EMILIO AGUINALDO COLLEGE

Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

SCHOOL OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

FINAL EXAMINATION

FINANCIAL ACCOUNTING AND REPORTING

1st Semester AY 2022-2023

VISION

Emilio Aguinaldo College envisions itself as an internationally recognized private non-

sectarian, academic institution rooted in the Filipino nationalist tradition that consistently
pursues the advancement and welfare of humanity.
MISSION
Emilio Aguinaldo College provides an outcomes-based education with relevant curricula
geared towards excellent research, active industry cooperation and sustainable community
extension.

NAME: __________
________________________________ ___ DATE: ___________

1. What is accounting? Please discuss the essential elements of accounting. (5

points) Easy

Accounting is the process of documenting a business's financial transactions. These

transactions are compiled, examined, and reported to oversight organizations, regulatory
bodies, and tax collection organizations as part of the accounting process. A company's
operations, financial condition, and cash flows are summarized in the financial
statements that are used in accounting. They provide a succinct summary of financial
transactions across an accounting period.

There are 3 essential elements of accounting these are the identifying, recording, and
communicating. Identifying is use by an accountant that analyze each business
transaction and identify transaction that as an accountable event. After you identify
transactions, you need to record it this process also called journalizing. And last is
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

communicating wherein the accountant summarizes the information and processed in

the accounting system in order to produce meaningful reports.

2. Who are the users of Financial Statement? Please give at least 3 example each (5
points) Easy

Financial statements are documents that describe a company's operations and financial
performance. Government organizations, accounting companies, etc. frequently audit
financial statements to guarantee accuracy and for tax, financing, or investing purposes.
The balance sheet, income statement, statement of cash flow, and statement of changes
in equity are the four basic financial statements for for-profit entities. A similar but distinct
set of financial statements is used by nonprofit organizations.

Who are the external users it is the potential investor that can be part of your
business, those people who are not mainly responsible for running the company
but is concern how the company doing well. Through accounting information that
provides to external user it can pursue and attract more investment if the
financial statements and all information that are reflecting the image of company
is doing great.

In internal user these are the people who have a direct hand in running the
company. It can be the business owner, board of directors, and all the
managerial personnel. We provide accounting information to internal users
because they are the one making investment, decision, and making the company
gain more profit. That’s why this is one of the function of accounting to let the
accounting information tell the result of their actions in what happening inside the
company, and if the business earn a profit.

3. Enumerate the elements of Financial Statements? Please explain each. (8 points)

Moderate

There are 3 elements of financial statement it is the asset, liabilities and owners equity.
Asset, These are the resources belong to the corporation and were developed or
purchased using equity funds or outside borrowings. Depending on whether or not they
are anticipated to be realized within a year of the reporting period, they are further
separated into current and non-current assets. Inventory, real estate, accounts
receivable, financial assets, deferred tax assets, and other kind of assets.
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

The company's debts to third parties are referred to as liabilities it is the amounts owned
to parties other than shareholders in their capacity as a shareholder. T he liabilities are
divided into current and non-current categories according to whether or not they are
forecast to be paid off within a year of the reporting period. Borrowings, provisions, trade
payables, deferred tax liability,  are some of the general ledger for liabilities that are most
frequently depicted.

The amount that belongs to the company's shareholders is known as equity. This shows
how much the shareholders have contributed and how much the company still owes
them. Equity is made up of a variety of parts, including paid-up share capital, revenue
reserves, capital reserves, etc.

4. Please briefly discuss the accounting cycle. (8 points) Moderate

Financial ratios enable entrepreneurs to assess their company's performance

and compare it to other firms in their field. Ratios define the relationship between
two or more financial statement components. They are especially useful when
comparing outcomes over many time periods.

Ratio analysis can identify information about a company's financial health and
future prospects. Ratio analysis examines track data from a company's financial
records to collect the information about profitability, liquidity, activity ratios, and
financial leverage ratios. Ratio analysis may show how a firm has changed over
time and compare one company to another in the same industry or sector. The
outcomes of these comparisons can lead to more effective decision-making
when choosing which businesses to invest in.

In profitability ration it provides information on the amount of income from each

sale. Also, it is a collection of metrics called profitability ratios is used to assess a
company's capacity to generate profits. When these ratios increase over a trend
line or are comparatively better than the outcomes of competitors, they are seen
as positive.
Liquidity ratio is measured a company's ability to settle its immediate financial
commitments with its present assets.

