QUIZZES 10.

Which of the following processes best describes

accounting?
21-FAR Prelim Quiz 1
a. measures economic activities
1. The Philippine accountant considers peso as the
common unit of measure for all business transactions. b. communicates results to interested users
a. True b. False c. prevents fraud
2. For accounting purposes, a business firm and its d. both a & b
owner are considered as one and the same.
e. both a & c
a. True b. False
f. all of the above
3. A partnership is a business owned by two or more
persons, who bind themselves to contribute money, 11. A business that prepares financial statements
every year is following which accounting concept?
property or industry to a common fund, with the
intention of dividing the profits among themselves. a. business entity c. materiality
a. True b. False b. adequate disclosure d. periodicity
4. Manufacturing companies buy raw materials, 12. Which of the following statements about
convert them into finished products, and then sell accounting concepts and the characteristics of financial
these finished products to other firms or to final reporting information is not correct?
consumers.
a. Entities may exclude information that is
a. True b. False relevant in financial statements, because it is too
5. The accounting phase of summarizing reduces the difficult for the users to understand.
effects of numerous transactions into useful groups or b. Only the transactions and events capable of
categories. being measured in monetary terms are recognized in
a. True b. False the financial statements.

6. The entity concept states that the transactions of c. Consistency in the use of the same accounting
different entities should not be accounted for policies or methods for the same or similar items from
one accounting period to the next is essential to
together.
enhance comparability.
a. True b. False
13. Which accounting concept states that omitting or
7. Accounting is a service activity whose function is to misstating this information could influence or affect
provide quantitative information about economic the assessment, and consequently, the decision of the
entities that is intended to be useful in making users of the financial statements?
economic decisions.
a. consistency concept c. accrual concept
a. True b. False
b. materiality concept d. business entity concept
8. A business transaction is the occurrence of an event
or of a condition that must be recorded. 14. Which accounting concept should be considered if
the business owner gets cash from the business which
a. True b. False he will use for personal purposes?
9. This accounting concept assumes that the business a. substance over form concept
has an indefinite life.
b. going concern concept
a. Business entity c. Going Concern
c. time period concept
b. Time period d. Materiality
d. business entity concept
15. Accounting changes are often made and the
monetary effect is reflected in the financial statements
of an entity even though in theory, this may be a
violation of the accounting concept of:
a. materiality c. comparability
b. objectivity d. consistency
16. The principle of objectivity includes the attribute
of:
a. verifiability c. classification
b. summarization d. conservatism
17. The periodicity concept:
a. Requires that all companies prepare monthly,
quarterly, and annual financial statements.
b. Results from the Bureau of Internal Revenue
requirement that all taxable income be reported on an
annual basis.
c. Requires all companies to adopt the calendar year
ending December 31.
d. Involves dividing the life of a business entity into
accounting periods of equal length, thus enabling the
users to periodically evaluate the results of business
operations.
18. Accountants do not recognize that the value of the
peso changes over time. This concept is the:
a. stable monetary unit concept
b. going concern concept
c. cost principle
d. entity concept
19. The basic purpose of accounting is:
a. To provide the information that the managers of an
economic entity need to control its operations
b. To provide information that the creditors of an
economic entity can use in deciding whether to make
additional loans to the entity
c. To measure the periodic income of the economic
entity
d. To provide quantitative financial information about a
business enterprise that is useful in making rational
economic decisions.
20. This concept states that the financial statements
should be stated in terms of a common financial
denominator.
a. accrual concept c. going concern
b. unit of measure d. exchange price
21. This accounting concept states that an accounting
transaction should be supported by sufficient evidence
to allow two or more qualified individuals to arrive at
essentially similar conclusion.
a. matching c. periodicity
b. objectivity d. stable monetary unit
22. Which of the following is an appropriate definition
of accounting?
a. the measurement, processing, and communication of
financial information about an identifiable economic
entity
b. a means of recording transactions and keeping
records
c. the interconnected network of subsystems necessary
to operate a business
d. electronic collection, organization, and
communication of vast amounts of information
23. The entity concept means that:
a. Because a firm is separate and distinct from its
owners, those owners cannot have access to the firm’s
assets unless the firm ceases to operate.
b. The financial affairs of a business firm and its owner/s
are always kept separate for the purpose of preparing
their accounts or records.
c. The owner of the business can, at any time, take any
property from the firm for his/her personal use.
d. none of the above
24. The consistency concept means that:
a. When preparing the accounts of a firm, similar items
should be accounted for in the same way from one
accounting period to the next.
b. Firms in the same industry must account for similar
items in the same way.
c. Firms should never change the way in which they
prepare their accounts.
d. None of the above
25. The consistency standard of reporting requires 10. Both sides of the fundamental accounting
that: equation must be equal.
a. Expenses be reported as charges against the period in a. True b. False
which they are incurred.
11. Transactions are analyzed on the basis of source
b. The financial effects of any change in accounting documents.
policy or method be properly disclosed in the financial
a. True b. False
statements.
c. Extra-ordinary gains and losses should not appear in 12. Every business transaction affects a minimum of
the financial statements. three accounting elements.

d. Accounting procedures which give a consistent rate a. True b. False

of return should be adopted. 13. In a few selected transactions, the accounting
equation may not be maintained.

21-Prelim FAR Quiz 2 a. True b. False

14. An expense may be recognized and recorded even
1. The liability created when supplies are bought on
account is called an account payable. though no cash payment has been made.

a. True b. False a. True b. False

2. The owner’s drawing account is included among the 15. When owner’s equity decreases, a liability may
increase.
expenses of the business.
a. True b. False a. True b. False

3. The owner’s withdrawal is recorded as a decrease in 16. Which of the following is not a feature of a
business transaction?
asset and an increase in expense.
a. True b. False a. Two parties are involved.

4. Every transaction is recorded in terms of increases b. Information may be financial or nonfinancial.

and/or decreases in two or more accounts or c. There is an exchange of values.
elements.
d. It is expressed in terms of money.
a. True b. False
17. The financial structure may be stated in the
5. Liabilities represent amounts owed to creditors. following accounting equations except:
a. True b. False a. Assets = Claims of Creditors and Owner/s
6. In the fundamental accounting equation, assets are b. Assets – Creditors’ Claims = Owner’s Equity
added to liabilities.
c. Assets – Owner’s Claims = Liabilities
a. True b. False
d. Assets = Owner’s Equity - Liabilities
7. When a business receives cash, it is always recorded
as an increase in Cash and a decrease in an Expense. 18. Increase in an asset may be a result of:

