1. This refers to the business that is owned and controlled by one person.

A. Corporation C. Sole Proprietorship

B. Partnership D. Sole Proprietor

2. This form of business is considered as the most common form of business organization in the Philippines.
A. Corporation C. Sole Proprietor
B. Sole Proprietorship D. Partnership

3. Users of Accounting Information that make decisions directly affecting the internal operations of the
enterprise
A. External users C. Shareholders
B. Internal users D. Partners

4. It is the process of transferring the information found in the journal into the book of final entry known as the
general ledger (GL).
A. Journalizing C. Posting
B. Recording D. Summarizing

5. Transactions that cannot be recorded appropriately in a special journal are recorded in the
A. Cash Receipt Journal C. General Journal
B. Sales Journal D. General Ledger

6. Which of the following statements is/are true?

I. The general journal is designed to record purchases of MERCHANDISE, SUPPLIES and OTHER ASSETS
on account.
II. Sales on account are usually recorded in the cash receipts journal rather than in the sales journal
because sales on account is best controlled when all routine cash receipts are recorded in one journal.
A. I only C. Both I and II
B. Il only D. Neither I nor II

7. These are the books of original entry other than the general journal. These are designed for recording
specific types of transactions of a similar nature
A. Special Journals C. Cash Receipt Journal
B. Sales Journal D. General Journal

8. For income earned on buildings, space or other properties owned and rented out by the business as the
main line of its activity.
A. Rental Income C. Professional Income
B. Service Income D. Interest Income

9. The purchase discounts account is a contra account to

A. Accounts Payable C. Purchases
B. Sales D. Inventory

10. For the portion of the cost of property and equipment or fixed assets that has expired based on rational
and systematic allocation procedure
A. Utilities Expense C. Depreciation Expense
B. Salaries Expense D. Insurance Expense
11. Which of the following statements is/are true?
I. When the terms of the sale include a sales discount, it is usually advisable for the buyer to pay within
the discount period.
II. The entry to record the return of goods from a customer would include a credit to Sales Returns and
Allowances.
A. I only C. Both I and II
B. Il only D. Neither I nor II

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12. This method of accounting recognizes and records revenues, services provided or products sold, when
earned regardless of whether cash has been received or not. It also recognizes and records expenses when
incurred regardless of whether cash has been paid or not
A. Cash Basis of Accounting C. Accrual Basis of Accounting
B. Constructive Accounting D. None of the Above

13. The amount of income earned but not yet collected.

A. Accrued Expense C. Cash Sales
B. Prepaid Expenses D. Accrued Income

14. Which of the following accounts will not be found in a post-closing trial balance?
A. Marco, Capital P15,000 C. Allowance for Bad Debts, P15.000
B. Accumulated Depreciation, P25,000 D. Consultancy Revenues, P25,000.

15. Which of the following activities is not a component of the operating cycle?
A. ordering of merchandise C. collection of cash from merchandise sales
B. sale of merchandise D. purchase of merchandise
16. Goods totaling 30,000 were purchased September 2 with terms of 2/10, n/30. Returns of P2,000 were
made on September 10. The account was paid on September 12. The entry to record the payment of
account is
A. Debit Accounts Payable 30,000; Credit Purchase discount 600 and Cash 29,400
B. Debit Accounts Payable 28,000; Credit Purchase discount 600 and Cash 27,400
C. Debit Accounts Payable 28,000; Credit Purchase discount 560 and Cash 27,440
D. Debit Accounts Payable 28,000; Credit Cash 28,000
17. Which of the following statements is correct?
A. Periodic system determines the inventory on hand only at the end of the accounting period.
B. Periodic system provides an easy means to determine inventory on hand.
C. Periodic system records the cost of sales on the date the sale is made
D. Periodic system keeps a record showing the inventory on hand at all times
18. Which of the following accounts would not appear on a worksheet for a merchandising company that uses
the periodic inventory system?
A. sales discount C. cost of goods sold
B. transportation in D. purchases
19. Reversing entries are journal entries made at the beginning of the next accounting period. This process is
for transactions involving certain types of adjustments such as:
A. adjusting entries for accrued revenues and accrued expenses.
B. adjusting entries for deferred revenue when income method is used.
C. adjusting entries for prepaid expenses when expense method is used.
D. all of the above

