Mock Qualifying Examination – Level 1
BASIC FINANCIAL ACCOUNTING AND REPORTING
1. The following has a normal credit balance except:
a. Expenses
b. Capital
c. Revenue
d. Liabilities
2. Service revenue is treated as a revenue when:
a. Cash is received
b. Goods are purchased
c. Goods are delivered
d. Services are rendered
3. On January 1, 2023, ABC Company had a total allowance for doubtful accounts of Php5,000. Write
offs throughout the year amounted to Php1,000 and the recovered amount totaled to Php 2,000. The
company’s accounts receivable is Php100,000 and its sales is Php90,000. For estimation of allowance,
the company uses 7% if accounts receivable is used and 2% if sales is used. What is the ending
balance of the allowance for doubtful accounts if the company uses Percentage on Accounts
Receivable?
a. Php7,000 Aging Method - AFDA, year-end
% of A/R - AFDA, year-end 100,000 * 7% = 7,000
b. Php1,800 % of Sales - Bad Debts Expense
c. Php7,800
d. Php13,000
4. On January 1, 2023, ABC Company had a total allowance for doubtful accounts of Php5,000. Write
offs throughout the year amounted to Php1,000 and the recovered amount totaled to Php 2,000. The
company’s accounts receivable is Php100,000 and its sales is Php90,000. For estimation of allowance,
the company uses 7% if accounts receivable is used and 2% if sales is used. What is the ending
balance of the allowance for doubtful accounts if the company uses Percentage on Sales?
a. Php7,000
b. Php1,800
c. Php7,800
d. Php13,000
5. A company purchased supplies totaling Php5,000 on January 1, 2023. On December 31, 2023, the
company found out that the supplies used were Php2,000. What is the adjusting debit entry if the
company recorded the supplies purchased as assets?
a. Supplies 3,000
b. Supplies 2,000
c. Supplies expense 3,000
d. Supplies expense 2,000
6. ABC company purchased equipment with a total value of Php500,000 on January 1, 2023. The
useful life deemed for the equipment is 10 years. If there is no residual value, what is the accumulated
depreciation on December 31, 2025?
a. Php 50,000
b. Php 45,000
c. Php 100,000
d. Php 150,000
7. EFG Company received an advance payment of Php10,000 from a customer representing 2 months
of service. After a month, the company provided the service for the customer. What is the adjusting
entry for the service provided by the company after a month from the receipt of the advance payment
a. Db- Unearned Revenue 10,000, Cr- Cash 10,000
b. Db Unearned Revenue 5,000, Cr- Service Revenue 5,000
c. Db- Accounts Receivable 5,000, Cr- Service Revenue 5,000
d. Db- Cash 10,000 Cr- Accounts Receivable 10,000
8. A 3-year note payable totalling to Php100,000 with an annual interest of 6% as signed on October
1, 2023. What is the adjusting debit entry for the interest on December 31, 2023.
a. Interest Payable 1,500
b. Interest Expense 1,500
c. Interest Payable 6,000
d. Interest Expense 3,000
9. What is the debit account used in closing expense accounts?
a. Income Summary
b. Expense Account
c. Owner’s Capital
d. Cash
10. A credit balance in the income summary account indicates a:
a. Loss
b. Nothing
c. Profit
d. None of the above
11. What is the credit entry for returning purchased merchandise using a perpetual inventory system?
a. Accounts Payable
b. Inventory
c. Purchases Returns and Allowances
d. Cash
12. Discounts taken in a periodic inventory system are credited to what account?
a. Purchase Discount
b. Inventory
c. Cost of Sales
d. Accounts Payable
13. Which of the following is a correct formula when calculating the cost of goods sold?
a. Beginning Inventory+Net purchases-Ending Inventory
b. Net purchases-Ending Inventory-Beginning Inventory
c. Beginning Inventory-Net purchases+Ending Inventory
d. Beginning Inventory+Net purchases+Ending Inventory
14. Which of the following is not true. Net sales is:
a. The same as gross sales when there is no discounts or returns True
b. Calculated through deducting returns and discount from gross sales True
c. Only involves sales on accounts False
d. Calculated through deducting administrative and operating expenses from gross sales False
15. Igris company has the following information for the year 2022:
Gross Profit 5,000
Purchases 6,000
Ending Inventory 1,000
Cost of Sales 7,000
Net Income 1,000
Calculate the Company’s beginning inventory balance
a. 7,000
b. 1,000
c. 5,000
d. 2,000
16. Kaiden is in-charge of recording transactions in the company’s journals. If the company purchased
goods from its suppliers worth Php500,000 on account and Php200,000 with cash, what amount
should be recorded in the cash disbursement journal?
a. Php500,000
b. Php200,000
c. Php700,000
d. Php0
17. Tusk Company has an inventory amounting to Php50,000 on December 31, 2023. On December
31,2024, the Company found out that the remaining inventory of the company is Php20,000. If the
cost of goods sold is Php100,000, what is the company’s total net purchase?
