NAGA COLLEGE FOUNDATION, INC.

M.T. Villanueva Avenue, Naga City

College of Accountancy and Finance
Financial Accounting and Reporting

FINAL EXAMINATION
Name: _________________________________________ Course and Section: ________________
Class Schedule: _________________________________ Date: ____________________________

1. Which accounting concepts states that omitting or misstating this information could influence users
of the financial statements?
a. The consistency concepts c. The materiality concepts
b. The accrual concepts d. The going concern concepts

2. The account form of the balance sheet

a. is identical to the account form.
b. lists the asset section to the left and the liabilities and owner's equity sections to the right.
c. shows assets above liabilities and owner's equity.
d. lists assets to the left, liabilities in the middle, and owner's equity to the right.

3. The prepaid insurance account had a balance of P180,000 before adjustment. This was paid on
March 1, 2023. How much will be the balance of prepaid insurance on December 31, 2023 if the
insurance covers a two-year policy?
a. P75,000 c. P30,000
b. P105,000 d. P150,000

4. Which should be reviewed by the creditors when assessing the liquidity of a business?
a. Total assets of the business
b. Total owner’s equity
c. Assets and liabilities of the business
d. Net income for the period

5. Which of the following is an accrued liability?

a. Unearned revenues.
b. Wages payable.
c. Rent revenue collected 1 month in advance.
d. Portion of long-term debt payable in current year.

6. Of the following errors, the one that will cause an equality in the trial balance totals
a. Failure to record a transaction
b. Recording the same transaction more than once
c. Posting a transaction to the wrong account
d. Incorrectly computing an account balance

7. Stating assets and liabilities and changes in them in terms of a common financial denominator is a
prerequisite in measuring financial position and periodic net income.
a. Periodicity concept
b. Going concern assumption
c. Monetary unit assumption
d. Accrual basis
8. Which of the following can be reversed at the next accounting period?
a. the recognition of an allowance for doubtful accounts
b. the recognition of the supplies used at year-end
c. the recognition of an unearned revenue at year-end
d. the recognition of a depreciation of an asset
9. Simultaneous recognition of both a revenue and an expense may result from certain transactions or
events. An example of an expense so recognized may be
a. Expired portion of prepaid insurance.
b. Salespersons’ monthly salaries.
c. Transportation to customers.
d. Electricity used to light offices.

10. The owner’s equity balance in the statement of financial position is equivalent to the
a. Total capital invested by the owner
b. Total capital balance after adjustment
c. Total capital balance after closing entries
d. None of the above

11. Jerry's Car Repair Shop started the year with total assets of P90,000 and total liabilities of P60,000.
During the year the business recorded P150,000 in car repair revenues, P95,000 in expenses, and
Jerry withdrew P15,000. Jerry's Capital balance at the end of the year was
a. P70,000. c. P85,000.
b. P40,000. d. P55,000.
12. If an individual asset is decreased, then
a. there must be an equal decrease in a specific liability.
b. there must be an equal increase in owner's equity.
c. there must be an equal decrease in another asset.
d. none of these is possible.

13. If the owner's equity account increases from the beginning of the year to the end of the year, then
a. net income is less than owner drawings.
b. a net loss is less than owner drawings.
c. additional owner investments are less than net losses.
d. net income is greater than owner drawings.
14. The part of the accounting process where accounts are classified
a. Journalizing c. Preparation of trial balance
b. Posting d. Preparation of financial statements

15. If a company fails to make an adjusting entry to record unearned revenue, then
a. the owner's equity will be understated.
b. expense will be overstated.
c. assets will be understated.
d. net income will be overstated.

16. Lala Company signed a six-month note payable in the amount of P30,000 on September 1. The note
requires interest at an annual rate of 8%. The amount of interest to be accrued at the end of
September is
a. P2,400. c. P600.
b. P800. d. P200.

17. The common characteristic possessed by all assets is

a. long life. c. tangible nature.
b. great monetary value. d. future economic benefit
18. If the company’s total assets are P380,000 and the liabilities is 40% of assets. How much is the
equity?
a. P228,000 c. P950,000
b. P152,000 d. P570,000

19. The primary purpose of accounting is to

a. decision-making c. record transaction
b. provide financial information d. analyze records
20. If total liabilities decreased by P5,000, then
a. assets must have decreased by P5,000.
b. owner's equity must have decreased by P5,000.
c. assets must have increased by P5,000
d. assets and owner's equity each increased by P2,500.