20. Which is false concerning use of special journals?

A. Only sales of merchandise on account are recorded in the sales journal. Cash sales are recorded in the
cash receipts journal.
B. Purchases of any items on account are recorded in the purchases journal. Acquisitions of any items for
cash are recorded in the cash disbursement journal.
C. Transactions that cannot be appropriately recorded in a special journal are recorded in the general
journal.
D. Only cash purchases are recorded in the cash disbursements journal.
21. When special journals are used, which of the following is true?
A. A general journal is not used.
B. All sales transactions should be recorded in the sales journal.
C. All cash receipts should be recorded in the cash receipts journal.
D. All purchase transactions should be recorded in the purchases journal.

2
22. On October 7, Crown Furniture Store sold 6 chairs for P1,000 each, terms 2/10, n/30 After one week, the
customer paid its account. The recording of these two made in which special journals?
A. Purchase Journal and Cash Disbursement Journal, respectively
B. Sales Journal and Cash Receipts Journal, respectively
C. General Journal and Cash Receipts Journal, respectively
D. General Journal and Cash Disbursement Journal, respectively

23. Voucher System consist of

A. voucher. C. unpaid and paid voucher file.
B. voucher register and check register. D. all of the choices.

24. This is a serially numbered form that identifies the name and address of the payee, the due date, terms,
description and invoice amount.
A. check C. invoice
B. voucher D. official receipt

25. Which of the following statements is not correct regarding combination journal?
A. Combination journal combines features of the general journal and the special journals in a single
record.
B. Combination journal contains separate amount columns for the accounts used most often.
C. Big companies prefer to use the combination journal.
D. Other accounts columns are provided for the recording of the transactions that do not fit into any of
the special column.

26. In a periodic inventory system, a return of defective merchandise by is recorded by crediting

A. Accounts Payable. C. Purchases.
B. Merchandise Inventory. D. Purchase Returns and Allowances.

27. Which of the following statements is/are true?

I. An entry with more than one debit or credit is called a compound entry.
II. Transactions of different entities should not be accounted for together, each entity should be evaluated
separately, an organization or a section of an organization stands apart from other organizations and
individuals as a separate economic unit. This concept is the entity concept.
A. I only C. Both I and II
B. Il only D. Neither I nor II

28. The journal entry to record a return of merchandise purchased on account under a periodic inventory system
would be
A. Dr. Accounts Payable, Cr. Purchase Returns and Allowances
B. Dr. Purchase Returns and Allowances, Cr. Accounts Payable
C. Dr. Accounts Payable, Cr. Inventory
D. Dr. Inventory Accounts, Cr. Payable

29. Are journal entries made at the end of an accounting period that is prepared for the proper matching of
revenues and expenses.
A. Journal Entries C. Closing Entries
B. Adjusting Entries D. None of the choices
30. The purpose of the post-closing trial balance is to
A. provide the account balances for the preparation of the balance sheet.
B. ensure that the ledger is in balance for completion of the worksheet.
C. aid the journalizing and posting of the closing entries
D. ensure that the ledger is in balance for the start of the next period.
31. Closing entries reduce the following type of accounts to a zero balance at the end of the period.
A. income and expenses C. withdrawals
B. income summary D. all of the choices

3
32. Which of the following statements is/are true?
I. When preparing the worksheet for a merchandising company that uses the periodic inventory system,
the merchandise inventory amount shown on the trial balance will be carried over to the Statement of
financial position debit column.
II. On the worksheet of a merchandising company that uses the periodic inventory system, both the
purchases and purchase returns and allowances appear in the statement of financial performance
columns.
A. I only C. Both I and II
B. Il only D. Neither I nor II

The next seven items are based on the following information:

The income statement for the year 2008 of Nova Co. contains the following information:
Revenues P70,000
Expenses:
Wages Expense P45,000
Rent Expense 12,000
Advertising Expense 6,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 73,500
Net income (loss) P(3,500)

