FELLOWSHIP BAPTIST COLLEGE

COLLEGE OF BUSINESS AND ACCOUNTANCY

Bachelor of Science in Accountancy

Basic Accounting
Prepared by: _________ Date: _______
(Acctg 1) Reviewed by: ________ Date: _______
Prelim Examination Verified by: _________ Date: _______
Approved by: _________ Date: _______

Name: _________________________________ Date:_____________ Score:____________

PART 1. THEORY OF ACCOUNTS. Encircle the letter of the BEST answer

1. Which one of the following is not a difference between a retail business and a service business?
a. in what is sold
b. the inclusion of gross profit in the income statement
c. accounting equation
d. merchandise inventory included in the balance sheet

2. Net income plus operating expenses is equal to

a. cost of merchandise sold

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 b. cost of goods available for sale
c. net sales
d. gross profit

3. Generally, the revenue account for a merchandising business is entitled

a. Sales
b. Net Sales
c. Gross Sales
d. Gross Profit

4. What is the term applied to the excess of net revenue from sales over the cost of merchandise sold?
a. gross profit
b. income from operations
c. net income
d. gross sales

5. The term "inventory" indicates

a. merchandise held for sale in the normal course of business
b. materials in the process of production or held for production
c. supplies
d. both (a) and (b)

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6. A company using the periodic inventory system has the following account balances: Merchandise Inventory
at the beginning of the year, P4,000; Transportation-In, P450; Purchases, P12,000; Purchases Returns and
Allowances, P2,300; Purchases Discounts, P220. The cost of merchandise purchased is equal to
a. P13,930
b. P9,930
c. P9,489
d. P14520

7. A company, using the periodic inventory system, has merchandise inventory costing P140 on hand at the
beginning of the period. During the period, merchandise costing P400 is purchased. At year-end,
merchandise inventory costing P180 is on hand. The cost of merchandise sold for the year is
a. P720
b. P550
c. P360
d. P140

8. When the three sections of a balance sheet are presented on a page in a downward sequence, it is called the
a. account form
b. comparative form
c. horizontal form
d. report form

9. Merchandise inventory is classified on the balance sheet as a

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 a. Current Liability
b. Current Asset
c. Long-Term Asset
d. Long-Term Liability

10. The primary difference between a periodic and perpetual inventory system is that a
a. periodic system determines the inventory on hand only at the end of the accounting period
b. periodic system keeps a record showing the inventory on hand at all times
c. periodic system provides an easy means to determine inventory shrinkage
d. periodic system records the cost of the sale on the date the sale is made

11. The inventory system employing accounting records that continuously disclose the amount of inventory is
called
a. retail
b. periodic
c. physical
d. perpetual

12. When the perpetual inventory system is used, the inventory sold is shown on the income statement as
a. cost of merchandise sold
b. purchases
c. purchases returns and allowances

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 d. net purchases

13. When comparing a retail business to a service business, the financial statement that changes the most is the
a. Balance Sheet
b. Income Statement
c. Statement of Retained Earnings
d. Statement of Cash Flow

14. When comparing a retail business to a service business, the financial statement that changes the least is the
a. Balance Sheet
b. Income Statement
c. Statement of Changes in Equity
d. Statement of Cash Flow

15. Gross profit is equal to:

a. sales plus (sales discounts and sales returns and allowances) plus cost of merchandise sold
b. sales plus sales returns and allowances less sales discounts less cost of merchandise sold
c. sales plus sales discounts less sales returns and allowances less cost of merchandise sold
d. sales less (sales discounts and sales returns and allowances) less cost of merchandise sold

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16. Where are selling and administrative expenses found on the multi-step income statement?
a. before gross profit
b. after sales and before gross profit
c. after net income before expenses
d. after gross profit

17. Silver Co. sold merchandise to Bronze Co. on account, P23,000, terms 2/15, net 45. The cost of the
merchandise sold is P18,500. Silver Co. issued a credit memorandum for P2,500 for merchandise returned
that originally cost P1,900. The Bronze Co. paid the invoice within the discount period. What is amount of
net sales from the above transactions?
a. P20,090
b. P20,500
c. P3,490
d. P23,000

18. Using a perpetual inventory system, the entry to record the sale of merchandise on account includes a
a. debit to Sales
b. debit to Merchandise Inventory
c. credit to Merchandise Inventory
d. credit to Accounts Receivable

19. Which of the following accounts has a normal debit balance?

a. Accounts Payable

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 b. Sales Returns and Allowances
c. Sales
d. Interest Revenue

20. Merchandise is ordered on November 12; the merchandise is shipped by the seller and the invoice is
prepared, dated, and mailed by the seller on November 15; the merchandise is received by the buyer on
November 17; the entry is made in the buyer's accounts on November 18. The credit period begins with
what date?
a. November 12
b. November 15
c. November 17
d. November 18

21. Using a perpetual inventory system, the entry to record the return from a customer of merchandise sold on
account includes a
a. credit to Sales Returns and Allowances
b. debit to Merchandise Inventory
c. credit to Merchandise Inventory
d. debit to Cost of Merchandise Sold

22. If merchandise sold on account is returned to the seller, the seller may inform the customer of the details by
issuing a

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 a. sales invoice
b. purchase invoice
c. credit memorandum
d. debit memorandum

23. The arrangements between buyer and seller as to when payments for merchandise are to be made are called
a. credit terms
b. net cash
c. cash on demand
d. gross cash

24. In credit terms of 1/10, n/30, the "1" represents the

a. number of days in the discount period
b. full amount of the invoice
c. number of days when the entire amount is due
d. percent of the cash discount

25. Merchandise with a sales price of P500 is sold on account with term 2/10, n/30. The journal entry to record
the sale would include a
a. debit to Cash for P500
b. Debit to Sales Discounts for P10
c. Credit to Sales for P500
d. Debit to Accounts Receivable for P490

PART 2. PRACTICAL ACCOUNTING: (3 pts each)

1. Using the following information, what is the amount of cost of merchandise sold?

Purchases P28,000 Purchases discounts P800

Merchandise 6,500 Merchandise inventory 7,800
inventory April 1 April 30
Sales returns and 750 Sales 57,000
allowances
Purchases returns and 1,000 Transportation In 880
allowances

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a. 25,780
b. 23,270
c. 31,220
d. 24,020

2. Using the following information, what is the amount of gross profit?

Purchases P28,000 Purchases discounts P800

Merchandise inventory 6,500 Merchandise inventory 7,800
April 1 April 30
Sales returns and 750 Sales 57,000
allowances
Purchases returns and 1,000 Transportation In 880
allowances

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a. 31,970
b. 30,470
c. 25,780
d. 56,250

3. Using the following information, what is the amount of net sales?

Purchases P28,000 Purchases discounts P800

Merchandise inventory 6,500 Merchandise inventory 7,800
April 1 April 30
Sales returns and 750 Sales 57,000
allowances
Purchases returns and 1,000 Transportation In 880
allowances
a. 25,780
b. 57,000
c. 57,750
d. 56,250

4. Using the following information, what is the amount of merchandise available for sale?

Purchases P28,000 Purchases discounts P800

Merchandise inventory 6,500 Merchandise inventory 7,800
April 1 April 30
Sales returns and 750 Sales 57,000
allowances
Purchases returns and 1,000 Transportation In 880
allowances
a. 33,580
b. 30,470
c. 25,780
d. 34,500

5. The unearned rent account has a balance of P40,000. If P3,000 of the P40,000 is unearned at the end of
the accounting period, the amount of the adjusting entry is
a. P3,000
b. P40,000
c. P37,000

--- END OF EXAMINATION ---

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