SUMMATIVE EXAM I ANSWER KEY

Subject: Fundamentals of Accounting and Business Management 1

Grade & Section: ABM 11 – Simon

I. MULTIPLE CHOICE
Encircle the correct answer.
1. It is prepared to check the equality of total debits and total credits in the ledger.
a. Unadjusted Trial Balance
b. Post-closing Trial Balance
c. Trial Balance
2. It is the process of recording a business transaction in the form of an accounting entry in the
“journal” or the so-called “book of the original entry”.
a. Ledger
b. Journalizing
c. Accounting
3. The third step in the accounting cycle, is the process of transferring data from the journal
to the appropriate accounts in the ledger. More specifically, this is done by transferring
the amounts of debits and credits in a recorded journal entry to the ledger accounts.
a. Journalizing
b. Post-Trial Balance
c. Posting
4. It is simply assets minus liabilities. Other terms for equity are “capital”, “net assets” and
“net worth”.
a. Equity
b. Accounts Payable
c. Services
5. Increases in economic benefits during the period in the form of increases in assets or
decreases in liabilities, that result in increases in equity, excluding those relating to
investments by the business owner.
a. Income
b. Cash
c. Accounts Receivable
6. The basic storage of information in accounting. It is a record of the increases and
decreases in a specific item of asset, liability, equity, income or expense.
a. T-account
b. Ledger
c. Account
7. The left side of the T-account.
a. Debit side
b. Account Title
c. Credit side
8. It is one of the components of a complete set of financial statements. This shows the
financial position of a business.
a. Balance sheet
b. Income statement
c. Trial balance
9. It is the aggregate amount of estimated losses from uncollectible accounts receivable.
Another term is “allowance for doubtful accounts”.
a. Accumulated depreciation
b. Inventory
c. Allowance for bad debts
10. Items related to incomes that were collected in advance before they are earned. After the
earning process is completed, these items are transferred to income.
a. Income
b. Interest payable
c. Unearned interest

II. IDENTIFICATION
Write the correct answer on the space provided.
1. It is a process of identifying, recording and communicating economic information that is
useful in making economic decisions.
  ACCOUNTING
2. An information used to express in money, financial information is also quantitative
information because monetary amounts are normally expressed in numbers.
 FINANCIAL INFORMATION
3. It refers to the process of recording the accounts or transactions of an entity.
 BOOKKEEPING
4. It serves as guide when recording and communicating information.
 ACCOUNTING STANDARD
5. Set of logical ideas and procedures that guide the accountant in recording and
communicating economic information.
 ACCOUNTING CONCEPTS AND PRINCIPLES
6. Accounting is often referred to as the .
 LANGUAGE OF BUSINESS
7. These are the economic resources you control that have resulted from past events and can
provide you with economic benefits.
 ASSETS
8. These are your present obligations that have resulted from past events and can require
you to give up economic resources when settling them.
 LIABILITIES
9. Any commercial organization engaged in an activity that provides service to clients for profit
is called a .
 SERVICE BUSINESS
10. A chronological record of all company’s events or business transactions showing all the
effects of each transaction listed by date.
 GENERAL JOURNAL

III. TRUE OR FALSE

Direction: Write TRUE if the statement is correct and FALSE if it is not. Write your
answer on the space provided.

1. Accounting refers to the process of recording the accounts or transactions of an entity.

Bookkeeping normally ends with the preparation of the trial balance.
 FALSE. BOOKKEEPING
2. Accounting covers the whole process of identifying, recording, and communicating
information to interested users.
 TRUE
3. Production refers to how goods are produced or services are rendered.
 True
4. Leonardo Da Vinci is considered as the “Father of Modern Accounting.”
 False. Fra Luca Pacioli
5. Service businesses have no physical product actually sold to clients; instead, their product is
“service”.
 True
6. Adjusted trial balance is the process of recording a business transaction in the form of an
accounting entry in the “journal” or the so-called “book of the original entry”.
 False. Journalizing
7. Liabilities are the economic resources you control that have resulted from past events and
can provide you with economic benefits.
 False. Assets
8. Legal obligation an obligation that results from a contract, legislation, or other operation
of law.
 True
9. Materiality concept assets, liabilities, equity, income and expenses are stated in terms of a
common unit of measurement, which is the Philippine peso. Moreover, the purchasing
power of the peso is regarded as stable. Therefore, changes in the purchasing power of
the peso due to inflation are ignored.
 False. Stable monetary unit
10. Accounting standards serve as a guide when recording and communicating information.
 True
 IV. MATCHING TYPE
Direction: Match column A with the correct answer on column B, write the letter on the
space provided before the number.

