INSTITUTIONAL ASSESSMENT

Bookkeeping NC III
CORE COMPETENCY
Written Test in Bookkeeping NC III

Name: Date:

READ INSTRUCTION.
MULTIPLE CHOICE: Read the questions carefully. ENCIRCLE the best answer that corresponds to each description.

1. What are closing entries?

a. reflects the net income for the accounting period c. involves all ledger accounts
b. recorded in the special journals d. also posted in the subsidiary ledger

2. What accounts are not affected by adjusting entries?

a. cash accounts c. only nominal accounts
b. neither real nor nominal accounts d. both nominal or real accounts

3. It is the process of transferring the accounts recorded in the journal into the ledger.
a. posting c. trial balance
b. worksheet d. journalizing

4. A subsidiary ledger is a.
a. listing of the closing entries c. listing of accounts of a subsidiary
b. listing of journal entries d. listing of the components of control account balances

5. Physical audits include hand-counting cash and any physical assets tracked in the accounting system, such as
inventory, materials, and tools. Physical counting can reveal well-hidden discrepancies in account balances by
bypassing electronic records altogether. What internal control policy is this?
a. Physical audits c. Double-entry accounting system
b. Periodic reconciliations in accounting system d. Standardized financial documentation

6. Bank reconciliation involves comparing cash balances and records of deposits and receipts between your
accounting system and bank statements. Differences between these types of complementary accounts can
reveal errors or discrepancies in your own accounts, or the errors may originate with the other entities. What
internal control policy is this?
a. Approval authority requirements c. Periodic reconciliations in accounting systems
b. Daily or weekly trial balances d. Standardized financial documentation
7. The accounting device used in summarizing the effects of transactions on each account.
a. T account c. subsidiary ledger
b. account title d. financial statements

8. All are correct concerning the rules of debit and credit, EXCEPT
a. the left side of an account is always the debit and the right side is always the credit
b. the word debit means to “increase” and the word “credit” means to decrease
c. the normal balance of any account appears on the side for recording increases
d. increase in asset and expenses are debit and increase in liability, equity, and revenue are credit entries

9. All are correct about the general ledger, EXCEPT

a. the T account formula or ledger running balance format may be adopted
b. postings are based on source documents
c. the opening balances are entered before posting current transaction entries
d. it follows the sequence of the accounts in the chart of accounts

10. What is a chart of accounts?

a. always contains beginning balances c. an account procedure manual for an entity
b. specific for a particular entity d. the general ledger

11. Financial statements must be prepared at least

a. annually c. every two years
b. quarterly d. semi-annually

12. In the accounting cycle, financial statements must be prepared

a. after preparing the post-closing trail balance c. before the adjusting entries are made
b. after the adjusting and closing entries d. after the adjusting entries are made

13. The main purpose of the worksheet is to

a. showcases the capability of accountants c. has a place for adjusting entries
b. generates additional reports to management d. facilitate the preparation of financial
statements

14. Which among of the following categories deals with complying with laws, regulations, and policies?
a. Effectiveness and efficiency of operations c. Reliability of financial reporting
b. Compliance with applicable laws and objectives d. All of the above

15. Which is NOT TRUE about the worksheet?

a. Resulting net income or net loss is reflected in the worksheet
b. the adjusting entries are entered in the worksheet
c. the total debits and credits in the income statement columns are not the same before and after the
 recognition of the net income or net loss
d. the difference between the total debits and credits in the income statement columns has to be
the same as the difference between the total debits and total credits in the balance sheet
columns

16. Statement I. In achieving internal control over payroll operations, no changes in employee pay rates
should be made without a written memo from management.
Statement II. The payroll maker will also be the one who prepares checks and will be alone to release it.

Which statement is/are CORRECT?

a. Both statements are correct c. Statement I is correct; Statement II is incorrect

b. Both statements are incorrect d. Statement I is incorrect; Statement II is correct

17. Which of the following is NOT TRUE when it comes to policy compliance?
a. Withhold financial reports to management and other shareholders
b. Remit to the SSS the deducted contributions from employees together with the employer’s share of the
contribution
c. Comply with the government requirements
d. Communicate down to the salespeople the sales and collection policies

18. The further duties are separated, the less chance any single employee has of committing fraudulent acts.
For businesses with only a few accounting employees, sharing responsibilities between two or more people
or requiring critical tasks to be reviewed by co-workers can serve the same purpose. What internal control
policy is this?
a. Separation of duties c. Standardized financial documentation
b. Approval authority requirements d. accounting system access controls

19. Requiring approval for large payments and expenses can prevent unscrupulous employees from making
large fraudulent transactions with company funds, for instance. What internal control policy is this?
a. Approval authority requirements c. Periodic reconciliations in accounting systems
b. Daily or weekly trial balances d. Standardized financial documentation

20. Deborah has been an employee at the accounting department of MST Corporation for the past 20
years. Which of the following actions she had taken on instances is the most desirable?
a. She called the attention of a married office mate dating an also married co-worker
b. She did not participate and did not report on gambling done by co-workers during break time.
c. She never reported inventory pilferage done by “best friend” co-worker.
d. She took home scrap materials which she thinks are useless to the company
21. All the statements are correct about Cash Collections, Except?
a. Cash collections are deposited intact daily c. Official receipts are issued once cash is received
b. Cash count is conducted at regular intervals d. Collectors can borrow the cash collected

