Test Material No.

Rating: _____________

Name________________________________
Year and Section_______________________

Date____________________________
Professor________________________

MULTIPLE CHOICE - Problems

Instructions: Encircle the letter that corresponds to your answer. Present supporting
computations in good form in a separate work sheet.
1. If the debit and credit totals of a trial balance were P240,000 and an additional entry
was recorded and posted for the purchase of P4,000 of office supplies for cash, what
would be the new debit and credit totals for the trial balance after this entry is made
a. P236,000
c. P244,000
b. P420,000
d. P248,000
2. A trial balance has debit and credit totals of P240,000. The purchase of P4,000 of
office supplies on account was omitted from the original journal entries. After the
recording and posting of this transactions, the new debit and credit totals for the trial
balance would be
a. P236,000
c. P244,000
b. P240,000
d. P248,000
3. Aquino Service Company billed P1,200,000 for services to clients on account and had
expenses of P500,000 on account. Accounts receivable had a beginning balance of
P120,000 and an ending balance of P80,000. How much cash did Aquino collect on
accounts receivable and what type of entry to accounts receivable was made?
a. P740,000; credit
c. P1,240,000; credit
b. P740,000; debit
d. P1,240,000; debit
4. Bonifacio Co. Pays cash for three months of rent in advance, at rate of P60,000 per
month. The balance of the Prepaid rent account in two months later would be
a. P20,000
c. P60,000
b. P40,000
d. P120,000
5. Prepaid Insurance account had a beginning balance of P45,000. At the end of the
accounting period, it had a balance of P7,500. Accumulated depreciation had a beginning
balance of P30,000 and an end-of-period balance of P45,000. The change in the account
balances of these two accounts resulted in total expenses changing by

a. A decrease of P52,500
b. An increase of P52,500

c. A decrease of P100,000
d. An increase of P100,000

6. Carlos Company paid four months rent on August 1 and debited Rent Expense for
P80,000. On August 31, Carlos should
a. Debit Prepaid Rent for P20,000
b. Credit Prepaid Rent for P20,000
c. Credit Rent Expense for P20,000
d. Credit Rent Expense for P60,000
7. Dagohoy Organizers purchased an equipment costing P100,000 on July 1, 2010. The
equipment has an estimated useful life of 10 years with an estimated residual value of
P10,000. The balance of the Accumulated Depreciation account on December 31, 2010 is
a. P4,500
c. P13,500
b. P5,000
d. P15,000
8. The Unearned Service Revenue account shows an adjusted end-of-year balance of
P300,000. The adjusting entry to Unearned Service Revenue indicated P400,000 in
Service Revenue was earned during the accounting period. What was the balance of the
Unearned Service Revenue account before the adjusting entry was recorded?
a. P100,000 credit
c. P700,000 credit
b. P100,000 debit
d. P700,000 debit
9. Esteban Company has a P180,000, 10%, 90-day note receivable outstanding at
December 31. The note is dated December 1. The appropriate adjusting entry is made to
record accrued interest on the note at year-end. What is the correct reversing entry on
January 1 of the following year?
a. Debit Interest Revenue and credit Interest Receivable, P1,500
b. Debit Interest Receivable and credit Interest Revenue, P1,500
c. Debit Interest Revenue and credit Interest Receivable, P4,500
d. Debit Interest Receivable and credit Interest Revenue, P4,500
10. On a worksheet, the Income Statement debit column equals P800,000 and the credit
column equals P700,000. Which of the following statements is correct?
a. The company realized a profit of P100,000 and it must be added to the Income
Statement credit column and the Statement of Financial Position debit column to
complete the worksheet.
b. The company incurred a loss of P100,000 and it must be subtracted from the Income
Statement debit column and the Statement of Financial Position credit column to
complete the worksheet.
c. The company incurred a loss of P100,000 and it must be added to the Income
Statement credit column and the Statement of Financial Position debit column to
complete the worksheet.
d. The company realized a profit of P100,000 and it must be subtracted from the Income
Statement debit column and the Statement of Financial Position credit column to
complete the worksheet.

