1.
Basic steps in the recording process include all of
the following except
a. Transfer the journal information immediately to the
company annual report
b. Analyze each transaction for the effect on the
accounting elements
c. Enter the transaction information in a journal
d. All of the choices are correct regarding the basic
steps in the recording process
2. Which statement is true regarding debits and credits?
a. In the income statement, debits are used to increase
account balances, whereas in the statement of
financial position, credits are used to increase
account balances
b. Before adjustments, debits will not equal credits in
the trial balance
c. The rules for debit and credit and the normal balance
of capital are the same as for liability
d. In the income statement, revenue is increased by a
debit whereas in the statement of financial position,
capital account is increased by a credit
3. Which of the following is not a possible combination
of a journal entry?
a. Increase in asset and increase in liability
b. Decrease in equity and increase in liability
c. Decrease in liability and decrease in asset
d. Increase in asset and decrease in capital
4. A subsidiary ledger is
a. A listing of the components of account balances
b. A backup system to protect against record destruction
c. A listing of accounts before closing entries
d. A list of accounts of a subsidiary
5. Which statement regarding a trial balance is
incorrect?
a. A trial balance is a test of the equality of the
debit and credit balances in the ledger
b. A trial balance is a list of all the open accounts in
the ledger with their balances
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
6. Numerous errors may exist even though the trial
balance columns agree. Which is not one of these
errors?
a. A transaction is not journalized
b. Transposition error
c. A journal entry is posted twice
d. A transaction is recorded and posted at an incorrect
amount
7. Who is the father of accounting and bookkeeping?
a. Saint Matthew, the Tax collector
b. Luca Pacioli
c. Leonardo da Vinci
d. Noe Quinanola
8. The definition of accounting underscores the
following concepts, except
a. Accounting is considered a service activity
b. Accounting provides information that is financial in
character
c. Accounting vouches the attainability of projection
d. Accounting provides information for decision making
9. The primary responsibility for the preparation of the
financial statements is reposed in
a. Management of the entity
b. Internal auditor
c. External auditor
d. Controller
10. Which is included in a complete set of financial
statements?
a. A statement of compliance with local legislation
b. A statement of changes in equity
c. Value added statement
d. Annual report
11. Which of the following is not a reason for sales
discounts to be offered to the customers?
a. Improve the seller’s liquidity by turning the
accounts receivable into cash
b. Encourage earlier settlement of debts by the
customers
c. Increase the amount to be paid by the customers
d. Reduce the level of bad debts
12. When the seller pays the common carrier the
delivery cost and the terms of the sale is FOB
Origin, the seller records the payment of the
transportation costs by debiting?
a. Accounts Payable
b. Accounts Receivable
c. Sales
d. Freight-in
13. The cost of goods available for sale during the
year depends on the amounts of
a. Beginning merchandise inventory and cost of goods
sold
b. Beginning merchandise inventory and cost of goods
purchased
c. Beginning merchandise inventory, cost of goods sold,
and ending merchandise inventory
d. Beginning merchandise inventory, net purchases, and
ending merchandise inventory
14. A special journal contained columns for cash,
purchase discounts, and accounts payable. This
journal is
a. A cash disbursements journal
b. A cash receipts journal
c. A purchases journal
d. A sales journal
15. Which of the following transactions affects the
total value of liabilities of a firm
a. Goods purchased from suppliers by cash
b. Interest received from bank
c. Office equipment bought on credit
d. Goods sold to customers on credit
16. A statement of financial position lists down
a. The types and amounts of the revenues and expenses of
a business
b. Only the information about what happened to equity
during a time period
c. The types and amounts of assets, liabilities, and
equity of a business as of a specified date
d. The inflows and outflows of cash during the period.
e. The assets and liabilities of a firm but not the
owner’s equity because it is presented already in the
statement of changes in equity
17. Assets created by selling goods and services on
credit are
a. Accounts payable
b. Accounts receivable
c. Liabilities
d. Expenses
e. Equity
18. How would the accounting equation of Sky Company
be affected by the billing of a client for P10,000 of
consulting work completed?
a. +P10,000 Accounts receivable, -P10,000 Accounts
payable
b. +P10,000 Accounts receivable, +P10,000 Accounts
payable
c. +P10,000 Accounts receivable, +P10,000 Cash
d. +P10,000 Accounts receivable, +P10,000 Revenue
e. +P10,000 Accounts receivable, -P10,000 Revenue
19. While in the process of posting from the journal
to the ledger a company failed to post a P500 debit
to the Office Supplies account. The effect of this
error will be that:
a. The trial balance will not balance
b. The error will overstate the debits listed in the
journal
c. The total debits in the trial balance will be larger
than the total credits
d. The error will overstate the credits listed in the
journal
20. The Post. Ref. column in the general journal is
used to show that an account has been posted to the
ledger when which of the following is placed in it?