33. The entry to close the revenue account includes a

A. debit to Income Summary for P3,500 C. debit to Revenues for P70,000
B. credit to Income Summary for P3,500 D. credit to Revenues for P70,000

34. The entry to close the expense accounts includes a

A. debit to Income Summary for P3,500 C. debit to Income Summary for P73,500
B. credit to Income Summary for P3,500 D. debit to Wages Expense for P2,500

35. After the revenue and expense accounts have been closed, the balance in Income Summary will be
A. P0 C. a credit balance of P3,500
B. a debit balance of P3,500. D. a credit balance of P70,000.

36. The entry to close Income Summary to Nova, Capital includes a

A. debit to Revenue for P70,000 C. a credit to Income Summary for P3,500
B. credits to Expenses totaling P73,500 D. a credit to Nova, Capital for P3,500

37. After all closing entries have been posted, the Income Summary account will have a balance of
A. P0 C. P3,500 credit
B. P3,500 debit. D. P36,500 credit

38. After all closing entries have been posted, the revenue account will have a balance of
A. P0 C. P70,000 debit
B. P70,000 credit D. P3,500 credit

39. At January 1, 2008, Nova reported owner's equity of P50,000. Owner drawings for the year totaled
P10,000. At December 31, 2008, the company will report owner's equity of
A. 63,500 C. 43,500
B. 56,500 D. 36,500

40. This can be determined by summarizing the uncollected sales invoices and the confirmed promissory notes of
the customers.
A. Notes and Accounts Receivable C. Notes and Accounts Payable
B. Inventory and Supplies on Hand D. Cash

4
41. This can be determined by subtracting the assets and liabilities as of any given date.
A. Net Income C. Net Purchases
B. Net Sales D. Owner's Equity or Capital

42. It is the person responsible for maintaining petty cash fund and for making disbursement from the fund.
A. Petty Cash Fund Custodian C. Accountant
B. Bookkeeper D. None of the choices

43. This can be determined through cash count and by looking at the bank statement
A. Petty Cash Fund C. Cash
B. Capital D. Withdrawals

44. Under this technique, each item in the financial statements of the current period is compared with the
previous period. The increase or decrease in peso amount Will be expressed in percentage or as a ratio to
be more meaningful.
A. Comparative Statements C. Horizontal Analysis
B. Financial Analysis D. Vertical Analysis

45. Formula of getting Net Monetary Assets

A. Current Assets/Current Liabilities C. Current assets minus Current Liabilities
B. Quick Assets minus Current Liabilities D. Current assets plus Current Liabilities

46. Formula of getting Return on Assets

A. Net Income/Average Current Assets C. Gross Margin / Cost of sales
B. Net Income/Net Sales D. Net Income/Average Total Assets

47. Which of the following statements is/are true?

I. Efficiency is the ability of the company to convert non-cash current assets into cash.
II. Ratios are useful tools in the analysis of financial statements because they summarize data in a form
easy to understand, interpret, and compare.
A. I only C. Both I and II
B. Il only D. Neither I nor II

Straight Problems
Instructions: Encircle your final answer. Use this format in writing your final answer: Pxxx,xxx Example answer:
P123,400

48. What is the cost of goods sold if there was beginning inventory of P43.000, purchase returns and
allowances of P12,000, ending inventory of P62,000 and purchases of P300,000?

49. During 2008, Salon Enterprises generated revenues of P60,000. The company's expenses were as follows:
cost of goods sold of P30,000, operating expenses of P12,000 and a loss on the sale of equipment of
P2,000. Salon's gross profit is

50. During 2008, Salon Enterprises generated revenues of P60,000. The company's expenses were as follows:
cost of goods sold of P30,000, operating expenses of P12,000 and a loss on the sale of equipment of
P2,000. Salon's income from operations is

51. During 2008, Salon Enterprises generated revenues of P60,000. The company's expenses were as follows:
cost of goods sold of P30,000, operating expenses of P12,000 and a loss on the sale of equipment of
P2,000. Salon's net income is

