LYCEUM OF ALABANG

ISO 9001:2015 CERTIFIED

COLLEGE OF BUSINESS MANAGEMENT AND EDUCATION

BACHELOR OF SCIENCE IN ACCOUNTANCY

COURSE/SECTION: BSA12M1/12M2 TYPE OF EXAM: SELF-EVALUATION

SUBJECT: FINANCIAL ACCOUNTING AND REPORTING DATE: June 08,2020

INTRUCTION: Read the questions carefully before you answer. Be honest to yourself in analyzing and
answering each question to really know your competency and capacity to pursue higher level of
accounting courses that are more complex, challenging and difficult. Do not cheat yourself. This test
is aimed at assessing if you have acquired the basic foundations that will enable you not only to
obtain your bachelor degree in accountancy but what is most important is for you to pass the CPA
Licensure Examination.( CPALE). You have only two and one half hour to finish this test. By 10:30 AM
you must submit individually your answer sheet to my email [email protected]. In your answer
sheet write your name, course/section, date and only the LETTERS choices to the questions. GOOD
LUCK.

MULTIPLE CHOICE

1. The business entity has a legal personality of its own and its resources and obligations are
separate and distinct to the personal assets and liabilities of the owner..
a. Single proprietorship c. going concern
b. Trust fund doctrine d. economic entity concept
2. Income is recognized when earned and expense when incurred is based upon
a. Cash basis c. prepayment
b. Deferral d. accrual basis
3. At the end of the year, the business entity has an account receivable of P 2,000,000 and
allowance for uncollectible accounts of P 300,000. At that time, it is estimated that uncollectible
accounts is about 20 % of the accounts receivable. The net realizable value of accounts
receivable at the end of the year is
a. P 1,700,000 c. P 1,600,000
b. P 1,300,000 d. P 1,400,000
Sol. 2,000,000 –(2,000,000 x 20%)= 1,600,000
4. Financial statements has predictive and confirmative value, which is a qualitative
characteristic of
a. Faithful representation c. relevance
b. Full disclosure d. objectivity
5. A firm purchased merchandise for sale at P 1,500,000 on January 9, 2020 and P 1,300,000 on
April 18, 2020. On September 22, 2020, it has sold P 2,000,000 with a markup of 25%.. How
much is the ending merchandise inventory using the First-in-First-out method?
a. P 1,300,000 c. P 1,800,000
b. P 1,500,000 d. P 1,600,000
Sol. Cost of inventory P 2,800,000
Less: Cost of sales ( 2 Mn /1.25) 1,600,000
Ending Inventory (FIFO) 1,600,000
6. The measurement of assets of a business entity is generally based on
a. Historical cost c. Future value
b. Present value d. Net Realizable Value
7. Business entity is considered as a continuing operations for indefinite period of time unless
proven otherwise is consistent with
a. Periodicity or time period concept c, accrual basis
b. Stable monetary concept d. going concern assumption

Km.30, National Road, Tunasan, Muntinlupa City, Philippines

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
 LYCEUM OF ALABANG
ISO 9001:2015 CERTIFIED

8. It is a short-term investment of cash for a period of not more than 90 days with a low risk and
low return
a. Temporary investment c. petty cash fund
b. Cash equivalent d. cash in bank
9. A firm has total assets of P 5,000,000 and non-current liabilities of P 3,000,000. Its current
ratio is 2:1, how much is its current asset?bonus
a. P 2,000,000 c. P3,000,000
b. P 4,000,000 d. P 1,000,000

10. Which of the following is not a criterion in classifying asset as current asset?
a. The asset must be convertible to cash within the business entity’s normal operating
cycle.
b. The asset must be converted into cash within one-year after the end of the accounting
period.
c. The asset is held for trading.
d. The asset is restricted from use for payment of its obligations.
11. The following are ingredients of faithful representation of financial statements, except
a. Completeness c. comparability
b. Neutrality d. free from error
12. On April 1, 2020, a business entity paid advanced rent of P 1,200,000 for one year for its office
space using the expense method of accounting. At the end of the year, the company has to
make adjustment by
a. Debiting rent expense for P 900,000 c. crediting rent expense for P 900,000
b. Debiting rent expense for P 300,000 d. debiting prepaid rent for P 300,000
13. The expanded accounting equation is
a. Assets –Liabilities =, Networth + Income –Expenses
b. Assets= Liabilities + Owner/s Equity + Expenses – Income
c. Assets= Liabilities + Owner/s Equity + Capital – Drawings
d. None of the above
14. Using the adjusted balance method, deposit in transit is an
a. Addition to bank balance c. addition to book balance
b. Deduction to bank balance d. deduction to book balance
15. Using the book balance to bank balance method, outstanding check is treated as
a. Addition to bank balance c. addition to book balance
b. Deduction to bank balance d. deduction to book balance
16. Using the income method, a company has recognized advance payment from its customer of
P 2,000,000 for the purchase of merchandise. At year-end, the company’s adjusting entry is
a. Debit unearned income, P 2,000,000 c. either a or b
b. Credit Income, P 2,000,000 d. neither a nor b

