FUNDAMENTALS OF ACCOUNTING

Question #1

Failure to record depreciation expense at the end of an accounting period results in

1) understated income.

2) understated assets.

3) overstated expenses.

4) overstated assets.

Question #2

Sky Corporation's salaries expense for 2013 was P136,000. Accrued salaries payable on December 31,
2013, was P17,800 and P8,400 on December 31, 2012. The cash paid for salaries during 2013 was

1) 126,600

2) 127,600

3) 145,400

4) 153,800

Question #3

The unexpired insurance at the end of the fiscal period represents

1) an accrued asset

2) an accrued liability

3) an accrued expense

4) a deferred expense

Question #4

Kite Company paid P24,900 in insurance premiums during 2013. Kite showed P3,600 in prepaid
insurance on its December 31, 2013, balance sheet and P4,500 on December 31, 2012. The insurance
expense on the income statement for 2013 was

1) 16,800

2) 24,000
3) 25,800

4) 33,000

Question #5

A business pays weekly salaries of P20,000 on Friday for a five-day week ending on that day. The
adjusting entry necessary at the end of the fiscal period ending on Thursday is

1) debit Salaries Payable, P16,000; credit Cash, P16,000

2) debit Salary Expense, P16,000; credit Dividends, P16,000

3) debit Salary Expense, P16,000; credit Salaries Payable, P16,000

4) debit Drawing, P16,000; credit Cash, P16,000

Question #6

The balance in the prepaid rent account before adjustment at the end of the year is P15,000, which
represents three months' rent paid on December 1. The adjusting entry required on December 31 is

1) debit Rent Expense, P5,000; credit Prepaid Rent, P5,000

2) debit Prepaid Rent, P10,000; credit Rent Expense, P5,000

3) debit Rent Expense, P10,000; credit Prepaid Rent, P5,000

4) debit Prepaid Rent, P5,000; credit Rent Expense, P5,000

Question #7

The general term employed to indicate a delay of the recognition of an expense already paid or of a
revenue already received is

1) depreciation

2) deferral

3) accrual

4) inventory

Question #8

Under the cash basis of accounting,

1) revenues are recorded when they are earned.

2) accounts receivable would appear on the balance sheet.

4) the matching principle is ignored.

Question #9

The matching concept

1) addresses the relationship between the journal and the balance sheet

2) determines whether the normal balance of an account is a debit or credit

3) requires that the dollar amount of debits equal the dollar amount of credits on a trial balance

4) determines that expenses related to revenue be reported at the same time the revenue is reported

Question #10

Unearned rent, representing rent for the next six months' occupancy, would be reported on the
landlord's balance sheet as a(n)

1) asset

2) liability

3) capital stock

4) revenue

Question #2

Which of the accounting steps in the accounting process below would be completed last?

1) preparing the adjusted trial balance

2) posting

3) preparing the financial statements

4) journalizing

Question #3

The account type and normal balance of Prepaid Expense is

1) revenue, credit

2) expense, debit

3) liability, credit
4) asset, debit

Question #4

Which of the following is presented in a balance sheet?

1) Prepaid expenses

2) Revenues

3) Net income

4) Gains

Question #5

An example of a nominal account would be

1) Allowance for Doubtful Accounts.

2) Notes Payable.

3) Prepaid Expense.

4) Cost of Goods Sold.

Question #6

The cost of office supplies to be used in future periods is ordinarily shown on the balance sheet as a(n)

1) stockholders equity

2) asset

3) contra asset

4) liability

Question #7

If there is a balance in the unearned subscriptions account after adjusting entries are made, it represents
a(n)

1) deferral

2) accrual

3) expense

4) revenue
Question #8

Which account would normally not require an adjusting entry?

1) Wages Expense

2) Accounts Receivable

3) Accumulated Depreciation

4) Capital Stock

Question #10

Accrued expenses are ordinarily reported on the balance sheet as

1) assets

2) liabilities

3) fixed assets

4) prepaid expenses

Question #1

Which of the following is an example of accrued revenue?

