URDANETA CITY

UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT

Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

Name: _________________________________________ Rating: __________

Course/Yr./Blk/Time: _______________________________ Score: __________

Instruction: Multiple choice. CHOOSE THE BEST ANSWER

MID-TERM EXAMINATION
Financial Accounting & Reporting

1. The amounts shown on this trial balance represent the beginning balances of accounts in the next
accounting period.
a. Unadjusted trial balance
b. Adjusted trial balance
c. Post-closing trial balance
d. Carry-over trial balance

Use the following information for the next three questions:

Entity A started operations on November 1, 20x1. The following were the transactions during the month:

Nov. 1, 20x1 The business owner provides ₱2,000,000 cash as investment to the business.

Nov. 5, 20x1 Entity A obtains a ₱500,000 loan and issues a promissory note.

Nov. 8, 20x1 Entity A acquires land costing ₱1,000,000 on cash basis.

Nov. 16, 20x1 Entity A renders services worth ₱1,200,000 on account.

Nov. 30, 20x1 Entity A pays salaries expense of ₱280,000.

2. How much is the total assets at the end of the period? (Hint: use the basic accounting equation)
a. 4,320,000
b. 3,840,000
c. 3,420,000
d. 2,980,000

3. How much is the total liabilities at the end of the period?

a. 500,000
b. 520,000
c. 580,000
d. 680,000

4. How much is the equity at the end of the period after taking into account income and expenses?
a. 2,920,000
b. 2,980,000
c. 3,120,000
d. 3,280,000

5. In a worksheet, which of the following is prepared after the unadjusted trial balance?
a. Adjusted trial balance columns
b. Income statement columns
c. Adjusting entries columns
d. Balance sheet columns

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

6. If total debits exceed total credits in the balance sheet columns of a worksheet, there is
a. profit.
b. loss.
c. owner’s drawings.
d. an error.

7. Adding amounts horizontally in a worksheet is called

a. footing.
b. cross-footing.
c. cross-legging.
d. horizontaling.

8. Accounts are listed in the trial balance in this sequence.

a. Asset, Liabilities, Equity, Expense, and Income
b. Asset, Equity, Liabilities, Expense, and Income
c. Asset, Liabilities, Equity, Income, and Expense
d. Asset, Expense, Liabilities, Equity, and Income

9. In accounting parlance, an account that has no balance is called a

a. closed account.
b. dead account.
c. ghost account.
d. blocked account.

10. This trial balance contains only real accounts.

a. Unadjusted trial balance
b. Adjusted trial balance
c. Post-closing trial balance
d. Permanent trial balance

11. It is a journal entry that is the exact opposite of a previous adjusting entry.
a. inside-out entry
b. closing entry
c. gnitsujda entry
d. reversing entry

12. In accounting parlance, to “accrue” means to

a. accumulate.
b. postpone.
c. reduce.
d. sneeze.

13. It is an account used temporarily to store discrepancies in the accounts pending their analysis and
permanent classification.
a. Suspense account
b. Horror account
c. Thriller account
d. Romantic comedy account

14. The first step in the accounting cycle is

a. posting to the ledger.
b. journalizing.

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

c. preparing the adjusting entries.

d. analyzing events.

15. Credit is on which side of an account?

a. Right
b. Left
c. Top
d. Bottom

16. A debit may signify an increase in

a. liability account.
b. asset account.
c. revenue account.
d. liability and revenue account.

17. A business sells goods in Year 1 but collects the sale price only in Year 2. According to the accrual
basis and time period concepts, the business should include the sale in its income statement in
a. Year 1.
b. Year 2.
c. Year 3.
d. Every year

18. Debit and debit result to

a. addition.
b. deduction.
c. multiplication.
d. two debits.

Instruction for the next twelve (12) questions: Choose the letter corresponding to the correct journal entry for
each of the transactions described.