21. Which of the following is not an advantage of the corporate form of business organization?
a. Limited liability of stockholders
b. Transferability of ownership
c. Unlimited personal liability for stockholders
d. Unlimited life
22. The accountant may spread the cost of the building over many years primarily because of the
a. Fiscal year assumption
b. Going concern assumption
c. Periodicity assumption
d. Going concern assumption and periodicity assumption

23. According to the conceptual framework, the process of reporting an item in the financial statements
of an entity is
a. Realization c. Matching
b. Recognition d. Allocation

24. Joe's Tune-up Shop follows the revenue recognition principle. Joe services a car on July 31. The
customer picks up the vehicle on August 1 and mails the payment to Joe on August 5. Joe receives
the check in the mail on August 6. When should Joe show that the revenue was earned?
a. July 31 c. August 5
b. August 1 d. August 6

25. Wages Payable at the end of March were P12,500 and P14,000 at the end of April. Salaries Expense
for March was P36,000. How much cash was paid for salaries on March?
a. P36,000 c. P37,500
b. P34,500 d. P62,500

26. During the year the business recorded P180,000 in revenues, P105,000 in expenses, and the owner
withdrew P25,000. If the total assets and liabilities at year-end amounted to P418,000 and P165,000,
respectively. Jerry's Capital balance at the beginning of the year was
a. P303,000. c. P203,000.
b. P253,000. d. P50,000.

27. The preparation of the financial statements is included in what part of the accounting process?
a. identifying economic events.
b. communicating results to users.
c. analyzing business transactions.
d. recording and classifying information.

28. The allowance for bad debts has a credit balance of P2,500 before adjustments. Accounts receivable
for the period was P250,000 and allowance are set up at 5% of Accounts Receivable. The adjusting
journal entry will be
a. Debit Bad Debts Expense, P2,500; Credit Allowance for Bad Debts, P2,500.
b. Debit Bad Debts Expense, P10,000; Credit Allowance for Bad Debts, P10,000.
c. Debit Bad Debts Expense, P12,500; Credit Allowance for Bad Debts, P12,500.
d. Debit Bad Debts Expense, P15,000; Credit Allowance for Bad Debts, P15,000.
29. Jo Smith is the proprietor (owner) of Smitty's, a retailer of athletic apparel. When recording the
financial transactions of Smitty's, Jo does not record an entry for a car she purchased for personal
use. Jo took out a personal loan to pay for the car. What accounting concept guides Jo's behavior
in this situation?
a. Periodicity concept c. Cash basis concept
b. Economic entity assumption d. Monetary unit assumption

30. Owner's equity is best depicted by the following:

a. Assets = Liabilities. c. Residual equity + Assets.
b. Liabilities + Assets. d. Assets – Liabilities.
31. If the books are already closed, then
a. No entries should be made related to the previous period
b. The equity balance will reflect an amount that is the same in the worksheet
c. Only permanent accounts will have balances
d. Revenue, expense, drawing, and contra-assets account will have zero balances

32. Rent revenue earned during the month of June was P45,000. Beginning and ending balance of Rent
Receivable was P18,000 and P16,400, respectively. How much was the total collection for the month
of June?
a. P46,600 c. P43,400
b. P45,000 d. P10,600

33. Which of the following transactions will not result in an increase in revenues?
a. Accumulation of interest in a bank account.
b. An investment in the business by the owner.
c. Sale of goods on credit.
d. Sale of services for cash.

34. The total assets decreased by P110,000 while the total liabilities decreased by P80,000. What will be
the effect on the owner’s equity?
a. Increase by P190,000 c. Increase by P30,000
b. Decrease by P190,000 d. Decrease by P30,000

35. A new accountant working for Metcalf Company records payment of accrued wages as follows:
Dr. Wages Expense 800
Cr. Cash 800

The effect of this entry will

a. understate total assets c. overstate liabilities
b. understate total expense d. overstate net income

36. ABC’s building was already 60% depreciated. The current book value of the building was P1,800,000
and was depreciated over a useful life of 15 years. How much is the annual depreciation?
a. P120,000 c. P48,000
b. P72,000 d. P300,000

37. Which of the following statements is false?

a. The final trial balance is called the post-closing trial balance.
b. A reversing entry is a journal entry is the exact opposite of a related adjusting entry made at the
end of the period.
c. Closing entries can be prepared by referring solely to the Income Statement columns of the
worksheet.
d. Depreciation Expense-Building is a temporary account.
38. Which of the following statements is true?
a. The post-closing trial balance contains asset, liability, withdrawal, and capital accounts.
b. The only accounts that are closed are income statements accounts.
c. There is sufficient information on post-closing trial balance to prepare a balance sheet.
d. The Income Summary account will appear on the post-closing trial balance.