1) Swimming pool cleaning that has been for three months in advance.

2) Swimming pool cleaning that has been provided but has not been billed or paid.

3) An agreement has been signed for swimming pool cleaning for the next three months.

4) Swimming pool cleaning that has been provided and paid on the same day.

Question #2

Prepaid expenses are eventually expected to

1) become expenses when their future economic value expires.

2) become revenues when services are performed.

3) become expenses in the period when they are paid.

4) become revenues when the liability is no longer owed.

Question #3
As time passes, fixed assets other than land lose their capacity to provide useful services. To account for
this decrease in usefulness, the cost of fixed assets is systematically allocated to expense through a
process called

1) equipment allocation

2) depreciation

3) accumulation

4) matching

Question #4

Adjusting entries affect at least one

1) income statement account and one balance sheet account

2) revenue and the dividend account

3) asset and one stockholders equity account

4) revenue and one capital stock account

Question #5

The supplies account has a balance of P1,000 at the beginning of the year and was debited during the
year for P2,800, representing the total of supplies purchased during the year. If P750 of supplies are on
hand at the end of the year, the supplies expense to be reported on the income statement for the year is

1) 750

2) 3,550

3) 3,800

4) 3,050

Question #6

All adjusting entries always involve

1) only income statement accounts.

2) only balance sheet accounts.

3) the cash account.

4) at least one income statement account and one balance sheet account.
Question #7

In November and December 2013, Bee Company, a newly organized newspaper publisher, received
P72,000 for 1,000 three-year subscriptions at P24 per year, starting with the January 2, 2014, issue of the
newspaper. How much should Bee report in its 2013 income statement for subscription revenue?

1) 0

2) 12,000

3) 24,000

4) 72,000

Question #8

Generally accepted accounting principles requires that companies use the ____ of accounting.

1) cash basis

2) deferral basis

3) accrual basis

4) account basis

Question #2

The entry to adjust for the cost of supplies used during the accounting period is

1) Supplies Expense, debit; Supplies, credit

2) Capital Stock, debit; Supplies, credit

3) Accounts Payable, debit; Supplies, credit

4) Supplies, debit; credit Capital Stock

Question #3

Adjusting entries are

1) the same as correcting entries

2) needed to bring accounts up to date and match revenue and expense

3) optional under generally accepted accounting principles

4) rarely needed in large companies

Which of the following is considered to be an accrued expense?

1) A computer technician has installed the latest software updates and was paid on the same day.

2) A computer technician has been paid in advance to install software updates as they become available.

3) A computer technician has just signed an agreement with you regarding pricing for future work.

4) A computer technician has installed the latest software updates, but you have not received their
invoice for payment.

Question #7

The balance in the office supplies account on June 1 was P5,200, supplies purchased during June were
P2,500, and the supplies on hand at June 30 were P2,000. The amount to be used for the appropriate
adjusting entry is

1) 4,500

2) 2,500

3) 9,700

4) 5,700

Question #3

The Supplies on Hand account balance at the beginning of the period was P6,600. Supplies totaling
P12,825 were purchased during the period and debited to Supplies on Hand. A physical count shows
P3,825 of Supplies on Hand at the end of the period. The proper journal entry at the end of the period

1) debits Supplies on Hand and credits Supplies Expense for P9,000.

2) debits Supplies Expense and credits Supplies on Hand for P12,825.

3) debits Supplies on Hand and credits Supplies Expense for P15,600.

4) debits Supplies Expense and credits Supplies on Hand for P15,600.

Question #5

Fees receivable would appear on the balance sheet as a(n)

1) asset

2) liability
3) fixed asset

4) unearned revenue

Question #6

The type of account and normal balance of Accumulated Depreciation is

1) asset, credit

2) asset, debit

3) contra asset, credit

4) contra asset, debit

Question #8

The use of computers in processing accounting data

1) eliminates the need for accountants.

2) eliminates the double entry system as a basis for analyzing transactions.