19. Owner’s cash investment to the business.

Debit Credit
a. Cash Owner’s capital
b. Cash Owner’s drawings
c. Owner’s capital Cash
d. Cash Sales

20. Acquisition of equipment on cash basis.

Debit Credit
a. Cash Equipment
b. Expense Cash
c. Equipment Cash
d. Equipment Owner’s capital

21. Acquisition of inventory on cash basis

Debit Credit
a. Inventory Accounts payable
b. Expense Cash
c. Inventory Cash
d. Cost of sales Cash

22. Acquisition of inventory on credit.

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

Debit Credit
a. Inventory Accounts payable
b. Accounts payable Inventory
c. Accounts payable Cash
d. Cost of sales Accounts payable

23. Payment (settlement) of accounts payable

Debit Credit
a. Inventory Accounts payable
b. Cash Accounts payable
c. Accounts payable Cash
d. Cost of sales Inventory

24. Sale of inventory on cash basis

Debit Credit
a. Inventory Sales
b. Cash Accounts receivable
c. Cash Sales
d. Cost of sales Cash

25. Sale of inventory on credit

Debit Credit
a. Cost of sales Sales
b. Cash Accounts receivable
c. Cash Sales
d. Accounts receivable Sales

26. Collection of accounts receivable

Debit Credit
a. Cost of sales Sales
b. Cash Accounts receivable
c. Cash Sales
d. Accounts receivable Sales

27. Payment of advertising expense

Debit Credit
a. Advertising expense Cash
b. Cash Advertising expense
c. Cash Advertisement payable
d. Advertising expense Accounts payable

28. Owner’s drawings (owner’s withdrawal of cash from the business)

Debit Credit
a. Drawings expense Cash
b. Cash Owner’s drawings
c. Owner’s drawings Cash
d. Cash Owner’s capital

29. Recognition of depreciation

Debit Credit
a. Depreciation expense Cash
b. Depreciation expense Equipment
c. Depreciation expense Accumulated depreciation
d. Accumulated depreciation Depreciation expense

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

30. Recognition of bad debts

Debit Credit
a. Bad debts expense Cash
b. Bad debts expense Accounts receivable
c. Bad debts expense Allowance for bad debts
d. Allowance for bad debts Bad debts expense

31. Which of the following statements is correct?

a. The “Sales” account is used by both service and merchandising businesses in recording revenues
from primary business activities.
b. “Accounts receivable” is used only by service businesses but not by merchandising businesses.
c. The “Inventory” account is most likely to be found in the financial statements of a merchandising
or manufacturing business but not of those of a service business.
d. A manufacturing business cannot be organized as a sole proprietorship.

32. Recording assets at their acquisition cost (entry value), rather than at their net selling price (exit value),
is in line with the concept of
a. Single entity concept.
b. Historical cost concept.
c. Going concern concept.
d. Matching principle.

33. The term “posting” as used in accounting means

a. recording an accountable event in debit-credit format.
b. transferring the debits and credits of journal entries from the journal to the affected accounts in the ledger.
c. checking the equality of the monetary totals of debits and credits of accounts in the ledger.
d. uploading photographs to the internet.

34. At the beginning of the period, Addy had a cash balance of ₱20,000 and a notes payable of ₱15,000.
During the period, Addy collected ₱11,000 accounts receivable, paid ₱8,000 notes payable, and issued
additional notes payable of ₱5,000 in exchange for cash. How much are the ending balances of cash and
notes payable, respectively?
Cash Notes payable

a. 17,000 20,000
b. 20,000 12,000
c. 28,000 12,000
d. 36,000 20,000

35. What is the normal balance of the purchase returns account?

a. debit
b. credit
c. zero
d. none of these

36. Which of the following is equal to total goods available for sale?
a. Net purchases – Inventory, beg.
b. Cost of sales – Inventory, end.
c. Inventory, end. + Cost of sales
d. Net purchases + Inventory, end.

37. A business has total assets, liabilities, and equity of ₱10,000, ₱7,000 and ₱3,000, respectively, at the
beginning of the period. During the period, total liabilities decreased to ₱4,000 while profit was ₱5,000.
How much is the ending total assets?

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

a. 12,000
b. 11,000
c. 9,000
d. 7,000

38. Imagine you are a business manager. Your company has an opportunity to venture out into a new
market with a new product. However, your current resources are limited. In order to take the
opportunity, you need to discontinue the production of one of your existing products. Your company’s
accountant provided you with the following information to help you decide which product to
discontinue.