a. True b. False a. a decrease in another asset

8. Accounts Receivable is classified as an asset. b. an increase in a liability

a. True b. False c. an increase in owner’s equity

9. A business owner can invest cash or non-cash assets d. all of the above
in the business. e. none of the above
a. True b. False
19. Purchasing supplies for cash:
a. decreases both assets and liabilities
b. increases both assets and liabilities
c. increases assets and decreases liabilities
d. does not affect total assets
20. The company’s assets are P12,000,000 of which
one-third represents owner’s equity. Liabilities amount
to:
a. P6,000,000 c. P8,000,000
b. P3,000,000 d. P4,000,000
21. At the start of the month, the assets of the
business totalled P1,000,000, with owner’s equity of
P800,000. During the month, equipment worth
P500,000 was purchased with a down payment of
P150,000 and the balance on credit. At the start of the
month, liabilities amounted to:
a. P1,800,000 c. P 200,000
b. P1,200,000 d. Zero
22. At the start of the month, the assets of the
business totalled P1,000,000, with owner’s equity of
P800,000. During the month, equipment worth
P500,000 was purchased with a down payment of
P150,000 and the balance on credit. At the end of the
month, how much are the liabilities?
a. P1,150,000 c. P 550,000
b. P1,000,000 d.P 800,000
23. On January 1, the assets were P500,000 and the
liabilities were P200,000. During the year, the assets
increased by P100,000, while the liabilities decreased
by P50,000.
Owner’s equity on January 1 was:
a. P800,000 c. P300,000
b. P700,000 d. P400,000
24. On January 1, the assets were P500,000 and the
liabilities were P200,000. During the year, the assets
increased by P100,000 while the liabilities decreased
by P50,000.
Owner’s equity on December 31 was:
a. P300,000 c. P250,000
b. P350,000 d. P450,000
25. Nature Trip purchased equipment for P120,000,
made a down payment of P50,000 and signed a
promissory note for the balance. This transaction:
a. increased total assets by P120,000
b. increased total liabilities by P50,000
c. did not affect owner’s equity
d. all of the above
e. none of the above
FAR PRELIMS EXAMS 2021
1. An increase in an expense:
a. Increases revenues c. Increases assets
b. Decreases liabilities d. Decreases owner's equity
2. A proprietorship business with total owner's equity
of P85,000 paid a P10,000 business debt. As a result of
this transaction, total owner's equity:
a. Did not change c. Increased by P10,000
b. Decreased by P10,000 d. Increased to P95,000
3. The right side of an account is always:
a. The debit side
b. The credit side
c. The balance of that account
d. Carried forward to the next accounting period
4. Footing is the process of:
a. Preparing a chart of accounts
b. Adding a column of figures
c. Transferring journal entries to ledger accounts
d. Recording entries in a journal
5. What are increases in resources that a firm earns by
providing services or goods to its customers?
a. Assets c. Income
b. Liabilities d. Expenses
6. In the accounting cycle, which is/are 13. Which accounting concept states that omitting or
misstating this information could influence the
considered the output document/s? decision of the users of the financial statements?
a. The financial statements c. The ledger a. Consistency concept
b. The journal d. The worksheet b. Materiality concept
7. If assets increase by P100,000 and the liabilities c. Accrual concept
decrease by P30,000, owner’s equity must:
d. Going concern concept
a. Remain unchanged c. Increase by P130,000
14. During the lifetime of an entity, accountants
b. Decrease by P70,000 d. Decrease by P130,000 produce financial statements at specific points in time
8. Which of the following is true? in accordance with which basic accounting concept?

a. The debit is on the right side of an asset account. a. Objectivity

b. The debit is on the left side of an asset account. b. Materiality

c. The credit is on the left side of a liability account. c. Periodicity or time period

d. The debit is on the right side of an expense account. d. Business entity

9. How many parts does a T-account have? 15. The best definition of assets is:

a. One c. Two a. The collection of resources belonging to the company

and the sources of, or claims on, these resources.
b. Three d. Four
b. The cash owned by the company
10. Which of the following accounts is increased by a
credit? c. The resources owned by a company from which the
company expects a future benefit to flow to the entity.
a. Accounts Receivable c. Service Fees Earned
d. The owner’s investment in the business
b. Office Equipment d. Taxes and Licenses
16. An investment by the owner in a business:
11. Which of the following statements is correct in
applying the rules of debit and credit? a. Increases assets and owner’s equity

a. The word “debit” means to increase, and the word b. Increases assets and liabilities
“credit” means to decrease. c. Increases liabilities and owner's equity
b. Asset, expense and capital accounts are debited for d. Increases assets only
increases.
17. The purchase of an asset for cash:
c. Liability, income and capital accounts are credited for
increases. a. Increases assets and owner’s equity
d. Asset, expense and drawing accounts are debited for b. Increases assets and liabilities
decreases.
c. Decreases assets and increases liabilities
12. Which accounting concept should be considered if
d. Has no effect on total assets
the owner of a business takes goods from the business
for his personal use? 18. The purchase of an asset on credit:
a. Going concern concept a. Increases assets and owner's equity
b. Business entity concept b. Increases assets and liabilities
c. Periodicity concept c. Decreases assets and increases liabilities
d. Objectivity d. Leaves total assets unchanged
19. The payment of a liability:
a. Decreases assets and owner's equity
b. Increases assets and decreases liabilities
c. Decreases assets and increases liabilities
d. Decreases assets and liabilities
20. Revenue earned:
a. Increases assets and liabilities
b. Increases assets and owner's equity
c. Increases assets and decreases owner's equity
d. Leaves total assets unchanged
21. A withdrawal by the owner:
a. Increases assets and owner's equity
b. Increases assets and decreases owner's equity
c. Decreases assets and owner's equity
d. Decreases assets and increases owner's equity
22. The effects on the accounting equation of which of
the following events cannot be determined?
a. Purchase of a one-year insurance policy
b. Agreement to perform a service at a future date
c. Purchase of equipment partly on cash and on account
d. Payment for a service performed previously
23. The account credited for cash received on account
is:
a. Cash c. Accounts Receivable
b. Service Revenue d. Accounts Payable
24. An account is said to have a debit balance if:
a. The total debits to the account exceed its total
credits.
b. There are more entries on the debit side than on the
credit side.
c. Its normal balance is debit without regard to the
amounts or number of entries on the debit side.
d. The last entry of the accounting period was posted on
the debit side.
25. Suppose a customer who owes the business
P50,000 pays his debt by transferring the payment into
the bank account of the business. What would be the
effects on the accounting equation of the business?
a. Both assets and liabilities increase by P50,000.
b. Both assets and liabilities decrease by P50,000.
c. Only the assets increase by P50,000.
d. Total assets and liabilities remain unchanged.
26. Under the double-entry system, what is the value
of X if assets, liabilities and owner’s equity are:
X,P100,000 and P350,000, respectively?
a. P250,000 c.P350,000
b. P370,000 d.P450,000
e. None of the above
27. Which of the following processes best defines
accounting?
a. Measuring economic activities
b. Communicating results to interested parties
c. Preventing fraud
d. Both a and b
28. Which of the following concepts means that similar
items should receive the same accounting treatment?
a. Going concern c. Accrual concept
b. Substance over form d. Consistency
29. Assets are usually valued under which basis?
a. Replacement cost c. Cost or exchange price
b. Net realizable value d. None of the above
30. The financial statements should be stated in terms
of a common financial denominator.
a. Unit of measure concept
b. Time period or periodicity concept
c. Going concern concept
d. Stable monetary unit concept
31. Which of the following states that an accounting 36. The liabilities of LL Stylist are equal to one-third of
transaction should be supported by sufficient evidence its total assets, and the owner’s equity is P240,000.
to allow two or more qualified individuals to arrive at How much are its liabilities?
essentially similar conclusion?
a. P240,000 c. P120,000
a. Matching principle c. Objectivity
b. P360,000 d. P480,000
b. Periodicity d. Stable monetary unit
e. None of the above
32. Which of the following is correct under the double-
entry system? 37. The liabilities of LL Stylist are equal to one-third of
its total assets, and the owner’s equity is P240,000.
a. The asset amount must be equal to the liability How much are its assets?
amount.
a. P240,000 c. P120,000
b. The change in the asset must be compensated by a
change in the liability. b. P360,000 d. P480,000