While the activity ratios are measure of how well assets are used. A financial
indicator called an activity ratio shows how effectively a company is using the
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

assets on its balance sheet to produce revenue and cash. The financial leverage
ratio is any of a number of financial metrics that examine the amount of capital
that comes from debt (loans) or evaluates a company's capacity to satisfy its
financial obligations.

5. Discuss and elaborate at least 5 basic accounting concepts as applied to

business. (14 points) Difficult

We have several accounting principles like the accrual principle, time period principle,
the conservatism principle also known as prudence and the historical cost concept. The
accrual principle, this is the concept that accounting transactions should be recorded in
the accounting periods when they actually occur, rather than in the periods when there
are cash flows associated with them. The accrual basis of accounting is based on this. It
is crucial for the creation of financial statements that accurately reflect what took place
during an accounting period without being unnecessarily delayed or accelerated by the
related cash flows. If you disregarded the accrual principle, for instance, you would only
record an expense when you paid for it, which could include a significant delay brought
on by the terms of payment for the related supplier invoice.

The time period principle. This principle states that a company should present the
outcomes of its operations over a set time frame. Although it may be the most obviously
clear accounting principle of them all, the goal is to provide a standard set of comparable
periods that are helpful for trend analysis.

Prudence or the conservatism principle, this statement means that while revenues and
assets should be recorded as soon as possible, expenses and liabilities should be
recorded as soon as practicable. Due to potential delays in revenue and asset
recognition, this gives the financial statements a more cautious tilt and could result in
lower reported profits. In contrast, this approach favours the earlier rather than the later
recording of losses. This idea can be overused if a company consistently presents its
results as worse than they actually are.

An asset's value on the balance sheet is recorded at its original cost when it was
purchased by the company when using a historical cost as a measure of value in
accounting.
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

6. How should business use accounting in decision making? (8 points) Moderate

Accounting reports give business owners a clear view of how their company is doing.
Based on the actual financial situation of the company, significant decisions should be
taken, such as how much to budget for the time period, whether to expand the business,
buy additional equipment or staff, or downsize.

The financial statement affects the decision making of the company because it will show
how much is the money they have or what their company’s worth in order to acquire
more investment and expand their business, and keep their business on going. Financial
statements can also help you better run your business. A thorough understanding of the
flows of revenue and expenses can assist you in managing your day-to-day operations.
Financial statements assist you in identifying possible expansion opportunities.

Overall, the financial statement is very relevant to company when it comes to decision
making this is the documents you need first in order to decide every step of the
company. It is important to every business man, entrepreneur, SME’s, investors, and
aspiring business owner to know these financial documents it will show the condition of
company and how the management handle the business.

7. Please discuss the Financial Statement and the importance of each one? (14
points) Moderate
After the journalizing, ledger, and balance sheet we will prepare the financial statements
the financial position, statement of comprehensive income, the statement of changes in
equity and statement of cash flow. A statement of financial position is frequently used to
evaluate a company's condition in terms of possible risk and financial stability. A
snapshot of the assets, liabilities, and equity of a company is likely to be included in a
standard statement. Also in the financial position it is utilized to meet short-term
obligations for the company's operations, it is a crucial indication of the financial health of
the business. If the company's current assets decrease, it will need to find alternative
sources of funding for its operations.

The statement of comprehensive income included those revenue and expense items
that have not yet been recognized It is used in combination with an organization's
income statement and is meant to provide a more thorough view of the financial
performance of a company. It is frequently included on the same page as the income
statement in the financial statements package, sometimes following the income
statement.
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

Reconciled in the statement of changes in equity is the beginning and ending equity
balances of a corporation throughout the course of a reporting period. The likelihood that
it won't be released is the highest of all the financial statements because it is not seen as
a necessary component of the monthly financial statements. It does, however, frequently
appear in the annual financial accounts. Beginning with the beginning equity balance,
the statement proceeds to add or deduct elements like profits and dividend payments
until it reaches the finishing ending balance.

Last part of financial statement is the statement of cash flow it lets you keep track of
incoming and departing cash by displaying the source of that money. An organization's
operational, investment, and financial operations all generate cash flow. The statement
also provides information on investments, business-related expenses, and cash
withdrawals at a specific point in time. The knowledge you obtain from the cash flow
statement helps managers make wise decisions for managing business operations.