a. 50,000
b. 70,000
c. 80,000
d. 30,000
18. Which of the following is not a part of company’s inventory
a. Goods out on consignment
b. Consigned goods from another company
c. Goods purchased FOB shipping Point
d. Goods sold FOB destination
19. Violet Gym purchased boxing equipment on credit for P25,000. This transaction is classified as
a. Exchange of Assets
b. Source of Assets
c. Exchange of Claims
d. Use of Assets
20. Violet Gym purchased boxing equipment on credit for P25,000. What would be the effect of the
transaction in the accounting equation?
a. Increase in Asset, Decrease in Liability
b. Increase in Asset, Increase in Liability
c. Increase in Asset, Decrease in Asset
d. Increase in Asset, Increase in Equity
21. Glasc Industries’ unearned revenue account showed a balance of P460,000 at the beginning of the
year. They entered into new contracts with customers that paid P300,000 in advance and completed
some of its engagement contracts from the prior year amounting to P240,000. How much unearned
revenue should Glasc report in its balance sheet for the current year?
a. 240,000
b. 520,000
c. 300,000
d. zero
22. What function do general ledgers serve in the accounting cycle
a. Summarizing
b. Recording
c. Classifying
d. Reporting
23. It is an index of all account titles that an entity may use in recording its accountable transactions.
a. General Journal
b. Ledger
c. Chart of Accounts
d. Trial Balance
24. A list of all accounts with their respective debit or credit balances.
a. General Journal
b. Ledger
c. Chart of Accounts
d. Trial Balance
25. An accounting error characterized by reversing the order of numbers.
a. Transposition
b. Footing Error
c. Number Slide
d. Miscalculation
26. An accounting error characterized by erroneous moving of decimal point.
a. Transposition
b. Footing Error
c. Number Slide
d. Miscalculation
27. Medarda Manufacturing disclosed the following information for the current year:
Debit Credit
Cash 30,000
Account Receivable 20,000
Finished Goods 10,000
Work-in-Process 50,000
Raw Materials 70,000
Factory Equipment 90,000
Accounts Payable 50,000
Tax Payable 15,000
Share Capital 100,000
Share Premium 70,000
Retained Earnings 80,000
Sales Revenue ?
Cost of Revenue ?
Operating Expenses 80,000
400,000 400,000
How much is the Cost of Revenue for the current year?
a. 58,000
b. 50,000
c. 50,500
d. 56,000
28. Which of the following is a deferred expense?
a. Singed Pharmaceuticals received P2,000,000 cash paid by its major customer in advance
b. At the end of the year, Singed Pharmaceuticals recognized an interest income of P32,000 for
its notes receivable that are past due
c. An electricity bill of P270,000 was received by Singed Pharmaceuticals at the end of the year
d. Singed Pharmaceuticals paid its P40,000 software subscription for the coming year
29. Which among the following will be the impact of the failure by an entity to record the
depreciation of its building?
Total Assets Total Liabilities Total Equity Net Income
a. Overstated Overstated No Effect No Effect
b. Understated No Effect Understated Understated
c. Overstated No Effect Overstated No Effect
d. Overstated No Effect Overstated Overstated
30. Caitlyn Bakeshop reported the following information for the current year:
Beginning Inventory 4,000,000
Freight in 3,000,000
Purchase Returns 9,000,000
Ending Inventory 5,000,000
Selling Expenses 12,500,000
Sales Discount 2,500,000
The cost of goods is six times the selling expenses
How much is the total goods available for sale?
a. 80,000,000
b. 75,000,000
c. 70,000,000
d. 80,500,000
31. Renata Company provided the following information for the current year
Sales 10,000,000
Cost of Sales 3,000,000
Distribution Cost 1,000,000
General and Administrative Cost 2,000,000
Correction of Overstated A/R from last year 500,000
Interest Expense 350,000
Income Tax Expense 500,000
Dividends Declared 400,000
Gain on Sale of Equipment 600,000
How much is the net income before tax?
a. 4,250,000
b. 3,750,000
c. 3,350,000
d. 2,850,000
32. Which of the following accounts are not found in the income statement?
a. Bad Debts Expense
b. Sales Revenue
c. Accumulated Depreciation
d. Gain on Sale of Equipment
33. Chross Trading provided the following information during the current year:
Rental income received 500,000
Owner withdrawals 1,000,000
Cash received from customers 9,000,000
Proceeds from issuing share capital 1,500,000
Royalty income received 200,000
Proceeds from sale of PPE 2,000,000
Cash paid to suppliers 6,400,000
Income taxes paid 300,000
Cash balance, beginning
How much is the net cash provided (used) in operating activities?
a. 3,000,000
b. 3,300,000
c. 2,700,000
d. 2,000,000
34. How much is the net cash provided (used) in investing activities?
a. 2,500,000
b. 2,000,000
c. 2,200,000
d. zero
35. The Last Drop provided the following information on December 31, 2024:
Cash 600,000
Account Receivable 2,800,000
Inventory 2,000,000
Property, Plant and Equipment 10,500,000
Accounts Payable 1,800,000
Income Tax Payable 1,500,000
Deferred Tax Liability 700,000
Net Sales 15,000,000
Cost of Sales 10,000,000
Income Tax Expense 2,100,000
How much is the total equity?
a. 11,450,000
b. 11,900,000
c. 11,400,000
d. 11,950,000
36. Kirraman Realty had the following balance sheet accounts at the end of the year:
Cash 30,000
Accounts Receivable 10,000
Equipment 70,000
Building ?
