43.

Basic steps in the recording process include all of the following, except
a. Transfer journal information to the appropriate account in the statement of financial
position
b. Analyze each transaction for the effect of the accounts
c. Enter the transaction information in a journal
d. All of the choices are correct regarding the basic steps in the recording process
44. Statement 1: In the income statement, debits are used to increase account balances,
whereas in the statement of financial position, credits are used to increase account
balances.
Statement 2: The rules for debit and credit and the normal balance of an equity are the
same as for liability.
a. True, False
b. True, True
c. False, False
d. False, True
45. Which of the following is not a possible combination of a journal entry?
a. Increase in asset and increase in liability
b. Decrease in equity and increase in liability
c. Decrease in liability and decrease in asset
d. Increase in asset and decrease in equity
46. Which accounts measure economic flows over a period of time?
a. Real accounts
b. Nominal accounts
c. Mixed accounts
d. Contra accounts
47. Which of the following is(are) true concerning ledgers?
I. A subsidiary ledger is a listing of accounts of a subsidiary.
II. A general ledger is defined as a group of transactions made in the operating cycle
of an entity.
a. I only
b. Both statements
c. II only
d. Neither statement
48. Which of the statement regarding trial balance is correct?
a. A trial balance proves that no errors of any kind have been made in the accounts
during the accounting period.
b. Preparation of the trial balance determines that total debits equal total credits and that
all amounts have been posted to the correct accounts.
c. The trial balance is a listing of all account balances in the order of accounts appear in
the statement of financial position.
d. None of the statement is true regarding trial balance.
e. All of the following statements are correct.
49. Which of the following best defines an accrual?
 a. Adjusting entries where cash flow precedes revenue or expense recognition.
b. Adjusting entries where revenue or expense recognition precedes cash flow
c. Adjusting entries where cash flow and revenue or expense recognition are
simultaneous.
d. Adjusting entries where revenue or expenses are recognized in the absence of cash
flow evidence.
50. An accrued expense can be best described as an amount
a. Paid and currently matched with earnings
b. Paid and not currently matched with earnings
c. Not paid and not currently matched with earnings
d. Not paid and currently matched with earnings
51. After the accounts have been closed
a. All the accounts have zero balances.
b. The asset, liability, and shareholders’ equity accounts have zero balances
c. The revenue, expense, income summary, and retained earnings account have zero
balances.
d. The revenue, expense, and income summary accounts have zero balances.
52. The post-closing trial balance
a. Consists of statement of financial position accounts only.
b. Will balance if a transaction is not journalized and posted or if a transaction is not
journalized and posted or if a transaction is journalized and posted twice.
c. Shows hat the accounting equation is in balance at the end of the accounting period.
d. All of the choices are correct regarding the post-closing trial balance.
53. Adjusting entries that should be reversed include
a. All accrued revenue and expenses
b. Those that debit an asset or credit a liability
c. All of the following
d. None of the following
54. A reversing entry should never be made for an adjusting entry that
a. Accrues unrecorded revenue
b. Adjust expired costs from an asset account to an expense account
c. Accrues unrecorded expenses
d. Adjusts unexpired costs from an expense account to an asset account
55. Reversing entries
a. Impact the income statement only
b. Are not allowed under the Philippine Financial Reporting Standards
c. Impact the statement of financial position and the income statement
d. Change the amounts reported in the financial statements of the preceding period
56. Which of the following generally would not be separately accounted for in the
computation of cost of goods sold?
a. Trade discounts applicable to purchases
b. Cash discounts taken
c. Purchase returns and allowances
 d. Cost of transportation for merchandise purchased
57. The use of purchase discount account implies that the recorded cost of a purchased
inventory is
a. Invoice price
b. Invoice price plus any purchase discount lost
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable whether taken or not
58. The use of discount lost account implies that the cost of purchased inventory is
a. Invoice price
b. List price
c. Invoice price less the purchase discount taken
d. Invoice price less the purchase discount allowable whether taken or not
59. Which of the following regarding accrual versus cash-basis accounting is true?
a. The FASB believes that the cash basis is appropriate for some smaller companies,
especially those in the service industry.
b. The cash basis is less useful in predicting the timing and amounts of future cash flows
of an enterprise.
c. Application of the cash basis results in an income statement reporting only revenues.
d. The cash basis requires a complete set of double-entry records.
60. The purchase id recorded as a credit to accounts payable
a. As if the discount to be taken, if using the gross method
b. Without regard for the discount, if using the net method
c. As if the discount is to be taken, if using the net method
d. As if the discount is to be taken, using either the gross or net method
61. A discount given to a customer for purchasing a large volume of merchandise is typically
referred to as
a. Trade discount
b. Quantity discount
c. Size discount
d. Cash discount
62. I. In periodic inventory method, purchase returns are recorded by debiting accounts
payable and crediting purchase returns and allowances.