22. What is the main purpose of an internal audit?

a. assurance of the company that established company policies are properly observed
b. detect fraud committed by the employees
c. imposes punishments on those employees not following company policies
d. undertakes safety measures within the company

23. Which of the following statements is INCORRECT?

a. the post ref/folio column serves as the cross-reference between the journal and the ledger
b. the post ref/folio column of the affected account in the journal contains the account number of the
ledger account from where the entry is posted
c. the post ref/folio columns of the affected account in the general ledger contain the journal and journal
page number from where the posting was taken
d. the cross-referencing in the post ref/folio column is done even before posting

24. Which statement is CORRECT relative to a trial balance?

a. the trial balance is a summary taken directly from the general journal
b. the trial balance proves that no errors have been made
c. the trial balance provides information that is helpful when making adjusting entries
d. the trial balance usually contains the account balances that should appear in the financial statements

25. Which of the following statements is INCORRECT as to why an entity must make an adjusting entry?
a. to prepare reliable income statements and balance sheet
b. to account for accruals and deferrals
c. to ensure that the revenue recognition and expense recognition principles are followed
d. to prepare for closing and reversing entries

26. Which item is NOT a possible post-closing trial balance item?

a. Capital c. Drawing
b. Retained earnings d. Accumulated depreciation

27. Which of the following statements relating to analysis of business documents or transactions is/are
correct?
I. the accountant determines the impact of the transactions on the financial position
II. financial position is represented by the basic accounting equation “assets=liabilities + equity”

a. Both statement I and II c. Statement I only

b. Neither statement I nor statement II d. Statement II only
28. The general ledger is simply called as
a. a group of related accounts c. the book of original entry
b. the financial statements d. the summarizing device

29. Which of the following is not part of the recording process?

a. transfers the journal information into the appropriate account
b. enters the transaction information in the journal
c. ensures the equality of the total debits and total credits in the entry
d. analyzes each transaction for the effect on the accounts

30. Which statement is INCORRECT relative to the source documents?

a. the documents generated internally are numbered in series
b. the documents generated internally are verified as authorized and approved
c. the source documents received from outside parties take less importance
d. they may be internally generated or received from different outside parties

31. The use of computers in processing accounting data is?

a.It eliminates the double-entry accounting system c. It eliminates the need for bookkeepers
b.It eliminates the need for financial accounting standards d. It may result in the elimination of document
trails used to verify accounting records

32. The following statements pertain to financial statements

I. They are the means by which the information accumulated and processed in financial
accounting is periodically communicated to the users
II. They are a structured financial representation of the financial position and financial performance of an
entity, which of the statements is/are CORRECT?
a. Both statements I and II c. Neither Statement I nor Statement II
b. Statement I only d. Statement II only

33. Using standard document formats can make it easier to review past records when searching for the
source of a discrepancy in the system. A lack of standardization can cause items to be overlooked or
misinterpreted in such a review.
a. Separation of duties c. accounting system access controls
b. Standardized financial documentation d. Physical audits of assets

34. The following statements pertain to a trial balance:

I. It is prepared at the end of every accounting period after all transactions for the period have been
recorded and posted to the general ledger
II. It provides evidence that the total debits in the general ledger equals with the total credits
III. It is a control device that helps eliminates accounting errors
Which of the statements is/are CORRECT?
a. I and II only c. I, II and III
b. I and III only d. II and III only

35. It involves splitting of responsibility for bookkeeping, deposits, reporting, and auditing. The further the
duties are separated, the less chance any single employee has of committing fraudulent acts; sharing
responsibilities between two or more people or requiring critical tasks to be reviewed by co-workers can
serve the same purpose.
a. Separation of duties c. Accounting system access controls
b. Physical audits of assets d. Standardized financial documentation

36. Which of the following statements is CORRECT in posting with the use of special journals?
a. No subsidiary ledger posting is necessary
b. The general ledger posting has to be ahead of the subsidiary ledger posting
c. The general ledger posting has to coincide with the subsidiary ledger posting
d. The subsidiary ledger posting has to be ahead of the general ledger posting

37. Requiring specific managers to authorize certain types of transactions can add a layer of
responsibility to accounting records by proving that transactions have been seen, analyzed, and
approved by appropriate authorities.
a. Separation of duties c. Standardized financial documentation
b. Approval authority requirements d. accounting system access controls

38. The journal is called the,

a. Book of accounts c. Book of final entry
b. Book of original entry d. Book of balance

39. The third financial statement to prepare

a. Trial balance c. Balance Sheet
b. Cash Flow d. Statement of Financial Performance

40. Which of the following errors would NOT prove the equality of the trial balance debits and credits?
a. A debit entry of P 15,000 for rent was posted as P 15, 500
b. A debit entry to Supplies was recorded as a debit to Equipment
c. A miscellaneous expense for transportation was omitted
d. A payment for utilities was recorded twice.