POLYTECHNIC UNIVERSITY OF

THE PHILIPPINES College of

Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

THEORIES
1. It is designed in providing accounting information for all parties external to the
operating responsibility of the company.

A. Accounting
B. Accounting cycle
C. Financial Accounting
D. Management Accounting

2. All of the following are areas of accounting except;

A. Public Accounting
B. Private Accounting
C. Government Accounting
D. Formal Accounting

3. It is the General Accepted Accounting Principle that states that a business is

presumed to go on in perpetuity so long as there is no threat to their ability to
continue operation.

A. Accrual basis of accounting

B. Timeliness
C. Going Concern
D. Materiality

4. The account income summary is

A. Nominal account
B. Real account
C. Capital account
D. Mixed account

5. Reversing entries
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POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

A. Are normally prepared for accruals and prepayments.

B. Are necessary to achieve a proper matching of revenue and expense. C.
Are desirable to exercise consistency and establish standardized
procedures.
D. Must be made at year-end.

6. Relies upon the physical count of the inventory to determine the ending inventory
balance.

A. Merchandising Busiess
B. Periodic Inventory System
C. Perpetual Inventory System
D. Partnership

7. It is a type of sales tax which is levied on the consumption on the sale of goods,
services or properties, as well as goods imported in the Philippines.

A. Output Tax
B. Value Added Tax (VAT)
C. Input Tax
D. Government Tax

8. Examples of this type of business are salons, repair shops, hotels and restaurants,
and professional firms like law and accounting.

A. Merchandising Business
B. Manufacturing Business
C. Service Business
D. Corporation
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POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

9. This refers to a series of steps accountants perform during an accounting period for
the orderly accumulation, reporting, and interpretation of data pertaining to the
financial operations of the business.

A. The Accounting Cycle

B. Accrual Basis and Cash Basis of Accounting
C. Generally Accepted Accounting Principle (GAAP)
D. Recording Phase

10. Formed by two or more individuals who agreed to carry on a trade or business.

A. Sole Proprietorship
B. Partnership
C. Corporation
D. None of the above

11. Set of accounting principles, standards, and procedures that must be followed
when preparing financial statements.

A. The Accounting Cycle

B. Accrual Basis and Cash Basis of Accounting
C. Generally Accepted Accounting Principle (GAAP)
D. Recording Phase

12. The revenue activities of a _________ involve the buying and selling of goods or
merchandise to its customers. However, except for the merchandise-related
accounts, the accounting cycle for both types of business activities is the same.
 A. Merchandising Business
B. Manufacturing Business
C. Service Business
D. None of the above

13. The two main types of inventory systems are the ________ and
the__________.

A. Periodic Inventory System

B. Perpetual Inventory System
C. Both A and B
D. None of the above

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

14. The _______ relies upon the physical count of the inventory to determine the
ending inventory balance.

A. Special Journal
B. Perpetual Inventory System
C. Periodic Inventory System
D. None of the above

15. Under the perpetual inventory system, purchases and sale of merchandise are
recorded in the Merchandise Inventory account and the Cost of the Merchandise
sold account.

A. Special Journal
B. Perpetual Inventory System
C. Periodic Inventory System
D. None of the above

16. A type of sales tax that is levied on the consumption on the sale of goods, services,
or properties, as well as goods imported into the Philippines.

A. Special Journal
B. Perpetual Inventory System
C. Periodic Inventory System
D. None of the above
17. The entries with two or more debits and or two or more credits

A. double entry
B. compounded journal entry
C. multiple entry
D. dual entry

18. Deferred Revenue are

A. Accrued assets
B. Advance collection
C. Advance payments
D. Accrued Liabilities

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

19. Which of the following pertains to a ledger?

A. A collection of the entire group of accounts maintained by a company

B. Should show accounts in alphabetical order
C. The book of original entry
D. Contains only the permanent accounts

20.The matching principle states

A. That revenue is recorded only when cash is received

B. That revenues and expenses must be recorded when they are earned and
incurred regardless of when cash is received
C. That revenue is recorded only after you have earned it
D. Expenses be recorded in the period they are incurred and match them against
the revenues earned during the same time period

