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31. 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
32. An adjusting entry should never include
a. A debit to revenue and a credit to liability
b. A debit to expense and a credit to liability
c. A debit to liability and a credit to asset
d. A debit to asset and a credit to revenue
33. Which statement is not true about accrual and deferral?
a. An accrued expense is an amount not paid and currently matched with earnings.
b. A prepaid expense is an amount paid and not currently matched with earnings.
c. An accrued income is an amount not collected and currently matched with expenses.
d. A deferred income is an amount collected and currently matched with expenses.
34. Accrual is best defined as adjusting entries where
a. Cash flow precedes revenue or expense recognition
b. Revenue or expense recognition precedes cash flow
c. Cash flow and revenue or expense recognition are simultaneous
d. Revenue and expenses are recognized in the absence of cash flow evidence
35. Closing entries are
a. Made at the end of accounting period
b. Prepared after adjusting entries and financial statements have been prepared
c. Prepared for the purpose of reducing all nominal accounts to zero
d. All choices are correct about closing entries
36. The postclosing trial balance
a. Provides a convenient listing of balances that can be used to prepare financial statements.
b. Does not include nominal accounts
c. Is identical to the statement of financial position
d. Proves that accounts have been closed properly
37. Reversing entries
a. Are normally prepared for accruals and prepayments
b. Are necessary to achieve proper matching of revenue and expense
c. Are desirable to exercise consistency and establish standardized procedure
d. Must be made at year-end
38. Reversing entries apply to
a. All adjusting entries
b. All deferrals
c. All accruals
d. All closing entries
39. 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
d. Adjusts unexpired costs from expense account to an asset account
40. 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
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