Km.30, National Road, Tunasan, Muntinlupa City, Philippines

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
 LYCEUM OF ALABANG
ISO 9001:2015 CERTIFIED

17. In a purchase of merchandise by a business entity from its supplier with a term Free on Board
Destination, the freight is paid by
a. The seller c. The freight forwarder
b. The buyer d. None of the above
18. Physical inventory method is being applied by a business entity when
a. Large volume, low price c. either a or b
b. Large price, low volume d. neither a or b
19. The Philippine Peso is considered as a stable currency and used as the common denominator
in recording business transaction is known as
a. Stable monetary principle c. cash basis of accounting
b. Historical cost principle d. none of the above
20. Which of the following standards governs property, plant and equipment?
a. PAS 1 c. PAS 16
b. PAS 12 d. PAS 19
21. Minor repairs of equipment is recognized as
a. Non-current asset c. ordinary expense
b. Current asset d. capital expense

22. Which of the following is not a characteristic of a financial liability?

a. There is a present obligation either legal or constructive
b. The obligation has arisen from past event or obligating event
c. The obligation is of a particular business entity
d. None of the above
23. It is an artificial being created by operation of law, with the power of succession, and the
power, property and attributes are provided for under the law or incident to its existence.
a. Sole proprietorship c. Corporation
b. Partnership d. Cooperative
24. Which of the following is not a characteristic of a partnership?
a. Mutual agency c. unlimited liability
b. Limited life d. power of succession
25. A partnership may be dissolved by the following, except
a. Acceptance of new partner c. withdrawal of a partner
b. Death of a partner d. leave of absence of a partner
26. Reversing entries are being done for the following reasons, except
a. Avoid duplication of entries c. mandated by the accounting rules
b. Present reliable accounts balances d. correct the adjustment made

Km.30, National Road, Tunasan, Muntinlupa City, Philippines

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
 LYCEUM OF ALABANG
ISO 9001:2015 CERTIFIED

27. ABC Company bought machineries worth ten million pesos with an estimated useful life of 10
years and scrap value of P 500,000. Using the sum of the year digit method, what is the
depreciation expense on the first year?
a. 172,727 c. 181,818
b. 345,455 d. 1,727,273
Sol. [(10,000,000-500,000)/10 years=9,500,000 x 10/55=1,727,273
28. A credit balance in accounts receivable is recognized as a/an
a. Contra-asset account c. account off-set
b. Current liability d. none of the above
29. If cash is restricted to use, it is classified in the statement of financial position as
a. Current asset c. owner’s capital
b. Non-current asset d. intangible asset
30. Which of the following is not a component of a complete set of financial statements?
a. Statement of financial position c. Notes to Financial Statements
b. Statement of comprehensive income d. Statement of Retained Earnings
31. The Statement of Financial Position is a statement showing the conditions of assets, liabilities
and Networth of the business entity at
a. A given date c. either a or c
b. A given period d. neither a nor c
32. Which of the following is not a business activity in the statement of cash flows?
a. Financing c. investing
b. Operating d. budgeting
33. One of the qualitative characteristics of financial statements is it must show the relative
similarities and difference between companies within the same industry or differences between
accounting periods of the same company, which is referred to as
a. Objectivity c. comparability
b. Relevance d. full disclosure
34. Under the accounting standards, accounts receivable must be measured at
a. Present value c. net realizable value
b. Historical value d. future value

35. XYZ Company sold merchandise on account for P 5,000,000, terms: down payment P
1,000,000, 2/10, n/30. Within 10 days, the company received payment from its customer. How
much did the company receive as cash payment?
a. ,P 4,080,000 c. P 4,900,000
b. P 4,000,000 d. P 3,920,000
Sol. 4,000,000 x 98%= 3,920,000

Km.30, National Road, Tunasan, Muntinlupa City, Philippines

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
 LYCEUM OF ALABANG
ISO 9001:2015 CERTIFIED

