ACCOUNTING REVIEW 1

FAR 003: ACCOUNTING PROCESS

1. Economic data on the transaction and other accounting events of an entity

are collected by means of
a. Journals c. Accounting Records
b. Accounts d. Source Documents

2. The first step in accounting cycle is to

a. Post journal entries to general ledger accounts
b. Analyze transactions from source documents
c. Adjust the general ledger accounts
d. Record transactions in a journal

3. The debit and credit analysis of a transaction normally takes place

a. After the preparation of the financial statements
b. Before an entry is recorded in the journal
c. When the entry is posted to the ledger
d. When the trial balance is prepared

4. What is the effect of a purchase of inventories?

a. Total assets decrease
b. Total liabilities increase
c. Total assets remain unchanged
d. Total shareholders’ equity decreases

5. The accounting equation must remain in balance

a. Only when journal entries are made
b. Only at the time the trial balance is prepared
c. Throughout each step in the accounting cycle
d. Only when formal financial statements are prepared

6. Which of the following documents does NOT initiate an entry to be made in

the accounts?
a. Sales Invoice c. Purchase Invoice
b. Credit Memorandum d. Purchase Order

7. What is the book of “original” entry?

a. Trial balance c. Ledger
b. Journal d. Book of Genesis

8. What function do accounting journals serve in the accounting process?

a. Recording c. Summarizing
b. Classifying d. Reporting

9. What function do accounting ledgers serve in the accounting process?

a. Recording c. Summarizing
b. Classifying d. Reporting

10. Credits are used to record increases in

a. Expenses, liabilities and equity
b. Revenues, liabilities and equity
c. Revenues, dividends and assets
d. Assets, liabilities, revenues, dividends and equity

11. What special journal is used to record cash purchase transaction?

a. Sales Journal c. Cash receipts journal
b. Purchase Journal d. Cash disbursements journal

12. When specials journals are used, adjusting, closing and reversing
entries are recorded in the
a. Cash disbursement journal c. General journal
b. Cash receipts journal d. Purchase journal
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13. POSTING is a terminology that refers to the process of transferring

accounting information from
a. Journals to general ledger accounts
b. General ledger accounts to journals
c. Source documents to journals
d. Journals to source documents

14. A subsidiary ledger is

a. A listing of accounts balances just before closing entries are prepared
b. A listing of the components of account balances in the general ledger
c. A backup system to protect against unexpected destruction of records
d. A listing of accounts of a subsidiary company owned by a parent company

15. A listing of all the general ledger accounts in a systemic form is

called
a. Subsidiary ledger c. Voucher
b. Chart of accounts d. Accounts

16. Which is an example of a nominal (temporary) and contra account?

a. Accumulated depreciation
b. Sales returns and allowances
c. Distribution costs
d. Discount on bonds payable

17. Which is an example of a real (permanent) and adjunct account?

a. Freight-in c. Allowance for bad debts
b. Freight-out d. Premium on bonds payable

18. Which of the following constitutes both transposition and sliding

errors?
a. A transaction amounting to P 1,234 recorded in the journal as P 1,243
b. A transaction amounting to P 800 posted in the ledger as P 8,000
c. A transaction amounting to P 777 unintentionally not recorded in the
journal
d. A transaction amounting to P 690 recorded in the journal as P 9,600

19. A trial balance that is in balance proves that

a. No significant errors exist in the ledger accounts
b. Total debit and credit in the ledger accounts are equal
c. All transactions have been entered in the journal completely
d. All entries have been posted from the journal to the ledger correctly

20. When total debit exceeds total credit in the income statement columns
of the worksheet, this indicates
a. Net loss c. Zero Profit
b. Net income d. No meaningful amount

21. When total debit exceeds total credit in the balance sheet columns of
the worksheet, this indicates
a. Net loss c. Zero profit
b. Net income d. No meaningful amount

22. Adjusting entries involve

a. Only real accounts
b. Only nominal accounts
c. Only capital accounts
d. One real and one nominal account

23. ACCRUED expense is an expense that is

a. Already paid and incurred
b. Already paid but not yet incurred
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FAR 003: ACCOUNTING PROCESS

c. Already incurred but not yet paid

d. Not yet incurred and not yet paid

24. An adjusting entry to record an accrued expense involves debit to a

(an)
a. Expense account and a credit to Cash
b. Expense account and a liability account
c. Expense account and a credit to a prepaid account
d. Liability account and a credit to an expense account

25. PREPAID expense can be best described as an amount

a. Paid and matched with earnings
b. Paid but not matched with earnings
c. Not paid but matched with earnings
d. Not paid and not matched with earnings

26. If the advanced payment of an expense was initially and entirely

recorded in an expense account, then the adjusting entry will involve
a. A debit to expense and a credit to the asset account in the amount of the
expired cost
b. A debit to expense and a credit to the asset account in the amount of the
unexpired cost
c. A debit to asset and a credit to the expense account in the amount of the
expired cost
d. A debit to asset and a credit to the expense account in the amount of the
unexpired cost

27. Which of the following accounts is affected by the closing entries?

a. Asset accounts
b. Capital accounts
c. Liability accounts
d. None of the choices

28. When business operations result in a profit, the income Summary

account is
a. Not used at all
b. Used for adjusting entries
c. Debited and the capital account is credited
d. Credited and the capital account is debited

29. Which of the following accounts would NOT be subject to a closing

entry?
a. Gain on sale of equipment
b. Gain on sale of treasury shares
c. Gain on sale of investment in debt securities
d. Gain on extinguishment of financial liabilities

30. Reversing entries are done

a. At the end of the accounting period
b. To correct erroneous entries made during the period
c. To reverse the effect of certain closing entries made at year end
d. To simplify the subsequent recording of certain kinds of recurring
transactions.

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