8. Analyze the relationships of the four major financial statements. (8 points)

Moderate

The financial statements are not standalone documents; rather, they are interconnected
and flow into one another to provide a comprehensive picture of the financial health of
the company. Each of the statements can be read alone to provide a summary of the
data.

The financial position, statement of total revenue, statement of equity changes, and
statement of cash flow in the financial statements. A company's situation is commonly
assessed in terms of potential risk and financial stability using a statement of financial
status. A standard statement is likely to include a summary of a company's assets,
liabilities, and equity. It is a significant sign of the financial health of the organization in
that it is also used to meet short-term obligations for day-to-day operations. The
corporation will need to identify alternate sources of finance for its operations if its
current assets decline.

9. How should Horizontal and Vertical Analysis work in analyzing Financial

Statements. (8 points) Moderate

After the journalizing, ledger, and balance sheet we will prepare the financial statements
the financial position, statement of comprehensive income, the statement of changes in
equity and statement of cash flow. A statement of financial position is frequently used to
evaluate a company's condition in terms of possible risk and financial stability. A
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

snapshot of the assets, liabilities, and equity of a company is likely to be included in a

standard statement. Also in the financial position it is utilized to meet short-term
obligations for the company's operations, it is a crucial indication of the financial health of
the business. If the company's current assets decrease, it will need to find alternative
sources of funding for its operations.

The statement of comprehensive income included those revenue and expense items
that have not yet been recognized It is used in combination with an organization's
income statement and is meant to provide a more thorough view of the financial
performance of a company. It is frequently included on the same page as the income
statement in the financial statements package, sometimes following the income
statement.

Reconciled in the statement of changes in equity is the beginning and ending equity
balances of a corporation throughout the course of a reporting period. The likelihood that
it won't be released is the highest of all the financial statements because it is not seen as
a necessary component of the monthly financial statements. It does, however, frequently
appear in the annual financial accounts. Beginning with the beginning equity balance,
the statement proceeds to add or deduct elements like profits and dividend payments
until it reaches the finishing ending balance.

Last part of financial statement is the statement of cash flow it lets you keep track of
incoming and departing cash by displaying the source of that money. An organization's
operational, investment, and financial operations all generate cash flow. The statement
also provides information on investments, business-related expenses, and cash
withdrawals at a specific point in time. The knowledge you obtain from the cash flow
statement helps managers make wise decisions for managing business operations.

10. How business use trend analysis as their tool in decision making? (8 points)
Moderate

A technique called trend analysis is used to look at and forecast movements of an item
using both recent and previous data. By using trend data to guide your decisions, you
may use trend analysis to better your company.

Trend analysis offers a way to assess corporate data over the course of time by
concentrating on the change in particular line items within the income statement and
balance sheet. This technology is employed with the presumption that history always
repeats itself and that the precise moment at which this repetition will occur may be
anticipated.
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

Trend analysis is often used to evaluate each line item on the income statement and
balance sheet. This analysis points to the reason we perform trend analysis—to identify
the increases and decreases in dollar amounts from one year to the next and to take a
close look at unusual trends.
11. Please enumerate the 10 most important ratios and discuss each one. (14 points)
Difficult

Financial ratios enable entrepreneurs to assess their company's performance

and compare it to other firms in their field. Ratios define the relationship between
two or more financial statement components. They are especially useful when
comparing outcomes over many time periods.

Ratio analysis can identify information about a company's financial health and
future prospects. Ratio analysis examines track data from a company's financial
records to collect the information about profitability, liquidity, activity ratios, and
financial leverage ratios. Ratio analysis may show how a firm has changed over
time and compare one company to another in the same industry or sector. The
outcomes of these comparisons can lead to more effective decision-making
when choosing which businesses to invest in.

In profitability ration it provides information on the amount of income from each

sale. Also, it is a collection of metrics called profitability ratios is used to assess a
company's capacity to generate profits. When these ratios increase over a trend
line or are comparatively better than the outcomes of competitors, they are seen
as positive.
Liquidity ratio is measured a company's ability to settle its immediate financial
commitments with its present assets.