36. Using the perpetual inventory system, a firm sold merchandise at a selling price of P 3,000,000
with a 30% mark-up. The firm sold it on credit to its supplier . The entry to record the sale is
a. Debit Accounts Receivable, P 3,000,000 and Credit Sales, P 3,000,000
b. Debit Accounts Receivable, P 3,000,000 and Credit Merchandise Inventory, P
3,000,000
c. Debit Accounts Receivable, P 2,100,000 and Credit Merchandise Inventory, P
2,100,000
d. Debit Accounts Receivable, P 3,000,000 and Credit Sales, P 3,000,000; then Debit
Cost of Sales, P 2,100,000 and Credit Merchandise Inventory, P 2,100,000.
37. Mr. Jack and Ms. Jill formed a partnership engaged in the buy and sell of used cars. Mr. Jack
contributed cash for P 1,000,000 and Ms. Jack a piece of land bought at P 500,000 but with a
fair market value of P 1,000,000. They agreed to share in profit and loss equally. For the first
year, they earned P 800,000. How much will be the share of each in the profit of the company,
assuming they have to pay tax of 30%?
a. Jack, P 280,000; Jill, P 140,000
b. Jack, P 280,000; Jill, P 280,000 sol. 800,000x70%-=560,000/2=280,000
c. Jack P 400,000; Jill, P 400,000
d. Jack , P 140,000; Jill, P 280,000
38. DEF Company has a balance of P 2,500,000 in its cash and cash equivalent at year-end
composed of the following items: Cash on Hand, P 800,000; cash in bank A, P 500,000; bank
overdraft in bank B, P 50,000; Cash Advances to Employees, P 250,000; Manager’s check, P
300,000; and 90-day time deposit, P 600,000. What should be the correct balance of cash and
cash equivalent at year end?
a. P 2,500,000 c. P 2,200,000
b. P 2, 450,000 d. P 2,250,000
Sol: 2,500,000 –(50,000 +250,000)=2,200,000
39. The government agency which is responsible for the regulation of the practice of accounting in
the Philippines as well as the administration of CPA licensure examination is the
a. Philippine Institute of CPAs c. SEC
b. Board of Accountancy d. CHED
40. The law which governs the accounting profession in the Philippines is
a. RA 9892 c. RA 9982
b. RA 9298 d. RA9289
41. The following are the major fields of practice in accounting profession under the law, except
a. Public Accounting c. Non-Government Organization
b. Commerce & Trade d. Academe
42. The following are the major elements of financial statements, excluding
a. Income c. Liability
b. Asset d. Drawings
43. The resources owned and controlled by the business entity which is expected to provide
probable future economic benefits that can be measured reliably.
a. Assets c. Income
b. Equity d. Revenue
44. A constructive obligation is a liability arising from good customs and practices wherein a
company has made a policy and made it known to the public that it is committed to pay. An
example of a constructive obligation is
a. Trade account c. claims on environmental damage
b. Note payable d. accrued liability

Km.30, National Road, Tunasan, Muntinlupa City, Philippines

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
 LYCEUM OF ALABANG
ISO 9001:2015 CERTIFIED

45. The elements of financial statements that are directly related to the measurement of financial
performance
a. Income and expenses c. Assets, liabilities and equity
b. Assets and liabilities d. income, expenses and equity
46. The basic objective of accounting is
a. To provide information to managers to control operations
b. To provide information to creditors to obtain additional loans.
c. To measure the periodic income of the company.
d. To provide quantitative financial information useful in economic decisions.
47. It Is the accounting standards setting body in the Philippines.
a. Accounting Standard Council
b. Auditing and Assurance Standards Council
c. Philippine Accounting Standards Board
d. Financial Reporting Standard Council
48. General purpose financial statements are the product of
a. Financial accounting c. Either a or b
b. Managerial accounting d. Neither a nor b
49. Which of the following best describes generally accepted accounting principles?
a. They have been formulated in the public sector.
b. They have been developed on the basis of usage and practical necessity.
c. They are the same as laws and regulations.
d. They are not applicable to small entities..
50. Which of the following is not a basic assumption underlying financial accounting?bonus=all are
basic assumptions
a. Economic entity assumption c. Periodicity assumption
b. Going concern assumption d. Historical cost assumption
51. Which basic assumption may not be followed when an entity in bankruptcy reports financial
results?
a. Economic entity concept c. going concern assumption
b. Periodicity assumption d. monetary unit assumption
52. The concept of accounting entity is applicable
a. Only to the legal aspects of the business entity
b. Only to the economic aspects of the business entity
c. Only to the business organizations
d. Whenever accounting is involved
53. The valuation of a promise to receive cash in the future at present value is valid because of the
accounting concept of
a. Entity c. time period
b. Going concern d. Stable monetary unit
54. Which of the following financial attributes is generally considered to be more relevant?
a. Present value c. current cost
b. Current value d. historical cost
55. The term recognized is synonymous with the term
a. Recorded c. realized
b. Matched d. allocated
56. Which of the following is not a theoretical basis for allocation of expense?
a. Immediate recognition c. cause and effect association
b. Systematic allocation d. profit maximization
57. In which account are customers’ post-dated checks received classified”
a. Prepaid expense c. cash
Km.30, National Road, Tunasan, Muntinlupa City, Philippines
b. Accounts receivable d. accounts payable
Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
 LYCEUM OF ALABANG
ISO 9001:2015 CERTIFIED

