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Accounting Review Materials

1. A Cash Short and Over account is not generally accepted is debited when petty cash fund proves out over is debited when petty cash fund proves out short is a contra account to Cash The journal entries for a bank reconciliation A. are taken from the balance per bank section only B. may include a debit to office expense for bank service charges C. may include a credit to Accounts Receivable for an NSF check D. may include a debit to Accounts Payable for an NSF check Which of the following items would not accompany a monthly bank statement? A. Depositors checks paid by the bank during the month. B. Copies of outstanding checks at the end of the month. C. Copies of bank debit memos issued during the month. D. Copies of bank credit memos issued during the month A credit memorandum issued by a bank will: A. Not affect the depositors account balance. B. Increase the depositors account balance. C. Decrease the depositors account balance. D. Be recorded as a debit to Cash on the depositors books. The term outstanding checks refers to A. Checks that have been lost in mail or for some other reason have been misplaced. B. Customer checks which have been returned by the bank because the customers bank would not honor them. C. Depositor checks which have not yet cleared the banking system. D. Depositor checks which have been processed by the bank but have not yet been recorded by the depositor. If the cash balance shown on a companys accounting records is less than the correct cash balance and neither the company nor the bank has made any errors, there must be A. Deposits credited by the bank but not yet recorded by the company. B. Deposits in transit C. Outstanding checks D. Bank charges not yet recorded by the company Which will not require an adjusting entry on the depositors books? A. Collection from customer deposited in the amount of P 100,000 but recorded by the depositor only as P 10,000. B. Check in payment of account payable amounting to P 50,000 is recorded by the depositor as P 5,000. C. Deposit of another company is credited to the account of enterprise. D. Bank service charge Which statement is true? A. Bank service charge will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal. B. Outstanding checks will cause balance per ledger to be greater than the balance reported by the bank, all other things being equal. C. An error made by a bank by charging an amount to the depositors account requires a correcting entry in the depositors own records. D. The cash amount shown in the balance sheet must be the balance reported in the bank statement. A proof of cash A. Is a physical count of currencies on hand on balance sheet date. B. Is a formal statement showing the total cash receipts during the year. C. Is a four column bank reconciliation showing the reconciliation of cash balance per book and per bank at the beginning and end of the current month and reconciliation of cash receipts and cash disbursements of the bank and the depositor during the current month. D. Is a summary of cash receipts and cash payments. A. B. C. D. 2.








10. A. B. C. D. 11. a. b. c. d. 12. a. b. 13.

A proof of cash would be useful for Discovering cash receipts that have not been recorded in the journal. Discovering time lag in making deposits. Discovering cash receipts and cash payments. Discovering an inadequate separation of incompatible duties of employees. The amount of any writedown of inventory to net realizable value and all losses of inventory shall be Deferred until the related inventory is sold. Recognized as other expense in the period the witedown or loss occurs. Recognized as component of cost of sales in the period the writedown or loss occurs. Recognized as operating expense in the period the writedown or loss occurs. The inventories of a service provider may simply be described as Unbilled services c. Billed services Work in progress d. Services inventory Freight and other handling charges incurred in the transfer of goods from the consignor to consignee

are a. Inventoriable by the consignor b. Expense on the part of the consignor c. Inventoriable by the consignee d. Expense on the part of the consignee 14. Reporting inventories at amount greater than cost can best be justified on the basis of a. Industry practice c. Verifiability b. Matching d. Substance over form 15. Which of the following terms represents the deduction from the invoice price of purchased goods granted by suppliers for early payment? a. Trade discount c. Sales discount b. Purchase returns and allowances d. Purchase discount 16. A company purchases items it intends to resell at a profit. Such a transaction is an example of the process of a. the acquisition/sales process c. the sales/payment process b. the acquisition/payment process d. the acquisition/collection process 17. A company has two choices when it comes to physically accounting for and reconciling its inventory and updating its records. The method that updates inventory after each sale that is made is commonly known as the a. perpetual inventory method c. weighted average method b. periodic inventory method d. first in, first out inventory method 18. Which one of the following costs is not considered part of inventory? a. Freight costs to have the goods delivered to our warehouse. b. Set up cost for displaying the inventory. c. Both freight costs to have the goods delivered to our warehouse and set up cost for displaying inventory is considered costs of inventory. d. Neither freight costs to have the goods delivered to our warehouse nor set up cost for displaying inventory are considered costs of inventory. 19. This cost flow assumption conforms to most actual physical inventory flows. a. FIFO method c. Weightedb. Replacement average method cost method d. Specific identification method 20. 1st Statement: Goods in transit shipped FOB shipping point should be included in the buyers ending inventory. 2nd Statement: Under the periodic inventory system, cost of goods sold is not recorded until the end of the accounting period. a. True; False c. True; True b. False; True d. False; False