1. The accrual basis of accounting recognizes a.

revenues when products are produced as part of

2. When of the following events would not be considered an accounting transaction? A. payment
of fees to tax consultant b. purchase of print advertising space for a new service c. tabulation of
the results of a customer satisfaction survey d. sales of a new product during the first month of
operations

3. The accounting cycle is a. the length of time it takes to complete a set of financial statement
after the books are closed b. a process that begins with adjusting entries and ends with the
preparation of the financial statements c. applicable only to manual system, not to
computerized systems d. the sequence of procedures used by a business to process economic
information and to produce financial statements

4. The primary function of an account in the accounting system is to a. identify the type of
organization b. accumulate accounting information c. determine at what point a transaction
should be recorded d. store accounting transactions until they are classified

5. The first step in the accounting cycle is to a. record transactions in journal b. analyze
transactions from source documents c. post journal entries to general ledger accounts d. adjust
the general ledger accounts

C
 6. Which of the following steps in the accounting cycle are listed in logical order? A. prepare the
income statement, prepare the statement of financial position and then prepare a worksheet b.
post the journal entries to the ledger accounts, prepare a worksheet, and then take a trial
balance c. journalize the closing entries, post the closing entries, and then take a post-closing
trial balance

d. post the closing entries, take a post-closing trial balance, then journalize the closing entries A 7. The
manner in which the accounting records are organized and employed within business is referred to as a.
accounting information system b. business document c. voucher system d. special journal A

7. An account has two sides called the a. debit and b. asset and liability c. income and expense d.
journal and ledger

8. Transactions are recorded chronologically in the a. Journal c. daybook b. T-account d. ledger

9. The first step in recording a transaction in a journal is to a. write an explanation b. record the
debit c. record the date d. record the credit

10. A journal entry composed of two or more debits or two or more credits is called a. multiple
journal enrtry b. compound journal entry c. complex journal entry d. double journal entry

11. A simple journal entry a. consists of two debits and one credit b. consists of one debit and two
credits c. is a memorandum entry d. consist of one debit and one credit
A

12. A journal entry that contains more than accounts is called a. a compound journal entry b. a
posted journal entry c. an adjusting journal entry d. an erroneous journal entry

13. What function do accounting journals serve in the acocunting process? A. Classifying c.
recording b. Summarizing d. reporting

14. The normal balance of an account is on the a. debit side of the account b. side represented by
increases in the account balance c. credit side of the account d. side represented by decrease in
the account balance

15. All of the following are assets except a. unearned revenue b. cash c. equipment d. inventory

16. When a customer buys services on credit, the contract is regarded as complete when a. the
services are rendered b. the bill is presented c. the cash payment is received d. the date
specified in the contract is at hand
B 18. A sale of merchandise on credit represents an exchange of goods for a promise future payment.
This promise is a. an asset c. an increase in accounts payable b. a liability d. a revenue A

19. When an entity pays for goods or services before actual receipt, the payment should be recorded as
a decrease in Cash and an increase in a. an expense c. an owner’s equity account b. an asset d. a liability

20. Entries recorded on the right side of any account are called a. increases b.credits c. decreases d.
debits

21. Credits are used to record a. decreases in liabilities b. decreases in owner’s equity c. increases in
expenses d. increases in income

Of

22. When an asset increases, one of the following must occur a. a liability decreases b. owner’s equity
decreases c. an expense increases d. none of the above

23. When owner’s equity decreases, one of the following must occur a. an asset increases b. an income
increases c. a liability increases d. withdrawals decreases

B
24. When cash is debited, a typical credit is to a. accounts payable b. accounts receivable c. expenses d.
withdrawals

25. The withdrawal account of a sole proprietorship is debited when a. the owner invests cash b. the
owner withdraws cash c. an expense is paid d. a liability is paid

26. Payment of insurance premium in advance gives rise to a. unearned income b. prepaid expense c.
accrued income d. accrued expenses

27. Credit to csh results to a. an increase in owner’s equity b. a decrease in assets c. an increase in
liabilities d. an increases in income

28. Debits to expense accounts signify a. increases in capital b. increases in assets c. decreases in capital
d. increases in liabilities

29. When rent is prepaid for several months in advance, the debit is to

a. An expense account b. an asset account c. a capital account d. a liability account B

