CITY OF MALABON UNIVERSITY

College of Business and Accountancy

AccountingProcess Assignment/Review of ISRIII CODE A 1-1

1. The first step in the accounting process is

a. Preparation of trial balance.
b. Posting to general ledger.
c. Journalizing business transactions.
d. Identifying and analyzing business transactions.

2. Which of the following source documents does not create a Journal Entry?
a. Sales Invoice
b. Official Receipts
c. Purchase Order
d. Purchase Invoice

3. Which of the following business transactions requires a journal entry in the company’s books?
a. Order of equipment.
b. Signing of advertising contract.
c. Loss of inventory due to fire.
d. Guaranteeing a loan for others.

4. This accounting process is the recognition and non-recognition of business activities as accountable
events.
a. Identifying
b. Measuring
c. Communicating
d. Interpreting

5. A debit may signify a(n):

a. Increase in an asset account.
b. Decrease in an asset account.
c. Increase in a liability account.
d. Increase in the owner’s equity account.

6. This is also called the book of original entry.

a. Trial balance
b. General Journal
c. General Ledger
d. Worksheet

7. Which of the following is false regarding General Journal?

a. The debit and credit column should always be equal.
b. It should be chronologically prepared.
c. It may contain more than one debit account or credit account.
d. It is used to classify and summarize transactions, and to prepare data for financial statements.

8. Sales on account should be recorded in which Special Journal?

a. Cash Receipt Journal
b. Cash Disbursement Journal
c. Sales Journal
d. Purchases Journal

9. Sales return and allowances on credit sales should be recorded in which Special Journal?
a. Cash Receipt Journal

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 b. Cash Disbursement Journal
c. General Journal
d. Purchases Journal

10. Payment of liability out of the owner’s personal cash

a. Decreases liabilities and increases equity.
b. Does not affect the business.
c. Decreases both assets and liabilities.
d. Decreases both assets and equity.

11. Which of the following is a nominal adjunct account?

a. Share premium
b. Carriage inward
c. Purchase returns and allowances
d. Accumulated depreciation

12. Which of the following describes the classification and normal balance of Sanchez, Personal?
a. Asset, debit
b. Expense, debit
c. Equity, debit
d. Equity, credit

13. The receipt of cash from customers in payment of their accounts would be recorded by
a. A debit to cash and a credit to accounts receivable.
b. A debit to accounts receivable and a credit to cash.
c. A debit to cash and a credit to accounts payable.
d. A debit to accounts payable and a credit to cash.

14. Which of the following define “Posting”?

a. The process of recording a transaction in the journal.
b. The process of transferring the debits and credits from the journal entries to the accounts.
c. An analysis and updating of the accounts when financial statements are prepared.
d. The transfer process of converting temporary account balances to zero by transferring the revenue
and expense account balances to Income summary, transferring the Income summary to capital
account.

15. Which of the following errors will not cause the debit and credit column of the trial balance to be
unequal?
a. A debit entry was recorded in the wrong account.
b. A debit was entered in an account as a credit.
c. The account balance was carried to the wrong column of the trial balance.
d. The balance of an account was incorrectly computed.

16. Which of the following defines “Subsidiary Ledger”?

a. A ledger containing individual accounts with a common characteristic.
b. Journals designed to be used for recording a single type of transaction.
c. A list of the accounts in the ledger
d. The two-column form used for entries that do not fit in any of the special journals.

17. It is the process of adding the debit column or adding the credit column of an account.
a. Footing
b. Cross-Footing
c. Balancing
d. Totaling

18. Which of the following is the function of Trial Balance?

a. To record business transactions.
b. To classify business transactions.

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 c. To check errors in the recording and posting process.
d. To provide quantitative information primarily financial in nature about economic events for decision
making of interested users.

19. Adjusting entries are made to ensure that

a. Balance sheet, income and expense accounts have incorrect balances at the end of the accounting
period.
b. Income and expenses are recognized in the period in which they are earned and incurred.
c. Part of the asset that has been unused is recognized as expense.
d. All of the above.

20. Which of the following defines “ Accrued Expenses”?

a. Income that have been earned but not recorded in the books.
b. Expenses that have been paid but not yet incurred.
c. Income that have been collected but not yet earned.
d. Expenses that have been incurred but not recorded in the books.

21. The pro-forma entry to record Accrued Income is

a. Debit Expense and Credit Asset.
b. Debit Income and Credit Receivable.
c. Debit Receivable and Credit Income.
d. Debit Expense and Credit Payable.

22. A deferred rent expense was recorded using the asset method. What pro-forma adjusting entry is
necessary at the end of the accounting period?
a. Debit Rent Income and Credit Unearned Rent Income.
b. Debit Rent Expense and Credit Deferred Rent Expense.
c. Debit Unearned Rent Income and Credit Rent Income.
d. Debit Deferred Rent Expense and Credit Rent Expense.

23. The pro-forma entry to record depreciation is

a. Debit Depreciation Expense and Credit to Intangible Asset.
b. Debit Depreciation Expense and Credit to Liability for Depreciation.
c. Debit Depreciation Expense Credit to Reserve for Depreciation.
d. Debit to Depreciation Expense and Credit to Accumulated Depletion.

