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 20. This concept states that the financial statements
monetary effect is reflected in the financial statements should be stated in terms of a common financial
of an entity even though in theory, this may be a denominator.
violation of the accounting concept of:
a. accrual concept c. going concern
a. materiality c. comparability
b. unit of measure d. exchange price
b. objectivity d. consistency
21. This accounting concept states that an accounting
16. The principle of objectivity includes the attribute transaction should be supported by sufficient evidence
of: to allow two or more qualified individuals to arrive at
essentially similar conclusion.
a. verifiability c. classification
a. matching c. periodicity
b. summarization d. conservatism
b. objectivity d. stable monetary unit
17. The periodicity concept:
22. Which of the following is an appropriate definition
a. Requires that all companies prepare monthly, of accounting?
quarterly, and annual financial statements.
a. the measurement, processing, and communication of
b. Results from the Bureau of Internal Revenue financial information about an identifiable economic
requirement that all taxable income be reported on an entity
annual basis.
b. a means of recording transactions and keeping
c. Requires all companies to adopt the calendar year records
ending December 31.
c. the interconnected network of subsystems necessary
d. Involves dividing the life of a business entity into to operate a business
accounting periods of equal length, thus enabling the
users to periodically evaluate the results of business d. electronic collection, organization, and
operations. communication of vast amounts of information
18. Accountants do not recognize that the value of the 23. The entity concept means that:
peso changes over time. This concept is the:
a. Because a firm is separate and distinct from its
a. stable monetary unit concept owners, those owners cannot have access to the firm’s
assets unless the firm ceases to operate.
b. going concern concept
b. The financial affairs of a business firm and its owner/s
c. cost principle are always kept separate for the purpose of preparing
d. entity concept their accounts or records.

19. The basic purpose of accounting is: c. The owner of the business can, at any time, take any
property from the firm for his/her personal use.
a. To provide the information that the managers of an
economic entity need to control its operations d. none of the above

b. To provide information that the creditors of an 24. The consistency concept means that:
economic entity can use in deciding whether to make a. When preparing the accounts of a firm, similar items
additional loans to the entity should be accounted for in the same way from one
c. To measure the periodic income of the economic accounting period to the next.
entity b. Firms in the same industry must account for similar
d. To provide quantitative financial information about a items in the same way.
business enterprise that is useful in making rational c. Firms should never change the way in which they
economic decisions. 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: 25. Nature Trip purchased equipment for P120,000,
made a down payment of P50,000 and signed a
a. decreases both assets and liabilities promissory note for the balance. This transaction:
b. increases both assets and liabilities a. increased total assets by P120,000
c. increases assets and decreases liabilities b. increased total liabilities by P50,000
d. does not affect total assets c. did not affect owner’s equity
20. The company’s assets are P12,000,000 of which d. all of the above
one-third represents owner’s equity. Liabilities amount
to: e. none of the above
a. P6,000,000 c. P8,000,000
b. P3,000,000 d. P4,000,000 FAR PRELIMS EXAMS 2021
21. At the start of the month, the assets of the 1. An increase in an expense:
business totalled P1,000,000, with owner’s equity of
P800,000. During the month, equipment worth a. Increases revenues c. Increases assets
P500,000 was purchased with a down payment of b. Decreases liabilities d. Decreases owner's equity
P150,000 and the balance on credit. At the start of the
month, liabilities amounted to: 2. A proprietorship business with total owner's equity
of P85,000 paid a P10,000 business debt. As a result of
a. P1,800,000 c. P 200,000 this transaction, total owner's equity:
b. P1,200,000 d. Zero a. Did not change c. Increased by P10,000
22. At the start of the month, the assets of the b. Decreased by P10,000 d. Increased to P95,000
business totalled P1,000,000, with owner’s equity of
P800,000. During the month, equipment worth 3. The right side of an account is always:
P500,000 was purchased with a down payment of a. The debit side
P150,000 and the balance on credit. At the end of the
month, how much are the liabilities? b. The credit side
a. P1,150,000 c. P 550,000 c. The balance of that account
b. P1,000,000 d.P 800,000 d. Carried forward to the next accounting period
23. On January 1, the assets were P500,000 and the 4. Footing is the process of:
liabilities were P200,000. During the year, the assets
a. Preparing a chart of accounts
increased by P100,000, while the liabilities decreased
by P50,000. b. Adding a column of figures
Owner’s equity on January 1 was: c. Transferring journal entries to ledger accounts
a. P800,000 c. P300,000 d. Recording entries in a journal
b. P700,000 d. P400,000 5. What are increases in resources that a firm earns by
providing services or goods to its customers?
24. On January 1, the assets were P500,000 and the
liabilities were P200,000. During the year, the assets a. Assets c. Income
increased by P100,000 while the liabilities decreased
by P50,000. b. Liabilities d. Expenses