58. In reimbursing petty cash fund, which of the following statements is true?
a. Cash is debited c. petty cash is credited
b. Petty cash is debited d/ expense accounts are debited
59. A cash over and short account
a. Is not generally accepted
b. Is debited when the petty cash proves over
c. Is debited when the petty cash proves short
d. Is a contra account to cash
60. Financial assets include the following, except
a. Prepaid expenses c. cash in bank
b. Trade accounts receivable d. loans receivable
61. It is an entity over which the investor has significant influence
a. Associate c. Venture capital organization
b. Investee d. Mutual Fund
62. Depreciation is best described as
a. Asset valuation c. cost allocation
b. Current value allocation d. useful life estimation
63. All of the following would be classified as biological assets, except
a. Dairy cattle c. eggs
b. Chickens d. Trees
64. Which of the following is classified as agricultural produce?
a. Tree c. Butter
b. Bush d. Apple
65. Which of the following would be classified as a product that is the result of processing after
harvest?
a. Cotton c. bananas
b. Wool d. cheese
66. AXY Company has the following data at year-end: Cash balance in checking account with
Bank B, P 5,000,000; Overdraft with checking account with Bank C, P 500,000; cash in hand
for plant expansion, P 2,000,000; change fund, P 50,000; and Petty Cash Fund balance, P
15,000. How much is the total cash to be reported at year-end?
a. P 4,565,000 c. P 7,065,000
b. P 5,065,000 d. P 5,070,000
Sol. 5,000,000+50,000+15,000=5,065,000
67. In preparing its August 31,2019 bank reconciliation , Ador Company has made available the
following information: Balance per bank statement, P 1,805,000; deposit in transit, P 325,000;
return of customer’s check for no sufficient fund, P 60,000; outstanding checks, P 275,000,
and bank service charge for the month of August, P 10,000. What is the adjusted cash in bank
on August 31, 2019?
a. P 1,855,000 c. P 1,785,000
b. P 1,795,000 d. P 1,755,000
SOL. 1,805,000 +325,000-(60,000+275,000+10,000)

Km.30, National Road, Tunasan, Muntinlupa City, Philippines

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248
 LYCEUM OF ALABANG
ISO 9001:2015 CERTIFIED

68. On January 1, 2020, Mal Company ‘s allowance for uncollectible accounts had a credit
balance of P 300,000. In 2020, the entity charged P 650,000 to doubtful account expense,
wrote off P 450,000 of uncollectible accounts receivable, and unexpectedly recovered P
100,000 of bad debts written off in prior years. On December 31, 2020, what is the balance of
allowance for uncollectible accounts?
a. P 500,000 c. P 650,000
b. P 600,000 d. P 950,000
SOLUTION: 300,000+(650,000-450,000) +100,000=600,000

69. Regal Company used the allowance method of accounting for uncollectible accounts. During
2019, the entity had charged P 800,000 to uncollectible expense accounts, and wrote off
accounts receivable of P 900,000 as uncollectible. What is the decrease in working capital as a
result of the transactions relating to accounts receivable.
a. P 900,000 c. P 100,000
b. P 800,000 d. P 0.00
70. On November 1, 2019, Dab Company entered into a commitment to buy 10,000 ounces of
gold on February 15, 2020 at a price of P 310 per ounce. On December 31, 2019, the market
price of gold was P 270 per ounce. On February 15, 2020, the price of gold was P 300 per
ounce. How much is the gain on purchase commitment that should be recognized by the
company on February 15, 2020?
a. P 400,000 c. P 300,000
b. P 100,000 d. P 0.00THERE IS A LOSS

PREPARED BY: NOTED BY: APPROVED BY:

CESAR V. RAMIREZ BENJAMIN FRANKLIN A. SABUG DR. LEAH P. DIGO

INSTRUCTOR BME-DEAN VPAA

Km.30, National Road, Tunasan, Muntinlupa City, Philippines

Tel. Nos. (02)856-93-23 / (02)856-9246 / (02)403-8248