24. The pro-forma entry to record Doubtful Accounts Expense is

a. Debit Doubtful Account Expense and Credit to Accounts Receivable.
b. Debit to Doubtful Accounts Expense and Credit to Allowance for Doubtful Accounts.
c. Debit to Allowance for Doubtful Accounts and Credit to Accounts Receivable.
d. Debit to Accounts Receivable and Credit to Allowance for Doubtful Accounts.

25. The principal difference between depreciation and most other types of expenses is that depreciation
a. Does not require immediate cash outflow.
b. Is not deductible for tax purposes.
c. Can be avoided thru periodic repairs and maintenance.
d. Is subject to accurate measurement.

26. Adjusting entry

a. Should not include cash account.
b. Includes at least one nominal account and at least one real account.
c. Should not include a debit to income and a credit to expense account.
d. All of the above.

27. Which accounting concept/principle is the reason for adjusting entries?

a. Entity Concept
b. Periodicity Concept
c. Accrual Concept

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 d. Stable Monetary Unit Concept

28. Why adjusting entries are necessary?

a. Transactions take place over more than one accounting period.
b. To make debits equal credits.
c. To close nominal accounts.
d. To correct erroneous balances in accounts.

29. The “Carrying Value” or “Book Value” of a depreciable asset is equal to

a. Cost less residual value
b. Cost less accumulated depreciation
c. Cost less accumulated depreciation and residual value
d. Fair value less cost of disposal

30. At the end of the accounting period, My Precious Company omitted the recording of an accrued expense.
As a result, the current year Assets, Liabilities, Equity, and Net Income, respectively, are:
a. Understated, Understated, Understated, Understated
b. Not affected, Understated, Overstated, Overstated
c. Not affected, Overstated, Understated, Understated
d. Understated, Overstated, Understated, Understated

31. At the end of the accounting period, Bhe Bhe ko Company omitted the recording of expired insurance. As
a result, the current year Assets, Liabilities, Equity, and Expenses, respectively, are:
a. Overstated, Not affected, Understated, Understated
b. Understated, Not affected, Overstated, Overstated
c. Overstated, Not affected, Understated, Overstated
d. Overstated, Not affected, Overstated, Understated

32. A tool used to summarize all information to make adjusting entries and closing entries and facilitate the
preparation of financial statements.
a. T-Account
b. Post Closing Trial Balance
c. Unadjusted Trial Balance
d. Worksheet

33. These are structured financial representation of the financial position and financial performance of an
entity.
a. Statement of Financial Position
b. Auditor’s Report
c. Financial Statements
d. Financial Reports

34. If the business generated a profit during the year, the sum of the income statement debit column in the
worksheet will be
a. Smaller than the balance sheet debit column.
b. Smaller than the balance sheet credit column.
c. Smaller than the income statement credit column.
d. Larger than the income statement credit column.

35. The Income Statement debit and credit columns are not equal after adding the respective columns,
a. An error has been made.
b. The Company generated a profit.
c. The Company incurred a loss.
d. The Company either generated a profit or incurred a loss.
36. In preparing financial statements, which of the following financial statements is prepared first?
a. Statement of Financial Position
b. Statement of Changes in Equity
c. Income Statement

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 d. Statement of Comprehensive Income

37. Which of the following accounts in the adjusted trial balance columns of the end-of-period spreadsheet
(worksheet) would be extended to the balance sheet columns?
a. Utilities Expense
b. Rent Revenue
c. Precious, Drawing
d. Merchandise Inventory, Beginnings

38. Which of the following accounts would be classified as a current asset on the Statement of Financial
Position?
a. Office Equipment
b. Land
c. Accumulated Depreciation
d. Accounts Receivables

39. Which of the following is not subject to closing entry?

a. Income and Expenses
b. Income Summary
c. Withdrawal
d. Retained Earnings

40. Which of the following entries closes the drawing account at the end of the period?
a. Debit Drawing, Credit Income Summary
b. Debit Equity, Credit Drawing
c. Debit Income Summary, Credit to Drawing
d. Debit Drawing, Credit Equity

41. Which of the is subject to closing process?\

a. Cost of Sales
b. Accrued Expenses
c. Accumulated Depreciation
d. Deferred revenue

42. Which of the following statements pertain to closing entry?

a. Its purpose is to check error in the adjusting and closing process.
b. It is done to facilitate the recording of certain transactions in the next accounting period.
c. It sets nominal or temporary account balances to zero at the start of the next accounting period.
d. It ensures proper matching of income and expenses.

43. Which of the following is true regarding “Post Closing Trial Balance”?
a. It includes real and nominal accounts.
b. It is a required step in the accounting process.
c. It is normally done in the beginning of the next accounting period.
d. Its function is to detect error in the adjusting and closing process.

44. Reversing entries

a. Are required by accounting standards.
b. Must be made at the end of the accounting period.
c. Are made to simplify recording of certain transactions in the next accounting period.
d. Are done before closing entries.

45. Which of the following is not subject to reversing entry?

a. Accrued Income
b. Prepaid Expenses under asset method
c. Deferred income under income method
d. Accrued Expenses

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