52. Financial information is presented: Operating Expenses P 45,000; Sales Returns and Allowances 13,000;
Sales Discounts 6,000; Sales 160,000; Cost of Goods Sold 77,000. The amount of net sales on the income
statement would be

5
53. Financial information is presented: Operating Expenses P 45,000; Sales Returns and Allowances 13,000;
Sales Discounts 6,000; Sales 160,000; Cost of Goods Sold 77,000. Gross profit would be

54. Financial information is presented: Operating Expenses P 45,000; Sales Returns and Allowances 13,000;
Sales Discounts 6,000; Sales 160,000; Cost of Goods Sold 77,000. The gross profit rate would be (in 3
decimal places). Example answer. 0.123

55. If a company has sales of P420,000, net sales of P400,000, and cost of goods sold of P260,000, the gross
profit rate is (in percentage). Example answer: 50%

56. West Company has the following account balances: Purchases P48,000; Sales Returns and Allowances
6,400; Purchase Discounts 4,000; Freight-in 3,000; Delivery Expense 4,000. The cost of goods purchased
for the period is

57. Baden Shoe Store has a beginning merchandise inventory of P30,000. During the period, purchases were
P140,000; purchase returns, P4,000; and freight-in P10,000. A physical count of inventory at the end of
the period revealed that P20,000 was still on hand. The cost of goods available for sale was

58. ABC Corporation issued a one-year, 9%, P200,000 note on April 30, 2021. Interest expense for the year
ended December 31, 2021 was

59. ABC Corporation issued a one-year, 12% P200,000 note on August 31, 2021. Interest expense for the
year ended December 31, 2021 was

60. Employees at ABC Corporation are paid P5,000 cash every Friday for working Monday through Friday.
The calendar year accounting period ends on Wednesday, December 31. How much salary expense should
be recorded two days later on January 2?

The next four items are based on the following information:

The following balances were extracted from the general ledger of Karen Keng, owner of the GINHAWA
MASSAGE CLINIC on December 31, 2017:
Karen, Capital P 85,000 Notes Receivable P 1,200
Office Equipment 12,000 Notes Payable 8,000
Accounts Payable 16,600 Interest Income 360
Cash 18,540 Tel. & Tel. Expense 1,250
Tools 21,500 Interest Expense 220
Karen, Drawings 10,000 Postage & Stamps Expense 50
Accounts Receivable 21,460 Insurance Expense 4,100
Mortgage Payable 30,000 Truck 84,700
Loan Payable 20,000 Subscription & Publication Expense 160
Service Income- 78,560 Office Supplies Expense 3.150
Furniture & Fixtures 8,900 Machinery 36,290
Salaries Expense 21,000 Rent Income 6,000

61. What is the computed Trial Balance?

62. What is the amount of Net Income?

63. What is the Computed Capital-ending?

64. What is the Total Liabilities and Owner's Equity?

6
The next four items are based on the following information:
On January 1, 2017, the following accounts appeared in the general ledger of Joni's Repair Shop:
Cash P 10,500
Accounts Receivable 8,400
Furniture 12,600
Repair Equipment 54,000
Accounts Payable 22,000
Loan Payable 5,000
Joni, Capital ?

During the month of January, the following transactions transpired:

• Collection of Accounts Receivable, P4,500
• Furniture bought for cash, P3,700
• Repair equipment bought for cash, P12,000
• Payments of accounts, P6,600
• Partial payment of loan, P3,000
• Additional investment of Joni, P10,000
• Cash withdrawal of Joni, P4,000
• Cash received for repair services rendered, P50,000
• Total expenses paid for the month, P27,000

65. Amount from Cash Flows from Operating Activities?

66. Amount from Cash Flows from Investing Activities?

67. Amount from Cash Flows from Financing Activities?

68. What is the amount of Cash and Cash Equivalents ending?

The next five items are based on the following information:

The following account balances appear in the P. Patron Law Office general ledger as of December 31 of the
current year.
Cash P 34,500 Office supplies expense P0
Prepaid advertising 4,800 Salary expense 76,500
Office Supplies 8,300 Professional fees 255,800
Salary payable 0 Unearned fees 10,000
Advertising expense 0

Additional information at December 31 is as follows:

a) The office supplies on hand at December 31 are valued at P1, 450.
b) Salaries for the last week of December has been earned but not paid amounted to P13, 500.
c) Advertising paid on November 1 covered a period of six months.
d) Of the record unearned fees, only P2, 500 has been earned.