c. The change in a debit-side entry must be e. None of the above

compensated by a change in a credit side entry. 38. At the beginning of the year, the assets of Cleofe
d. An increase in asset must be compensated by a Services were P360,000 and owner’s equity was
decrease in asset. P200,000. How much were its liabilities at the
beginning of the year?
33. Which of the following statements regarding the
a. P360,000 c. P200,000
double-entry system is incorrect?
a. An increase in asset means a credit entry in the asset b. P560,000 d. P160,000
account. 39. At the beginning of the year, the assets of Cleofe
Services were P360,000 and owner’s equity was
b. A decrease in liability means a debit entry in the
liability account. P200,000. During the year, its assets increased by
P120,000 and the liabilities also increased by P20,000.
c. An increase in owner’s drawings means a debit entry How much were its assets at the end of the year?
in the owner’s personal account.
a. P360,000 c. P480,000
d. A decrease in assets means a credit entry in the asset
account. b. P560,000 d. P180,000

34. Which of the following transactions affects the
total liabilities of a firm?
a. Goods purchased on cash from suppliers
b. Interest income received from the bank
c. Office equipment bought on credit
d. Services rendered on credit to customers
35. Which of the following is correct if the sole
proprietor of a business firm borrows P300,000 in the
name of the business and then deposits the money in
the bank account of the business?
40. At the beginning of the year, the assets of Cleofe
Services were P360,000 and owner’s equity was
P200,000. During the year, its assets increased by
P120,000 and the liabilities also increased by P20,000.
How much was owner’s equity at the end of the year?
a. P160,000 c. P140,000
b. P480,000 d. P300,000
41. The normal balance of an account is on the:
a. Side represented by decreases in the account
b. Debit side of the account

a. The assets of the entity increase by P300,000. c. Side represented by increases in the account

b. The liabilities of the firm decrease by P300,000. d. Credit side of the account

c. The capital of the owner increases by P300,000.

d. The owner’s drawings increase by P300,000.
42. Office supplies are expensed: 48. Which of the following accounts does not affect
the balance sheet totals?
a. At no time, since they are assets
a. Purchasing P50,000 supplies on account
b. When they are paid for
b. Collecting P40,000 from customers on account
c. When they are purchased
c. Paying a P30,000 note payable to the bank
d. When they are consumed or used up
d. Withdrawal of P20,000 cash by the firm’s owner
43. The primary function of an account is to:
49. The following are found in the statement of
a. Store accounting transactions until they are classified financial position:
b. Identify the type of organization a. Assets, liabilities and owner’s equity
c. Accumulate accounting information b. Revenues and expenses
d. Determine at what point a transaction should be c. Operating, investing and financing activities
recorded
d. Net income and owner’s drawing
44. Which of the following is classified differently from
the others? 50. All of the following financial statements cover a
specific period, except the:
a. Office Equipment c. Accounts Payable
a. Income Statement
b. Accounts Receivable d. Store Supplies
b. Statement of Owner’s Equity
45. When owner’s equity decreases, one of the
following must occur: c. Statement of Cash Flows
a. An asset increases c. An expense decreases d. Statement of Financial Position
b. A liability increases d. An income increases 51. Greg organized a repair shop by investing P500,000
cash in his business. The effects of this transaction are:
46. The first financial statement that is prepared from
the trial balance is the: a. Debit Cash, P500,000; Credit Greg, Capital, P500,000
a. Income statement b. Debit Cash, P50,000; Credit Service Income, P500,000
b. Statement of Cash Flows c. Debit Cash, P500,000; Credit Loans Payable, P500,000
c. Statement of Financial Position d. None of the above
d. Statement of Owner’s Equity 52. Secured business permit and paid business license,
P5,000. The effects are:
47. A trial balance:
a. Debit Taxes and Licenses, P5,000; Credit Cash, P5,000
a. Covers a specific period, the shortest of which is a
month b. Debit Greg, Capital, P5,000; Credit Cash, P5,000
b. Is a list of open accounts and their balances as of a c. Debit Taxes and Licenses, P5,000;
given date
Credit Greg, Capital, P5,000
c. Is prepared after the financial statements are done
d. None of the above
d. None of the above
53. Purchased P20,000 of repair supplies for cash. The
effects are:
a. Debit Cash, P20,000; Credit Supplies, P20,000
b. Debit Supplies, P20,000;
Credit Accounts Payable, P20,000
c. Debit Supplies, P20,000; Credit Cash, P20,000
d. None of the above
54. Bought repair equipment, P100,000, on credit. The
effects are:
a. Debit Repair Equipment, P100,000;
Credit Cash, P100,000
b. Debit Repair Equipment, P100,000;
Credit Accounts Payable, P100,000
c. Debit Repair Equipment, P100,000;
Credit Notes Payable, P100,000
d. None of the above
55. Rendered repair services for cash, P10,000. The
effects are:
a. Debit Service Income, P10,000;
Credit Greg, Capital, P100,000
b. Debit Accounts Receivable, P10,000;
Credit Greg, Capital, P10,000
c. Debit Cash, P10,000; Credit Service Income, P10,000
d. None of the above
56. Paid P25,000 for its account on the repair
equipment previously bought on credit. The effects
are:
a. Debit Cash, P25,000;
Credit Accounts Payable, P25,000
b. Debit Repair Equipment, P25,000;
Credit Cash, P25,000
c. Debit Accounts Payable, P25,000;
Credit Cash, P25,000
d. None of the above
57. A customer promised to pay after one week for
repair services rendered to him by the business,
P8,000. The effects are:
a.Debit Service Income, P8,000;
Credit Accounts Payable, P8,000
b. Debit Accounts Receivable, P8,000;
Credit Service Income, P8,000
c. Debit Cash, P8,000;
Credit Accounts Receivable, P8,000
d. None of the above
58. Received the utility bills for the month, P4,500. The
effects are:
a. Debit Utilities Expense, P4,500; Credit Cash, P4,500
b. Debit Utilities Expense, P4,500;
Credit Utilities Payable, P4,500
c. Debit Utilities Expense, P4,500;
Credit Service Income, P4,500
d. None of the above
59. Collected from the customer who promised to pay
after one week. The effects are:
a.Debit Accounts Receivable, P8,000;
Credit Service Income, P8,000
b. Debit Cash, P8,000; Credit Service Income, P8,000
c. Debit Cash, P8,000;
Credit Accounts Receivable, P8,000
d. None of the above
60. The owner withdrew P4,000 cash for his personal
use. The effects are:
a. Debit Greg, Drawing, P4,000; Credit Cash, P4,000
b. Debit Cash, P4,000; Credit Greg, Drawing, P4,000
c. Debit Drawing Expense, P4,000; Credit Cash, P4,000
d. None of the above
MIDTERM EXAM – FAR 8. An adjusting entry to record utilities used during a
month for which a bill has not yet been received is an
1. An example of a contra account is: example of:
a. Depreciation expense c. Accounts receivable a. Allocating assets to reflect the actual operating
b. Sales revenue d. Accumulated depreciation expenses incurred during the accounting period

2. At the date of purchase of a service which is not b. Allocating revenues received in advance to revenue
immediately used up, the cost of such unused service to reflect actual revenues earned during the accounting
is a/an: period

a. Revenue c. Asset c. Accruing expenses to reflect expenses incurred during

the accounting period but which are not yet paid or
b. Liability d. Expense recorded
3. Making insurance payments in advance is an d. Accruing revenues to reflect revenues earned during
example of a/an: the accounting period that are not yet received or
a. Accrued receivable c. Accrued liability recorded

b. Unearned revenue d. Prepaid expense 9. Which of the following is an example of an accrual?

