SANTA ISABEL COLLEGE OF MANILA

210 TAFT AVENUE, MANILA, PHILIPPINES

TEL. NO.: 525-94-16 TO 21
____________________________________________________________________________________

Financial Accounting & Reporting

MIDTERM EXAMINATION
First Semester, SY 2021-2022

NAME: MONES, Lenneth B. Exam:Permit: NO PERMIT Date: OCTOBER 8,2021

TIME: 5:00 TO 6:30 PM. online.
Instruction: Read carefully and follow the direction of the tests.
MULTIPLE CHOICE Theory (50%)
Direction: Encircle the correct Answer.
1. Accounting is the art of
a. Recording, classifying, summarizing and interpreting.
b. Analyzing, documenting, recording and presenting
c. Computing, recording, presenting and interpreting
d. None of the above.
2. The art of recording refers to
a. Journalizing
a. Posting
b. Preparing trial balance
c. Balancing accounts
3. The act of transferring data from Journal to ledger.
a. Journalizing
b. Posting
c. Preparing trial balance
d. Balancing accounts
4. Debit is in the left side of the T-account
a. True
b. False
c. Either true or false
d. Neither true or false
5. The book of original Entry
a. Subsidiary ledger
b. General Ledger
c. General Journal
d. Book of accounts
6. The list of accounts of Assets, Liabilities, Equity, income and expenses
a. Journal
b. Ledger
c. Subsidiary account
d. Chart of accounts
7. These are all temporary accounts, except
a. Assets
b. Income
c. Expense
d. Income and expense summary
8. Permanent accounts are
a. Real Accounts
b. Balance Sheet accounts
c. Asset, liabilities & equity
d. All of the above
9. All are Nominal accounts except
a. Income
b. Expenses
c. Temporary accounts
d. Real accounts
10. Expenses already paid but not yet consumed or used up.
a. Supplies
b. Prepaid insurance
c. Salaries and wages
d. None of the above
11. These are to be recognized when it was incurred, used up or consumed regardless of cash
transaction.
a. Income
b. Expense
c. Assets
d. Liabilities
12. An entity must be treated as separate and distinct from the owner
a. Going concern
b. Accounting Period
c. Cost principle
d. Business entity
13. Income is recognized when earned, and expenses are recognized when incurred, consumed or
used up regardless of cash transactions.
a. Cash Principle
b. Cost Principle
c. Accrual principle
d. Accounting period
14. An account presented as a deduction from its related accounts.
a. Assets
b. Liabilities
c. Equity
d. Contra accounts
15. A device or tool used to facilitate the preparation of financial statements.
a. Journal
b. Ledger
c. Trial Balance
d. Worksheet

16. A journal entry to zero out the balance of account.

a. Adjusting entries
b. Closing entries
c. Reversing Entries
d. None of the above

17. A journal entries to correct, classify, or record unrecorded accounts,

a. Adjusting entries
b. Closing entries
c. Reversing entries
d. All of the above
18. A journal entries recorded at the beginning of the accounting period.
a. Adjusting entries
b. Closing entries
c. Reversing entries
d. All of the above
19. Income already received but not yet earned.
a. Unearned income
b. Income Receivable
c. Service Income
d. All of the above.
20. A contra asset account for the wear and tear of depreciable assets
a. Accumulated depreciation
b. Allowance for doubtful accounts
c. Allowance for bad debts
21. A contra capital account.
a. Allowance for bad debts
b. Accumulated depreciation
c. Drawing accounts
d. All of the above.
22. It is a financial information that shows assets liabilities and equity
a. Statement of financial Position
b. Cash Flow Statement
c. Statement of Comprehensive Income
d. Statement of Owner’s Equity
 23. A financial statement that shows the inflows and outflows of Cash.
a. Statement of financial Position
b. Cash Flow Statement
c. Statement of Comprehensive Income
d. Statement of Owner’s Equity
24. The book of final entry
a. General journal
b. Special journal
c. General Ledger
d. Subsidiary Ledger
25. Statement of Financial Position is most commonly known as
a. Statement of Owner’s Equity
b. Income statement
c. Cash Flow Statement
d. Balance sheet

TEST 1 ANSWERS
1. A 16. B
2. A 17. A
3. B 18. C
4. A 19. A
5. C 20. A
6. D 21. C
7. A 22.A
8. D 23. B
9. D 24. C
10. B 25. D
11. B
12. D
13. C
14. D
15. D

Test -11 Essay ( 50%)

Briefly explain and direct to the point.