21. Recording the expiration of a prepaid expense would require:

A. A debit to the appropriate prepaid expense account

B. A debit to the appropriate expense account
 C. A credit to accounts payable
D. A credit to cash

22.A discount to encourage early payment of an account

A. Trade discount
B. Cash discount
C. List discount
D. Discount payable

23.The manner of dividing the net income or net loss together with salary and other
benefits to partners are stated in the:

A. Articles of Co-Partnership
B. Business Plan
C. Partnership Books
D. Philippine Law

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

24.I. All partnerships are subject to income tax except General Partnership II.
For financial reporting, purposes the personal assets and the debts of a
partner should not be combined with the assets and debts of the business.

A. Only statement I is true

B. Only statement II is true
C. Both statements are true
D. Both statements are false

25.What are the entries made to correct errors in the recording phase?

A. Journal entries
B. Adjusting entries
C. Closing entries
D. Reversing entries

PROBLEM SOLVING
26.The prepaid insurance account shows a total of P48,000 representing the cost of a
 one-year insurance policy dated October 1, 2020. Prepare the necessary adjusting
entry as of December 31, 2020.
A. Dr. Prepaid Insurance 12,000, Cr. Insurance Expense 12,000
B. Dr. Insurance Expense 12,000, Cr. Prepaid Insurance 12,000
C. Dr. Insurance Expense 16,000, Cr. Prepaid Insurance 16,000
D. Dr. Prepaid Insurance 16,000, Cr. Insurance Expense 16,000

27. Mr. Ysmael deposited cash and checks of P150,000 to Philippine National Bank
and invested P100,000 of tables, chairs, shelves, and machineries worth
P50,000 to start Everlasting Machine Shop. Which of the following Entries are
true?

A. Cash 150,000
Furniture and fixture 100,000
Machinery 50,000
Ysmael, capital 300,000

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

B. Ysmael, capital 300,000

Cash 150,000
Furniture and fixture 100,000
Machinery 50,000

C. Cash 150,000
Furniture and fixture 100,000
Machinery 50,000

D. Furniture and fixture 100,000

Machinery 50,000
Cash 150,000
28.Merchandise purchase on account on June 11, 2021 with terms 2/10/eom, n/60
 may have a discount until

A. July 10, 2021

B. June 30, 2021
C. June 21, 2021
D. July 11, 2021

29.Suppose RJ Garciano Sound had sales of P300,000 and sales returns of P40,000.
The cost of goods sold was P160,000. How much gross profit did RJ Garciano so
report?

A. P160,000
B. P180,000
C. P100,000
D. P260,000

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

30.Zoro's Martial Arts Training Center’s Inventory account showed a balance of

P100,000 before the year-end adjustments. The physical count of goods on hand
totaled P97,000. To adjust the accounts, Ramir Alindogan would make this entry:

A. Inventory 3,000
Accounts Receivable 3,000
B. Cost of Goods Sold 3,000
Inventory 3,000
C. Inventory 3,000
Cost of Goods Sold 3,000
D. Accounts Payable 3,000
Accounts Payable 3,000
31. Jan 1 Cash 30,000 Cash 30,000 Unearned Rent 30,000 Rent Income 30,000 31
Unearned Rent 10,000 Rent Income 20,000 Rent Income 10,000 Unearned
 Rent 20,000
Since P 30,000 is for 3 months, the monthly rent is P_____?

A. P1,000
B. P50,000
C. P30,000
D. P10,000

32.Listed below is a partial trial balance of the Straw Hat Retailers on Dec 31, 2021:

Merchandise Inventory P80,000

Sales P190,000
Sales Returns and Allowances P20,000
Purchases P60,000
Purchases Discounts P3,000
Transportation-In P1,000

Which of the following is the correct adjusting entry needed for this merchandise
inventory?