Land 70,000
Accounts Payable 60,000
Capital Account ?
If the balance of the building account was P80,000 and P30,000 of accounts payable were paid in
cash, what would be the total liabilities and equity?
a. 140,000
b. 180,000
c. 190,000
d. 230,000
37. Statement 1: Sales return and allowances is an expense account
Statement 2: The ending inventory of one period is the beginning inventory of the next period
a. True; True
b. True; False
c. False; True
d. False; False
38. An authorization made by the buyer to the seller to deliver the merchandise as detailed in the
form.
a. Purchase Requisition
b. Purchase Order
c. Invoice
d. Official Receipt
39. Medarda Manufacturing completed the following transactions for the month:
1. Sale of finished goods of P10,000 to Ambessa Law Firm on credit
2. Purchase of raw materials of P20,000 from a supplier on credit
3. Purchase of raw materials of P30,000 from a supplier on credit
4. Sale of equipment of P10,000 to Mel Company on credit
What is the total amount recorded in the sales account this month?
a. 10,000
b. 20,000
c. 55,000
d. 65,000
40. Silco Merchandising reported the following amount in its trial balance for the current year:
Sales 750,000
Sales Returns and Allowance 15,000
Sales Discount 10,000
Purchases 170,000
Purchase Returns and Allowance 20,000
Freight in 30,000
Freight out 75,000
General and Administrative Costs 275,000
In addition, the beginning and ending merchandise inventory was P55,000 and P35,000
respectively. How much is the net purchases?
a. 150,000
b. 180,000
c. 210,000
d. 430,000
41. Piltover Company’s physical inventory count on year-end revealed a total cost of P4,410,000. The
following are excluded in the count:
1. Merchandise shipped to a customer FOB Destination
On December 15, 2024 and received by the customer
On December 28, 2024 Ignore 380,000
2. Merchandise purchased from a supplier FOB Shipping
Point on December 26, 2024 and received by Piltover
On January 3, 2025 Add 460,000
3. Merchandise shipped to a customer FOB Shipping
Point on December 30, 2024 and received by the customer
On January 5, 2025 Ignore 830,000
4. Merchandise purchased from a supplier FOB Destination
On December 12, 2024 and received by Piltover on December
18, 2024 Add 510,000
How much should Piltover’s ending inventory be at year-end?
a. 5,300,000 c. 6,590,000
b. 5,760,000 d. 5,380,000
42. What is the journal entry of the seller if its sale to a customer has a shipping term of FOB
Shipping Point, Freight Prepaid?
a. Debit A/R; Credit Merchandise Inventory
b. Debit A/R; Credit Sales
c. Debit A/R; Credit Freight out
d. Debit A/R; Credit Cash
43. A supplementary record used to provide detailed information for a control account in the general
ledger.
a. General Ledger c. Subsidiary Ledger
b. Special Ledger d. Controlling Ledger
44. The type of transaction that would appear in the sales journal would be a sale of
a. PPE for cash
b. PPE in exchange for promissory note
c. Inventory for cash
d. Inventory in exchange for promissory note
45. Which of the following is classified as operating activity?
a. Declaration of dividend
b. Sale of long-term assets
c. Issuance of long-term bonds
d. Payment to suppliers for inventories
46. Which of the following is not a closing entry?
a. Debit Income Summary; Credit Expense
b. Debit Revenue; Credit Income Summary
c. Debit Expenses; Credit Owner’s Capital
d. Debit Income Summary; Credit Owner’s Capital
47. The primary objective of reversing entries is to
a. Correct errors
b. Simplify the bookkeeping associated with accruals from the prior period
c. Transfer the temporary accounts to an equity account
d. Place the expenses in its proper period
48. Branch of accounting that concentrates on the decision making
a. Taxation
b. Auditing
c. Financial Accounting
d. Managerial Accounting
49. Which of the following is a long-term asset that does not suffer from depreciation
a. Equipment c. Land
b. Building d. Vehicles
50. Is the art of recording, classifying, and summarizing in a significant manner and in terms of
money, transactions and events which are, in part at least, of financial character, and interpreting the
results thereof (AICPA)
a. Accounting c. Taxation
b. Management d. Costing
