POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
I.
THEORIES
1. When total debits exceed total credits in the income statement, this shows
_______________.
A. Income
B. Net Income
C. Loss
D. Net Loss
2. Statement I: Debit always means increase.
Statement II: Credit always means decrease.
A. Statement I only.
B. Statement II only.
C. Both the statements are correct.
D. Both the statements are incorrect.
3. What association defined accounting as 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?
A. Accounting Standard Council
B. American Institute of Certified Public Accountant
C. American Accounting Association
D. Financial Reporting Standards Council
4. It is the process of preparing accounting reports known as financial statements that
show the company’s financial performance and position to people outside the company
like creditors and customers.
A. Cost Accounting
B. Financial Accounting
C. Management Accounting
D. Auditing
5. Which of the statement/s is/are correct?
Statement I: Asset = Liability + Owner’s Equity
Statement II: Asset = Liability + Owner’s Equity + Income – Expenses – Withdrawal
Statement III: Asset = Equity
Statement IV: Equity = Asset – Liability
A. Statement I, and II
B. Statements I, II, and III
C. Statements I, II, and IV
D. All statements are correct.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
6. Under what concept indicates that the personal assets and liabilities of the owner is
separate from the assets and of the business?
A. Stable monetary concept
B. Conservatism
C. Business Entity concept
D. Periodicity concept
7. All of the following are expense accounts except:
A. Accrued Expense
B. Utilities Expense
C. Salaries Expense
D. Interest Expense
8. Which of the following is not a qualitative characteristic of financial statements?
A. Verifiability
B. Relevance
C. Comparability
D. Understandability
9. Which of the statement/s is/are correct?
Situation I: Increase in Asset = Increase in Owner’s Equity
Situation II: Increase in Asset = Decrease in Liability
Situation III: Increase in Owner’s Equity =Increase in Liability
Situation IV: Increase in one Liability =Decrease in another Liability
A. Situation I only
B. Situations I, III, and IV
C. Situations I, II, and IV
D. Situations I and IV
10. Biesey Co. erroneously recorded Debit Purchase amounting to P12,540 instead of
P21,540. What type of error made?
A. Error of Transposition
B. Error of Omission
C. Error of Commission
D. Compensating Error
11. Which of the following is not included in the Post-Closing Trial Balance?
A. Accrued Expense
B. Prepaid Expense
C. Salaries Expense
D. Unearned Revenue
12. Which of the following is a cash outflow from investing activities?
A. Payment for purchasing supplies.
B. Receipts from sale of property, plant, and equipment.
C. Receipt from collection on accounts receivable
D. Payment for purchasing office equipment.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
13. If the Balance Sheet’s total debits exceed total credits after adding the respective
amounts,
A. The entity incurred net loss.
B. The entity generated income.
C. An error was made.
D. The entity generated a net income.
14. Which of the following cannot be reversed?
Statement I: Prepaid expense under expense method
Statement II: Prepaid expense under asset method
Statement III: Deferred revenue under revenue method
Statement IV: Deferred revenue under liability method
A. Statement I and III
B. Statement I and IV
C. Statement II and III
D. Statement II and IV
15. Which of the following shows how to compute the cost of sales?
A. 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 + 𝑃𝑢𝑟𝑐𝑎ℎ𝑠𝑒𝑠 − 𝐸𝑛𝑑𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
B. 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 − 𝑃𝑢𝑟𝑐𝑎ℎ𝑠𝑒𝑠 + 𝐸𝑛𝑑𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
C. 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 + 𝑁𝑒𝑡 𝑃𝑢𝑟𝑐𝑎ℎ𝑠𝑒𝑠 − 𝐸𝑛𝑑𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
D. 𝐵𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 − 𝑁𝑒𝑡 𝑃𝑢𝑟𝑐𝑎ℎ𝑠𝑒𝑠 + 𝐸𝑛𝑑𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
16. Which of the following is true about FOB Shipping point, freight prepaid?
Statement I: Buyer should pay the freight
Statement II: Seller should pay the freight
Statement III: Buyer pays the freight
Statement IV: Seller pays the freight
A. Statements I and III
B. Statements I and IV
C. Statements II and III
D. Statements II and IV
17. All of the following are contra accounts except _______.
A. Purchase Returns and Allowances
B. Freight in
C. Sales Discount
D. Allowance for bad debts
18. This is prepared to ensure that the total balances in the subsidiary ledger agrees with
the control account.
A. Trial Balance
B. Special Journal
C. Schedule of accounts receivable
D. Balance Sheet
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
19. By the contract of partnership, two or more persons bind themselves to contribute
money, property, or industry to a common fund, with the intention of dividing the profits
among themselves, is according to what article?
A. Article 1167
B. Article 1676
C. Article 1767
D. Article 1776
20. Kind of partner whose liability to third persons extends to his separate property.
A. Industrial partner
B. Industrial partner
C. General partner
D. Managing partner
21. Which of the following is not an advantage of a partnership?
A. Unlimited liability
B. Better management
C. Larger resources
D. Transfer of ownership
22. Revenues are recognized and recorded when earned regardless of when the cash is
received. Expenses incurred are recorded whether or not cash is paid. This is under the
__________.
A. Cash basis
B. Accrual basis
C. Matching principle
D. Conservatism
23. Which of the following is true about adjusting entries?
A. Made at the end of the accounting period to bring all the balances of the temporary
accounts to zero.