Owner’s equity on December 31 was:

a. P300,000 c. P250,000
b. P350,000 d. P450,000
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: 25. Suppose a customer who owes the business
P50,000 pays his debt by transferring the payment into
a. Decreases assets and owner's equity the bank account of the business. What would be the
b. Increases assets and decreases liabilities effects on the accounting equation of the business?

c. Decreases assets and increases liabilities a. Both assets and liabilities increase by P50,000.

d. Decreases assets and liabilities b. Both assets and liabilities decrease by P50,000.

20. Revenue earned: c. Only the assets increase by P50,000.

a. Increases assets and liabilities d. Total assets and liabilities remain unchanged.

b. Increases assets and owner's equity 26. Under the double-entry system, what is the value
of X if assets, liabilities and owner’s equity are:
c. Increases assets and decreases owner's equity X,P100,000 and P350,000, respectively?
d. Leaves total assets unchanged a. P250,000 c.P350,000
21. A withdrawal by the owner: b. P370,000 d.P450,000
a. Increases assets and owner's equity e. None of the above
b. Increases assets and decreases owner's equity 27. Which of the following processes best defines
c. Decreases assets and owner's equity accounting?

d. Decreases assets and increases owner's equity a. Measuring economic activities

22. The effects on the accounting equation of which of b. Communicating results to interested parties
the following events cannot be determined? c. Preventing fraud
a. Purchase of a one-year insurance policy d. Both a and b
b. Agreement to perform a service at a future date 28. Which of the following concepts means that similar
c. Purchase of equipment partly on cash and on account items should receive the same accounting treatment?

d. Payment for a service performed previously a. Going concern c. Accrual concept

23. The account credited for cash received on account b. Substance over form d. Consistency
is: 29. Assets are usually valued under which basis?
a. Cash c. Accounts Receivable a. Replacement cost c. Cost or exchange price
b. Service Revenue d. Accounts Payable b. Net realizable value d. None of the above
24. An account is said to have a debit balance if: 30. The financial statements should be stated in terms
a. The total debits to the account exceed its total of a common financial denominator.
credits. a. Unit of measure concept
b. There are more entries on the debit side than on the b. Time period or periodicity concept
credit side.
c. Going concern concept
c. Its normal balance is debit without regard to the
amounts or number of entries on the debit side. d. Stable monetary unit concept