II. An entry debiting inventory and crediting cost of goods sold would be made when
merchandise is returned and perpetual inventory method is used.
a. True, True
b. False, True
c. True, False
d. False, False
63. In periodic system, the beginning inventory is
a. Net purchases minus cost of goods sold
b. Net purchases minus ending inventory
c. Total goods available for sale minus cost of goods sold
 d. Total goods available for sale minus net purchases
64. Which of the following accounts most likely would not appear in a post-closing trial
balance?
a. Retained Earnings
b. Inventory
c. Sales Revenue
d. Common Stock
65. Which of the following is true?
a. Prepaid expenses are increased by a credit.
b. Gains are increased by a debit.
c. Losses are increased by a credit.
d. Accumulated depreciation is increased by a credit.
66. Under the cash basis of accounting,
a. revenues are recorded when they are earned.
b. accounts receivable would appear on the balance sheet.
c. depreciation of assets having an economic life of more than one year is recognized.
d. the matching principle is ignored.
67. The basic financial statements are listed below:
i. Balance sheet
ii. Statement of retained earnings
iii. Income statement
iv. Statement of cash flows
In which of the following sequences does the accountant ordinarily prepare the
statements?
a. 1, 4, 3, 2
b. 2, 1, 3, 4
c. 3, 2, 1, 4
d. 3, 2, 4, 1
68. The use of computers in processing accounting data
a. eliminates the need for accountants.
b. eliminates the double entry system as a basis for analyzing transactions.
c. eliminates the need for financial reporting standards such as those promulgated by the
FASB.
d. may result in the elimination of document trails used to verify accounting records.
69. An adjusting entry will not take the format of which one of the following entries?
a. A debit to an expense account and a credit to an asset account
b. A debit to an expense account and a credit to a revenue account
c. A debit to an asset account and a credit to a revenue account
d. A debit to a liability account and a credit to a revenue account
70. If an inventory account is understated at year end, the effect will be to overstate the
a. net purchases.
b. gross margin.
 c. cost of goods available for sale.
d. cost of goods sold.
71. The premium on a two-year insurance policy expiring on June 30, 2015, was paid in total
on July 1, 2013. The original payment was debited to the insurance expense account. The
appropriate journal entry has been recorded on December 31, 2013. The balance in the
prepaid asset account on December 31, 2013, should be
a. the same as the original payment.
b. higher than if the original payment had been initially debited to an asset account.
c. lower than if the original payment had been initially debited to an asset account.
d. the same as it would have been if the original payment had been initially debited to an
asset account.
72. A routine collection on a customer's account was recorded and posted as a debit to Cash
and a credit to Sales Revenue. The journal entry to correct this error would be
a. a debit to Sales Revenue and a credit to Accounts Receivable.
b. a debit to Sales Revenue and a credit to Unearned Revenue.
c. a debit to Cash and a credit to Accounts Receivable.
d. a debit to Accounts Receivable and a credit to Sales Revenue.
73. The par value of share stock represents:
a. The arbitrary peso amount assigned to a share of stock
b. The liquidation value of a share
c. The book value of a share stock
d. The amount received when the stock was issued
74. The accounting process is of 5 basic phases. The statement that best describes the
classifying phase is
a. Transactions are analyzed in terms of their impact on the accounting equation.
b. Accountable transactions are entered into the accounting books
c. Journal Entries are posted to the ledgers on per-accounting books.
d. Financial statements are prepared to serve as the end-product of accounting.
75. The general rule on revenue recognition calls for recording of a revenue account in the
books
a. When the customer’s order is received
b. When the customer’s order is accompanied by a check as an advanced payment
c. When the transaction results to recording an account receivable
d. When the title to the goods changes
76. If the beginning inventory is overstated, what effect would this error has on cost of goods
sold and net income for the year ended, respectively?
a. Overstated, Understated
b. Understated, Overstated
c. Overstated, Overstated
d. Understated, Understated
77. When a specific customer’s account is written-off by a company using the allowance
method, the effect on the net income and the net realizable value of the accounts
receivable is
 Net Income Net Realizable Value of Accounts Receivable
a. None None
b. Decrease Decrease
c. Increase Increase
d. None Decrease
78. Liabilities are arranged in the balance sheet in the order of
a. Liquidity
b. Materiality
c. Maturity
d. All of these
79. The seller is the one that actually paid for the freight charges and is likewise the one
responsible for the same.
a. FOB Shipping point, freight prepaid
b. FOB Shipping point, freight collect
c. FOB Destination, freight prepaid
d. FOB Destination, freight collect
80. Which of the following is a recordable even or item?
a. Changes in managerial policy
b. The value of human resources
c. Changes in personnel
d. None of these
81. The general term employed to indicate a delay of the recognition of an expense already
paid or of revenue already received is
a. Depreciation
b. Deferral
c. Accrual
d. Inventory
82. Posting
a. should be performed in account number order.
b. accumulates the effects of journalized transactions in the individual ledger accounts.
c. involves transferring all debits and credits on a journal page to the trial balance.
d. is accomplished by examining ledger accounts and seeing which ones need updating.