B. Help simplify the recording of regular transactions in the next accounting period.
C. To bring back the account to their normal status
D. Bring the accounts up-to-date prior to preparing the financial statements.
24. It is a type of partnership whose main activity is the manufacture and sale or the
purchase and sale of goods.
A. Universal partnership of al profit
B. General co-partnership
C. Partnership at will
D. Trading partnership
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
25. For sole proprietor forming a partnership, which of the following contra account is carried
forward?
A. Allowance for Bad Debts
B. Accumulated Depreciation
C. Purchase discount
D. Sales Returns and allowances
II.
PROBLEMS
1. If asset increase by P200,000 and liabilities decreased by P10,000, Owner’s Equity must
A. Increase by P190,000
B. Increase by P210,000
C. Decrease by P210,000
D. Decrease by P190,000
2. The beginning balance of Biesey Co.’s asset is P100,000. During the year, the owner
invested 20,000 cash, and 30,000 worth of merchandise. How much is the ending
owner’s equity if the ending liability is 20,000?
A. P130,000
B. P150,000
C. P20,000
D. P80,000
3. The ending balance of Biesemey Co.’s owner’s equity is P50,000. During the year, the
owner withdrew 40,000 and net income of P10,000. How much is the Owner’s equity
beginning balance?
A. 0
B. P100,000
C. P80,000
D. P20,000
4. Utilitiesexpense amounting to P1,500 has been debited to salaries expense account.
What is the entry to correct the error?
A. Debit Utilities expense P3000, Credit Salaries expense P3000
B. Debit Salaries expense P3000, Credit Utilities expense P3000
C. Debit Salaries expense P1500, Credit Utilities expense P1500
D. Debit Utilities expense P1500, Credit Salaries expense P1500
5. Notes Receivable has a balance of P250,000 issued last October 1, 2019. The note is a
180-day, 10% note. How much is the interest for the year ended December 31,2019?
A. P12,500
B. P6,250
C. P25,000
D. P6,500
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
6. Service revenue earned but not yet collected as of December 31, 2019 amounted to
P20,000. Prepare the adjusting entry.
A. Debit Accounts Receivable P20,000; Credit Service Revenue P20,000
B. Debit Service Revenue P20,000; Credit Unearned Service Revenue P20,000
C. Debit Accounts Receivable P20,000; Credit Unearned Service Revenue P20,000
D. Debit Unearned Service Revenue; Credit Service Revenue
For items 7-9.
On November 1, 2020, a P75,000 purchase was made with the credit terms
2/10,1/15,n/30.
7. If the buyer paid on November 11, 2020, how much is the cash discount to be recorded?
A. No cash discount
B. P1,500
C. P750
D. P75,000
8. How much will the buyer pay in connection to item #7?
A. P75,000
B. P74,250
C. P73,500
D. 0
9. If the buyer pays after the discount period. The entry that the seller will record would
include a debit to
A. Cash P75,000
B. Accounts Payable P60,000
C. Accounts Receivable P60,000
D. Sales P60,000
10. Wantri incurs salaries of a 7-day work every Sunday at the rate of P650 per day. The
last payday was March 28. Give the amount of salaries expense on March 31.
A. P1,300
B. P4,500
C. 2,600
D. P1,950
11. Wantu purchased an office equipment on February 2019 amounting to P125,000 with a
salvage value of 25,000 and a useful life of 5 years. Compute the amount of depreciation
expense to be recorded for the year ended December 31, 2020.
A. P20,000
B. P25,000
C. P18,333.33
D. P16,666,66
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
For items 12-15. Use the following data to answer the questions given below. Efem Co. had the
following balance sheet accounts balances:
Accounts Payable
Accounts Receivable
Cash
Efem, Capital
Equipment
Furniture and Fixture
Notes Payable
20,000
50,000
100,000
?
70,000
?
10,000
12. If the amount of Furniture and Fixture is P50,000, what is the amount of the Efem
Capital?
A. P240,000
B. P270,000
C. P160,000
D. P190,000
13. If the amount of Furniture and Fixture is P20,000, what is the amount of non-current
assets?
A. P20,000
B. P70,000
C. P120,000
D. P90,000
14. If Efem Co. paid its remaining Liability, how much is its current assets?
A. P200,000
B. P190,000
C. P120,000
D. P130,000
15. If Efem Co. purchased supply amounting to P8,000 on account, how much is the total
liabilities?
