CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING _VALDUSIY/VALIX/ESCALA'SANTOSDELA CRUZ ACCO ‘TING PROCESS 1. Which sa logical order in the accounting cycle? 4. Posting, financial statements and unadjusted trial balance . Financial statements closing entities and reversing entries Financial statements, adjusting entries and recording <4. Closing entries, reversing entries and adjusting entries 2. The double entry accountng system means 4. Each tansucton is recorded with two journal eatres. Each item is recorded in ajoural enty and then ina general ledge. The dual effect of each transaction is recorded with a debit anda credit. 4. Allofthese are choices regarding double entry system. 3. Inrecording transactions ‘The word “debit” means increase and the word “credit” means decrease '. Assets, expenses and retained earings are debited for increases ‘Liabilities, revenue and share capital are credited fr increases 44, Assets, revenue and share capital are debited for decreases. 4, The normal balance ofan account ison the a Debitside Bb. Credit side ‘Side represented by the increase inthe account balance 4. Side represented by the decreas inthe account balance 5. Which is nota possible combination ofa journal entry? ‘a Increase in asset and increase in lability ‘Decrease in equity and increase in liability Decrease liability and decrease in asset 4. Tocrease in asset and decrease in equity 6. Asimplejoumal entry ‘2 Consists of one debit and one credit ». Consists oftwo debits and one ereit ©. Consists of one debit and two credits 44. Contains more than two accounts 7. Posting ‘a, Accumulates the effects of ledge entries and transfers them tothe general jour. '. Is done only for income statement activity becsuse activity related to the statement of financial position does not require posting ‘e. Isdone ance every year. <4. Transfers journal entries tothe ledger accounts 18. Atal balance may prove that debits and credits are oquel, except 2. Anamount could be entered inthe wrong account. ». A transaction could have been entered twice. ‘e. A transaction could have been omitted, . All ofthese may prove that debits and credits are equal 9, Which ofthe following is not correet about an unadjusted tral balance? ‘2 It proves that debits and credits of equal amounts ae i te ledge. i, Ttis the bass for any adjusiments tothe account balances . It supplies a listing of open accounts and their balances. 4. Ttproves that debits and credits were properly entered inthe ledger accounts, 10, Adjusting entries affect ‘One nominal account and one real account 1. Two nominal accounts ¢, Two rel accounts 4. Noparticular combination of nominal and real accountsPage 2 using ones DR sen peed afr the semen of Hoan poston ie, bt ed ot of he Soto of finncial ecto de b. Ae ncoary toon te fnanial statements oconfon wih IFRS cue th cca ed defo d._ All of the choices are correct regarding adjusting entries. 12. Anadjusting entry should never include ‘aA debit to revenue and a eredit to lability . A debit to expense and a credit to liability © A debit to liability and a eredit to asset 4. Adebitto asset and a credit to revenue 13, The adjusting entry for depreciation has the same effect as ths adjusting entry for a. An uneamed revenue b. A propaid expense An accrued revenue 4. An accrued expense 14. If an expense has been incurred but not yet recorded, the adjusting entry would involve a. A liability and an asset . Aliability and a revenue © Anexpense and an asset 4. Anasset and a revenue 15, Which statement is not true about accrual and deferral? 4 An accrued expense is an amount not paid and currently matched with earnings. A prepaid expense is an amount paid and not curently matched with earnings. ©. An accrued income isan amount not collected and currently matched with expenses. 4. A deferred income is an amount collected and currently matched with expenses. 16. Closing entries ‘8 Are optional in the accounting cycle . Affect only real accounts «Determine the amount of net income or net los forthe period 4. Reduce the balances of temporary accounts to zer0 17. Which closing procedure is unique to a corporation? 8. Close each revenue account to the income summary account '. Close cach expense account othe income summary eccount ©. Close the income summary account to retained earnings 4d. Close the drawing account tothe capital account 18. The postelosing tral balance Provides a convenient listing of balances that can be used to prepare financial statements, ‘Does not include nominal accounts Is identical tothe statement of financial position Proves that accounts have been closed properly epee 19, Adjusting entries that should be reversed include a Allacerued revenue b. all accrued expenses ©. Those that debit an asset or credit a liabil 4 All ofthese adjusting entries require reversl. 20. Reversing eves apply to & All ajusing eis b. Alldeferals & All accruals 4. All closing eares 6651Page 3 21, An entity is a resort located in Palawan. The entity collects cash when guests make reservation. During December 2019, the entity collected P600,000 of cash and recorded the receipt by recognizing unearned revenue. The entity had esmed one-third ofthis amount and the other two-thirds will be eared during January 2020, What isthe impact of the adjusting entry ‘on December 31, 20197 1. 400,000 increase in equity . 200,000 decrease in liability «6, 600,000 increase in asset 4. 200,000 decrease in equity 22. An entity is resort located in Boraoay. During December 2019, PICPA held an annual ‘conference at the resort. The charges related to the conference totaled 4,000,000, of which 25% had been paid. The entity failed to make the appropriate adjusting entry on December 31, 2019 for the uncollected balance. Which of the following statements is true? Equity is overstated by P3,000,000 Equity is understated by P1,000,000 ‘Assets are understated by P3,000,000 ‘Assets are oversated by P1,000,000 peep 23, During the first year of operations, an entity recorded all purchases of supplies as assets. Store ‘supplies in the amount of P2,000,000 were purchased. Actual yearend store supplies unused ‘amounted to PS00,000. What is the impact of the adjusting entry on store supplies? ‘Increase in net income P1,500,000 '. Increase in expenses P1,500,000 6, Decrease in assets P500,000 4. Decrease in expenses P500,000 24. An entity reported supplies unused at the beginning of the year with a balance of P400,000 before the reversing entry. Payments for supplies during the year amounted to 2,500,000 and ‘were recorded as expense. A physical count atthe end of year revealed supplies unused costing 500,000. Reversing entries are made by the entity. What is the adjusting entry at year-end? Debit supplies unused and credit supplies expense P100,000 '. Debit supplies expense and credit supplies unused P100,000 Debit supplies expense and credit supplies unused P2,400,000 4. Debit supplies unused and credit supplies expease P500,000 ® 25, An entity reported wages expense of P3,500,000 for 2019. The wages payable at the beginning of year amounted to PSO0,000. Wage payments during the year totaled P3,200,000. The previous year’s adjusting enty for unpaid wages was reversed on January 1, 2020. What isthe ‘adjusting entry for accrued wages payable on December 31, 2019? a. Debit wages expense and credit wages payable PS00,000 b. Debit wages expense and eredit wages payable P300,000 Debit wages expense and eredit wages payable P800,000 4. Debit wages payable and credit wages expense 500,000 END 6651