Professional Documents
Culture Documents
REVIEW MATERIALS
The Accounting Process to Accounts Receivable
1. It is a systematic compilation of a group of accounts.
a. Chart of accounts c. Ledger
b. Trial balance d. Journal
2. Which of the following criteria must be met before an event or item is recorded for accounting
purposes?
a. The event or item can be measured objectively in financial terms.
b. The event or item is relevant and reliable.
c. The event affects, or the item meets the definition of, a financial statement element.
d. All of these must be met.
3. An accounting record into which the essential facts and figures in connection with all
transactions are initially recorded is called the
a. ledger. c. trial balance.
b. account. d. none of these.
4. When an item of expense is paid and recorded in advance, it is normally called a(n)
a. prepaid expense. c. estimated expense.
b. accrued expense. d. cash expense.
8. Theta prepares its financial statements for the year to 30 April each year. The company pays rent
for its premises quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The
annual rent was ₱84,000 per year until 30 June 2000. It was increased from that date to ₱96,000
per year. What rent expense and end of year prepayment should be included in the financial
statements for the year ended 30 April 2001?
Expense Prepayment
a. 93,000 8,000
b. 93,000 16,000
c. 94,000 8,000
d. 94,000 16,000
D
Solution:
➢ Fiscal year period: May 1, 2000 to April 30, 2001
➢ Change in annual rent: June 30, 2000
➢ Rent expense:
o May 1, 2000 to June 30, 2000: 84,000 x 2/12 = 14,000
o July 1, 2000 to April 30, 2001: 96,000 x 10/12 = 80,000
o Total rent expense = (14,000 + 80,000) = 94,000
➢ Prepaid rent:
o Last payment date: April 1, 2001
o Amount paid: 96,000 ÷ 4 quarters = 24,000
o Unexpired portion as of April 30, 2001 = 24,000 x 2/3 = 16,000
9. On March 1, a company received ₱3,000 cash from a client as an advance for 12 months’ worth of
delivery services. The company initially recorded this receipt as a debit to cash and a credit to
delivery service revenue. The adjusting entry on December 31 would include a:
a. debit to delivery service revenue, ₱2,500.
b. credit to unearned delivery service revenue, ₱500.
c. credit to delivery service revenue, ₱500.
d. No adjusting entry was required because the delivery service was for a one-year period
exactly.
10. On August 1, a corporation received cash of ₱12,000 for one year's rent in advance and recorded
the transaction on that day as a credit to rent revenue. The December 31 adjusting entry is:
a. Rent revenue ₱5,000
Unearned rent revenue ₱5,000
b. Rent Revenue ₱7,000
Unearned rent revenue ₱7,000
c. Unearned rent revenue ₱5,000
Rent revenue ₱5,000
d. Unearned rent revenue ₱7,000
Rent revenue ₱7,000
Page |3
11. A corporation received cash of ₱24,000 on August 1 for one-year's rent in advance and recorded
the transaction on that day as a credit to unearned rent revenue for the full amount. The
December 31 adjusting entry is:
a. Rent revenue ₱10,000
Unearned rent revenue ₱10,000
b. Unearned rent revenue ₱24,000
Rent revenue ₱24,000
c. Rent revenue ₱14,000
Unearned rent revenue ₱14,000
d. Unearned rent revenue ₱10,000
Rent revenue ₱10,000
12. On July 1, a company paid a ₱600 premium for a three-year property insurance policy; insurance
expense was debited in full for the ₱600. The adjusting entry at the end of the year is:
a. Prepaid insurance ₱1,000
Insurance expense ₱1,000
b. Prepaid insurance ₱ 500
Insurance expense ₱ 500
c. Prepaid insurance ₱ 100
Insurance expense ₱ 100
d. Prepaid insurance ₱ 500
Insurance expense ₱ 500
13. The amount reported as "Cash" on a company's statement of financial position normally should
exclude
a. postdated checks that are payable to the company.
b. cash in a payroll account.
c. undelivered checks written and signed by the company.
d. petty cash.
16. Which of the following is not a basic characteristic of a system of cash control?
a. Use of a voucher system
b. Combined responsibility for handling and recording cash
Page |4
18. On December 31, 2009, West Company had the following cash balances:
19. Trans Co. had the following balances at December 31, 2009:
Tran’s policy is to treat as cash equivalents all highly liquid investments with a maturity of three
months or less when purchased. What amount should Trans report as cash and cash equivalents in
its December 31, 2009, balance sheet (statement of financial position)?
a. P110,000
b. P385,000
c. P460,000
d. P860,000
20. The cash balance of CAPSIZE OVERTURN Co. comprises the following:
Cash on hand 300,000
Cash in bank – savings – BPI 600,000
Cash in bank – current – BPI (240,000)
Cash in bank – deposit in escrow – Metrobank 300,000
Cash in bank – current – Metrobank ( 60,000)
Cash in bank – current – BDO ( 90,000)
Total 810,000
Page |5
Additional information:
• Cash on hand includes undeposited collections of P60,000.
• The cash in bank – savings maintained at BPI includes a P150,000 compensating balance which is
not restricted.
21. It is a report that is prepared for the purpose of bringing the balances of cash per records and per
bank statement into agreement.
a. Bank statement
b. Check Disbursement Voucher
c. Bank reconciliation
d. Bank deposit slip
22. These are deposits made but not yet credited by the bank to the depositor’s bank account.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)
23. These are deductions made by the bank to the depositor’s bank account but not yet recorded by
the depositor.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)
24. These are additions made by the bank to the depositor’s bank account but not yet recorded by
the depositor.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)
25. These are checks drawn and released to payees but are not yet encashed with the bank.
a. Credit memos (CM)
b. Debit memos (DM)
c. Outstanding checks (OC)
d. Deposits in transit (DIT)
Page |6
26. Which of the following is added to the cash balance per books when preparing a bank
reconciliation statement?
a. Credit memo
b. Debit memo
c. Outstanding check
d. Deposit in transit
27. Which of the following is added to the cash balance per bank statement when preparing a bank
reconciliation statement?
a. Credit memo
b. Debit memo
c. Outstanding check
d. Deposit in transit
ACCOUNTS RECEIVABLES
2. The direct write-off method for uncollectible accounts does not provide for the matching of
current revenues with related expenses. - TRUE
3. The use of the direct write-off method is acceptable under generally accepted accounting
principles. - FALSE
4. Doubtful accounts expense is normally reported as a deduction from sales in the income
statement. - FALSE
Page |7
5. The entry to write off an uncollectible account under the allowance method is a debit to Doubtful
Accounts Expense and a credit to Accounts Receivable. - FALSE
6. The method of estimating uncollectible accounts expense based on the accounts receivable
balance emphasizes the determination of the net realizable value of the receivables. - TRUE
7. When estimating collectability based on an analysis of the accounts receivable balance, any
existing balance in the allowance for doubtful accounts is ignored. - FALSE
8. The aging method of estimating doubtful accounts is a variation of the percentage of ending
receivables method. - TRUE
9. The "list" sales price less any trade discount is the invoice amount. - TRUE