A. P38,000
B. P28,000
C. P18,000
D. P8,000
For items 16-18. The trial balance on December 31, 2019 shows the following:
Purchases
Purchase Returns and Allowances
Transportation in
Ending Inventory
Cost of Goods Available for Sale
50,000
10,000
20,000
30,000
150,000
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
16. What is the amount of Net purchases?
A. P80,000
B. P20,000
C. P60,000
D. P40,000
17. What is the amount of beginning inventory?
A. P80,000
B. P90,000
C. P230,000
D. P210,000
18. What is the cost of goods sold?
A. P 120,000
B. P 130,000
C. P 180,000
D. P 200,000
For items 19-21. CAFand SC decided to form a partnership. CAF invested into a partnership a
building with a P1,000,000 carrying value and P1,200,000 agreed value. The related mortgage
of P30,000 was assumed by the partnership. SC invested cash amounting to P100,000;
equipment with a book value of P50,000 and fair market value of P40,000.
19. CAF capital account would
A. Credit P970,000
B. Debit P970,000
C. Credit P1,170,000
D. Debit P1,170,000
20. SC capital account would
A. Credit P140,000
B. Debit P140,000
C. Credit P150,000
D. Debit P150,000
21. Total assets of the partnership is
A. P1,120,000
B. P1,110,000
C. P1,310,000
D. P1,340,000
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
For items 22-25. Spongebob and Patrick formed a partnership and invested the following assets
and liabilities:
Fair Market Value
Agreed Value
Book Value
Spongebob:
Cash
Equipment
Furniture and Fixture
110,000
50,000
70,000
105,000
45,000
60,000
100,000
60,000
55,000
Patrick:
Cash
Building
Mortgage Payable
50,000
500,000
(30,000)
55,000
550,000
(40,000)
40,000
490,000
(20,000)
22. What is the amount of Spongebob’s total capital?
A. P205,000
B. P210,000
C. P215,000
D. P230,000
23. What is the amount of Patrick’s total capital?
A. P565,000
B. P550,000
C. P520,000
D. P510,000
24. What is the partnership’s total assets?
A. P650,000
B. P775,000
C. P795,000
D. P740,000
25. What is the amount of the total capital of the partnership?
A. P755,000
B. P650,000
C. P775,000
D. P740,000
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
III.
ANSWER KEY
Theories
1.
2.
3.
4.
5.
D
D
B
B
C
6. C
7. A
8. A
9. D
10. A
11.
12.
13.
14.
15.
C
D
D
D
C
16.
17.
18.
19.
20.
B
B
C
C
C
21.
22.
23.
24.
25.
D
B
D
D
A
Problems
1. B
Asset Increase
Liability Decrease
Owner’s equity,
P200,000
10,000
P210,000
2. A
Asset
Liability
Owner’s Equity
3. C
Beginning
100,000
20,000
80,000
During
50,000
50,000
Owner’s equity, Ending
Net Income
Owner’s Drawing
Owner’s equity, Beginning
50,000
(10,000)
40,000
80,000
Notes Receivable
Multiplied to
Multiplied to
Interest Expense
250,000
.10
90/360
6,250
Purchases
Multiplied to
Cash Discount
75,000
.02
1,500
Purchases
Multiplied to
Cash Discount
75,000
.98
73,500
4. D
5. B
6. A
7. B
8. C
Ending
150,000
20,000
130,000
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
9. A
10. D
Daily rate
Multiplied to
Salaries Expense
650
3
1,950
Office Equipment
Salvage Value
Depreciable Cost
Multiplied to
Depreciation Expense
125,000
25,000
100,000
5
20,000
Cash
Accounts Receivable
Equipment
Furniture and Fixture
Total Assets
Accounts Payable
Notes Payable
Efem, Capital
100,000
50,000
70,000
50,000
270,000
(20,000)
(10,000)
240,000
Equipment
Furniture and Fixture
Total non-current assets
70,000
20,000
90,000
Cash
Accounts Receivable
Current Assets
Accounts Payable
Notes Payable
Total current assets
100,000
50,000
150,000
(20,000)
(10,000)
120,000
Accounts Payable
Notes Payable
Supply
Total current assets
20,000
10,000
8,000
38,000
11. A
12. A
13. D
14. C
15. A
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
16. C
Purchases
Purchases Returns and
Allowances
Transportation in
Net purchases
50,000
(10,000)
20,000
60,000
17. B
Cost of Goods Available for Sale
Net Purchases
Beginning Inventory
150,000
(60,000)
90,000
Cost of Goods Available for Sale
Ending Inventory
Cost of goods sold
150,000
(30,000)
1200,000
18. A
19. C
Building
Mortgage Payable
CAF Capital
1,200,000
(30,000)
1,170,000
Cash
Equipment
SC Capital
100,000
40,000
140,000
Cash
Building
Equipment
Total Capital
100,000
1,200,000
40,000
1,340,000
Cash
Equipment
Furniture and Fixture
Spongebob, Capital
100,000
45,000
60,000
205,000
Cash
Building
Mortgage Payable
Patrick, Capital
40,000
550,000
(40,000)
550,000
Cash
Building
Equipment
Furniture and Fixture
Total Asset
140,000
550,000
45,000
60,000
795,000
20. A
21. D
22. A
23. B
24. C
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES
College of Accountancy and Finance Student Council
CAF Review
ACCO 20033: Financial Accounting and Reporting 1
(Midterm Examinations)
25. A
Cash
Building
Equipment
Furniture and Fixture
Mortgage Payable
Total Capital
140,000
550,000
45,000
60,000
(40,000)
755,000