1. It is a systematic compilation of a group of accounts.
a. Chart of accounts c. Ledger
b. Trial balance d. Journal
2. It is a list of accounts and their balances.
a. Chart of accounts c. Ledger
b. Trial balance d.
...
1. It is a systematic compilation of a group of accounts.
a. Chart of accounts c. Ledger
b. Trial balance d. Journal
2. It is a list of accounts and their balances.
a. Chart of accounts c. Ledger
b. Trial balance d. Journal
3. 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.
4. 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.
5. A trial balance may prove that debits and credits are equal, but
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.
6. 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.
7. When an item of revenue or expense has been earned or incurred but not yet collected or paid, it
is normally called a(n) ____________ revenue or expense.
a. prepaid c. estimated
b. adjusted d. none of these
8. An unearned revenue can best be described as an amount
a. collected and currently matched with expenses.
b. collected but not currently matched with expenses.
c. not collected but currently matched with expenses.
d. not collected and not currently matched with expenses.
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9. Which of the following is a real (permanent) account?
a. Inventory
b. Sales
c. Accounts Receivable
d. Both Inventory and Accounts Receivable
10. Reversing entries are
1. normally prepared for prepaid, accrued, and estimated items.
2. necessary to achieve a proper matching of revenue and expense.
3. desirable to exercise consistency and establish standardized procedures.
a. 1 c. 3
b. 2 d. 1 and 2
11. Adjusting entries that may be reversed include
a. all accrued revenues.
b. all accrued expenses.
c. those that debit an asset or credit a liability.
d. all of these.
12. An entity’s unadjusted trial balance does not equal. The following information was determined:
• The debit posting for a sale on account was omitted. 5,000
• The balance of Prepaid assets was listed as a credit instead of debit 34,000
• The balance of Office expense was listed as Rent expense 16,000
• Accounts payable was listed as a debit instead of credit 4,000
How much is the difference between the total debits and total credits in the trial balance?
a. 65,000 b. 81,000 c. 30,000 d. 34,000
A
Solution:
Trial balance
Dr. Cr.
Debit to accounts
receivable omitted 5,000 5,000
Corresponding credit
of the debit to
accounts receivable
Prepaid assets
omitted and listed as
credit 34,000 34,000
Corresponding credit
of the debit to Prepaid
assets
34,000
Prepaid assets listed
as a credit
Corresponding debit
of the credit to
Accounts payable 4,000 4,000
Accounts payable
omitted and listed as
debit
Accounts payable
listed as debit 4,000
Total Debits 8,000 73,000 Total Credits
65,000
Difference, excess of
total credits over
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total debits
13. 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
14. 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.
15. 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
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Rent revenue ₱7,000
16. 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
17. 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
18. A company paid its property taxes on April 1 for the period April 1, Year 1 to March 30, Year 2.
When the payment was made, the company debited property tax expense and credited cash for
₱12,000. The adjusting entry at the end of the Year 1 is:
a. prepaid property tax ₱9,000
property tax expense ₱9,000
b. prepaid property tax ₱3,000
property tax expense ₱3,000
c. property tax expense ₱3,000
prepaid tax expense ₱3,000
d. property tax expense ₱9,000
prepaid tax expense ₱9,000
19. On May 1, a company purchased a six-month subscription to an investment analysis service
publication. The ₱300 cash payment was debited to subscription expense at the time. The
adjusting entry on June 30, the end of the company's fiscal year, is:
a. subscription expense ₱100
subscription payable ₱100
b. prepaid subscriptions ₱100
subscriptions expense ₱100
c. prepaid subscription ₱200
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subscription expense ₱200
d. No adjusting entry was required because the subscription was for only six months not a full
year.
20. A sole proprietor took some goods costing ₱800 from inventory for his own use. The normal
selling price of the goods is ₱1,600. Which of the following journal entries would correctly record
this?
a. Drawings account 800
Inventory account 800
b. Drawings account 800
Purchases returns account 800
c. Sales account 1,600
Drawings account 1,600
d. None of these
“A wise man will hear and increase learning, and a man of understanding will attain
wise counsel.” (Proverbs 1:5)
- END -
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Chapter 2
Cash and Cash Equivalents
1. 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.
2. Which of the following would not be classified as cash?
a. Personal checks
b. Travelers' checks
c. Cashiers' checks
d. Postdated checks
3. What is the proper accounting treatment for a stale check?
a. Revert back to cash and accounts payable.
b. Revert back to cash and a credit to gain.
c. Ignored
d. Either a or b
4. 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
c. Daily deposit of all cash received
d. Internal audits at irregular intervals
5. The principal purpose of a voucher system is to provide assurance that
a. all cash receipts are deposited intact in the bank.
b. all cash disbursements are approved before a check is issued.
c. all cash receipts are recorded in the accounting records.
d. all purchase invoices are supported by debit memoranda.
6. On January 1, 2002, Kyle Corporation established a petty cash fund of ₱400. On December 31,
2002, the petty cash fund was examined and found to have receipts and documents for
miscellaneous expenses amounting to ₱364. In addition, there was cash amounting to ₱44. What
entry would be required to record replenishment of the petty cash fund on December 31, 2002?
a. Petty Cash.................... 364
Cash Short and Over......... 8
Cash in bank 356
b. Miscellaneous Expense......... 36
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