39. What is the meaning of freight-in?

a. The expenses spent on carrying the returned goods from customers
b. The expenses spent on carrying the goods return to suppliers
c. The expenses spent on carrying the goods sold to customers
d. The expenses spent on carrying the goods purchased from suppliers to the entity

For number 40-43, use the following information

Sales 950,000 Administrative Expenses 145,000
Purchases 500,000 (excluding freight)
Merchandise Inv. Beg 60,000 Sales Discount 38,000
Merchandise Inv. End 40,000 Sales Return 19,000
Freight-in 25,000 Purchase Return 27,500
Freight-out 22,000 Purchase Discount 18,500

40. How much is the net sales?

a. P950,000 c. P893,000
b. P912,000 d. P871,000

41. How much is the net purchases?

a. P500,000 c. P454,000
b. P472,500 d. P479,000

42. How much is the cost of goods sold?

a. P499,000 c. P459,000
b. P474,000 d. P434,000

43. How much is the net income?

a. P272,000 c. P249,000
b. P247,000 d. P227,000

44. Purchased merchandise, terms 2/10,n/30, P75,000. Prepare the necessary journal entries.
a. Purchases P75,000
Cash P75,000

b. Purchases P75,000
Accounts Payable P75,000

c. Cash P75,000
Sales P75,000

d. Accounts Receivable P75,000

Sales P75,000

45. Sold P26,500 with terms, 2/10, n/30, FOB Destination, Freight Collect. Freight cost is P2,350. The
journal entry on the seller’s book will include a
a. Debit to Freight-in of P2,350
b. Debit to Accounts Receivable of P24,150
c. Credit to Cash of P2,350
d. Credit to Sales of P28,850
46. Purchased P17,400 worth of merchandise with terms, FOB Shipping Point, Freight Collect. Freight
cost is P1,950. The journal entry on the buyer’s book will include a
a. Debit to Freight – in of P1,950
b. Debit to Purchases of P19,350
c. Credit to Accounts Payable of P19,350
d. Credit to Accounts Payable of P1,950

47. Which of the following best describes a merchandising business?

a. It is a business involved in providing services to customers.
b. It provides tangible product which are already available for sale.
c. It converts raw materials into finished products.
d. It is a combination of two or more type of business.

48. In closing merchandise inventory using adjusting entry method, beginning balance of P130,000 and
establishing an ending balance of P95,000, the journal entry will include a
a. Debit to Merchandise Inventory of P130,000
b. Debit to Merchandise Inventory of P95,000
c. Credit to Income Summary of P130,000
d. Debit to Income Summary of P95,000

49. Which of the following is a correct definition of gross profit?

a. Gross Profit = Profit – Other Expenses
b. Gross Profit = Net Sales – Net Purchases
c. Gross Profit = Net Sales – Cost of Goods Sold
d. Gross Profit = Net Purchases + Cost of Goods Sold

50. Which of the following statement is true?

a. The difference between the revenues from sales and cost of sales is operating income.
b. The cost of merchandise purchased during the period is determined by subtracting from the net
purchases the amount of transportation costs incurred during the period.
c. Ending merchandise inventory is included in the calculation of cost of goods available for sale.
d. Summing ending merchandise inventory and cost of goods sold gives the cost of goods available
for sale.

51. A physical count of inventory is usually taken

a. At the end of the fiscal year c. At the start of the fiscal year
b. At the peak of the busy season d. In the middle of the fiscal year

52. On December 12, 2023, Adora Merch sold P18,000 worth of merchandise to Esy Co. with terms 2/15,
n/45. On December 14, 2023, Esy Co. returned goods valued at P4,000. What will be the journal
entry of Adora Merch if Esy Co. paid on December 23, 2023?
a. Cash P13,720
Sales discount 280
Accounts Receivable P14,000

b. Cash P17,640
Sales discount 360
Accounts Receivable P18,000

c. Accounts Payable P14,000

Purchases discount 280
Cash P13,720

d. Accounts Payable P18,000

Purchases discount 360
Cash P17,640
53. How much is the total VAT payable for goods purchased at P28,000 and was later sold at P33,600?
a. P5,600. c. P3,600
b. P672 d. P600.