d. The last entry of the accounting period was posted on

the debit side.
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 40. At the beginning of the year, the assets of Cleofe
total liabilities of a firm? Services were P360,000 and owner’s equity was
P200,000. During the year, its assets increased by
a. Goods purchased on cash from suppliers P120,000 and the liabilities also increased by P20,000.
How much was owner’s equity at the end of the year?
b. Interest income received from the bank
a. P160,000 c. P140,000
c. Office equipment bought on credit
b. P480,000 d. P300,000
d. Services rendered on credit to customers
41. The normal balance of an account is on the:
35. Which of the following is correct if the sole
proprietor of a business firm borrows P300,000 in the a. Side represented by decreases in the account
name of the business and then deposits the money in
the bank account of the business? 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 57. A customer promised to pay after one week for
effects are: repair services rendered to him by the business,
P8,000. The effects are:
a. Debit Cash, P20,000; Credit Supplies, P20,000
a.Debit Service Income, P8,000;
b. Debit Supplies, P20,000;
Credit Accounts Payable, P8,000
Credit Accounts Payable, P20,000
b. Debit Accounts Receivable, P8,000;
c. Debit Supplies, P20,000; Credit Cash, P20,000
Credit Service Income, P8,000
d. None of the above
c. Debit Cash, P8,000;
54. Bought repair equipment, P100,000, on credit. The
effects are: Credit Accounts Receivable, P8,000
a. Debit Repair Equipment, P100,000; d. None of the above
Credit Cash, P100,000 58. Received the utility bills for the month, P4,500. The
effects are:
b. Debit Repair Equipment, P100,000;
a. Debit Utilities Expense, P4,500; Credit Cash, P4,500
Credit Accounts Payable, P100,000
b. Debit Utilities Expense, P4,500;
c. Debit Repair Equipment, P100,000;
Credit Utilities Payable, P4,500
Credit Notes Payable, P100,000
c. Debit Utilities Expense, P4,500;
d. None of the above
Credit Service Income, P4,500
55. Rendered repair services for cash, P10,000. The
effects are: d. None of the above
a. Debit Service Income, P10,000; 59. Collected from the customer who promised to pay
after one week. The effects are:
Credit Greg, Capital, P100,000
a.Debit Accounts Receivable, P8,000;
b. Debit Accounts Receivable, P10,000;
Credit Service Income, P8,000
Credit Greg, Capital, P10,000
b. Debit Cash, P8,000; Credit Service Income, P8,000
c. Debit Cash, P10,000; Credit Service Income, P10,000
c. Debit Cash, P8,000;
d. None of the above
Credit Accounts Receivable, P8,000
56. Paid P25,000 for its account on the repair
equipment previously bought on credit. The effects d. None of the above
are:
60. The owner withdrew P4,000 cash for his personal
a. Debit Cash, P25,000; use. The effects are:
Credit Accounts Payable, P25,000 a. Debit Greg, Drawing, P4,000; Credit Cash, P4,000
b. Debit Repair Equipment, P25,000; b. Debit Cash, P4,000; Credit Greg, Drawing, P4,000
Credit Cash, P25,000 c. Debit Drawing Expense, P4,000; Credit Cash, P4,000
c. Debit Accounts Payable, P25,000; d. None of the above
Credit Cash, P25,000
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 18. Failure to record the unexpired portion of
accrual accounting? insurance premiums paid would:
a. Adjusting unearned advertising revenues to the a. Understate total expenses
correct balance at the end of the month
b. Understate profit
b. Recording advertising revenues at the time cash
payment is received c. Overstate owner’s equity
d. Overstate total liabilities
c. Recording advertising revenues at the time the work
is done 19. Which of the following is an application of accrual
d. Recording telephone expense when the monthly bill accounting?
is received a. Depreciating a building as quickly as allowed by
income tax regulations
13. Which of the following accounts is an income
statement account? b. Expensing a machine in its entirety as expense when
a. Accounts receivable c. Owner’s capital purchased
c. Recording revenue at the time payment is received
b. Salaries and wages d. Accrued Salaries
14. Which of the following is an example of a deferral? d. Recording utilities expense when the monthly bill is
received
a. Legal fees already earned but not yet collected
20. Which of the following results in the recognition of
b. Taxes accrued but not yet paid an expense?
c. Accumulation of interest in a bank account a. Expiration of usefulness of equipment during the
accounting period
d. Fees received this month for services to be rendered
next month b. Payment of the principal amount of a loan
15. Failure to adjust for accrued salaries at the end of c. Payment of accounts
the period will result in an:
d. Withdrawal of cash by the owner
a. Overstatement of assets
21. The beginning balance of Accounts Receivable was
b. Overstatement of liabilities P120,000. Services billed to customers for the period
were P215,000, and the collections on account from
c. Overstatement of profit for the period the customers were P236,000. What was the ending
d. Understatement of profit for the period 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 e. None of the above
recorded in the commission income account. It was 31. A business has Cash of P30,000; Notes Payable of
discovered that an additional commission income of P25,000; Accounts Payable of P43,000; Service
P47,000 was earned but was not yet received as at Revenue of P70,000 and Accrued Rent Expense of
Dec. 31, 2020. How much was the commission income P18,000. On the basis of these data, how much are its
earned during the year ended Dec 31, 2020? total liabilities?
a. P 47,000 c. P188,000 a. P 55,000 c. P 68,000
b. P235,000 d. P282,000 b. P 86,000 d. P138,000
e. None of the above 32. Insurance Expense account has a balance of
27. Equipment costing P50,000 showed an adjusted P10,800 before adjustment. This amount represents
accumulated depreciation of P13,500 as of December insurance premiums for three months beginning
31, 2020. If the estimated useful life is ten years and December 1, 2020. Based on these data, the insurance
scrap value is P5,000, the date of acquisition was: 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 36. In the worksheet, the owner’s capital account is
a balance of P13,500. Adjustment data gathered shows found in the:
that supplies inventory on hand at year-end amounted
to P4,500. The amount of supplies expense to be a. Balance sheet debit column and nowhere else
shown in the income statement is: b. Trial balance credit column, adjusted trial balance
a. P 4,500 c. P 9,000 credit column and balance sheet credit column
c. Trial balance credit column, adjustments credit
b. P 13,500 d. P 18,000
column, adjusted trial balance credit column, and
34. Rent Income account has a credit balance of balance sheet credit column
P240,000 as at Dec 31, 2020 composed of the
following: Rent received for three months ending d. Trial balance credit column and income
statement debit column
March 31, 2020, P45,000.
• A credit of P195,000 representing advance rental e. Trial balance debit column, adjustments debit
collection for one year beginning April 1, 2020.The column, adjusted trial balance credit column, and
income statement credit column
December 31, 2020 adjusting entry will require a debit
to Rent Income and a credit to Unearned Rent of: 37. Which two steps in the accounting cycle are aided
a. P 45,000 c. P 48,750 by the preparation of the worksheet?