69. After recording the adjusting entries at December 31, what is the adjusted amount of Unearned fees?

70. After recording the adjusting entries at December 31, what is the adjusted amount of Prepaid Advertising?

71. After recording the adjusting entries at December 31, what is the adjusted amount of Office Supplies?

72. After recording the adjusting entries at December 31, what is the adjusted amount of Salaries Payable?

73. After recording the adjusting entries at December 31, what is the adjusted amount of Office Supplies
Expense?

7
The next five items are based on the following information:
Shown below are the financial statements of LEE Van Trading.

New Trend Corporation

Statement of Financial Position
As of December 31, 2016 and December 31, 2017

ASSETS 2016 2017

Current Assets
Cash P 75.000 P 85,000
Marketable Securities 25,000 25.000
Trade receivables, net 185,000 245,000
Inventory at cost 250,000 220,000
Prepaid expenses 15,000 10.000
Total Current Assets P550,000 P 585,000

Property and Other assets

Equipment P 340,000 P 320,000
Other assets 15.000 15.000
Total 355,000 P 335,000
TOTAL ASSETS P 905,000 P 920,000

LIABILITIES AND OWNER'S EQUITY

Current Liabilities
Trade Payables P 185,000 P 165,000
Accrued Expenses 20,000 25,000
Other current liabilities 10,000 10,000
Total Current Liabilities P 215,000 200,000
Noncurrent Liabilities
Mortgage Payable P 120,000 P 120,000
TOTAL LIABILITIES P 335,000 P320,000

Owner's Equity
Capital stock, P100 par P 300,000 P 300,000
Additional Paid-in capital P30,000 P30,000
Retained Earnings - Appropriated 80,000 80,000
Retained Earnings - Unappropriated 160,000 190,000
Total Owner's Equity P570,000 P 600,000
TOTAL LIABILITIES AND OWNER'S EQUITY P 905,000 P 920,000

8
 New Trends Corporation
Statement of Comprehensive Income and Retained Earnings
For the year ended December 31, 2017

Net Sales P 1,000,000

Less: Cost of Goods Sold
Inventory, December 31, 2016 P 250.000
Purchases 720,000
Total Goods Available for sale 970,000
Inventory, December 31, 2017 220,000 750,000
Gross Margin P 250,000
Less: Operating expenses
Selling and Administrative P 105,000
Depreciation 20,000 P 125.000
Net Income before Income tax P 125,000
Less: Provision for Income tax 35,000
Net Income for the year 90,000
Retained Earnings, beginning 130,000
Total 220,000
Less: Dividends Paid 30.000
Retained Earnings, ending 190,000

74. What is the amount of Working Capital?

75. What is the amount of Net Monetary Asset?

76. Compute for the Current Ratio. (Use 2 decimal places for your final answer)

77. Compute for the Acid Test Ratio. (Use 2 decimal places for your final answer)

78. Compute for the gross profit rate. (Your final answer must be in percentage.)

The next two items are based on the following information:

Everest Company received the August Bank Statement that showed a balance of P38, 810.00 as of August 31,
2017. Other additional information is as follows:

Balance per checkbook, P38, 120.00

The following checks were outstanding:

No. 750150 438.70 No. 750159 6,508.00
No. 750152 681.30 No. 750160 732.50
No. 750157 1.404.50 No. 750162 495.00
• Customer's check returned NSF P 680.00
• August 31 deposit not recorded in the bank statement 8,430.00
• Check No. 750153 for P 2,120.00 returned with the statement had been recorded in the books as
P 2,210.00
• Bank service charges 550.00

79. What is the amount of total Outstanding checks?

80. What is the amount of adjusted book balance?