11. The following accounts were closed to the Income Summary account: Salary
Expense, P50,000 debit; Cost of Goods Sold, P80,000 debit; Utility Expense, P25,000
debit; Sales, P120,000 credit. The amount and the entry to close Income Summary to the
Capital account would be
a. P35,000 credit to the Income Summary account
b. P35,000 debit to the Income Summary account
c. P120,000 debit to the Income Summary account
d. P120,000 credit to the Income Summary account
12. If the Income Summary Account has a credit balance of P100,000 before it is closed
to the Capital account, you know that
a. Revenues exceeded expenses by P50,000
b. The company had a loss of P100,000
c. The company had a profit of P100,000
d. The owner invested an additional P100,000 in the business
13. The cost of goods available for sale is P1,300,000. The gross profit is P300,000, net
sales amounted to P1,000,000, net purchases are P1,100,000, and operating expenses are
P220,000. How much is the profit or loss of the company?
a. P80,000 profit
c. P300,000 profit
b. P80,000 loss
d. P300,000 loss
14. On August 1, 2010, the Gabriel Company prepaid P36,000 for a one-year insurance
policy. Gabriel debited Insurance Expense and credited Cash for P36,000.
If adjusting entries are recorded annually, the appropriate adjusting entry at December 31,
2010 is
a. A debit to Prepaid Insurance and a credit to Insurance Expense fo P15,000
b. A debit to Insurance Expense and a credit to Prepaid Insurance for P15,000
c. A debit to Prepaid Insurance and a credit to Insurance Expense fo P21,000
d. A debit to Insurance Expense and a credit to Prepaid Insurance for P21,000
15. Using the information in No. 14 and assuming that Gabriel Company prepares
reversing entries, what is the correct reversing entry on January 1, 2011?
a. A debit to Insurance Expense and a credit to Prepaid Insurance for P15,000
b. A debit to Prepaid Insurance and a credit to Insurance Expense fo P21,000
c. A debit to Insurance Expense and a credit to Prepaid Insurance for P21,000
d. No reversing entry should be recorded
16. Jacinto Company has a beginning inventory of P600,000 and ending inventory of
P700,000. Under the periodic inventory system, the Inventory account at the end of the
period would have the following balances, respectively, before and after adjusting and
closing entries.
a. P600,000 and P700,000
c. P700,000 and P600,000
b. P600,000 and P600,000
d. P700,000 and P700,000

17. Prepaid Insurance has an ending balance of P46,000. During the period, insurance
premium in the amount of P24,000 expired. The adjusting entry would contain a debit to
a. Prepaid Insurance for P22,000
b. Insurance Expense for P22,000
c. Prepaid Insurance for P24,000
d. Insurance Expense for P24,000
18. A business received cash for P300,000 in advance for service that will be provided
later. The cash receipt was recorded by a debit to Cash and a credit to Unearned Revenue
for P300,000. At the end of the period, P110,000 is still unearned. The appropriate
adjusting entry is
a. Debit Unearned Income and credit Income for P190,000
b. Debit Unearned Income and credit Income for P110,000
c. Debit Income and credit Unearned Income for P190,000
d. Debit Income and credit Unearned Income for P110,000
19. The adjusted trial balance of BLP Company shows the following balances:
Debit
Credit
Cash
P500,000
Accounts Receivable
100,000
Furnitures and Fixtures
150,000
Accumulated Depreciation
P40,000
Accounts Payable
50,000
Pelejo, Capital
250,000
Pelejo, Drawing
50,000
Service Fee
630,000
Salary Expense
100,000
Depreciation Expense
40,000
Miscellaneous Expense
30,000
P970,000
P970,000
How much is the profit and the total assets of the company?
Profit
Total assets
a. P410,000
P710,000
b. P410,000
P750,000
c. P460,000
P710,000
d. P460,000
P750,000
20. The Supplies on Hand account balance at the beginning of the period was P30,000.
Supplies totaling P120,000 was purchased during the period and debited to Supplies on
Hand. A physical count shows P40,000 of unused supplies at the end of the period. The
appropriate adjusting journal entry at the end of the period is
a. Debit Supplies on Hand and credit Supplies Expense for P80,000
b. Debit Supplies Expense and credit Supplies on Hand for P80,000
c. Debit Supplies on Hand and credit Supplies Expense for P110,000

d. Debit Supplies Expense and credit Supplies on Hand for P110,000

21. Silang Company purchased equipment on November 1, 2010 by giving their supplier
a one-year, 12% note with a face value of P200,000. The December 31 adjusting entry
related to the note is
a. Debit Interest Expense and credit Cash for P4,000
b. Debit Interest Expense and credit Interest Payable for P4,000
c. Debit Interest Expense and credit Interest Payable for P6,000
d. Debit Interest Expense and credit Interest Payable for P24,000
22. Before any year-end adjustments were made, the profit of Valiete Co. Was
P2,000,000. However, the following adjustments were necessary: office supplies used,
P30,000; services performed for clients but not yet collected, P65,000; interest accrued on
notes payable, P15,000. After recording these adjustments, the profit would be
a. P1,890,000
c. P2,020,000
b. P1,920,000
d. P2,050,000
23. The following adjusted account balances are taken from the ledger of Roque
Merchandising Company as of December 31, 2010:
Freight-in
P70,000
Inventory, beginning
560,000
Purchases Discount
30,000
Purchases Returns and Allowances
25,000
Purchases
1,020,000
Sales Discounts
43,000
Sales Returns and Allowances
37,000
Sales Revenue
1,915,000
A physical count revealed an ending inventory of P578,000.
The adjusting entry required to close beginning inventory will include a
1. Debit to Income Summary, P560,000
2. Credit to Income Summary,P560,000
3. Debit to Inventory,P560,000
a. 1 only
b. 2 only