  Product A Product B Product C

Net sales (income) 5,000,000 3,500,000 2,100,000

Attributable costs (expenses) (4,800,000) (2,275,000) (630,000)

Which product will you most likely consider to stop producing?

a. Product A
b. Product B
c. Product C
d. All them

39. Which of the following is not a special journal?

a. General Journal
b. Sales Journal
c. Purchase Journal
d. Cash Receipts Journal

40. A business sells goods on cash basis. This transaction is most likely recorded in which of the following
special journals?
a. Sales journal
b. Purchases journal
c. Cash receipts journal
d. Diary journal

41. At the beginning of the period, Entity A’s notes payable had a balance of ₱1,200. During the period,
Entity A obtained an additional loan of ₱800 and made total payments of ₱500. How much is the
ending balance of Entity A’s notes payable?
a. 1,800
b. 1,500
c. 1,200
d. 900

42. This branch of accounting involves teaching accounting, taxation, and other business-related subjects.
a. Accounting education
b. Government Accounting
c. Accounting research
d. Tax accounting

43. This account is used to record payments received from customers prior to the delivery of goods or
rendering of services.
a. Accrued income
b. Unearned income
c. Prepaid asset

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

d. Accounts receivable

44. A chart of accounts is

a. a listing of all accounts and their balances.
b. a subsidiary ledger.
c. a special journal.
d. a listing of all account titles.

45. How is profit or loss calculated?

a. It is the difference between net assets at the beginning and end of the accounting period irrespective
of transactions with owners.
b. It is the difference between net liabilities at the beginning and end of the accounting period.
c. It is the difference between assets and liabilities.
d. It is the difference between income and expenses.

46. It refers to money held and bank deposits that are available for unrestricted use by the business.
a. Cash
b. Accounts receivable
c. Income
d. Inventory

47. An increase to an account is recorded

a. in the debit side of that account.
b. in the credit side of that account.
c. in the side of that account that represents its normal balance.
d. beside the account.

48. The beginning balance of “Cash” is placed on which side of the T-account?
a. Left side
b. Right side
c. Bottom side
d. Every side

49. When a customer buys goods from your business and promises orally to pay for the sale price next week, you will
a. debit accounts receivable.
b. credit accounts receivable.
c. not give him the goods.
d. ignore the customer.

50. When the customer in #49 above pays the sale price, you will
a. debit cash.
b. credit cash.
c. say “Thank you.”
d. a and c

51. If your business uses special journals, where will you record the transactions in #’s 49 and 50 above?
Transaction in #1 Transaction in #2
a. Sales journal Cash receipts journal
b. General journal General journal
c. General journal Cash receipts journal
d. Not recorded Cash receipts journal

52. If you debit a liability account, what happens?

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

a. Its balance increases.

b. Its balance decreases.
c. Its balance disappears.
d. Nothing!

53. Which of the following represents an abnormal balance?

a. Accounts receivable, end. ₱10 (Dr.)
b. Inventory, end. ₱10 (Dr.)
c. Accounts payable, end. ₱10 (Dr.)
d. All of these look normal to me.

54. Entity A has the following information:

1) Accounts receivable, ₱100,000
2) Accounts receivable – Mr. George U. Tang, ₱20,000

Where will you find the accounts described above?

a. Both in the General ledger

b. First one, in the General ledger; second one, in the Subsidiary ledger
c. First one, in the General ledger; second one, nowhere
d. Both on the forehead of the accountant

55. Which of the following is not an example of a source document?

e. Delivery receipt
f. Sales invoice
g. Special journal
h. Bank statement

56. Journal entries are recorded in the journal

a. chromatically.
b. chronologically.
c. pharmaceutically.
d. cutely.

57. A journal entry with more than one debit or more than one credit is called a
a. simple journal entry.
b. compound journal entry.
c. complicated journal entry.
d. sophisticated journal entry.