b. P 191,250 d. P195,000 a. Adjusting the accounts and preparing the financial

statements
35. The Giveaway Enterprises reported an Allowance
for Bad Debts of P16,000 (credit) at December 31, b. Analysing source documents and preparing financial
2020, before any adjustment. At the end of the year, statements
the company reports accounts receivable of P800,000, c. Posting journal entries and adjusting the accounts
3% of which is estimated to be uncollectible. The
adjusting entry required at December 31, 2020 would d. Journalizing transactions and posting to the accounts
be: 38. Which columns of the worksheet show unadjusted
a. Dr. Bad Debts Expense, 8,000; amounts?

Cr. Allowance for Bad Debts, 8,000 a. Trial balance c. Adjustments

b. Dr. Bad Debts Expense, 16,000; b. Income statement d. Balance sheet

Cr. Allowance for Bad Debts, 16,000 39. Which situation indicates a loss in the income
statement columns of the worksheet?
c. Dr. Bad Debts Expense, 24,000;
a. When the total debits equal total credits
Cr. Allowance for Bad Debts, 24,000
b. When the total credits exceed the total debits
d. Dr. Bad Debts Expense, 40,000;
c. When the total debits exceed the total credits
Cr. Allowance for Bad Debts, 40,000
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 45. The amount of net profit will appear on the debit
trial balance. At year-end the count of supplies showed side of the income statement columns on a worksheet:
P20,000. What adjustment will appear on the
worksheet? a. If profit exceeds the owner’s withdrawals

a. Dr. Supplies, 40,000; Cr. Supplies Expense, 40,000 b. If total assets exceeded total liabilities for the period

