Department of Education

Region III
Division of City of San Fernando (P)
San Fernando North District
BALITI INTEGRATED SCHOOL
Baliti, City of San Fernando (P)

ACTIVITY
FABM 1 Grade 11
FOURTH QUARTER
School Year: 2023-2024

Name: __________________________________________________________ Yr. & Sec. _________________________________

Parent’s Signature: _____________________ Score: ___________________ Date: _____________________________

I. Write the letter of the correct answer on the blank before each number.

1. Which of the following is a reason why adjusting entries are Operating expenses 1,000,000
necessary in accounting? Cash 280,000
a. To keep track of daily transaction Dividends 80,000
b. To distribute dividends to shareholders Inventory 40,000
c. To close out the revenue and expense accounts Accounts payable 160,000
d. To update the financial statements to reflect the accrual basis of Accounts receivable 120,000
accounting Retained earnings, 1/1/20XX 600,000

2. Which financial statement is affected by the adjusting entry for Rodger’s assets on December 31, 20XX are _______________.
depreciation?
a. Balance Sheet a. P640, 000 c. P1, 360, 000
b. Income Statement b. b. P760, 000 d. P1, 880, 000
c. Statement of Cash Flows
11. A plant asset with a cost of P900,000 and accumulated depreciation
d. Retained Earnings Statement of P800,000 is sold for P80,000. What is the amount of the gain or
loss on disposal of the plant asset?
3. Which of the following is an example of a deferral adjusting entry? a. P20, 000 loss c. P80, 000 loss
a. Recognizing accrued salaries b. P20, 000 gain d. P80, 000 gain
b. Amortizing prepaid insurance
c. Recording depreciation expense 12. What is the purpose of an income statement?
d. Acknowledging unearned revenue a. To show the cash flows of a company
b. To show the investments made by a company
4. What happens if adjusting entries are not made at the end of an c. To show the assets and liabilities of a company
accounting period? d. To show the revenues and expenses of a company
a. The cash account will be overstated
b. The financial statements will be accurate 13. Which part of the income statement represents how much revenue
c. The retained earnings balance will not change exceeds the expenses?
d. The financial statements will not show the true picture of the a. Gross Profit c. Non-operating Income
business b. Net Income d. Operating Income

5. Which of the following best describes adjusting entries in the 14. What does the term "bottom line" refer to on an income statement?
accounting cycle? a. The last line of the statement
a. Entries made to close out revenue accounts b. The total assets of a company
b. Entries made to ensure all expenses are recorded c. The first line of the statement
c. Entries made to distribute profits to shareholders d. The amount of net income or loss
d. Entries made to update account balances prior to financial
statement preparation 15. What financial statement is often prepared first in the accounting
cycle?
6. Which financial statement is NOT directly impacted by adjusting a. Balance Sheet
entries? b. Cash Flow Statement
a. Balance sheet c. Income Statement
b. Cash flow statement d. Statement of Retained Earnings
c. Income statement
d. Statement of retained earnings 16. Which financial statement is NOT directly prepared using data from
the trial balance?
7. Which type of adjusting entry is typically used for expenses that a. Balance Sheet
have been incurred but not yet paid or recorded? b. Cash Flow Statement
a. Accrued expenses c. Prepaid expenses c. Income Statement
b. Accrued revenues d. Unearned revenues d. Statement of Retained Earnings

8. What is the main goal of making adjusting entries in accounting? 17. In a trial balance, a credit balance in which account indicates a
a. To prepare financial statements for external users possible error?
a. Accounts Payable c. Cash
b. To calculate the company's total assets and liabilities
b. Accounts Receivable d. Prepaid Expenses
c. To ensure that all transactions are recorded in the general
ledger 18. How can an error in the trial balance be identified and corrected?
d. To update account balances to reflect the current period's a. By closing the revenue accounts
activity
b. By adjusting trial balance entries
c. By posting adjusting journal entries
d. By comparing general ledger account balances

19. Which of the following represents the correct order of steps in the
closing process?
a. Journalize closing entries, post-closing trial balance, prepare
financial statements
b. Post-closing trial balance, prepare financial statements,
journalize closing entries
c. Prepare financial statements, post-closing trial balance,
journalize closing entries
d. Post-closing trial balance, journalize closing entries, prepare
financial statements