54. The adjustment for that portion of revenue received in advance which now has been earned is to
debit
a. Cash and credit Unearned Revenues
b. Service Revenues and credit Unearned Revenues
c. Unearned Revenues and credit Cash
d. Unearned Revenues and credit Service Revenues

55. Which of the following is a cash outflow from financing activities?

a. Payment for office supplies
b. Payment of accrued wages
c. Payment for the purchase of property and equipment
d. Payment of long-term borrowing.

56. Which of the following can be reversed at the beginning of the next accounting period?
a. An adjustment to record estimates for uncollectible accounts
b. An adjusting entry that consists of debit to expense and credit to asset
c. An adjustment for the depreciation of an asset
d. An unrecorded rent expense at the end of the year

57. The owner’s capital balance increased by P120,000. No additional investment was made but the
owner withdrew P30,000. Expense of the business is 60% of the total revenue. How much is the total
revenue?
a. P375,000 c. P150,000
b. P250,000 d. P90,000

58. On December 1, JTC Enterprise purchased merchandise with an invoice price of P270,000, trade
discount of 10% and credit terms of 1/10, n/30. Freight costs and terms were P15,000 and FOB
Destination, Freight Collect. If payment is made within the discount period, how much will be paid by
JTC Enterprise to the seller?
a. P243,000 c. P255,570
b. P240,570 d. P225,570

59. Using the same information in number 58, how much will be the total cost of purchased merchandise
of JTC Enterprise?
a. P243,000 c. P255,570
b. P240,570 d. P225,570

60. Which of the following will have normal balance of debit?

a. Freight out c. Purchase discount
b. Sales d. VAT Output Tax

61. A supplier offers the following discounts: Trade discounts of 10% and 5% at a list price of P20,000
and another cash discount of 3%. If paid in full before the due date, how much is to be paid by the
customer?
a. P16,857 c. P17,100
b. P16,490 d. P19,400

62. An advance payment for services to be rendered will be recorded by the paying party as
a. Unearned revenue c. Accrued revenue
b. Prepaid expense d. Accrued expense
63. A merchandiser will earn an operating income of exactly zero when
a. Cost of goods sold equals gross profit
b. Gross profit equals operating expenses
c. Net sales equals cost of goods sold
d. Operating expenses equal net sales

64. The machinery has an accumulated depreciation of P120,000 after adjustment. Said machinery was
purchased three years ago and estimated to have a useful life of 12 years with no salvage value.
How much is the cost of the machinery?
a. P120,000 c. P480,000
b. P360,000 d. P1,440,000

65. Which of the following would not be considered an external user of accounting data for the XYZ
Company?
a. Internal Revenue Service Agent c. Management
b. Creditors d. Customers

66. A post-closing trial balance will show owner’s equity that is equivalent to
a. the beginning owner’s equity
b. the owner’s equity balance in the worksheet
c. the owner’s equity balance in the statement of financial position
d. none of the above

67. Which of the following transactions will not result in the recognition of an expense?
a. Purchase of supplies
b. Expiration of prepaid insurance
c. Interest accrued on a bank loan
d. Use of machinery during the period

68. A net increase in cash of P115,000 was recorded. Operating and financing cash flows show a record
of P218,000 and (P180,000), respectively. How much is the cash flow provided by (used in) investing
activities?
a. P77,000 c. P283,000
b. (P77,000) d. (P283,000)

69. Which of the following is carried over to the next accounting period?
a. Rent Expense c. Service Income
b. Drawing d. Allowance for Doubtful Accounts

70. Which of the following best describes the postponement of the recognition of an expense
a. revenues are recorded first as liabilities
b. prepayments are first recorded as an asset
c. accrued expenses are recorded at year-end.
d. unearned revenues are already presented as income

Bonus Questions: (Indicate Full Name)

1. Who is your instructor?
2. Who is the Associate Chair for BSA/BSAIS program of CAF?
3. Who is the Dean of the College of Accountancy and Finance?