4. Recording revenue earned from a customer, but not a. Payment of two years’ insurance in advance
yet received or collected, is an example of a/an: b. Services rendered by employees but whose salaries
a. Prepaid expense c. Unearned revenue have not yet been paid

b. Accrued liability d. Accrued income c. Purchase of office supplies

5. Prepayments occur when: d. Tuition fees received in advance

a. Cash payment precedes expense recognition 10. An adjusted trial balance is prepared to:

b. Sales are delayed pending credit approval a. Prove that the ledger is still in balance after the
accounts have been adjusted and facilitate preparation
c. Customers are unable to pay the full amount due of the financial statements.
when goods are delivered
b. Facilitate preparation of the adjusting entries.
d. Manufactured goods await quality control inspections
c. Facilitate preparation of the closing entries.
6. Which of the following is an example of an adjusting
entry? d. Test if the ledger is still in balance before the
accounts have been adjusted.
a. Recording the purchase of supplies on account
11. Which of the following accounts would normally be
b. Recording depreciation expense on a truck found on the credit side of the adjusted trial balance?
c. Recording the billing of customers for services a. Accumulated Depreciation-Equipment
rendered
b. Depreciation Expense-Equipment
d. Recording the payment of wages to employees
c. Prepaid Interest
7. In the worksheet, the trial balance debit or credit
amount of each account is combined with the amount d. Accounts Receivable
of any debit or credit adjustment to that account to
determine the new or adjusted balance of the account.
This process is known as:
a. Balancing c. Cross-footing
b. Footing d. Totalling
12. Which of the following is not an application of
accrual accounting?
a. Adjusting unearned advertising revenues to the
correct balance at the end of the month
b. Recording advertising revenues at the time cash
payment is received
c. Recording advertising revenues at the time the work
is done
d. Recording telephone expense when the monthly bill
is received
13. Which of the following accounts is an income
statement account?
a. Accounts receivable c. Owner’s capital
b. Salaries and wages d. Accrued Salaries
14. Which of the following is an example of a deferral?
a. Legal fees already earned but not yet collected
b. Taxes accrued but not yet paid
c. Accumulation of interest in a bank account
d. Fees received this month for services to be rendered
next month
15. Failure to adjust for accrued salaries at the end of
the period will result in an:
a. Overstatement of assets
b. Overstatement of liabilities
c. Overstatement of profit for the period
d. Understatement of profit for the period
18. Failure to record the unexpired portion of
insurance premiums paid would:
a. Understate total expenses
b. Understate profit
c. Overstate owner’s equity
d. Overstate total liabilities
19. Which of the following is an application of accrual
accounting?
a. Depreciating a building as quickly as allowed by
income tax regulations
b. Expensing a machine in its entirety as expense when
purchased
c. Recording revenue at the time payment is received
d. Recording utilities expense when the monthly bill is
received
20. Which of the following results in the recognition of
an expense?
a. Expiration of usefulness of equipment during the
accounting period
b. Payment of the principal amount of a loan
c. Payment of accounts
d. Withdrawal of cash by the owner
21. The beginning balance of Accounts Receivable was
P120,000. Services billed to customers for the period
were P215,000, and the collections on account from
the customers were P236,000. What was the ending
balance of Accounts Receivable?

16. Expenses are incurred: a. P335,000 c. P141,000

a. Only during the adjustment process b. P 99,000 d. P331,000

b. To generate revenue e. None of the above

c. To produce assets 22. On Jan 1, 2020, P140,000 was paid for rent for 14
months. The payment was recorded in the Rent
d. To incur liabilities Expense account. How much is the Prepaid Rent as of
17. Failure to record the unearned portion of rent Dec 31, 2020?
received in advance would: a. P140,000
a. Understate income b. P 20,000
b. Understate profit c. P120,000
c. Overstate expenses d. P 10,000
d. Understate total liabilities e. None of the above
23. On Nov 1, 2021 insurance premiums amounting to 28. The company provides for uncollectible accounts
P125,000 for five months were paid and recorded in based on an estimate. This is called the:
the Prepaid Insurance account. Of this amount, how
much was the Prepaid Insurance as of Dec 31, 2021? a. Allowance method

a. P125,000 c. P 25,000 b. Accrual method

b. P 50,000 d. P 75,000 c. Direct write-off method

d. Matching method
e. None of the above
24. For the fiscal year ended Mar 31, 2020, a business 29. Adjusting entries are:
that offers yoga lessons received P14,000 in yoga fees, a. The same as correcting entries.
which was recorded in the Yoga Fees Earned account.
Included in this amount is P3,500 for April 2020 yoga b. Needed to bring accounts up to date and to match
lessons. Of the P14,000 how much was actually earned revenues and expenses
during the fiscal year? c. Optional under generally accepted accounting
a. P14,000 c. P17,500 principles.

b. P10,500 d. P 3,500 d. Rarely needed in large companies.

e. None of the above 30. Adjusting entries are made to ensure that:

25. On January 1, 2021, a P150,000 payment was made a. Assets, liabilities, income and expenses have correct
for rent expense for 15 months, which was recorded in balances at the end of the accounting period.
the rent expense account. How much was the prepaid b. Revenues and expenses are recognized in the period
rent expense as of December 31, 2021? in which they are earned and incurred, respectively.
a. P 10,000 c. P 30,000 c. Part of the asset that has been used up is recognized
b. P 120,000 d. P 150,000 as expense.

