Professional Documents
Culture Documents
Mani la
ACCOUNTING PROCESS
6. Debits
a. Increase assets and decrease expenses, liabilities, revenue and equity.
b. Increase assets and expense and decrease liabilities, revenue and equity.
c. Increase liabilities, revenue and equity and decrease assets and expenses (CREDITS)
d. Increase assets and equity and decrease liabilities and revenue
6801
Page 2
14. A trial balance may prove that debits and credits are equal, except
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 may prove that debits and credits are equal.
15. Which of the following is not correct about an unadjusted trial balance?
a. It proves that debits and credits of equal amounts are in the ledger.
b. It is the basis for any adjustments to the account balances.
c. It supplies a listing of open accounts and their balances.
d. It proves that debits and credits were properly entered in the ledger accounts.
Page 3
21. What is the adjusting entry for prepaid expenses assuming the expense method is used?
a. Debit prepaid expenses and credit expenses.
b. Debit expenses and credit prepaid expenses
c. Debit prepaid expenses and credit accrued expense
d. It is not necessary to adjust prepaid expenses.
22. What is the adjusting entry for prepaid expenses assuming the asset method issued?
a. Debit prepaid expenses and credit accrued expenses
b. Debit expenses and credit accrued expenses
c. Debit expenses and credit prepaid expenses
d. No adjusting entry
24. What is the adjusting entry for unearned income if the income method is used?
a. Debit unearned income and credit income
b. Debit income and credit unearned income
c. Debit accrued income and credit unearned income
d. No adjusting entry
25. What is the adjusting entry for unearned income if the liability method is used?
a. Debit income and credit unearned income
b. Debit accrued income and credit unearned income
c. Debit unearned income and credit income
d. No adjusting entry
6801
Page 4
31. A reversing entry should never be made for an adjusting entry that
a. Accrues unrecorded revenue
b. Accrues unrecorded expenses
c. Adjusts expired costs from an asset account to an expense account (ASSET METHOD)
d. Adjusts unexpired costs from expense account to an asset account (EXPENSE METHOD)
32. Which of the following should be reversed assuming prepayments are initially recorded in
nominal accounts?
a. Adjusting entry to record ending inventory
b. Adjusting entry to record doubtful accounts
c. Adjusting entry to record depreciation
d. Adjusting entry to record portion of rental received in advance that is unearned at year-end
33. An entity is a resort located in Boracay. The entity collects cash when guests make a reservation.
During December 2021, the entity collected P5,000,000 of cash and recorded the receipt by
recognizing unearned revenue. The entity had earned P2,000,000 of this amount and the balance
will be earned during January 2022. What is the impact of the adjusting entry on December 31,
2021?
34. An entity recorded all purchases of supplies as expense. Prepaid supplies totaled P400,000 on
January 1, 2021. Supplies in the amount of P5,000,000 were purchased during the current year.
Actual year-end supplies unused amounted to P1,000,000. No reversing entry was made on
January 1, 2021. What is the adjusting entry on December 31, 2021?
35. An entity reported wages expense of P6,000,000 for 2021. The wages payable at the beginning of
year amounted to P1,500,000. Wage payments during the year totaled P5,000,000. The previous
year’s adjusting entry for unpaid wages was reversed on January 1, 2021. What is the adjusting
entry for accrued wages payable on December 31, 2021?
END
6801