1.

Given the dual effects of accountable events, an increase in a liability cannot possibly be accompanied by a (an)
a. Decrease in another liability c. Increase in an asset
b. Increase in owner’s equity d. Decrease in revenue
2. ABC Company purchased a computer for P200,000. The company paid P50,000 cash as down payment and issued a P150,000 note
payable without interest in 60 days. Which one of the following is not descriptive of the transaction?
a. Total liabilities increased by P150,000.
b. Total assets increased by P200,000.
c. The transaction did not immediately affect the owner’s equity.
d. From the viewpoint of a short time creditor the transaction made the business less solvent.
3. Which is false concerning the use of special journals?
a. Only sales of merchandise on account are recorded in the sales journal and cash sales are recorded in the cash receipts journal.
b. Purchases of any items on account are recorded in the purchases journal.
c. Transactions that cannot be appropriately recorded in a special journal are recorded in the general journal.
d. Only cash purchases are recorded in the cash disbursements journal.
4. What function do general ledgers serve in the accounting process?
a. Reporting c. Classifying
b. Summarizing d. Recording
5. Which of the following best describes the purpose of a general ledger?
a. The general ledger contains only accounts which are supported by subsidiary accounts.
b. The general ledger provides a record of transactions classified by account.
c. The general ledger eliminates the need for control accounts.
d. The general ledger provides a listing of the dates of transactions affecting each account, what amount and the ending balance of
each account.
6. A subsidiary ledger is
a. A listing of the components of account balances
b. A back up system to protect against record destruction.
c. A listing of all account balances just before closing entries are prepared.
d. A listing of accounts of a subsidiary company.

7. A trial balance (choose the incorrect one)

a. Is a test of the equality of the debits and credits in the general ledger
b. Is a list of all open accounts in the ledger with their balances as of a given date
c. Provides information that is helpful when making adjusting entries
d. Proves that no errors of any kind have been made in the accounts during the accounting period.
8. A transplacement error is an
a. Error of interchanging the figures
b. Error of placing the decimal point
c. Error of not recording the transaction
d. Error, which if not detected, is automatically compensated or corrected in the next accounting period.
9. What is the normal order of accounts in the unadjusted trial balance?
a. Asset, equity, income, expense and liability
b. All accounts with debit balances and then all accounts with credit balances
c. Asset, liability and equity
d. Asset, liability, equity, income and expense
10. Which is an incorrect statement?
a. An accounting information system is designed to collect data about each transaction and should be recorded by an entity during an
accounting period.
b. Posting is a transfer process which reclassifies chronological information in the journal into an account classification format in the
ledger.
c. In recording transactions, an external transaction is more likely to be overlooked and not recorded as compared to an internal
transaction.
d. A trial balance may be prepared after adjusting entries are recorded but before closing entries.
11. The sum of either trial balance column represents
a. Total assets c. Total liabilities and equity
b. Total liability d. No meaningful amount
12. Which statement is correct concerning journal and ledger?
a. A ledger is included in basic financial statements but a journal is not.
b. Entries are posted from the ledger to the journal.
 c. All debit and credit parts of all journal entries must eventually be posted to the ledger accounts.
d. A ledger is the place most transactions are originally recorded.
13. Which of the following is not a principal purpose of the 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.
14. Why are adjusting entries necessary?
a. Transactions take place over more than one accounting period.
b. They help properly measure net income or net loss.
c. To bring assets and liabilities to correct balances.
d. All of these.
15. Adjusting entries are needed
a. Whenever revenue is not received in cash
b. Whenever expenses are paid in cash
c. Primarily to correct errors in the initial recording of business transactions
d. Whenever transactions affect the revenue or expenses of more than one accounting period.