3) eliminates the need for financial reporting standards such as those promulgated by BOA.

4) may result in the elimination of document trails used to verify accounting records.

Question #1

Which of the following is considered to be unearned revenue?

1) Concert tickets sold for tonights performance.

2) Concert tickets sold yesterday on credit.

3) Concert tickets that were not sold for the current performance.

4) Concert tickets sold for next months performance.

Question #2

When is the adjusted trial balance prepared?

1) Before adjusting journal entries are posted

2) After adjusting journal entries are posted.

3) After the adjusting journal entries are journalized

Question #6

The adjusting entry to record the depreciation of equipment for the fiscal period is

1) debit Depreciation Expense; credit Equipment

2) debit Depreciation Expense; credit Accumulated Depreciation

3) debit Accumulated Depreciation; credit Depreciation Expense

4) debit Equipment; credit Depreciation Expense

Question #9

By matching revenues and expenses in the same period in which they incur

1) net income or loss will always be underestimated.

2) net income or loss will always be overestimated.

3) net income or loss will be properly reported on the income statement

4) net income or loss will not be determined.

Question #10

One of the accounting concepts upon which deferrals and accruals are based is

1) matching

2) cost

3) price-level adjustment

4) conservatism

Question #5

Which of the following accounts most likely would not appear in a post-closing trial balance?

1) Retained Earnings

2) Inventory

3) Sales Revenue

4) Common Stock
Question #6

Supplies are recorded as assets when purchased. Therefore, the credit to supplies in the adjusting entry
is for the amount of supplies

1) that are in the ending balance

2) purchased

3) used

4) either used or remaining

Question #7

Beginning and ending Accounts Receivable balances were P28,000 and P24,000, respectively. If
collections from clients during the period were P80,000, then total services rendered on account were
apparently

1) 76,000

2) 84,000

3) 104,000

4) 108,000

Question #1

Prepaid advertising, representing payment for the next quarter, would be reported on the balance sheet
as a(n)

1) asset

2) liability

3) contra asset

4) expense

Question #6

Using accrual accounting, expenses are recorded and reported only

1) when they are incurred, whether or not cash is paid

2) when they are incurred and paid at the same time

3) if they are paid before they are incurred

Question #8

Accrued revenues would appear on the balance sheet as

1) assets

2) liabilities

3) stockholder's equity

4) prepaid expenses

Question #9

Sky Company collected P12,350 in interest during 2013. Sky showed P1,850 in interest receivable on its
December 31, 2013, balance sheet and P5,300 on December 31, 2012. The interest revenue on the
income statement for 2013 was

1) 3,450

2) 8,900

3) 12,350

4) 14,200

Question #10

Data for an adjusting entry described as "accrued wages, P2,020" means to debit

1) Wages Expense and credit Wages Payable

2) Wages Payable and credit Wages Expense

3) Accounts Receivable and credit Wages Expense

4) Drawing and credit Wages Payable

Question #6

The adjusting entry to adjust supplies was omitted at the end of the year. This would effect the income
statements by having

1) expenses understated and therefore net income overstated

2) revenues understated and therefore net income understated

3) expenses understated and therefore net income understated

Question #7

What is the proper adjusting entry at June 30, the end of the fiscal year, based on a prepaid insurance
account balance before adjustment, P15,500, and unexpired amounts per analysis of policies, P4,500?

1) debit Insurance Expense, P4,500; credit Prepaid Insurance, P4,500

2) debit Insurance Expense, P15,500; credit Prepaid Insurance, P15,500

3) debit Prepaid Insurance, P11,500; credit Insurance Expense, P11,500

4) debit Insurance Expense, P11,000; credit Prepaid Insurance, P11,000

Question #9

Iowa Cattle Company uses a perpetual inventory system. Iowa purchased cattle from Big D Ranch at a
cost of P19,500, payable at time of delivery. The entry to record the delivery would be

1) Debit: Purchases (19,500); Credit: Accounts Payable (19,500)