c. 3 only
d. Both 2 and 3

24. Using the information in No. 23, the adjusting entry required to record ending
inventory will include a
1. Debit to Income Summary,P578,000
2. Credit Income Summary,P578,000
3. Debit to Inventory,P578,000
a. 1 only
b. 2 only

c. 3 only
d. Both 2 and 3

25. Using the information in No. 23, the correct entry to close the accounts with debit
balances to Income Summary account is
a. Credit Income Summary,P1,732,000
b. Debit Income Summary,P1,170,000
c. Debit Income Summary,P1,732,000
d. Credit Income Summary,P1,170,000

Answers:
1. C
2. C
3. C
4. C
5. B
6. D
7. A
8. C
9. A
10. C
11. A
12. C
13. A
14. C
15. C
16. A
17. D
18. A
19. C
20. D
21. B
22. C
23. A
24. D
25. E

Test Material No.2

Rating: _____________

Name________________________________
Year and Section_______________________

Date____________________________
Professor________________________

MULTIPLE CHOICE - Theory

Instructions: Encircle the letter that corresponds to the best answer.
1. Adjusting entries are necessary
a. To measure properly the income for the period
b. To update the balances of asset accounts
c. To update the balances of liability accounts
d. For all the above reasons
2. Which of the following is distinguishing characteristic of contra account?
a. It always has a credit balance
b. Its normal balance matches that of its companion account
c. It always increases the balance of its companion account
d. It always decreases the balance of its companion account
3. The carrying amount (book value) of an item of property, plant and equipment is
determined by
a. Deducting depreciation expense during the period from the original balance of the asset
account
b. Adding the contra account balance to the original balance of the asset account
c. Deducting the contra account balance from the original balance of the asset account
d. An independent appraiser
4. Recording the expiration of a prepaid expense that was originally recorded in an asset
account would require
a. A debit to the appropriate prepaid asset account
b. A debit to the appropriate expense account
c. A credit to cash
d. A credit to accounts payable
5. An adjusting entry for unearned revenue is required because
a. Cash is received before the revenue is earned
b. Cash is received after the revenue is earned
c. Cash is received as revenue is earned

d. Noncash consideration is received as revenue is earned

6. An adjusting entry for accrued expense is required because
a. Cash is paid before the expense is incurred
b. Cash is paid after the expense is incurred
c. Cash is paid as the expense is incurred
d. Office supplies were acquired on account
7. An entry requiring a debit to an expense account and a credit to an asset account is an
example of an adjusting entry classified as
a. Accrued expense
c. Prepaid expense
b. Depreciation
d. Uncollectible accounts
8. The post-closing trial balance is prepared
a. After preparing the financial statement
b. After completing the work sheet
c. After preparing the closing entries
d. At any time in the accounting cycle
9. Depreciation is the process of
a. Saving money to purchase new assets
b. Systematically allocating the cost of plant assets over their useful life
c. Systematically recording the current market value of plant assets
d. Recording the physical deterioration of plant assets
10. Which of the following accounts would not be used in an adjusting entry?
a. Accounts receivable
c. Interest expense
b. Accumulated depreciation
d. Salaries payable
11. In the accounting cycle, which step follows the preparation of financial statements?
a. Journalize and post transactions as they occur
b. Journalize and post adjusting and closing entries
c. Prepare the work sheet
d. Prepare a post-closing trial balance
12. An entry requiring a debit to expense account and a credit to a liability account is an
example of an adjusting entry classified as
a. Accrued expense
c. Prepaid expense
b. Depreciation
d. Uncollectible accounts
13. A post-closing trial balance is prepared after
a. Combining trial balance and adjustment figures
b. Preparing the financial statements
c. Completing the work sheet
d. Journalizing and posting the closing entries

