the double-entry system?

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 A. Asset amount must be equal to liability amount.
B. The change in asset must be compensated by a change in liability.
C. The change in a debit-side entry must be compensated by a change in credit side
entry.
D. An increase in asset must be compensated by a decrease in asset.

24. The entity purchases P10,000 fixtures for entity use on credit. Which of the following
will be affected?
1. Assets 2. Liabilities 3. Capital
A. (1) and (2) only
B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

25. Which of the following statements are correct?

1. The total amount of liabilities can be greater than the total amount of capital.
2. Assets = Capital + Liabilities
3. The total amount of assets can be greater than the sum of liabilities and capital.

A. (1) and (2) only

B. (1) and (3) only
C. (2) and (3) only
D. (1), (2) and (3)

26. Which of the following will cause a trial balance to be out of balance?
A. Mistakenly debiting an asset account instead of an expense account
B. Posting P1,230 as P2,130 to both a debit and a credit account
C. Posting the same transaction twice by mistake
D. Posting only the debit part of a transaction

27. Posting refers to the process of transferring information from

A. A journal to the general ledger accounts.
B. General ledger accounts to journal.
C. Source of documents to a journal.
D. A journal to source documents.

28. ___________ refers to the process of entering transactions into the books of original
entry.
A. Identifying C. Reporting
B. Classifying D. Recording

29. A sole proprietor contributes his own van with a value of P400,000 to the business. The
journal entry should be:
Account to be debited Account to be credited
A. Asset Liability
B. Cash Capital
C. Capital Van

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 D. Van Capital

30. Suppose an entity pays P50,000 to its creditors by check. The journal entry should be:
Account to be debited Account to be credited
A. Accounts receivable Bank
B. Accounts payable Bank
C. Accounts payable Cash
D. Cash Accounts payable

31. The owner, Mr. Pearson, invested cash worth of P250,000 as the starting fund of
business.
A. Journal entry should include a debit to Pearson, Capital for P250,000.
B. Journal entry should include a credit to Cash for P250,000.
C. Journal entry should include a credit to Pearson, Capital for P250,000.
D. All of the choices are false

32. The company collected its accounts receivable from customers worth of P750,000.
A. Journal entry should include a credit to Accounts Receivable P750,000.
B. Journal entry should include a credit to Cash P750,000.
C. Journal entry should include a debit to Accounts Receivable P750,000.
D. All of the above choices are correct.

33. The company performed services for cash, P939,000.

A. Increase in Asset
B. Increase in Liabilities
C. Increase in Equity
D. Increase in Expense

34. The company paid maintenance work done on the same day, P117,000.
A. Increase in Asset
B. Decrease in Income
C. Increase in Equity
D. Increase in Expense

35. Without the use of a trial balance, _____________.

A. Double-entry system will not be applied in accounting
B. There are no other ways to identify whether there are any problems
C. Accounting ratios cannot be calculated
D. Inequality between debit and credit balances cannot be easily found

36. Which of the following is not included in a trial balance?

A. Dates of transactions C. debit balances
B. Ledger accounts D. credit balances
37. A chart of accounts is a (an)
A. Journal C. list of names of all account titles
B. Flowchart of all transactions D. accounting procedure manual

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38. Which of the following events would not be considered an accounting transaction?
A. Payment of fees to a tax consultant.
B. Purchase of print advertising space for a new service.
C. Sales of a new product during the first month of operations.
D. Tabulation of the results of a customer satisfaction survey.

39. Transactions are recorded chronologically in the

A. Ledger C. daybook
B. T-account D. journal

40. A ledger is defined as a collection of

A. All statement of financial position accounts
B. All income statement accounts.
C. Account titles – asset, liability, equity, income and expense accounts
D. Transactions

41. Which of the following is an example of an adjusting entry?

A. Recording the purchase of supplies on account
B. Recording depreciation expense on a truck
C. Recording the billing of customers for services rendered
D. Recording the payment of wages to employees

42. The financial year of Divina Cayabyab ends on December 31 each year. On May 30,
2019, Divina Cayabyab received an annual service fee of P600,000 from a customer for a
service commencing on June 1. On Dec. 31, 2019,___________.
A. P250,000 should be treated as unearned revenues
B. P300,000 should be treated as unearned revenues
C. P600,000 should be treated as unearned revenues
D. P600,000 should be treated as revenues for the current financial year

43. The journal entry to record an accrued expense results in which of the following types of
accounts being debited and credited?
A. Asset and income C. Expense and asset
B. Asset and liability D. Expense and liability

44. The word “accrued” implies which of the following?

A. Money has been paid and the service has been provided.
B. Money has been paid but no servies have been provided.
C. Money has been paid for a service to be performed during the next period.
D. Money has not been paid or received but the service has already been performed or
rendered.

45. The adjusting entry to accrue salaries expense

A. Debits salaries expense and credits cash.
B. Debits salaries expense and credits salaries payable.
C. Debits salaries payable and credits cash.
D. Debits salaries payable and credits salaries expense.

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46. On Nov. 15, 2018, cash is received in advance of rendering services. Assuming that the
services have been performed by Dec. 31, 2018, the adjusting entry would be a debit to
A. Cash and a credit to Service Revenues.
B. Service Revenues and a credit to Accounts Receivable.
C. Unearned revenues and a credit to Cash.
D. Unearned revenues and a credit to Service revenues.

47. Which of the following is an example of an accrual?

A. Payment of two years’ insurance in advance
B. Salaries incurred but not yet paid
C. The purchase of office supplies
D. Tuition revenue collected in advance

48. An entity’s weekly payroll of P5,000 is paid on Fridays. Assume that the last day of the
month falls on Wednesday. Which of the following is the required adjusting entry?
A. Debit Salaries Expense P3,000 and credit Salaries Payable P3,000
B. Debit Salaries Expense P2,000 and credit Salaries Payable P2,000
C. Debit Salaries Payable P3,000 and credit Salaries Expense P3,000
D. Debit Unpaid Salaries P3,000 and credit Salaries Payable P3,000

49. A business received cash of P30,000 in advance for revenue that will be earned later.
The cash receipt entry debited cash and credited unearned revenues for P30,000. At the
end of the period, P11,000 is still unearned. The adjusting entry for this situation will
A. Debit revenues and credit unearned revenues for P19,000.
B. Debit revenues and credit unearned revenues for P11,000.
C. Debit unearned revenues and credit revenues for P19,000.
D. Debit unearned revenues and credit revenues for P11,000.

50. If services totaling P12,500 had been performed but not yet billed, the adjusting entry to
record this would include a
A. Credit to Service Revenues for P12,500.
B. Credit to Service Revenues for P62,500.
C. Credit to Unearned service revenues for P12,500.
D. Debit to Service Revenues for P12,500.

-END-

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