e. None of the above d. All of the above

26. Cash of P235,000 was received in 2020 and
recorded in the commission income account. It was
discovered that an additional commission income of
P47,000 was earned but was not yet received as at
Dec. 31, 2020. How much was the commission income
earned during the year ended Dec 31, 2020?
a. P 47,000 c. P188,000
b. P235,000 d. P282,000
e. None of the above
27. Equipment costing P50,000 showed an adjusted
accumulated depreciation of P13,500 as of December
31, 2020. If the estimated useful life is ten years and
scrap value is P5,000, the date of acquisition was:
e. None of the above
31. A business has Cash of P30,000; Notes Payable of
P25,000; Accounts Payable of P43,000; Service
Revenue of P70,000 and Accrued Rent Expense of
P18,000. On the basis of these data, how much are its
total liabilities?
a. P 55,000 c. P 68,000
b. P 86,000 d. P138,000
32. Insurance Expense account has a balance of
P10,800 before adjustment. This amount represents
insurance premiums for three months beginning
December 1, 2020. Based on these data, the insurance
expense for the year ended December 31, 2020 is:

a. January 1, 2018 a. P 0

b. June 30, 2017 b. P 7,200

c. January 1, 2017 c. P 3,600

d. June 30, 2018 d. P 10,800

e. January 1, 2016
33. Prior to adjustments, Supplies Expense account has
a balance of P13,500. Adjustment data gathered shows
that supplies inventory on hand at year-end amounted
to P4,500. The amount of supplies expense to be
shown in the income statement is:
a. P 4,500 c. P 9,000
b. P 13,500 d. P 18,000
34. Rent Income account has a credit balance of
P240,000 as at Dec 31, 2020 composed of the
following: Rent received for three months ending
March 31, 2020, P45,000.
• A credit of P195,000 representing advance rental
collection for one year beginning April 1, 2020.The
December 31, 2020 adjusting entry will require a debit
to Rent Income and a credit to Unearned Rent of:
a. P 45,000 c. P 48,750
b. P 191,250 d. P195,000
35. The Giveaway Enterprises reported an Allowance
for Bad Debts of P16,000 (credit) at December 31,
2020, before any adjustment. At the end of the year,
the company reports accounts receivable of P800,000,
3% of which is estimated to be uncollectible. The
adjusting entry required at December 31, 2020 would
be:
a. Dr. Bad Debts Expense, 8,000;
Cr. Allowance for Bad Debts, 8,000
b. Dr. Bad Debts Expense, 16,000;
Cr. Allowance for Bad Debts, 16,000
c. Dr. Bad Debts Expense, 24,000;
Cr. Allowance for Bad Debts, 24,000
d. Dr. Bad Debts Expense, 40,000;
Cr. Allowance for Bad Debts, 40,000
36. In the worksheet, the owner’s capital account is
found in the:
a. Balance sheet debit column and nowhere else
b. Trial balance credit column, adjusted trial balance
credit column and balance sheet credit column
c. Trial balance credit column, adjustments credit
column, adjusted trial balance credit column, and
balance sheet credit column
d. Trial balance credit column and income
statement debit column
e. Trial balance debit column, adjustments debit
column, adjusted trial balance credit column, and
income statement credit column
37. Which two steps in the accounting cycle are aided
by the preparation of the worksheet?
a. Adjusting the accounts and preparing the financial
statements
b. Analysing source documents and preparing financial
statements
c. Posting journal entries and adjusting the accounts
d. Journalizing transactions and posting to the accounts
38. Which columns of the worksheet show unadjusted
amounts?
a. Trial balance c. Adjustments
b. Income statement d. Balance sheet
39. Which situation indicates a loss in the income
statement columns of the worksheet?
a. When the total debits equal total credits
b. When the total credits exceed the total debits
c. When the total debits exceed the total credits
d. None of the above
40. Which sections of the worksheet show profit?
a. Balance sheet
b. Adjusted trial balance
c. Income statement
d. Both a and c
e. Both b and c
41. Supplies has a P60,000 balance in the unadjusted
trial balance. At year-end the count of supplies showed
P20,000. What adjustment will appear on the
worksheet?
a. Dr. Supplies, 40,000; Cr. Supplies Expense, 40,000
b. Dr. Supplies Expense, 20,000; Cr. Supplies, 20,000
c. Dr. Supplies Expense, 40,000; Cr. Supplies, 40,000
d. No adjustment is needed because the Supplies
account balance is correctly stated.
42. In the adjusted trial balance, the owner’s capital
account reflects the:
a. Beginning balance
b. Increase in income
c. Ending balance
d. Net effect of all the adjusting entries
43. Which of the following steps comes first in
worksheet preparation?
a. Compute each account’s adjusted balance by
combining the trial balance and adjustment figures.
b. Compute the profit or loss as the difference between
total revenues and total expenses in the income
statement.
c. Enter the account balances in the unadjusted trial
balance columns and foot the debit and credit columns.
d. Enter the adjusting entries in the adjustment columns
and total the amounts.
44. If the income statement debit and credit columns
are not equal after adding the respective columns:
a. An error has been made.
b. The entity either generated a net profit or incurred a
net loss.
c. The entity generated a profit.
d. The entity incurred a loss.
e. The liabilities must exceed the assets.
45. The amount of net profit will appear on the debit
side of the income statement columns on a worksheet:
a. If profit exceeds the owner’s withdrawals
b. If total assets exceeded total liabilities for the period
c. If total expenses exceeded total revenue for the
period
d. If total revenues exceeded total expenses for the
period
e. If withdrawals were made during the period
46. Assuming an entity is profitable in the current
period, the total of the balance sheet credit column in
the worksheet will be:
a. Larger than the balance sheet debit column
b. Larger than the income statement credit column
c. Larger than the income statement debit column
d. Smaller than the balance sheet debit column
47. In which columns of the worksheet would the
adjusted balance of Accumulated Depreciation
appear?
a. Adjusted trial balance credit, balance sheet credit
b. Adjusted trial balance credit, income statement credit
c. Adjusted trial balance debit, balance sheet debit
d. Trial balance credit, adjustments credit, adjusted trial
balance credit, balance sheet credit
e. Trial balance debit, adjusted trial balance debit
48. If total credits exceed total debits in the balance
sheet columns of a worksheet,
a. A net loss was incurred.
b. A net profit was generated.
c. A mistake was committed.
d. The assets exceeded liabilities.
e. No conclusion can be drawn until the closing entries
have been made.
49. The income statement debit column of the
worksheet contains:
a. Asset account balances
b. Expense account balances
c. Contra asset account balances
d. Liability account balances
e. Revenue account balances
50. Which of the following comes first in the
accounting process?
a. Journalizing business transactions
b. Preparation of an adjusted trial balance
c. Preparation of an unadjusted trial balance
d. Preparation of the worksheet
51. The purpose of the post-closing trial balance is to:
a. Provide the account balances for the preparation of
the balance sheet
b. Ensure that the ledger is in balance for the
completion of the worksheet
c. Aid in the journalization and posting of the closing