While the activity ratios are measure of how well assets are used. A financial
indicator called an activity ratio shows how effectively a company is using the
assets on its balance sheet to produce revenue and cash. The financial leverage
ratio is any of a number of financial metrics that examine the amount of capital
that comes from debt (loans) or evaluates a company's capacity to satisfy its
financial obligations.
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

NOTE: RUBRICS IN EASY ESSAY QUESTIONS (5 POINTS)

Be sure to say exactly what you mean. It is not sufficient to hint or suggest
your meaning. You must state your points explicitly so there is no doubt about
your meaning. Students often ask, "Couldn't you figure out what I meant?" It
0.5 CLARITY
isn't the reader's job to guess your meaning. It is your job to say it clearly.
Even when I suspect that a student knows an answer, if it is not clearly stated, I
will not give credit for what is not said.
Although this is closely related to clarity, it is so important that it deserves
separate mention. Your answer should not be open to multiple interpretations.
0.5 UNAMBIGUOUS Statements that are too general can cover too much ground. Poor grammar or
poor word choice can confuse meaning. You must communicate your ideas so
there is no doubt about your meaning.
Partial answers deserve only partial credit. To get full credit, you must answer
the entire question, not just a part of it, and certainly not some other question
2 COMPLETE (like the one you studied for). Multiple-part questions require multiple-part
answers. Giving a complete answer to the specific question asked
demonstrates your mastery of the material.
Being clear, complete, and unambiguous doesn't count for much unless you
2 ACCURATE are also accurate. It must also contain your own words not coming from the
world wide web or other ideas. Plagiarism automatically means inaccuracy.

NOTE: RUBRICS IN MODERATE ESSAY QUESTIONS (8 POINTS)

Be sure to say exactly what you mean. It is not sufficient to hint or suggest
your meaning. You must state your points explicitly so there is no doubt about
your meaning. Students often ask, "Couldn't you figure out what I meant?" It
1 CLARITY
isn't the reader's job to guess your meaning. It is your job to say it clearly.
Even when I suspect that a student knows an answer, if it is not clearly stated,
I will not give credit for what is not said.
Although this is closely related to clarity, it is so important that it deserves
separate mention. Your answer should not be open to multiple interpretations.
1 UNAMBIGUOUS Statements that are too general can cover too much ground. Poor grammar or
poor word choice can confuse meaning. You must communicate your ideas so
there is no doubt about your meaning.
Partial answers deserve only partial credit. To get full credit, you must answer
the entire question, not just a part of it, and certainly not some other question
3 COMPLETE (like the one you studied for). Multiple-part questions require multiple-part
answers. Giving a complete answer to the specific question asked
demonstrates your mastery of the material.
3 ACCURATE
Being clear, complete, and unambiguous doesn't count for much unless you
 EMILIO AGUINALDO COLLEGE
Gov. D. Mangubat St., Brgy. Burol Main, City of Dasmariñas, Cavite 4114, Philippines
Tel. Nos. (046) 416-4341-42 www.eac.edu.ph
ISO 9001:2015 CERTIFIED
QUALITY MANAGEMENT SYSTEM

are also accurate. It must also contain your own words not coming from the
world wide web or other ideas. Plagiarism automatically means inaccuracy.

NOTE: RUBRICS IN DIFFICULT ESSAY QUESTIONS(14 POINTS)

Be sure to say exactly what you mean. It is not sufficient to hint or suggest
your meaning. You must state your points explicitly so there is no doubt about
your meaning. Students often ask, "Couldn't you figure out what I meant?" It
2 CLARITY
isn't the reader's job to guess your meaning. It is your job to say it clearly.
Even when I suspect that a student knows an answer, if it is not clearly stated,
I will not give credit for what is not said.
Although this is closely related to clarity, it is so important that it deserves
separate mention. Your answer should not be open to multiple interpretations.
2 UNAMBIGUOUS Statements that are too general can cover too much ground. Poor grammar or
poor word choice can confuse meaning. You must communicate your ideas so
there is no doubt about your meaning.
Partial answers deserve only partial credit. To get full credit, you must answer
the entire question, not just a part of it, and certainly not some other question
5 COMPLETE (like the one you studied for). Multiple-part questions require multiple-part
answers. Giving a complete answer to the specific question asked
demonstrates your mastery of the material.
Being clear, complete, and unambiguous doesn't count for much unless you
5 ACCURATE are also accurate. It must also contain your own words not coming from the
world wide web or other ideas. Plagiarism automatically means inaccuracy.