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Chapter 1
The Accounting Process

NAME: Date:
Professor: Section: Score:

QUIZ:

1. It is a systematic compilation of a group of accounts.

a. Charts of account c. Ledger
b. Trial balance d. Journal

2. It is a list of accounts and their balances.

a. Charts of account c. Ledger
b. Trial balance d. Journal

3. Which of the following criteria must be met before an event or item should be recorded for
accounting purposes?
a. The event or item can be measured objectively in financial terms.
b. The event or item is relevant and reliable.
c. The event or item is an element.
d. All of these must be met.

4. An accounting record into which the essential facts and figures in connection with all
transactions are initially recorded is called the
a. ledger. c. trial balance
b. account d. none of these.

5. A trial balance may prove that debits and credits are equal, but
a. an amount could be entered in the wrong account.
b. a transaction could have been entered twice.
c. a transaction could have been omitted.
d. all of these.

6. When an item of expense is paid and recorded in advance, it is normally called a(n)
a. prepaid expense. c. estimated expense.
b. accrued expense. d. cash expense.

7. When an item of revenue or expense has been earned or incurred but not yet collected or paid, it
is normally called a(n) ____________ revenue or expense.
a. prepaid c. estimated
b. adjusted d. none of these

8. An unearned revenue can best be described as an amount

a. collected and currently matched with expenses.
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b. collected and not currently matched with expenses.

c. not collected and currently matched with expenses.
d. not collected and not currently matched with expenses.

9. Which of the following is a real (permanent) account?

a. Inventory
b. Sales
c. Accounts Receivable
d. Both Inventory and Accounts Receivable

10. Reversing entries are

1. normally prepared for prepaid, accrued, and estimated items.
2. necessary to achieve a proper matching of revenue and expense.
3. desirable to exercise consistency and establish standardized procedures.
a. 1 c. 3
b. 2 d. 1 and 2

11. Adjusting entries that should be reversed include

a. all accrued revenues.
b. all accrued expenses.
c. those that debit an asset or credit a liability.
d. all of these.

12. The trial balance of Giovanni, a limited liability company, did not agree and a suspense account
was opened for the difference. The following errors were subsequently found:
1) A cash refund due to customer A was correctly treated in the cash book and then credited to
the accounts receivable ledger account of customer B.
2) The sale of goods to a director for ₱300 was recorded by debiting sales revenue account and
crediting the director’s current account.
3) The total of the discount received column in the cash book had been credited in error to the
discount allowed account.
4) Some of the cash received from customers had been used to pay sundry expenses before
banking the money.
5) ₱5,800 paid for plant repairs was correctly treated in the cash book and then credited to plant
and equipment asset account.

Which of the above errors would require an entry to the suspense account as part of the process of
correcting them?
a. 1, 3 and 5 c. 1 and 5
b. 1, 2 and 5 d. 3 and 4

13. Theta prepares its financial statements for the year to 30 April each year. The company pays rent
for its premises quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The
annual rent was ₱84,000 per year until 30 June 2000. It was increased from that date to ₱96,000
per year. What rent expense and end of year prepayment should be included in the financial
statements for the year ended 30 April 2001?
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Expense Prepayment
a. 93,000 8,000
b. 93,000 16,000
c. 94,000 8,000
d. 94,000 16,000

14. On March 1, a company received ₱3,000 cash from a client as an advance for 12 months’ worth of
delivery services. The company initially recorded this receipt as a debit to cash and a credit to
delivery service revenue. The adjusting entry made at December 31, would include a:
a. debit to delivery service revenue, ₱2,500.
b. credit to unearned delivery service revenue, ₱500.
c. credit to delivery service revenue, ₱500.
d. No adjusting entry was required because the delivery service was for a one-year period
exactly.

15. On August 1, a corporation received cash of ₱12,000 for one year's rent in advance and recorded
the transaction on that day as a credit to rent revenue. The December 31 adjusting entry is:
a. Rent revenue ₱5,000
Unearned rent revenue ₱5,000
b. Rent Revenue ₱7,000
Unearned rent revenue ₱7,000
c. Unearned rent revenue ₱5,000
Rent revenue ₱5,000
d. Unearned rent revenue ₱7,000
Rent revenue ₱7,000

16. A corporation received a cash of ₱24,000 on August 1,for one year's rent in advance and
recorded the transaction on that day as a credit to an unearned rent revenue for the full amount.
The December 31 adjusting entry is:
a. Rent revenue ₱10,000
Unearned rent revenue ₱10,000
b. Unearned rent revenue ₱24,000
Rent revenue ₱24,000
c. Rent revenue ₱14,000
Unearned rent revenue ₱14,000
d. Unearned rent revenue ₱10,000
Rent revenue ₱10,000

17. On July 1, a company paid a ₱600 premium for a three-year property insurance policy; insurance
expense was debited in full for the ₱600. The adjusting entry made at the end of the year was:
a. Prepaid insurance ₱1,000
Insurance expense ₱1,000
b. Prepaid insurance ₱ 500
Insurance expense ₱ 500
c. Prepaid insurance ₱ 100
Insurance expense ₱ 100
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d. Prepaid insurance ₱ 500

Insurance expense ₱ 500

18. A company paid its property taxes on April 1 for the period April 1, Year 1 to March 30, Year 2.
When the payment was made the company debited property taxes expense and credit cash for
₱12,000. The adjusting entry made at the end of the year 1 was:
a. prepaid property tax ₱9,000
property tax expense ₱9,000
b. prepaid property tax ₱3,000
property tax expense ₱3,000
c. property tax expense ₱3,000
prepaid tax expense ₱3,000
d. property tax expense ₱9,000
prepaid tax expense ₱9,000

19. On the May 1, a company purchased a six-month subscription to an investment analysis service
publication. The ₱300 cash payment was debited to subscription expense at the time. The
adjusting entry made at June 30, the end of the company's fiscal year, was:
a. subscription expense ₱100
subscription payable ₱100
b. prepaid subscriptions ₱100
subscriptions expense ₱100
c. prepaid subscription ₱200
subscription expense ₱200
d. No adjusting entry was required because the subscription was for only six months not a full
year.

20. A sole trader took some goods costing ₱800 from inventory for his own use. The normal selling
price of the goods is ₱1,600. Which of the following journal entries would correctly record this?
a. Drawings account 800
Inventory account 800
b. Drawings account 800
Purchases account 800
c. Sales account 1,600
Drawings account 1,600
d. None of these

“A wise man will hear and increase learning, and a man of understanding will attain
wise counsel.” (Proverbs 1:5)
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