30. When an asset is purchased on account, the credit is to a. a capital account b. a liability account c. an
income account d. an expense account
B

31. When payment is made to a supplier for goods previously purchased on account, the debit is to a. an
asset account b. a liability account c. a capital account d. an expense account

32. Posting refers to the process of transferring information from a. general ledger accounts to journal b.
source documents to journal c. journals to general ledger accounts d. journals to source documents

33. A ledger is defined as a collection of a. transactions b. all statements of financial position accounts c.
all income statement d. account titles – asset, liability, equity, income and expense accounts

34. What function do general ledgers serve in the accounting process? A. Reporting b. Summarizing c.
Recording d. Classifying

35.A chart of accounts is a (an) a. flowchart of all transactions b. list of names of all account titles c.
accounting procedure manual d. journal

36. Balance sheet accounts are a. temporary accounts

37. When accounting information is accumulated in individual accounts, a chart of accounts is a. limited
to those accounts that will appear in the balance sheet b. changed each year by an entity depending on
the results of operations c. a listing of each account that will be used to accumulate information d. used
to determine whether a debit or credit balance will appear in each of the accounts the end of the
accounting period

38. Most companies use a chart of accounts prepared by the a. company’s accounting department b.
accounting standards council c. securities and exchange commission d. Bureau of Internal Revenue

39. Posting is the process of transferring information from the a. journal to the trial balance b. ledger to
the financial statement c. ledger to the trial balance d. journal to the ledger

40. The term ooting refers to the a. addition of a column of figures b. process of obtaining the top
number in an account c. process of obtainig the bottom number in an account d. process of posting

41. Which of the following statements regarding a trial balance is incorrect? A. A trial balance is a test of
the equality of the debit and credit balances in the l edger b. A trial balance is a list of all of the open
accounts in the ledger with their balances as of a given date c. A trial balance proves that no errors of
any kind have been made in the accounts during the accounting period d. A trial balance helps to
localize errors within an identifiable time period

D
42. Which of the following transactions does not affect the balance sheet totals? A. Purchasing P50,000
supplies on account b. Collecting P40,000 from customers on account c. Paying a P300,000 by the firm’s
owner d. Withdrawal of P80,000 by the firm’s owner

43. An entity’s trial balance a. shows its financial position b. establishes whether its accounting records
are correct c. lists all of the entries in its double-entry accounting records d. is a lists of all of the
accounts with their respective debit or credit balances

44. The totals of a trial balance a. Need not always agree, as there are sometimes legitimate reasons
why they should differ. B. Should agree in all cases except when the trial balance is prepared at the end
of an accounting period c. Need not always agree, because the trial balance is not the same as a balance
sheet d. None of the above

45. An error of original entry occurs when a. Either the debit entry or the credit entry for a particular
transaction is recorded in the wrong class of account b. A correct figure is entered in the double-entry
accounting records, once in the correct ledger account and once in the wrong person’s acount. C. An
incorrect figure is entered on the correct sides of the correct ledger accounts. D. None of the above.

46. Which of the following has the primary responsibility for the preparation and reliability of
information in the financial statement? A. Management b. Internal audit staff c. External auditor d.
Internal management accountant

C
47. The equality of debits and credits in the ledger should be verified at the end of each accounting
period by preparing a. an accounting statement b. an account verification report c. a trial balance d. a
balance report

48. of the following errors, the one that will cause an inequality in the trial balance totals is a. incorrectly
computing an account balance b. failure to record a transaction c. recording the same transaction more
than once

c. Posting a transaction to the wrong account B

49. Which of the following transactions correctly maintains the equality in the accounting equation? A.
To record collections on account, cash and accounts receivable are increases by P160,000. B. To record
the purchase of computer equipment, computer equipment is increased and cash is decreased by
P46,000. C. To record payment of notes, notes payable is decreased and cash is increased by P70,000. D.
To record payment of rent, rent expense and cash are increased by P8,000.