b. Dr. Supplies Expense, 20,000; Cr. Supplies, 20,000 c. If total expenses exceeded total revenue for the
period
c. Dr. Supplies Expense, 40,000; Cr. Supplies, 40,000
d. If total revenues exceeded total expenses for the
d. No adjustment is needed because the Supplies period
account balance is correctly stated.
e. If withdrawals were made during the period
42. In the adjusted trial balance, the owner’s capital
46. Assuming an entity is profitable in the current
account reflects the:
period, the total of the balance sheet credit column in
a. Beginning balance the worksheet will be:
b. Increase in income a. Larger than the balance sheet debit column
c. Ending balance b. Larger than the income statement credit column
d. Net effect of all the adjusting entries c. Larger than the income statement debit column
43. Which of the following steps comes first in d. Smaller than the balance sheet debit column
worksheet preparation?
47. In which columns of the worksheet would the
a. Compute each account’s adjusted balance by adjusted balance of Accumulated Depreciation
combining the trial balance and adjustment figures. appear?
b. Compute the profit or loss as the difference between a. Adjusted trial balance credit, balance sheet credit
total revenues and total expenses in the income
statement. b. Adjusted trial balance credit, income statement credit

c. Enter the account balances in the unadjusted trial c. Adjusted trial balance debit, balance sheet debit
balance columns and foot the debit and credit columns. d. Trial balance credit, adjustments credit, adjusted trial
d. Enter the adjusting entries in the adjustment columns balance credit, balance sheet credit
and total the amounts. e. Trial balance debit, adjusted trial balance debit
44. If the income statement debit and credit columns 48. If total credits exceed total debits in the balance
are not equal after adding the respective columns: sheet columns of a worksheet,
a. An error has been made. a. A net loss was incurred.
b. The entity either generated a net profit or incurred a b. A net profit was generated.
net loss.
c. A mistake was committed.
c. The entity generated a profit.
d. The assets exceeded liabilities.
d. The entity incurred a loss.
e. No conclusion can be drawn until the closing entries
e. The liabilities must exceed the assets. have been made.
49. The income statement debit column of the 54. Reversing entries are:
worksheet contains:
a. Optional
a. Asset account balances
b. Made to record a change in corporate objectives
b. Expense account balances
c. Required by generally accepted accounting principles
c. Contra asset account balances
d. Made prior to preparing a post-closing trial balance
d. Liability account balances
55. An important purpose of closing entries is to:
e. Revenue account balances
a. Adjust the accounts in the ledger
50. Which of the following comes first in the
accounting process? b. Set nominal account balances to zero at the start of
the next accounting period
a. Journalizing business transactions
c. Set real account balances to zero at the start of the
b. Preparation of an adjusted trial balance next accounting period
c. Preparation of an unadjusted trial balance d. Set all account balances to zero at the start of the
next accounting period
d. Preparation of the worksheet
56. Which of the following is done last in the
51. The purpose of the post-closing trial balance is to: accounting process during the current accounting
a. Provide the account balances for the preparation of period?
the balance sheet a. Journalizing reversing entries
b. Ensure that the ledger is in balance for the b. Preparing the post-closing trial balance
completion of the worksheet
c. Preparing the adjusted trial balance
c. Aid in the journalization and posting of the closing
entries d. Preparing the financial statements
d. Ensure that the general ledger is in balance for the 57. Which of the following sequences of documents or
start of the next accounting period records describes the proper sequence in the
accounting cycle?
52. If the last item on a trial balance reads “Owner’s
Capital”, this must be the: a. Source documents, ledger, journal, financial
statements, worksheet
a. Unadjusted trial balance
b. Journal, source documents, ledger, worksheet,
b. Adjusted trial balance financial statements
c. Trial balances of totals c. Source documents, journal, ledger, worksheet,
d. Post-closing trial balance financial statements