entries
d. Ensure that the general ledger is in balance for the
start of the next accounting period
52. If the last item on a trial balance reads “Owner’s
Capital”, this must be the:
a. Unadjusted trial balance
b. Adjusted trial balance
c. Trial balances of totals
d. Post-closing trial balance
53. If a trial balance were to be prepared on the first
day of the new accounting period, and the account
Salaries Expense had a credit balance, you would know
that:
a. The trial balance is a post-closing trial balance
b. The adjusting entries have been recorded
c. A reversing entry has been made
d. The trial balance is an unadjusted trial balance
54. Reversing entries are:
a. Optional
b. Made to record a change in corporate objectives
c. Required by generally accepted accounting principles
d. Made prior to preparing a post-closing trial balance
55. An important purpose of closing entries is to:
a. Adjust the accounts in the ledger
b. Set nominal account balances to zero at the start of
the next accounting period
c. Set real account balances to zero at the start of the
next accounting period
d. Set all account balances to zero at the start of the
next accounting period
56. Which of the following is done last in the
accounting process during the current accounting
period?
a. Journalizing reversing entries
b. Preparing the post-closing trial balance
c. Preparing the adjusted trial balance
d. Preparing the financial statements
57. Which of the following sequences of documents or
records describes the proper sequence in the
accounting cycle?
a. Source documents, ledger, journal, financial
statements, worksheet
b. Journal, source documents, ledger, worksheet,
financial statements
c. Source documents, journal, ledger, worksheet,
financial statements
d. Ledger, source documents, financial statements,
journal, worksheet
58. Closing entries will:
a. Increase the owner’s capital balance.
b. Decrease the owner’s capital balance
c. Not affect the owner’s capital balance
d. Either increase or decrease the owner’s capital
balance
59. If no adjustments are needed for a particular
entity, its:
a. Post-closing trial balance will be identical to its trial
balance.
b. Adjusted trial balance will be the same as its post-
closing trial balance.
c. Trial balance will be the same as its adjusted trial
balance.
d. Trial balance, adjusted and post-closing trial balance
will be the same.
60. Which of the following could not possibly be a
closing entry?
a. Dr. Income Summary and Cr. Owner’s Capital
b. Dr. Owner’s Capital and Cr. Owner’s Drawings
c. Dr. Income Summary and Cr. Owner’s Drawings
d. Dr. Owner’s Capital and Cr. Income Summary
61. At the end of the accounting period, the equation
Assets = Liabilities + Owner’s Equity does not balance.
Which of the following actions balances the equation?
a. Subtract revenues from and add expenses to owner’s
equity.
b. Subtract revenues from owner’s equity and add
expenses to assets.
c. Add to owner’s equity the difference between
revenues and expenses.
d. Add revenues to and subtract expenses from assets.
62. The post-closing trial balance contains:
a. Real accounts only
b. Nominal accounts only
c. Both real and nominal accounts
d. Neither real nor nominal accounts
63. In which financial statement does Income
Summary appear?
a. Income statement
b. Statement of changes in equity
c. Statement of financial position
d. Statement of Cash Flows
e. It does not appear in any financial statement.
64. If an entity suffered a loss, the amount of the loss
is entered on the worksheet on the:
a. Debit side of the Income Statement and credit side of
the Balance Sheet
b. Credit side of the Income Statement and debit side of
the Balance Sheet
c. Debit side of both the Income Statement and Balance
Sheet
d. Credit side of both the Income Statement and
Balance Sheet
65. Which of the following accounts could appear in an
adjusting entry, a closing entry and a reversing entry?
a. Salaries Payable c. Depreciation Expense
b. Interest Income d. Prepaid Advertising
66. In preparing closing entries, which of the following
columns of the worksheet are most helpful?
a. Adjustments columns
b. Adjusted trial balance columns
c. Income statement columns
d. Balance sheet columns
67. An accrued expense is classified as a/an:
a. Current asset c. Operating expense
b. Current liability d. Operating income
68. The adjustment for a prepaid expense requires
a/an:
a. Decrease in asset and increase in expense
b. Increase in asset and increase in revenue
c. Decrease in revenue and decrease in asset
d. Increase in asset and decrease in expense
69. Which of the following statements is true?
a. Only nominal accounts are contained in an adjusted
trial balance.
b. The accrual principle records revenue only when cash
is received, and records expenses only when cash is
paid.
c. The post-closing trial balance provides the basis for
the preparation of the financial statements.
d. The worksheet is accomplished at the end of the
accounting period to work out the adjustments and
prepare the financial statements.
70. Accrued income is classified as a/an:
a. Current asset
b. Current liability
c. Non-current liability
d. Operating expense
QUIZ MIDTERMS
1. Which of the following is an example of a financing
activity?
a. Obtaining a bank loan
b. Paying taxes to the government
c. Producing goods and services
d. Purchasing a building
2. Which of the following is an example of an investing
activity?
a. Employing workers
b. Paying off a loan
c. Selling idle land not used by the entity
d. Owner’s cash contribution
3. The Statement of Cash Flows would disclose the
owner’s cash withdrawal in the:
a. Financing activities section
b. Investing activities section
c. Operating activities section
d. Notes to the financial statements
4. Which of the following payments is a cash outflow
from operating activities?
a. For purchase of supplies
b. To acquire property and equipment
c. To settle notes payable
d. To owners in the form of withdrawals
5. Which of the following receipts is a cash inflow from
financing activities?
a. From collection of customers’ accounts
b. From interest on notes receivable
c. From issuance of notes payable
d. From sale of property and equipment
6. Closing entries reduce the following types of
accounts to a zero balance at the end of the
accounting period.
a. Income and expenses c. Withdrawals
b. Income summary d. All of the above
e. Only a and b
7. If the last item on a trial balance reads “Owner’s
Capital”, this must be the:
a. Post-closing trial balance c. Adjusted trial balance
b. Unadjusted trial balance d. Reversed trial balance
8. Reversing entries are:
a. Made to record a change in corporate objectives
b. Required by generally accepted accounting principles
c. Optional
d. Made prior to the preparation of the post closing trial
balance
9. Which of the following is done last in the accounting
process?
a. Preparation of the post-closing trial balance
b. Preparation of an adjusted trial balance
c. Preparation of the worksheet
d. Preparation of the trial balance from the general
ledger
10. An important purpose of closing entries is to:
a. Adjust the accounts in the ledger.
b. Set nominal accounts to a zero balance at the start of
the next accounting period.
c. Set real account balances to zero at the start of the
next accounting period.
d. Help in the preparation of the financial statements.
11. Which of the following accounting cycle steps is