14. A debit column is greater than the credit column total in the income statement section
of the work sheet. This means that
a. Mistakes were made in the preparation of the adjusted trial balance
b. The company had a profit
c. The company had a loss
d. The Income Summary account will have a credit balance after the nominal accounts
are closed
15. Closing entries are journalized and posted before
a. Financial statements are prepared
b. Adjusting entries are journalized and posted
c. Post-closing trial balance is prepared
d. Work sheet is completed
16. Before the adjusting entries are entered on the work sheet
a. The trial balance debit and credit column totals are not equal
b. The trial balance account balances do not reflect updated balances
c. The post-closing trial balance must be completed
d. The financial statements are prepared
17. The unearned rent income account is reported in the
a. Income section of the income statement
b. Asset section of the statement of financial position
c. Liability section of the statement of financial position
d. Owner's equity section of the statement of financial position
18. Which of the following items is not found in the work sheet?
a. Adjustments
c. General journal
b. Statement of financial position
d. Income statement
19. Which of the following items has no effect on owner's equity?
a. Revenue
c. Withdrawals
b. Land acquired
d. Expense
20. The following can be found in an income statement except
a. Profit or loss
c. Assets
b. Income
d. Expense

Answers:
1. D
2. D
3. D
4. B
5. A
6. B
7. C
8. C
9. B
10. A
11. D
12. A
13. D
14. C
15. C
16. B
17. C
18. C
19. B
20. C

Test Material No.4

Name________________________________
Year and Section_______________________

Rating: _____________

Date____________________________
Professor________________________

Instructions: For each transaction listed below, indicate the appropriate journal or register
to be used when a company uses special journals and subsidiary ledgers.
Choices:
journal

A. General journal
B. Sales journal
C. Cash receipts journal

_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____

D. Cash disbursement
E. Purchases journal

1. Collection of accounts receivable.

2. Receipt of money borrowed from the bank.
3. Purchase of merchandise on account.
4. Purchase of merchandise for cash.
5. Sale of merchandise on credit.
6. Recording of adjusting entries.
7. Recording of closing entries.
8. Sale of equipment for cash.
9. Payment of salaries of employees.
10. Payment of supplier on account.
11. Sale of equipment in exchange for a note.
12. Supplies purchased on account.
13. Price adjustment granted to a customer.
14. Return of defective merchandise purchased.
15. Merchandise acquired for P10,000 giving note for P10,000.

Test Material No.5

Rating: _____________

Name________________________________
Year and Section_______________________

Date____________________________
Professor________________________

MATCHING TYPE
Choices:
A. Accounting period
B. Accrued expenses
C. Adjunct account
D. Book value
E. Business documents
F. Business enterprise
G. Closing entries
H. Contra asset account
I. Cost of goods available for sale
J. Cost of goods sold
K. Credit
L. Debit
M. Deferral

N. Depreciation
O. Financial statements
P. General ledger
Q. Income summary
R. Nominal accounts
S. Post-closing trial balance
T. Posting
U. Prepaid expenses
V. Real accounts
W. Reversing entries
Y. Subsidiary ledger
Z. Worksheet

Instructions: Write the letter that corresponds to the best answer.

_____ 1. The end product of the accounting process.
_____ 2. Expenses already incurred but not yet paid and recorded at the end of the
accounting period.
_____ 3. An account with credit balance which is deducted from an asset account.
_____ 4. Systematic allocation of cost of an item of property, plant and equipment over
periods benefited by the use of the asset,
_____ 5. An entry on the right side of an account.
_____ 6. Economic entities organized for profit.
_____ 7. The original source materials evidencing business transactions.
_____ 8. Span of time covered by the income statement.
_____ 9. Merchandise inventory beginning plus purchases.
_____ 10. Journals designed in a tabular fashion to accommodate the recording of
specific types of similar transactions.

_____ 11. A book of accounts tha include all asset, liability, equity, revenue, and
expenses accounts.
_____ 12. The process of classifying and grouping similar transactions in common
accounts by transferring amounts from the journals to the ledger.
_____ 13. A postponement of the recognition of an expense already paid, or of revenues
already received in advance.
_____ 14. Entries that reduce all nominal accounts to a zero balance at the end of each
accounting period.
_____ 15. A working paper often used by accountants to summarize adjusting entries.
_____ 16. The temporary account used in closing nominal accounts whose credit
balance represents net income.
_____ 17. Accounts whose balances are carried forward to the next accounting period.
_____ 18. Entries prepared at the beginning of a new accounting period to facilitate the
recording of expense payments and revenue receipts in the usual manner.
_____ 19. A listing of all real account balances after the closing process has been
completed.
_____ 20. The difference between the accumulated depreciation account and the related
property and equipment account.