53. If a trial balance were to be prepared on the first d. Ledger, source documents, financial statements,
day of the new accounting period, and the account journal, worksheet
Salaries Expense had a credit balance, you would know 58. Closing entries will:
that:
a. Increase the owner’s capital balance.
a. The trial balance is a post-closing trial balance
b. Decrease the owner’s capital balance
b. The adjusting entries have been recorded
c. Not affect the owner’s capital balance
c. A reversing entry has been made
d. Either increase or decrease the owner’s capital
d. The trial balance is an unadjusted trial balance balance
59. If no adjustments are needed for a particular 64. If an entity suffered a loss, the amount of the loss
entity, its: is entered on the worksheet on the:
a. Post-closing trial balance will be identical to its trial a. Debit side of the Income Statement and credit side of
balance. the Balance Sheet
b. Adjusted trial balance will be the same as its post- b. Credit side of the Income Statement and debit side of
closing trial balance. the Balance Sheet
c. Trial balance will be the same as its adjusted trial c. Debit side of both the Income Statement and Balance
balance. Sheet
d. Trial balance, adjusted and post-closing trial balance d. Credit side of both the Income Statement and
will be the same. Balance Sheet
60. Which of the following could not possibly be a 65. Which of the following accounts could appear in an
closing entry? adjusting entry, a closing entry and a reversing entry?
a. Dr. Income Summary and Cr. Owner’s Capital a. Salaries Payable c. Depreciation Expense
b. Dr. Owner’s Capital and Cr. Owner’s Drawings b. Interest Income d. Prepaid Advertising
c. Dr. Income Summary and Cr. Owner’s Drawings 66. In preparing closing entries, which of the following
columns of the worksheet are most helpful?
d. Dr. Owner’s Capital and Cr. Income Summary
a. Adjustments columns
61. At the end of the accounting period, the equation
Assets = Liabilities + Owner’s Equity does not balance. b. Adjusted trial balance columns
Which of the following actions balances the equation?
c. Income statement columns
a. Subtract revenues from and add expenses to owner’s
d. Balance sheet columns
equity.
b. Subtract revenues from owner’s equity and add 67. An accrued expense is classified as a/an:
expenses to assets. a. Current asset c. Operating expense
c. Add to owner’s equity the difference between b. Current liability d. Operating income
revenues and expenses.
68. The adjustment for a prepaid expense requires
d. Add revenues to and subtract expenses from assets. a/an:
62. The post-closing trial balance contains: a. Decrease in asset and increase in expense
a. Real accounts only b. Increase in asset and increase in revenue
b. Nominal accounts only c. Decrease in revenue and decrease in asset
c. Both real and nominal accounts d. Increase in asset and decrease in expense
d. Neither real nor nominal accounts 69. Which of the following statements is true?
63. In which financial statement does Income a. Only nominal accounts are contained in an adjusted
Summary appear? trial balance.
a. Income statement b. The accrual principle records revenue only when cash
b. Statement of changes in equity is received, and records expenses only when cash is
paid.
c. Statement of financial position
c. The post-closing trial balance provides the basis for
d. Statement of Cash Flows the preparation of the financial statements.
e. It does not appear in any financial statement.
d. The worksheet is accomplished at the end of the 5. Which of the following receipts is a cash inflow from
accounting period to work out the adjustments and financing activities?
prepare the financial statements.
a. From collection of customers’ accounts
70. Accrued income is classified as a/an:
b. From interest on notes receivable
a. Current asset
c. From issuance of notes payable
b. Current liability
d. From sale of property and equipment
c. Non-current liability
6. Closing entries reduce the following types of
d. Operating expense accounts to a zero balance at the end of the
accounting period.
a. Income and expenses c. Withdrawals
QUIZ MIDTERMS
b. Income summary d. All of the above
1. Which of the following is an example of a financing
activity? e. Only a and b
a. Obtaining a bank loan 7. If the last item on a trial balance reads “Owner’s
Capital”, this must be the:
b. Paying taxes to the government
a. Post-closing trial balance c. Adjusted trial balance
c. Producing goods and services
b. Unadjusted trial balance d. Reversed trial balance
d. Purchasing a building
8. Reversing entries are:
2. Which of the following is an example of an investing
activity? a. Made to record a change in corporate objectives
a. Employing workers b. Required by generally accepted accounting principles
c. Optional
b. Paying off a loan
d. Made prior to the preparation of the post closing trial
c. Selling idle land not used by the entity balance
d. Owner’s cash contribution 9. Which of the following is done last in the accounting
3. The Statement of Cash Flows would disclose the process?
owner’s cash withdrawal in the:
a. Preparation of the post-closing trial balance
a. Financing activities section b. Preparation of an adjusted trial balance
b. Investing activities section c. Preparation of the worksheet
c. Operating activities section d. Preparation of the trial balance from the general
d. Notes to the financial statements ledger