20. How do closing entries affect the balance sheet of a company?

a. They decrease liabilities
b. They increase total assets
c. They zero out temporary accounts
9. Study the table above, what conclusion can you draw from the given d. They have no impact on the balance sheet
balance sheet?
a. It means nothing 21. If a company fails to make closing entries, which of the following is
b. The IRS will be happy the immediate impact on the next accounting period?
c. The account is balanced a. Assets will be overstated
d. There is an error in the calculations b. Equity will be miscalculated
c. Liabilities will be understated
10. Rodgers Company compiled the following financial information as of d. Net income will be overstated
December 31, 20XX:
Sales revenue 1,120,000 22. Why is it necessary to close temporary accounts at the end of an
Common stock 240,000 accounting period?
Buildings 320,000
 a. To facilitate tax preparation
b. To increase the company's profits 38. The formula for calculating net income on an income statement is:
c. To prevent errors in financial statements a. Net Sales - Gross Profit
d. To reset the balances for the new period b. Total Assets - Total Liabilities
c. Total Revenue - Total Expenses
23. How does a purchase return impact the financial statements of a
merchandising business?
d. Non-operating Income - Operating Expenses
a. It decreases total assets
39. What is the primary purpose of an income statement in accounting?
b. It increases total revenue a. Assess total liabilities
c. It decreases total liabilities b. Calculate total assets
d. It decreases cost of goods sold c. Determine cash flow
d. Evaluate a company's financial performance over a specific
24. When goods are purchased on credit, which account is debited? period
a. Cash c. Accounts payable
b. Inventory d. Accounts receivable 40. When preparing a trial balance, which of the following errors would
NOT be detected?
25. How does Gross Profit contribute to the overall financial health of a a. Recording a $100 debit as $1,000
company? b. Transposing digits within the same account
a. It reflects the company's total assets c. Posting a credit entry as a debit to the ledger
b. It shows the company's total liabilities
c. It determines the company's market share
d. Omitting an entire transaction from the journal
d. It indicates the efficiency of the company's operations
41. If the trial balance totals are not equal, what should be the first step
26. When recording an adjusting entry for accrued revenues, which taken?
accounts are typically involved? a. Ignore the imbalance
a. Cash and Accounts Receivable b. Reconstruct the entire ledger
b. Accounts Payable and Utilities Expense c. Check the arithmetic accuracy
c. Prepaid Insurance and Supplies Expense d. Close the books for the period
d. Accounts Receivable and Service Revenue
42. When preparing a trial balance, why is it essential to include all
27. What is the purpose of the adjusting entry for unearned revenue? accounts?
a. To calculate taxes accurately
a. To close out the drawing account b. To ensure the ledger is complete
b. To adjust the balance of the Rent Expense account c. To increase shareholder dividends
c. To record revenue that has been earned but not yet received d. To prevent fraud within the company
d. To recognize revenue that was previously recorded as a liability
43. When preparing a trial balance, which of the following errors would
28. How do adjusting entries impact the financial statements? NOT cause it to be out of balance?
a. They only impact the balance sheet a. Posting an entry to the wrong account
b. They only impact the income statement b. Omitting a transaction from the ledger
c. They have no effect on the financial statements c. Correctly totaling the debit and credit columns
d. They update the financial statements to reflect the true financial d. Recording a transaction with the wrong amount
position
44. How are dividends accounted for in the closing entries?
29. Which of the following accounts would be involved in an adjusting a. By debiting Retained Earnings and crediting the Dividends
entry for accrued expenses? account
a. Service Revenue and Cash b. By debiting the Dividends account and crediting Retained
b. Utilities Expense and Prepaid Utilities Earnings
c. Salaries Expense and Salaries Payable c. By debiting the Income Summary account and crediting
d. Unearned Revenue and Accounts Payable Retained Earnings
d. By debiting the Dividends account and crediting the Income
30. When should adjusting entries be made in the accounting period? Summary account
a. Monthly c. As soon as an error is spotted
b. Annually d. At the end of the accounting period 45. How do closing entries impact the retained earnings of a company?
a. They decrease retained earnings
31. When preparing adjusting entries, which items are typically b. They increase retained earnings
involved? c. They reset retained earnings to zero
a. Cash and equity c. Revenues and expenses d. They have no effect on retained earnings
b. Liabilities and assets d. Stockholder investments
46. Which of the following statements will happen to the balance of the
32. What is the purpose of the adjusting entry for prepaid expenses? income summary account after the closing entries are completed?
a. To close out the utilities expense account a. It is adjusted for inflation
b. To recognize expenses that were previously unrecorded b. It is closed to Retained Earnings
c. To recognize revenue that has been earned but not yet c. It is reported on the balance sheet
received d. It is carried forward to the next accounting period
d. To accurately reflect the amount of expenses incurred during
the period 47. How does a sale on credit impact the accounting equation of a
merchandising business?
33. How to evaluate a balance worksheet? a. Assets remain the same
a. Add up all the numbers b. Assets increase, equity decreases
b. Divide the numbers by 2 c. Assets increase, liabilities increase
c. Ensure the total debits equal the total credits d. Assets decrease, liabilities increase
d. Subtract the numbers on the right from the numbers on the left
48. How does a discount received for early payment affect the financial
34. Ashley’s Accessory Shop started the year with total assets of statements of a merchandising business?
P210,000 and total liabilities of P120,000. During the year the a. It decreases assets c. It increases expenses
business recorded P330,000 in revenues, P165,000 in expenses, b. It decreases revenue d. It increases liabilities
and dividends of P60,000. The net income reported by Ashley’s
Accessory Shop for the year was ____________. 49. What is included in the Statement of Cost of Goods Sold?
a. Selling expenses c. Cost of goods purchased
a. P120, 000 c. P165, 000 b. Revenue from sales d. Research and development costs
b. b. P150, 000 d. P195, 000
50. Which of the following effects does an increase in cost of goods sold
35. As of January 1, 20XX, Elena’s Store had a balance in its retained have on Gross Profit?
earnings account of P100,000. During the year Elena’s Store had a. Doubles Gross Profit
revenues of $80,000 and expenses of P45,000. In addition, the b. Decreases Gross Profit
business paid cash dividends of P20,000. What is the balance in c. Increases Gross Profit
Retained Earnings at December 31, 20XX for Elena’s Store?
d. No effect on Gross Profit
a. P100, 000 c. P135, 000
b. b. P115, 000 d. P155, 000

36. Given the following account balances at year end, compute the total
intangible assets on the balance sheet of Janssen Enterprises.
Cash 1,500,000
Accounts Receivable 1,000,000
Trademarks 1,200,000
Goodwill 2,500,000
Research & Development Costs 2,000,000 Corrected by: _________________________________
a. P3, 700, 000 c. P7, 700, 000
b. b. P5, 700, 000 d. P9, 700, 000 Date Checked: ________________________________

37. What does a negative net income on an income statement indicate?

a. The company is profitable
b. The company is financially stable
c. The company is experiencing growth
d. The company's expenses exceed its revenues