58. Which of the following is the effect of purchasing inventory on account?

a. Inventory is increased and Cash is decreased
b. Inventory is increased and Accounts payable is increased
c. Inventory is increased and Accounts payable is decreased
d. Inventory is decreased and Accounts payable is increased

59. Which of the following is the effect of a sale of goods on account?

a. Accounts receivable is increased and Cash is decreased
b. Accounts receivable is increased and Accounts payable is increased
c. Accounts receivable is increased and Sales is increased
d. Accounts receivable is decreased and Sales is decreased

60. It is the step in the accounting cycle where the identified accountable events are recorded in the journals.
a. Analyzing

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Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

b. Journalizing
c. Accounting
d. Posting

61. These are transactions that involve the business and another external party.
a. Outside transactions
b. External events
c. Internal events
d. External events other than transfers

62. This type of journal entry contains only a single debit and a single credit.
a. Single entry
b. Compound entry
c. Simple entry
d. One-sided entry

63. This source document is prepared each time goods are sold.
a. Sales journal
b. Cost of goods sold
c. Deposit slip
d. Sales invoice

64. This represents the steps or procedures used to record transactions and prepare financial statements. It implements
the accounting processes of identifying, recording, and communicating economic information.
a. Accounting cycle
b. Analyzing
c. Journalizing
d. Posting

65. It is a document issued by a buyer to a seller indicating the types, quantities and agreed prices for products or
services that the buyer intends to purchase.
a. Buyer document
b. Purchase invoice
c. Purchase order
d. Sales order

66. It is a document signed by the receiver of a shipment indicating that the goods have been received by the intended
recipient.
a. Official receipt
b. Delivery receipt
c. BIR receipt
d. Shipment receipt

67. If you pay your tuition fee in school, the school will issue you this document.
a. Official receipt
b. Sales invoice
c. Thank you note
d. Change

68. This document evidences a deposit transaction with a bank.

a. Bank reconciliation
b. Bank statement
c. Withdrawal slip

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Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

d. Deposit slip

69. Entity A received a 12%, ₱200,000, one-year, note receivable on October 1, 20x1. Entity A uses a
calendar year period. The principal and interest on the note are due on October 1, 20x2. The adjusting
entry to take up accrued interest income on December 31, 20x1 includes a
a. debit to interest income for ₱6,000.
b. credit to interest income for ₱12,000.
c. credit to interest receivable for ₱12,000.
d. debit to interest receivable for ₱6,000.

70. The mother of accounting is

a. Fra Luka Lady Gaga. c. Mami Siopao.
b. Accountant Mama. d. None of these

PART 2
UNADJUSTED TRIAL BALANCE

The ledger accounts of Entity A have the following balances on December 31, 20x1:

Account titles Balances

Accounts payable 480,000

Accounts receivable 210,000

Accumulated depreciation - Bldg. 1,250,000

Accumulated depreciation - Equipt. 1,800,000

Advertising expense 70,000

Allowance for bad debts 30,000

Bad debt expense 20,000

Building 5,000,000

Cash 770,000

Depreciation expense 200,000

Equipment 3,600,000

Land 2,000,000

Miscellaneous expense 4,000

Notes receivable 420,000

Owner’s drawings 80,000

Owner’s equity 4,200,000

Prepaid supplies 40,000

Salaries expense 1,140,000

Salaries payable 120,000

Service fees 6,000,000

Supplies expense 60,000

Taxes and licenses 120,000

Transportation and travel expense 140,000

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UNIVERSITY COLLEGE OF BUSINESS MANAGEMENT
Owned and operated by the City Government of Urdaneta AND ACCOUNTANCY

Utilities expense 46,000

Utilities payable 40,000

Requirement: Prepare the unadjusted trial balance. Be sure to provide a proper heading for the report and arrange the
accounts in the correct sequence.

- END –

Prepared by:

YVERINE VIANESSA O. GARCIA, MBA

Instructor

Checked by:

LOURDES T. CRUZ, MBA

Program Head- BSBA

Noted by:

PELILIA C. VELOSO, CPA, DBA, LLB

College Dean

Approved:

JOSEPHINE S. LAMBINICIO, EdD

VP for Academic Affairs

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