1. Discuss the chronological order of Accounting cycle.

2. The different forms of Financial Statement
a. Statement of Financial Position
b. Income Statement
3. Reasons why you do Closing Entries and How to do Closing Entries
4. Describe the Post Closing Trial Balance.
5. Is reversing entries compulsory or optional, Why do you make reversing entries and what are
to be reversed?
 1. Discuss the chronological order of the Accounting cycle.
The accounting cycle starts with (1) Identifying and analyzing the events to be
recorded.This step involves selecting the economic activities relevant to an organization with business
documents containing evidence supporting a business transaction. After journalizing, we (2)Record
transactions in the journal. This is done to provide a history of the company’s financial activities.
Objectivity must be present in recording transactions in the book of account (journal). And then we
must do the (3)Posting journal entries in the ledger. After journal entries are made, we must post the
journal entries into the ledger. Posting is transferring entries in the journal into the T-accounts in the
ledger. After posting, the next step is (4)Preparing the trial balance. This is to prove that the debits
equal the credits after posting. The trial balance is a list of accounts and their balances in which they
appear in the ledger. Fifth, (5) Preparing the worksheet and adjusting entries. Preparing a
worksheet and identifying adjusting entries make up the fifth step in the cycle. A worksheet is created
and used to ensure that debits and credits are equal.
After adjusting we must (6) Prepare the financial statements. Upon the posting of adjusting
entries, financial statements such as statement of financial position, income statement, statement of
changes in equity and cash flow statement are prepared. The next step is (7)Journalizing and posting
of adjusting journal entries. This is to update the accounts to conform with the accrual concept. At
the end of the accounting period, some income and expenses may have not been recorded or updated.
After that we must (8) start Journalizing and posting of closing journal entries.This step is
performed after financial statements have been prepared. Generally journalized and posted only at the
end of the company’s annual accounting period to distinguish between temporary and permanent
accounts. The next step is to (9) Prepare the post closing trial balance. After all closing entries have
been journalized and posted, the post-closing trial balance is made to list permanent accounts and their
balances. This is prepared from the general ledger accounts to prove the equality of the debit and
credit.
The last step is to (10) do the Journalizing and posting of reversing entries. Reversing
entries are made at the beginning of the net accounting period. It’s purpose is to simplify the recording
of a subsequent transaction related to an adjusting entry.

2. The different forms of Financial Statement

a. Statement of Financial Position

The Statement of Financial Position previously known as the Balance Sheet reports the
company’s financial condition through the Assets, Liabilities, and Owner’s Equity
accounts at a specific date usually in the month-end or year end.

b. Income Statement
The Income Statement reports the results of financial performance through the revenues
and expenses accounts for a specific period of time. Revenues are listed first followed by
expenses wherein net income (net loss) is determined.

3. Reasons why you do Closing Entries and How to do Closing Entries

 Closing entries formally recognize in the ledger the transfer of net income or net loss and
the owner’s drawing to owner’s capital.
Reasons:
1. This serves to transfer the balances out of certain temporary accounts and into
permanent ones.
2. This resets the balance of the temporary accounts to zero, ready to begin the next
accounting period.
How to do Closing Entries:
a. Close all income accounts to Income Summary
b. Close all expense accounts to Income Summary
c. Close Income Summary to the appropriate capital account
● Owner's capital account for sole proprietorship
● Partners' capital accounts for partnerships, based on ratio agreed
● Retained earnings for corporations
d. Close withdrawals/distributions to the appropriate capital account

4. Describe the Post Closing Trial Balance.

The Post Closing Trial Balance is done after all closing entries have been
journalized and posted in which it is prepared from the ledger. It balances lists of
permanent accounts and their balances after closing entries have been journalized and
posted. The purpose of this trial balance is to prove the equality of the permanent
accounts balances that are carried forward into the next accounting period. It will only
contain permanent-balance sheet- accounts.

5. Is reversing entries compulsory or optional? Why do you make reversing entries and
what are to be reversed?

The preparation of the reversing entries is an optional bookkeeping procedure that is

not a required step in the accounting cycle. Reversing entries are made at the beginning of
the net accounting period which is the exact opposite of the adjusting entry made in the
previous period. It’s purpose is to simplify the recording of a subsequent transaction
related to an adjusting entry. It is often helpful to reverse some adjusting entries before
recording regular transactions however this does not change the amounts reported in the
financial statements.