CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
BATCH 93 – MAY 2023 CPALE
ACCOUNTING PROCESS
1. Which is not in logical order in the accounting cycle?
a. Closing entries, postclosing, reversing entries
b. Trial balance, adjusting entries, financial statements
c. Adjusting entries, reversing entries, closing entries
d. Posting, trial balance, adjusting entries
2. The double entry accounting system means
a. Each transaction is recorded with two journal entries.
b. Each item is recorded in a journal entry and then in a general ledger.
c. The dual effect of each transaction is recorded with a debit and a credit.
d. All of these are choices regarding double entry system.
3. Which is not true concerning the rules of debit and credit?
a. The left side of an account is always the debit side and the right side is always the credit side.
b. Increases in assets and expenses are debit entries and increases in liabilities, equity and revenue are
credits entries.
c. The normal balance of any account appears on the side for recording increases.
d. The word “debit” means to increase and the word “credit” means to decrease.
4. Which is not a possible combination of a journal entry?
a. Increase in asset and increase in liability.
b. Decrease in equity and increase in liability.
c. Decrease in liability and decrease in asset.
d. Increase in asset and decrease in equity.
5. A general journal
a. Chronologically lists transactions and other events expressed in terms of debit and credit.
b. Contains one record for each asset, liability, equity, revenue and expense.
c. Lists all the increases and decreases in each account in one place.
d. Contains only adjusting entries.
6. A simple journal entry
a. Consists of one debit and one credit.
b. Consists of two debits and one credit.
c. Consists of one debit and two credits.
d. Is a memorandum entry.
7. A chart of accounts is
a. A flowchart of all transactions.
b. An accounting manual.
c. A journal.
d. A list of all account titles in the general ledger.
8. Real accounts include all of the following, except
a. Dividends
b. Assets
c. Liabilities
d. Equity
9. Equity is not affected by all
a. Cash receipts
b. Dividends
c. Revenue
d. Expenses
10. Posting is the process of transferring information from
a. Source document to the journal.
b. Journal to the source document.
c. Journal to the general ledger.
d. General ledger to the journal.

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11. A general ledger is defined as

a. A group of transactions.
b. A group of all statement of financial accounts.
c. A group of all income statement accounts.
d. The entire group of accounts.
12. A subsidiary ledger is
a. A listing of the components of account balances.
b. A backup system to protect against record destruction.
c. A listing of accounts before closing entries.
d. A listing of accounts of a subsidiary.
13. Which statement regarding a trial balance is incorrect?
a. A trial balance is a test of the equality of the debit and credit balances in the ledger.
b. A trial balance is a list of all of the open accounts in the ledger with their balances.
c. A trial balance proves that no errors of any kind have been made during the accounting period.
d. A trial balance helps to localize errors within an identifiable time period.
14. An unadjusted trial balance
a. Provides information that is helpful when making adjusting entries.
b. Proves that no errors have been made.
c. Usually contains the account balances that should appear in the financial statements.
d. Is a summary taken directly from the general journal.
15. 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 items may prove that debits and credits are equal.
16. Adjusting entries affect
a. One nominal account and one real account.
b. Two nominal accounts.
c. Two real accounts.
d. No particular combination of nominal and real accounts.
17. If an expense had been incurred but not yet recorded, the adjusting entry would involve
a. A liability and an asset.
b. A liability and a revenue.
c. An expense and an asset.
d. An asset and a revenue.
18. An adjusting entry to accrue wages incurred but not yet paid is an example of
a. Aligning recorded costs with appropriate accounting periods.
b. Aligning recorded revenue with appropriate accounting periods.
c. Reflecting unrecorded expenses incurred during an accounting period.
d. Reflecting unrecorded revenue earned during an accounting period.
19. Which of the following least resembles a typical adjusting entry?
a. Debit an asset and credit revenue.
b. Debit an expense and credit liability.
c. Debit revenue and credit liability.
d. Debit an asset and credit liability.
20. Adjusting entries
a. Are prepared after the end of reporting period but dated as of the end of reporting period.
b. Are necessary to conform with accounting standards.
c. Include both accruals and deferrals.
d. All choices are correct about adjusting entries.

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21. 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.
22. 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.
23. Which statement properly describes a deferral?
a. Cash is received after revenue is earned.
b. Cash is received before revenue is earned.
c. Cash is paid after expense is incurred.
d. Cash is paid at the same time period that an expense is incurred.
24. Closing entries are
a. Made at the end of the accounting period.
b. Prepared after the adjusting entries and financial statements have been prepared.
c. Prepared for the purpose of reducing all nominal and temporary accounts to zero.
d. All choices are correct about closing entries.
25. Which of the following closing procedures is unique to a corporation?
a. Close each revenue account to the income summary account.
b. Close each expense account to the income summary account.
c. Close the income summary account to the retained earnings account.
d. Close the owner’s drawing account to the owner’s capital account.
26. 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.
27. Reversing entries
a. Are normally prepared for accruals and prepayments.
b. Are necessary to achieve a proper matching of revenue and expense.
c. Are desirable to exercise consistency and establish standardized procedures.
d. Must be made at year-end.
28. Reversing entries apply to
a. All adjusting entries
b. All deferrals
c. All accruals
d. All closing entries
29. 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 asset account to an expense account.
d. Adjusts unexpired costs from an expense account to an asset account.
30. Which 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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