done before the others?
a. The financial statements are prepared.
b. Closing entries are recorded and posted.
c. Source documents are analyzed and recorded.
d. Adjusting entries are recorded and posted.
12. Closing entries will ultimately affect the:
a. Total liabilities c. Total assets
b. Cash account d. Owner’s Capital account
13. If no adjustments are needed for a particular
entity, its:
a. Post-closing trial balance will be the same as its
unadjusted trial balance.
b. Adjusted trial balance will be the same as its post-
closing trial balance.
c. Unadjusted trial balance will be identical to its
adjusted trial balance.
d. Unadjusted trial balance, adjusted trial balance and
post-closing trial balance will all be identical.
14. Which of the following could not possibly be a
closing entry?
a. Debit Income Summary and credit Owner’s Capital
b. Debit Owner’s Capital and credit Owner’s
Withdrawals
c. Debit Income Summary and credit Owner’s
Withdrawals
d. Debit Owner’s Capital and credit Income Summary
15. In preparing closing entries, which of the following
columns of the worksheet are most helpful?
a. Adjustments columns
b. Adjusted trial balance columns
c. Income Statement columns
d. Balance Sheet columns
16. Which of the following accounts could appear in an
adjusting entry, closing entry and reversing entry?
a. Interest Income c. Depreciation Expense
b. Salaries Payable d. Accumulated Depreciation
17. When there is a loss, the entry to close the Income
Summary account is:
a. Debit Loss and credit Income Summary
b. Debit Owner’s Capital and credit Income Summary
c. Debit Income Summary and credit Loss
d. Debit Income Summary and credit Owner’s Capital
18. In which financial statement does the Income
Summary account appear?
a. Income statement
b. Statement of changes in equity
c. Balance sheet
d. It does not appear in any financial statement.
19. Which of the following accounts is not closed?
a. Income Summary c. Commission Income
b. Owner’s Capital d. Taxes and Licenses
20. Consider the steps in the accounting cycle. Which
part of the accounting cycle provides information to
help a business decide whether to expand its
operations?
a. Post-closing trial balance c. Closing entries
b. Adjusting entries d. Financial statements
21. Financial statement time periods should
be of equal length,
a. And should correspond with the calendar year
b. And should end during the peak season
c. To comply with loan agreements
d. To make comparison meaningful
22. As the usefulness of the asset Property and
Equipment expires,
a. A liability is created.
b. An amount is transferred from one asset account to
another
c. A related expense account is reduced.
d. The cost of the asset is allocated to an expense
account.
23. If the amount of profit for the current period is less
than the amount of the owner’s withdrawals, there
will be a/an:
a. Decrease in the cash account
b. Decrease in the owner’s capital account
c. Increase in liabilities on the balance sheet
d. Increase in the cash account
e. Increase in the owner’s capital account
24. The primary purpose of reversing entries is to:
a. Correct errors.
b. Simplify the recording of regular transactions in the
next accounting period.
c. Transfer the balance of the expense accounts to the
owner’s capital account and set the accounts equal to
zero.
d. Place the expenses for the current period in the
proper accounts.
25. Which of the following pairs of accounts could not
be included in the same adjusting entry?
a. Interest Expense and Interest Receivable
b. Rent Expense and Rent Payable
c. Salaries Expense and Accrued Salaries
d. Precollected Fees and Fees Earned
QUIZ 1 - FINALS
TRUE or FALSE QUESTIONS
1. Under the periodic inventory system, purchases of
merchandise are recorded in the Merchandise
Inventory account.
2. Taking a physical inventory refers to making a count
of all merchandise on hand at a particular time.
3. Sales Returns and Allowances is a contra-revenue
account.
4. An advantage of using the periodic inventory system
is that it requires less record-keeping than the perpetual
inventory system.
5. Trade discounts are offered to the buyer to
encourage early payment of accounts.
6. The purchase of equipment for use in the business,
not for resale, should be debited to the Purchases
account.
7. The terms “freight prepaid or freight collect” will
dictate who should bear the transportation costs.
8. The perpetual inventory system requires the
recording of the cost of each sale as it occurs.
9. The two systems in accounting for merchandise
bought and sold are the periodic and perpetual
inventory methods.
10. Sales Discount normally has a debit balance.
11. Under the periodic inventory system, the Cost of
Goods Sold is treated as an account.
12. An entity would more likely know the amount of
inventory on hand or unsold merchandise at any time if
it uses the periodic inventory method rather than the
perpetual inventory method.
13. Under the perpetual inventory system, the
Merchandise Inventory account is not affected when a
sales allowance is granted by the seller.
14. Goods bought or sold should be recorded at the list
price less any trade discounts involved.
15. Under the periodic inventory system, the Purchases
account is used to accumulate all items acquired
primarily for resale purposes.
16. FOB shipping point implies that while the goods are
in transit, the seller is still the owner of such goods.
17. FOB destination means that the seller agrees to
shoulder the freight cost.
18. Cash discounts are termed Purchases Discounts
from the viewpoint of the seller
19. A credit term of “2/10, n/30” means that the buyer
may deduct 2% from the invoice price if payment is
made within 10 days from the end of the month
20. There is no need for a physical count if the entity
uses the perpetual inventory method.
21. Transportation In is considered as an added cost of
merchandise purchased.
22. Merchandise inventory could include goods that are
still in transit.
23. The perpetual inventory method provides an up-to-
date amount of inventory still on hand.
24. The terms “FOB shipping point or FOB destination” 6. A physical count of inventory is usually taken:
determine who should bear the freight cost.
a. At the end of the accounting period
25. When the periodic inventory method is used, a
physical inventory should be made at the end of the b. At the peak of the busy season
year to determine the unsold merchandise. c. At the start of the accounting period
FINALS – QUIZ 2 d. In the middle of the accounting period
1. A supplier offers the following discounts: Trade 7. A merchandiser will earn an operating income of
discount of 10% at list price and 5% cash discount if exactly zero when the:
paid in full before the due date. How much will a
customer pay before due date at a list price of a. Cost of goods sold equals gross margin/gross profit
P16,000? b. Gross profit equals total operating expenses
a. P13,680 c. P15,520 c. Net sales equals cost of goods sold
b. P14,000 d. P16,000 d. Total operating expenses equal net sales
2. Which account does a merchandiser, but not a 8. Which of the following is not a reason for sales
service entity, use? discounts to be offered to the credit customers?
a. Sales c. Cost of sales a. Increase the amount paid by the customers.
b. Inventory d. All of the above b. Improve the liquidity by converting the accounts
e. None of the above receivable into cash.