Answe COLUMN A COLUMN B

r
1.B 1. Users of accounting information who are not directly a. Freight-out
2.H involved in managing the business. b. External users
3.I 2. The life of the business is divided into series of c. Accounts
4.F reporting periods. receivable
5.D 3. Refers to how a business generates and manages its d. Account title
6.G funds. e. Notes receivable
7.A 4. The cost of processing and communicating f. Cost-benefits
8.L information should not exceed the benefits to be g. Unearned income
9.K derived from it. h. Time period
10.C 5. Describes the specific item of asset, liability, equity, i. Finance
income or expense. j. Freight-in
6. Items related to incomes that were collected in k. Staffing
advance before they are earned. l. Charts of
7. Represents the sellers’ costs of delivering goods to accounts
customers.
8. List of all the accounts used by a business.
9. Involves the process of selecting, training and
developing employees.
10. Receivables supported by oral or informal promises
to pay.
SUMMATIVE EXAM II ANSWER KEY

Subject: Fundamentals of Accounting and Business Management 1

Grade & Section: ABM 11 – Simon

I. MULTIPLE CHOICE
Direction: Encircle the correct answer.
1. Under this method, advanced collections of income are initially credited to an income
account.
a. Income method b. Expense method c. Liability method
2. Entries made prior to the preparation of financial statements to update certain accounts so
that they reflect correct balances as of the designated time.
a. Adjusting entries b. Journalizing c. Reversing entries
3. An analytical device used to facilitate the gathering of data for adjustments, the
preparation of financial statements, and closing entries.
a. Financial Statement b. Balance sheet c. worksheet
4. The third step in the accounting cycle, is the process of transferring data from the journal
to the appropriate accounts in the ledger.
a. Posting b. Adjusted trial balance c. Post-trial balance
5. This is prepared after adjusting entries but before the financial statements are prepared.
a. Posting b. Adjusted trial balance c. Post trial balance
6. The end product of the accounting process.
a. Recording b. Financial statement c. Posting
7. The amount in the Adjusted trial balance (or Income statement and Balance sheet
columns) are crossed-footed with the amounts in the Closing entries columns.
a. Posting b. Closing entries c. Post-closing trial balance
8. An account that has no balance.
a. Closed account b. open account c. Closing entries
9. Entries usually made on the first day of the next accounting period to reverse certain
adjusting entries in the immediately preceding period.
a. Reversing entries b. closing entries c. balance sheet
10.  The process of recording a business transaction in the form of an accounting entry.
a. Recording b. Posting c. Journalizing
11. A chronological record of all company’s events or business transactions showing all the
effects of each transaction listed by date.
a. Ledger b. Recording c. General journal
12. Account that are not closed at the end of the accounting period. These are extended to the
next accounting period.
a. Account Title b. Real accounts c. Nominal accounts
13. Costs that are directly associated with the earning of revenue are recognized as expenses
in the same period in which the related revenue is recognized.
a. Immediate recognition b. Matching c. Systematic & rational allocation
14. The procedure to compute for the adjusted balances of accounts in the adjusted trial
balance.
a. Book of accounts b. book of the original entry c. Cross-footing
15. The first step in accounting cycle.
a. Recording b. Posting c. Identifying and analyzing
II. TRUE OR FALSE
Direction: Write TRUE if the statement is correct and write FALSE if it not,
then underline the word/s that makes it false. Write your answer on the space
provided before the number.
1. A business is an activity carried out with the intention of earning the profit. TRUE
2. Balance sheet is the process of transferring data from the journal to the appropriate
accounts in the ledger. False. Posting
3. The difference between the total debits and total credits in that account is called “total”.
False, ending balance
4. Adjusting entries are entries made prior to the preparation of financial statements to
update certain accounts so that they reflect correct balances as of the designated time.
True
5. As the equipment is used, a portion of the cost is recognized as expense on a piecemeal
basis (or little by little). This portion is called depreciation. True
 6. Real accounts (Permanent accounts) are accounts that are closed at the end of the
accounting period. False, nominal accounts (Temporary accounts)
7. Mixed accounts are accounts that have both real and nominal account components. These
accounts are subject to adjustment. True
8. Adjusted trial balance is prepared after the closing process. False, post-closing trial
balance
9. Expense method are the prepayments of expenses are initially debited to an expense
account. True
10. Worksheet is an analytical device used to facilitate the gathering of data for adjustments,
the preparation of financial statements, and closing entries. True
11. T-account is a list of general ledger accounts and their balances. It is prepared to check
the equality of total debits and total credits in the ledger. False, trial balance
12. Accounts in the ledger resemble a “T-accounts”. True
13. The purpose of posting is to classify the effects of transactions on specific asset, liability,
equity, income and expense accounts in order to provide more meaningful information.
True
14. Any commercial organization engaged in an activity that provides service to clients for profit
is called a “merchandising business”. False, service business.
15. The simplest journal is the General Journal. True

III. FINANCIAL STATEMENT

Direction: Prepare what is being asked.

Entity A started operations on January 1, 20x1. A summary of the transactions during the
year is provided below:
a. The owner invested 2,000,000 to the business.
b. Acquired equipment for 1,000,000 cash.
c. Obtained a 12% one-year bank loan of 500,000.
d. Paid one-year insurance amounting to 160,000 on September 30, 20x1. Entity A uses
the “asset method” in recording repayments.
e. Total service fees earned amounted to 6,000,000, one-third of which was on cash
basis.
f. Collected 1,800,000 accounts receivable.
g. Total salaries expense paid amounted to 1,200,000.
h. Total utilities expense paid amounted 500,000.
i. Total supplies purchased on cash basis amounted to 120,000.
j. Total owner’s drawings amounted to 1,400,000.

Requirements:
1. Provide the journal entries for the transaction.
2. Post the entries to the ledger using T-account.
3. Prepare a trial balance using a worksheet.
Note: Use yellow paper in answering Test III.