4. Which of the following payments is a cash outflow 10. An important purpose of closing entries is to:
from operating activities? a. Adjust the accounts in the ledger.
a. For purchase of supplies b. Set nominal accounts to a zero balance at the start of
b. To acquire property and equipment the next accounting period.

c. To settle notes payable c. Set real account balances to zero at the start of the
next accounting period.
d. To owners in the form of withdrawals
d. Help in the preparation of the financial statements.
11. Which of the following accounting cycle steps is 17. When there is a loss, the entry to close the Income
done before the others? Summary account is:
a. The financial statements are prepared. a. Debit Loss and credit Income Summary
b. Closing entries are recorded and posted. b. Debit Owner’s Capital and credit Income Summary
c. Source documents are analyzed and recorded. c. Debit Income Summary and credit Loss
d. Adjusting entries are recorded and posted. d. Debit Income Summary and credit Owner’s Capital
12. Closing entries will ultimately affect the: 18. In which financial statement does the Income
Summary account appear?
a. Total liabilities c. Total assets
a. Income statement
b. Cash account d. Owner’s Capital account
b. Statement of changes in equity
13. If no adjustments are needed for a particular
entity, its: c. Balance sheet
a. Post-closing trial balance will be the same as its d. It does not appear in any financial statement.
unadjusted trial balance.
19. Which of the following accounts is not closed?
b. Adjusted trial balance will be the same as its post-
closing trial balance. a. Income Summary c. Commission Income

c. Unadjusted trial balance will be identical to its b. Owner’s Capital d. Taxes and Licenses
adjusted trial balance. 20. Consider the steps in the accounting cycle. Which
part of the accounting cycle provides information to
d. Unadjusted trial balance, adjusted trial balance and
post-closing trial balance will all be identical. help a business decide whether to expand its
operations?
14. Which of the following could not possibly be a
a. Post-closing trial balance c. Closing entries
closing entry?
a. Debit Income Summary and credit Owner’s Capital b. Adjusting entries d. Financial statements

b. Debit Owner’s Capital and credit Owner’s 21. Financial statement time periods should
Withdrawals be of equal length,
c. Debit Income Summary and credit Owner’s a. And should correspond with the calendar year
Withdrawals
b. And should end during the peak season
d. Debit Owner’s Capital and credit Income Summary
c. To comply with loan agreements
15. In preparing closing entries, which of the following
columns of the worksheet are most helpful? d. To make comparison meaningful

a. Adjustments columns 22. As the usefulness of the asset Property and

Equipment expires,
b. Adjusted trial balance columns
a. A liability is created.
c. Income Statement columns
b. An amount is transferred from one asset account to
d. Balance Sheet columns another
16. Which of the following accounts could appear in an c. A related expense account is reduced.
adjusting entry, closing entry and reversing entry?
d. The cost of the asset is allocated to an expense
a. Interest Income c. Depreciation Expense account.
b. Salaries Payable d. Accumulated Depreciation
23. If the amount of profit for the current period is less 6. The purchase of equipment for use in the business,
than the amount of the owner’s withdrawals, there not for resale, should be debited to the Purchases
will be a/an: account.
a. Decrease in the cash account 7. The terms “freight prepaid or freight collect” will
dictate who should bear the transportation costs.
b. Decrease in the owner’s capital account
8. The perpetual inventory system requires the
c. Increase in liabilities on the balance sheet recording of the cost of each sale as it occurs.
d. Increase in the cash account 9. The two systems in accounting for merchandise
e. Increase in the owner’s capital account bought and sold are the periodic and perpetual
inventory methods.
24. The primary purpose of reversing entries is to:
10. Sales Discount normally has a debit balance.
a. Correct errors.
11. Under the periodic inventory system, the Cost of
b. Simplify the recording of regular transactions in the Goods Sold is treated as an account.
next accounting period.
12. An entity would more likely know the amount of
c. Transfer the balance of the expense accounts to the inventory on hand or unsold merchandise at any time if
owner’s capital account and set the accounts equal to it uses the periodic inventory method rather than the
zero. perpetual inventory method.
d. Place the expenses for the current period in the 13. Under the perpetual inventory system, the
proper accounts. Merchandise Inventory account is not affected when a
25. Which of the following pairs of accounts could not sales allowance is granted by the seller.
be included in the same adjusting entry? 14. Goods bought or sold should be recorded at the list
a. Interest Expense and Interest Receivable price less any trade discounts involved.