3. The main inventory systems are: c. Encourage earlier settlement of debts by

debtors/customers.
a. Purchases and sales c. Cash and accrual basis
d. Reduce the amount of bad debts.
b. Returns and allowances d. Periodic and perpetual
9. Which of the following is correct about purchases
4. Which of the following activities is not a component discounts?
of the operating cycle?
a. It refers to the discounts offered by a third party for
a. Collection of accounts from credit sales of goods some reason.
b. Ordering of merchandise b. It refers to the discounts enjoyed by customers due
c. Acquisition of merchandise to bulk purchases.

d. Sale of goods c. It refers to the discounts enjoyed by customers due to

the early settlement of the debt.
5. The perpetual inventory system is most commonly
d. It refers to a reduction in list price.
used by entities that sell:
a. High-priced, high-volume merchandise 10. Which of the following items can lead to a
difference between values of gross profit and net
b. High-priced, low-volume merchandise profit?
c. Low-priced, high-volume merchandise a. Sales returns c. Purchases returns
d. Low-priced, low-volume merchandise b. Freight in d. Freight out
11. Freight in represents the expenses spent on 18. An amount deducted from the list price for an item
carrying the goods: of merchandise is called a:
a. Returned from the customers a. Customer discount c. Purchases discount
b. Returned to the suppliers b. Sales discount d. Trade discount
c. Sold to the customers 19. Under the perpetual inventory system, which of
the following accounts would not be used?
d. Purchased from suppliers to the buyer entity
a. Cost of sales c. Merchandise inventory
12. Which of the following equations correctly shows
the meaning of net sales? b. Purchases d. Sales
a. Net sales = Gross sales – Purchases 20. Which of the following is not considered in
computing the net cost of purchases?
b. Net sales = Gross sales – Sales returns
a. Purchases
c. Net sales = Gross sales – Purchases returns
b. Purchases returns and allowances
d. Net sales = Gross sales – Sales returns – Freight in
c. Freight paid on goods shipped to customers
13. Transportation out refers to the cost:
d. Freight paid on goods bought
a. Needed to sell the goods to the customers
21. The entry to record a sale of P7,500 with terms of
b. Incurred to transport the goods sold to the customers 2/10, n/30 would include a:
c. Incurred in advertising the goods available for sale a. Credit to Accounts receivable for P7,500
d. Regarding the human resource needed to b. Credit to Sales for P7,500
manufacture the products
c. Debit to Sales discounts for P150
14. Each of the following companies is a merchandising
entity, except a: d. Debit to Sales for P7,350
a. Candy store c. Car wash 22. The collection of a P4,000 account within the 2%
discount period would result in a:
b. Appliance store d. Drugstore
a. Credit to Accounts receivable for P3,920
15. Operating income will result if gross profit exceeds:
b. Credit to Cash for P3,920
a. Cost of goods sold
c. Debit to Accounts receivable for P3,920
b. Cost of goods sold plus operating expenses
d. Debit to Sales discounts for P80
c. Total operating expenses
23. The collection of a P5,000 account beyond the 2%
d. Purchases discount period would result in a:
16. Which of the following is not considered an a. Credit to Accounts receivable for P5,000
operating expense?
b. Credit to Cash for P5,000
a. Administrative expenses c. Cost of goods sold
c. Debit to Cash for P4,900
b. Advertising expense d. Transportation out
d. Debit to Sales discounts for P100
17. A sale on March 15 with terms of n/eom is due to
be collected by:
a. March 31 c. April 10
b. April 30 d. None of the above
24. Assuming that net purchases was P900,000 during
the year, and that the ending merchandise inventory
was P20,000 less than the beginning merchandise
inventory of P250,000, how much was cost of goods
sold?
a. P1,130,000 c. P 670,000
b. P 920,000 d. P1,170,000
25. The entry to record a payment of a P15,000
account within the 2% discount period would include
a:
a. Credit to Accounts payable for P14,700
b. Credit to Cash for P14,700
c. Debit to Accounts payable for P14,700
d. Debit to Purchases discounts for P300
26. Under a perpetual inventory system, the entry to
record a purchase of P60,000 with terms of 2/10, n/30
would include a:
a. Credit to Accounts payable for P58,800
b. Debit to Purchases for P60,000
c. Debit to Accounts payable for P58,800
d. Debit to Merchandise Inventory for P60,000
27. The basic differences between the financial
statements of a merchandising entity and a service
entity include the cost of sales section of the income
statement and the:
a. Equity section of the balance sheet
b. Inclusion of merchandise inventory on the balance
sheet as a current asset
c. Other income section of the income statement
d. Profit amount
28. In preparing a ten-column worksheet that uses the
perpetual inventory system,
a. Only the beginning merchandise inventory is
extended to the debit side of the income statement
columns.
b. The beginning merchandise inventory is extended to
the debit side and the ending inventory to the credit
side of the income statement columns.
c. Only the ending merchandise inventory is extended
to the debit side of the balance sheet columns.
d. The beginning merchandise inventory is extended to
the debit side and the ending inventory to the credit
side of the income statement columns, and also to the
debit side of the balance sheet columns.
29. Cost of goods sold is a major expense of a
merchandising entity.
a. True b. False
30. Which of the following is not relevant to the
computation of net purchases?
a. Purchases returns and allowances
b. Purchases discounts
c. Sales discounts
d. Freight in
31. When preparing a worksheet for a merchandising
entity that uses the perpetual inventory system, the
merchandise inventory amount shown on the trial
balance is the beginning balance that will be carried
over to the income statement debit column.
a. True b. False
32. When preparing closing entries under the periodic
inventory system, Sales and Purchases Returns and
Allowances are both closed in the same entry.
a. True b. False
33. Under the periodic inventory method, the two
Merchandise Inventory accounts appear in the closing
entries made at the end of the period.
a. True b. False
34. Under the perpetual inventory method, the ending
Merchandise Inventory is closed at the same time as
Cost of sales.
a. True b. False
35. The excess of gross profit over total operating
expenses is called operating profit or income from
operations.
a. True b. False
SPECIAL JOURNALS AND VOUCHER SYSTEM
8. The total of the cash disbursements journal is
posted to which side of the account, Accounts
1. The special journal in which the purchase of Payable?
merchandise on account may be recorded is the:
a. Debit c. Neither debit nor credit side
a. Cash disbursements journal c. General journal
b. Credit d. Both sides
b. Purchases journal d. Sales journal
9. Which of the following should be maintained to be
2. If only credit sales of goods are recorded in the Sales able to monitor the individual balances of the account
Journal, a cash sale of merchandise should be recorded customers?
in the:
a. General ledger
a. Cash receipts journal c. Sales journal
b. General journal
b. Cash disbursements journal d. General journal
c. Accounts payable subsidiary ledger
3. How is a return of goods by a credit customer
recorded in the books of the seller? d. Accounts receivable subsidiary ledger
a. Dr. Accounts receivable; Cr. Sales 10. Credit sales of merchandise are recorded in the:
b. Dr. Sales Returns; Cr. Accounts receivable a. Purchases journal c. Sales journal
c. Dr. Accounts Payable; Cr. Purchases Returns b. General journal d. Cash payments journal
d. Dr. Purchases; Cr. Accounts Payable 11. The payment of accounts is recorded in the:
4. If only goods bought on credit are recorded in the a. Cash payments journal c. Purchases journal
Purchases Journal, the purchase of supplies on account
is recorded in the: b. Cash receipts journal d. Sales journal
12. The adjusting entry to record accrued income is
a. General journal c. Cash disbursements journal
recorded in the:
b. Purchases journal d. Sales journal
a. Cash receipts journal c. Sales journal
5. To which account is the debit entry for the total of
the Sales Journal posted? b. General journal d. Purchases journal
13. The individual amounts in the accounts payable
a. Accounts payable c. Sales
column of the purchases journal are posted to the
b. Accounts receivable d. Purchases appropriate accounts in the:
6. Collections of accounts receivable are recorded in a. Accounts payable subsidiary ledger
the:
b. Accounts receivable subsidiary ledger
a. Sales journal c. Cash disbursements journal
c. General ledger
b. General journal d. Cash receipts journal
d. General journal
7. Which of the following is not a benefit of using
special journals? 14. The controlling account that summarizes the
individual accounts with creditors in a subsidiary
a. Similar transactions are recorded in one book. ledger is:
b. The clerical work of journalizing and posting is a. Accounts receivable c. Purchases
minimized.
b. Accounts payable
c. Several employees can work simultaneously.
d. It eliminates the need for the general journal.
15. A special journal contained columns for cash,
purchases discounts, and accounts payable. This is a:
a. Sales journal c. Cash receipts journal
b. Purchases journal d. Cash disbursements journal
16. Which of the following is true of a voucher system?
a. All major expenditures, including cash transactions,
would first be credited to Vouchers Payable before any
payment is made.
b. The check register replaces the cash receipts journal.
c. The voucher register contains a debit column for
vouchers payable.
d. Transactions are first entered in the check register,
and later, when payment is made, in the voucher
register.
17. Special journals are modified in practice to adapt
to the specific needs of an entity.
a. True b. False
18. Each amount in the “Other Accounts” column of
the cash receipts journal must be posted individually
to the appropriate general ledger account.
a. True b. False
19. The primary ledger that contains all of the balance
sheet and income statement accounts is the general
ledger.
a. True b. False
20. When special journals, control accounts and
subsidiary ledgers are used, no posting to any ledger
account is done until the end of the month.
a. True b. False