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance
CAF Review:
M&M
FINANCIAL ACCOUNTING AND REPORTING 1
A.
Date Particular Debit Credit

Dec. Income Summary 80,00

31 0

Merchandise Inventory Beginning 80,00

0
 Income Summary 74,000

Merchandise Inventory Ending 74,000

B.
Date Particular Debit Credit

Dec. Income Summary 74,000

31

Merchandise Inventory Beginning 74,000

Income Summary 80,00

0

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES
College of Accountancy
and Finance
CAF Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1
Merchandise Inventory Ending 80,00
0

C.
Date Particular Debit Credit

Dec. Merchandise Inventory Beginning 74,000

31

Income Summary 74,000

Income Summary 80,00

0

Merchandise Inventory Ending 80,00

0

D.
Date Particular Debit Credit

Dec. Income Summary 80,00

31 0

10

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES
College of Accountancy
and Finance
CAF Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1
Merchandise Inventory Beginning 80,00
0
 Merchandise Inventory Ending 74,000

Income Summary 74,000

33. A company issued a 60 day, 12% promissory note amounting to P100,000 dated
December 1, 2019. Reversing entry on January 1, 2020 would be a

A. DR. Interest Expense 1,000; CR Interest Payable 1,000

B. DR. Interest Expense 12,000; CR Interest payable 12,000
C. DR. Interest Payable 1,000; CR Interest Expense 1,000
D. DR. Interest Payable 12,000; CR Interest Expense 12,000

34. A company issued a 60 day, 12% promissory note amounting to P540,000 dated
December 1, 2019. Adjusting entry on December 31, 2019 would be a

A. DR. Interest Expense 5,400; CR Interest Payable 5,4000

B. DR. Interest Expense 12,000; CR Interest payable 12,000
C. DR. Interest Payable 1,000; CR Interest Expense 1,000
D. DR. Interest Payable 12,000; CR Interest Expense 12,000

11

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

35. Received P2,250 as commission for 25 crates of tetra pack juice to be delivered.
(30pcs/crate). As of reporting date, only 550 tetra packs were sold. The company uses
the liability method. Commissions revenue for the 550 packs would be.
A. 1,650
B. 660
C. 2,250
D. 1,250
36. Mamamoo Company had the following data for the period ended. Cash sales
P400,000; credit sales 70% of cash sales; sales discounts P25,000; sales returns
P20,000; freight in P15,000; freight out P16,000. The company would report net sales
on its income statement of __________. (2 Points)
A. P619,000
B. P634,000
C. P635,000
D. P650,000

37. On December 1, 2021, the beginning balance of Totoro Company (VAT registered)
inventory amounted to P600,000. On December 15, 2021, Totoro Company purchased
P952,000 (VAT inclusive) worth of inventory with terms 2/15 n/60. On December 25,
Totoro Company returned 10% of defective inventories and paid the rest on December
29, 2021. At the end of the accounting period, inventory on hand amounted to
P450,000. How much is the VAT on discount?
A. P1,286
B. P1,836
C. P2,040
D. P2,056

12

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1
38. Hwasa purchased merchandise from RBW Suppliers for P3,600 list price, subject to
a trade discount of 25%. The goods were purchased on terms of 2/10, n/30, FOB
destination. Hwasa paid P100 transportation costs. Hwasa returned P300 (invoice price)
or merchandise and later paid the amount due within the discount period. How much is
the amount paid by Hwasa?

A. P2,246.00
B. P2,252.00
C. P2,254.00
D. P2,352.00

39. On November 1, 2020, a P75,000 purchase was made with the credit terms
2/10,1/15,n/30. If the buyer paid on November 11, 2020, how much is the cash discount
to be recorded?

A. No cash discount
B. P750
C. P1,500
D. P75,000

40. Assuming that a VAT-registered company had a net purchase is P112,000 and the
net sales is P224,000. If all of the amounts are VAT-inclusive, how much is the VAT
payable at the end of the period?
A. P8,000.00
B. P17,000.00
C. P24,000.00
D. P12,000.00

41. Proprietors Solar and Wheein were to form a partnership where both were to have
equal interest in capital and in profits. Solar was to invest total assets of P340,000 while
Wheein was to contribute assets amounting P510,000. The partnership will assume
liabilities of Partner Wheein amounting to P50,000. Which of the following is True?