83. Which of these reflects the situation if a prepayments account is not adjusted for the
amount of the expense consumed?
a. The statement of financial position prepayments account is understated and the profit
is understated.
b. The statement of financial position prepayments account is overstated and the profit is
overstated.
c. The statement of financial position prepayments account is overstated and the profit is
understated.
d. The statement of financial position prepayments account is understated and the profit
is overstated.
84. A credit note is used as documentation for a journal entry that requires a debit to
 a. Sales and a credit to Cash.
b. Sales Returns and Allowances and a credit to Accounts Receivable.
c. Accounts Receivable and a credit to a contra revenue account.
d. Cash and a credit to Sales Returns and Allowances.
85. Profit will always result if
a. the cost of sales exceeds other expenses.
b. sales exceed cost of sales.
c. sales exceed other expenses.
d. gross profit exceeds other expenses.
86. Westcoe’s goods in transit at December 31 include:
sales made purchases made
(1) FOB destination (3) FOB destination
(2) FOB delivery point (4) FOB delivery point
Which items should be included in Westcoe's inventory at December 31?
a. (2) and (3)
b. (1) and (4)
c. (1) and (3)
d. (2) and (4)
87. Which of the following errors will cause an imbalance in the trial balance?
a. Omission of a transaction in the journal
b. Posting an entire journal entry twice to the ledger
c. Posting a credit of $ 720 to Accounts Payable as a credit of $ 720 to Accounts
Receivable.
d. Listing the balance of an account with a debit balance in the credit column of the trial
balance.
88. The failure to properly record an adjusting entry to accrue an expense will result in an:
a. Understatement of expenses and an understatement of liabilities
b. Understatement of expenses and an overstatement of liabilities
c. Understatement of expenses and an overstatement of assets
d. Overstatement of expenses and an understatement of assets.
89. If ending accounts receivable exceeds beginning accounts receivable:
a. Cash collections during the period exceed the amount of revenue earned.
b. Net income for the period is less than the amount of cash basis income.
c. No cash was collected during the period.
d. Cash collections during the year are less than the amount of revenue earned.
90. Goods in transit should be included in the inventory of the buyer when the
a. public carrier accepts the goods from the seller.
b. terms of sale are FOB Seller
c. terms of sale are FOB destination.
d. none of the above.
91. Using the perpetual inventory system, the inventory account balance appearing in a
worksheet represents the
a. ending inventory.
 b. beginning inventory.
c. cost of inventory purchased.
d. cost of inventory sold.
92. Profit will always result if
a. the cost of sales exceeds other expenses.
b. sales exceed cost of sales.
c. sales exceed other expenses.
d. gross profit exceeds other expenses.
93. If errors occur in the recording process, they
a. should be corrected as adjustments at the end of the period.
b. should be corrected when preparing closing entries.
c. cannot be corrected until the next accounting period.
d. should be corrected as soon as they are discovered.
94. The purpose of the post-closing trial balance is to
a. prove that the ledger is correct.
b. prove the equality of the statement of financial position account balances that are
carried forward into the next accounting period.
c. prove that the profit is correct.
d. list all the statement of financial position accounts in alphabetical order for easy
reference.
95. Which of the following accounts normally has a credit balance?
a. Sales return and allowances
b. Sales discount
c. Treasury Stock
d. Allowance for doubtful accounts
96. It is the specific principle, basis, convention, rule and practice adopted by an enterprise in
preparing and presenting the financial statements.
a. Accounting policy
b. Accounting estimate
c. Conceptual framework
d. Qualitative characteristics
97. Statement 1. Correcting entries are made any time an error is discovered even though it
may not be at the end of an accounting period
Statement 2. The information for preparing a trial balance on a worksheet is obtained
from the general journal
a. True, False
b. False, True
c. False, False
d. True, True
98. Unearned revenue on the books of one company is likely to be
a. a prepaid expense on the books of the company that made the advance payment.
b. an unearned revenue on the books of the company that made the advance payment.
c. an accrued expense on the books of the company that made the advance payment.
 d. an accrued revenue on the books of the company that made the advance payment.
99. Recording the adjusting entry for depreciation has the same effect as recording the
adjusting entry for
a. an unearned revenue.
b. a prepaid expense.
c. an accrued revenue.
d. an accrued expense.
100. How do these prepaid expenses expire?
Rent – Supplies
a. With the passage of time - Through use and consumption
b. With the passage of time - With the passage of time
c. Through use and consumption - Through use and consumption
d. Through use and consumption - With the passage of time