b. Rent Expense and Rent Payable 15. Under the periodic inventory system, the Purchases
account is used to accumulate all items acquired
c. Salaries Expense and Accrued Salaries primarily for resale purposes.
d. Precollected Fees and Fees Earned 16. FOB shipping point implies that while the goods are
in transit, the seller is still the owner of such goods.
QUIZ 1 - FINALS
17. FOB destination means that the seller agrees to
TRUE or FALSE QUESTIONS
shoulder the freight cost.
1. Under the periodic inventory system, purchases of
18. Cash discounts are termed Purchases Discounts
merchandise are recorded in the Merchandise
from the viewpoint of the seller
Inventory account.
19. A credit term of “2/10, n/30” means that the buyer
2. Taking a physical inventory refers to making a count
may deduct 2% from the invoice price if payment is
of all merchandise on hand at a particular time.
made within 10 days from the end of the month
3. Sales Returns and Allowances is a contra-revenue
20. There is no need for a physical count if the entity
account.
uses the perpetual inventory method.
4. An advantage of using the periodic inventory system
21. Transportation In is considered as an added cost of
is that it requires less record-keeping than the perpetual
merchandise purchased.
inventory system.
22. Merchandise inventory could include goods that are
5. Trade discounts are offered to the buyer to
still in transit.
encourage early payment of accounts.
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 c. Only the ending merchandise inventory is extended
the year, and that the ending merchandise inventory to the debit side of the balance sheet columns.
was P20,000 less than the beginning merchandise
inventory of P250,000, how much was cost of goods d. The beginning merchandise inventory is extended to
sold? the debit side and the ending inventory to the credit
side of the income statement columns, and also to the
a. P1,130,000 c. P 670,000 debit side of the balance sheet columns.
b. P 920,000 d. P1,170,000 29. Cost of goods sold is a major expense of a
merchandising entity.
25. The entry to record a payment of a P15,000
account within the 2% discount period would include a. True b. False
a:
30. Which of the following is not relevant to the
a. Credit to Accounts payable for P14,700 computation of net purchases?
b. Credit to Cash for P14,700 a. Purchases returns and allowances
c. Debit to Accounts payable for P14,700 b. Purchases discounts
d. Debit to Purchases discounts for P300 c. Sales discounts
26. Under a perpetual inventory system, the entry to d. Freight in
record a purchase of P60,000 with terms of 2/10, n/30
would include a: 31. When preparing a worksheet for a merchandising
entity that uses the perpetual inventory system, the
a. Credit to Accounts payable for P58,800 merchandise inventory amount shown on the trial
balance is the beginning balance that will be carried
b. Debit to Purchases for P60,000 over to the income statement debit column.
c. Debit to Accounts payable for P58,800 a. True b. False
d. Debit to Merchandise Inventory for P60,000 32. When preparing closing entries under the periodic
27. The basic differences between the financial inventory system, Sales and Purchases Returns and
statements of a merchandising entity and a service Allowances are both closed in the same entry.
entity include the cost of sales section of the income a. True b. False
statement and the:
33. Under the periodic inventory method, the two
a. Equity section of the balance sheet Merchandise Inventory accounts appear in the closing
b. Inclusion of merchandise inventory on the balance entries made at the end of the period.
sheet as a current asset a. True b. False
c. Other income section of the income statement 34. Under the perpetual inventory method, the ending
d. Profit amount Merchandise Inventory is closed at the same time as
Cost of sales.
28. In preparing a ten-column worksheet that uses the
perpetual inventory system, a. True b. False

a. Only the beginning merchandise inventory is 35. The excess of gross profit over total operating
extended to the debit side of the income statement expenses is called operating profit or income from
columns. operations.

b. The beginning merchandise inventory is extended to a. True b. False

the debit side and the ending inventory to the credit
side of the income statement columns.
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