A. Partner Solar will receive P60,000 Bonus

B. Partner Wheein will receive P60,000 Bonus
C. Partner Solar will receive P85,000 Bonus
D. Partner Wheein will receive P85,000 Bonus

13

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
 Accountancy and Finance CAF Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

42. Moonbyul was to invest an equipment in the partnership which he originally

purchased at P215,000 three years ago at the start of the year. Depreciation rate was at
10% per annum. On January 1 of the current year, new partner Moonbyul will be
credited for his investment of equipment amounting

A. P215,000
B. P64,500
C. P193,500
D. P150,500

43. Denji is to join Aki to form a partnership. The following are taken from the balance
sheet account of Aki.
Cash, P50,000
Merchandise Inventories, P75,000
Supplies. P4,000
Equipment. P95,000
Accumulated Depreciation, P8,000
The partnership is to assume the Promissory Note of Aki amounting to P50,000. Denji is
to invest sufficient cash to have 30% share in capital and in profit after Aki have adjusted
his accounts. Supplies has been fully consumed, merchandise Inventory is to be
decreased by P5,000 while Equipment should be 10% depreciated. Denji will contribute

A. P46,650
B. P63,214
C. P66,643
D. P88,071

44. The trial balance will be out of balance if:

A. P2,500 cash collection from credit customers is debited to Cash for P2,500 and
credited to Accounts Receivable for P2,050.
B. The purchase of supplies on account is debited to Supplies and credited to Cash
at same amounts.
C. A P4,500 payment on account is debited to Accounts Payable for P450 and
credited to Cash for P450.
D. A correct journal entry is posted twice.

14
 POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

45. The Supplies account of Arc Company has a balance of P20,000 on December 31,
2022, of which P7,000 is unused. The correct adjusting entry would be:

A. (Dr) Supplies Expense 13,000 | (Cr) Supplies 13,000

B. (Dr) Supplies 13,000 | (Cr) Supplies Expense 13,000
C. (Dr) Supplies Expense 7,000 | (Cr) Supplies 7,000
D. (Dr) Supplies 7,000 | (Cr) Supplies Expense 7,000

46. Joy Company’s accountant overlooked two entries off the adjustments columns of
the worksheet:
• Unused portion of Rent expense amounting to P1,500 was omitted • P3,200 of
unearned revenue had been earned, but no entry was made. What should be the
amount of net income if the incorrect net income was P58,450?

A. P60,150
B. P63,150
C. P53,750
D. P56,750

47. Rent Expense on the work sheet’s Trial Balance debit column has a P120,000
balance and a P145,000 balance on the work sheet’s Income Statement debit column.
The difference is due to:

A. An entry in the worksheet’s Adjustments debit column for P145,000 to Rent

Expense
B. An entry in the worksheet’s Adjustments credit column for P25,000 to Rent
Expense
C. An entry in the worksheet’s Adjustments credit column for P25,000 to Rent
Payable
D. None of the above.

48. If merchandise is sold on account to a customer for P20,000 terms FOB shipping
point, 1/10, n/30, and the seller prepays the transportation costs of P1,500, the amount
of the discount for early payment would be:

A. P215
B. P150
C. P200
D. P175
 15

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

49. If merchandise is sold on account on January 1 to a customer for P20,000 terms

FOB shipping point, 1/10, n/30, and the seller prepays the transportation costs of
P1,500, the amount to credit on Cash account on January 10 would be:

A. P21,300
B. P19,800
C. P20,000
D. P21,500

50. The unearned rent account has a balance of P36,000. If P4,000 of the P36,000
is unearned at the end of the accounting period, the amount of the adjusting entry
is

A. P 4,000
B. P 40,000
C. P 32,000
D. P 36,000
 16

POLYTECHNIC UNIVERSITY OF
THE PHILIPPINES College of
Accountancy and Finance CAF
Review: M&M
FINANCIAL ACCOUNTING AND REPORTING 1

SUMMARY OF ANSWERS

1. C 11. C 21. B 31. D 41. A 2. D 12. A 22. B 32. A 42. D 3. C 13. C 23. A 33. C 43. C 4.
A 14. C 24. B 34. A 44. A 5. C 15. B 25. D 35. A 45. A 6. B 16. D 26. B 36. C 46. A 7. B
17. B 27. A 37. B 47. D 8. C 18. B 28. A 38. B 48. C 9. A 19.A 29. C 39. C 49. A 10. B
20. D 30. B 40. D 50. C
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