2) Debit: Inventory (19,500); Credit: Accounts Payable (19,500)

3) Debit: Purchases (19,500); Credit: Cash (19,500)

4) Debit: Inventory (19,500); Credit: Cash (19,500)

Question #1

The type of account and normal balance of Unearned Rent is

1) revenue, credit

2) expense, debit

3) liability, credit

4) liability, debit

Question #4

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

1) 3,000

2) 40,000

3) 37,000
4) 43,000

Question #5

A company purchases a one-year insurance policy on June 1 for P840. The adjusting entry on December
31 is

1) debit Insurance Expense, P350 and credit Prepaid Insurance, P350

2) debit Insurance Expense, P280 and credit Prepaid Insurance, P280

3) debit Insurance Expense, P490, and credit Prepaid Insurance, P490.

4) debit Prepaid Insurance, P720, and credit Cash, P720

Question #5

If the prepaid rent account before adjustment at the end of the month has a debit balance of P1,600,
representing a payment made on the first day of the month, and if the monthly rent was P800, the
amount of prepaid rent that would appear on the balance sheet at the end of the month, after
adjustment, is

1) 800

2) 400

3) 2,400

4) 1,600

Question #1

Ingle Company paid P12,960 for a four-year insurance policy on September 1 and recorded the P12,960
as a debit to Prepaid Insurance and a credit to Cash. What adjusting entry should Ingle make on
December 31, the end of the accounting period?

1) Debit: Prepaid Insurance (810); Credit: Insurance Expense (810)

2) Debit: Insurance Expense (1,080); Credit: Prepaid Insurance (1,080)

3) Debit: Insurance Expense (3,240); Credit: Prepaid Insurance (3,240)

4) Debit: Prepaid Insurance (11,880); Credit: Insurance Expense (11,880)

4) overstated assets.

1) 126,600. Solution: 17,800 - 8,400-136,000= 126,600

4) a deferred expense

3) 25,800. Solution: 3,600 - 4,500-24,900 = 25,800 (nagbaba yung balance for 2013)

3) debit Salary Expense, P16,000; credit Salaries Payable, P16,000

1) debit Rent Expense, P5,000; credit Prepaid Rent, P5,000

2) deferral

4) the matching principle is ignored.

4) determines that expenses related to revenue be reported at the same time the revenue is reported

2) liability

3) preparing the financial statements

4) asset, debit

1) Prepaid expenses

4) Cost of Goods Sold.

2) asset

1) deferral

4) Capital Stock

2) liabilities

2) Swimming pool cleaning that has been provided but has not been billed or paid.

1) become expenses when their future economic value expires.

2) depreciation

1) income statement account and one balance sheet account

4) 3,050 solution : 1,000+2,800 = 3,800 - 750 = 3,050

4) at least one income statement account and one balance sheet account.
1) 0. solution: 2013 yung year

3) accrual basis

1) Supplies Expense, debit; Supplies, credit

2) needed to bring accounts up to date and match revenue and expense

4) A computer technician has installed the latest software updates, but you have not received their
invoice for payment.

4) 5,700

4) debits Supplies Expense and credits Supplies on Hand for P15,600. Solution: 6,600+12825-3825 =
15,600

1) asset

3) contra asset, credit

4) may result in the elimination of document trails used to verify accounting records.

4) Concert tickets sold for next months performance.

2) After adjusting journal entries are posted.

2) debit Depreciation Expense; credit Accumulated Depreciation

3) net income or loss will be properly reported on the income statement

1) matching

3) Sales Revenue

3) used

1) 76,000

1) asset

1) when they are incurred, whether or not cash is paid

1) assets

2) 8,900

1) Wages Expense and credit Wages Payable

1) expenses understated and therefore net income overstated

4) Debit: Inventory (19,500); Credit: Cash (19,500).

3) liability, credit

3) 37,000

3) debit Insurance Expense, P490, and credit Prepaid Insurance, P490.

1) 800

2) Debit: Insurance Expense (1,080); Credit: Prepaid Insurance (1,080)