50. Which of the folllowing combinations of trial balance totals suggest the presence of either a
transposition error or a number slide? A. P65,470 debit and P66,170 cdit b. P33,220 debit and P35,420
credit c. P25,670 dabit and P26,670 credit d. P14,517 debit and P15,477 credit

51. The first financial statement that is prepared from the trial balance is the a. balance sheet b.
statement of cash flows c. statement of changes in equity d. income statement

52. The amount of cash received or paid during a period is not an adequate measure of the economic
consequence of an organization’s activities because a. many activities may not involve the use of cash b.
cash inflows may represent the result of activities completed in previous period c. cash outflows may
precede or follow the activities with which they are associated d. All of the above reasons are correct

53. At the end of an accounting period, the equation Assets = Liabilities + Owner’s Equity does not
necessarily balance. Which of the following ations balances the equation? A. Add the difference
between revenues and expenses to owner’s equity b. Add revenues and subtract expenses fom assets c.
Subtract revenues and add expenses to owner’s equity d. Subtract revenues from owner’s equity and
add expenses to assets

54. Which of the following is a business event that is not considered a recordable transaction?

a. A company receives a product previously ordered b. A company pays an employee for work
performed c. A customer inquiries about the availability of a service d. A customer purchases a
services B

55. Which of the following is a business event that is also considered a recordable transaction? A. A
company hires a new employee b. A customer purchases merchandise c. A company orders a product
from a supplier d. An employee sends a purchased requisition to the purchasing department

56. Typically, the chart of accounts begins with a. Asset accounts b. Liability accounts c. Revenue
accounts d. Expense accounts

57. The purpose of the ledger is to a. record chronologically the day’s transaction b. keep a record of
docmentation to support each transaction c. maintain a separate account for each balance sheet and
income statement accounts d. make sure that all balance sheet and income statement accoounts have
normal balances at all times

58. Which of the following accounts probably would be listed before the others in a chart of accounts?
A. Accumulated Depreciation-Building b. Insurance Expense c. Owner’s Withdrawals d. Notes Payable

59. Which of the following accounts probably would be listed after the others in a chart of account? A.
Unearned Art Fees b. Prepaid Rent c. Owner’s Capital d. Art Revenues

60. The Unearned Art Fees account is classified as a(n) a. asset b. liability c. revenue

d. Expense D

61. Which of the following accounts is an asset? A. revenues b. notes payable c. supplies expense d.
prepaid rent

62. Which of the following accounts is not a liability account? A. accounts payable b. owner’s withdrawal
c. unearned revenue d. notes payable

C
63. Unearned Revenues are recorded by companies that a. pay money in advance of the performance of
a service b. pay money at the time the performance of a service is complete c. receive money in advance
of the performance of a service d. receive money at the time the performance of a service is complete

64. Which of the following is not considered a type of equipment? A. Fax machine b. Office suppliers c.
Cash register d. Drill press

65. Office supplies are expensed a. at no time, since they are assets b. when they are paid for c. when
they are purchased d. when they are consumed (used up)

66. A withdrawal will directly or indirectly reduce which of the following accounts? A. Accounts Payable
b. Revenues c. Owner’s Withdrawals d. Owner’s Capital

67. Which of the following does not directly or indirectly affect the owner’s Capital account? A. Paying
an accounts payable b. Withdrawals by the owner c. Earning of revenues d. Incurring of expenses

68. Which of the following accounts is classified differently from the others listed? A. Prepaid Rent b.
Cash c. Accounts Receivable d. Owner’s Capital

D
69. Which of the following accounts is classified differently from the others listed? A. Notes Payable b.
Unearned revenue c. Mortgage payable d. Art revenues

70. A person who wants to determine the balance of a particular account should refer to the a. source
documents b. chart of accounts c. ledger d. book of original entry

71. If Accounts Payable has debit postings of P85,000 credit postings of P70,000, and a normal ending
balance of P30,000, what was its beginning balance? A. P45,000 Cr. B. P15,000 Cr. C. P45,000 Dr. d.
P15,000 Dr.

72. If accounts receivable has debit postings of P290,000, credit postings of P220,000, and a normal
ending balance of P240,000, which of the following was its beginning balance? A. P170,000 Dr. b.
P310,000 Cr. C. P310,000 Dr. d. P170,000 Cr.

73. Which of the following accounting steps is accomplished after the others listed? A. Post the entry b.
Prepare the trial balance c. Apply the rules of double entry d. Record the entry

74. All of the following are examples of source documents except a. a check b. an invoice

b. A contract d. a journal C
75. Under the revenue recognition principle, revenue is recorded a. at the earliest acceptable time. B. at
the latest acceptable time. C. after it has been earned, but not before. D. at the end of the accounting
period.