a. Journal page number
b. Account number
c. Journal voucher number
d. Check mark
21. Umali Coffee Shop, in an effort to streamline
its accounting system, has decided to utilize a Cash
Receipts Journal in its operation. If the company is
to record the cash sale of food for P18 which is the
correct entry?
a. Cash Cr. P18, Food Revenue Dr. P18
b. Cash Dr. P18, Food Revenue Dr. P18
c. Cash Dr. P18, Food Revenue Cr. P18
d. Cash Cr. P18, Food Revenue Cr. P18
22. During the year, Sally’s Pet Shop’s inventory
account balance decreased by P29,000. If the
company’s cost of goods sold for the year was
P245,000, purchases must have been:
a. P187,000
b. P216,000
c. P274,000
d. Cannot be determined with the given data
23. Eli’s Electronic Repair Shop started the year
with total assets of P300,000 and total liabilities
of P200,000. During the year, the business recorded
P400,000 in electronic repair revenues, P300,000 in
expenses, and Eli withdrew P50,000. Eli's Owner’s
Capital balance changed by what amount from the
beginning of the year to the end of the year?
a. P100,000
b. P50,000
c. P200,000
d. P250,000
24. On June 1, 2020, Barcelona Inc. reported a cash
balance of P11,000. During June, the Cash General
Ledger shows that the firm made deposits of P3,000
and made disbursements totaling P9,000. What is the
cash balance as of June 30, 2020?
a. P5,000 debit balance
b. P14,000 debit balance
c. P5,000 credit balance
d. P4,000 credit balance
On August 13, 2020, Accounting Services Co. purchased
office equipment for P1,700 and office supplies of P300
on account. Which of the following journal entries is
recorded correctly and in the standard format?
25. Under the double entry system, what is the value
of X if assets, current liabilities, noncurrent
liabilities and capita are X, P40,000, P60,000, and
P350,000, respectively?
a. P250,000
b. P350,000
c. P370,000
d. P450,000
26. Which of the following combinations of trial
balance totals suggest the presence of either a
transposition error or a number slide
(transplacement)?
a. P65,470 debit and P68,170 credit
b. P33,220 debit and P35,420 credit
c. P25,670 debit and P26,670 credit
d. P14,517 debit and P15,477 credit
1.) a. Transfer the journal information immediately to the company annual report
2.) c. The rules for debit and credit and the normal balance of capital are the same as for
liability
3.) d. Increase in asset and decrease in capital
4.) a. A listing of the components of account balances
5.) c. A trial balance proves that no errors of any kind have been made in the accounts
during the accounting period
6.)d. A transaction is recorded and posted at an incorrect amount
7.) b. Luca Pacioli
8.) c. Accounting vouches the attainability of projection
9.) a. Management of the entity
10.) b. A statement of changes in equity
11.) c. Increase the amount to be paid by the customers
12.) b. Accounts Receivable
13.) b. Beginning merchandise inventory and cost of goods purchased
14.) c. A purchases journal
15.) c. Office equipment bought on credit
16.) c. The types and amounts of assets, liabilities, and equity of a business as of a
specified date
17.) c. The types and amounts of assets, liabilities, and equity of a business as of a
specified date
18.) d. +P10,000 Accounts receivable, +P10,000 Revenue
19.) a. The trial balance will not balance
20.) a. Journal page number
21.) c. Cash Dr. P18, Food Revenue Cr. P18
22.) c. P274,000
23.) b. P50,000
24.) a. P5,000 debit balance
25.) d. P450,000
26.)d. P14,517 debit and P15,477 credit
Explanation:
1.) the journal informations should be transferred in the appropriate ledger accounts, not in
the company's report.
2.) Both capital and liability have a normal balance in credit side, so to increase them record
a credit, and a debit to decrease them.
3.) If there is a decrease in asset there also be a decrease in the liability or equity account,
or else the debit and credit will not be balance.
4.) a subsidiary ledger contains details to support a control account.
5.) A TB doesn't necessarily prove that errors have not been made in the accounts
6.) If a transaction is recorded and posted at an incorrect amount, there is a possibility that
debit will not equal credit.
7.) Luca Pacioli is the father of accounting
8.) Accounting doesn't vouches the attainability of projection. It is based on historical data.
9.) Management of the entity is the one responsible for the preparation of the FS
10.) FS composed of: an Income Statement, a Statement of Changes in Equity, a Balance
Sheet, a Statement of Cash Flows, and Notes to Financial Statements.
11.) c. Sales discounts decrease the amount to be paid by the customers.
12.) The shipping fee should be paid by the buyer.
13.) Beginning merchandise inventory plus cost of goods purchased, equals the total goods
available for sale.
14.) purchases journal contains details about purchases.
15.) The entry to record the equipment on credit, will be have a credit liability account
(Accounts Payable)
16.) Statement of FP list all the types and amounts of assets, liabilities, and equity at a
specified date.
17.) Accounts Receivable will be debited by selling goods on credit.
18.) Dr: Accounts Rec. Cr: Revenue for 10,000
19. ) Since the 500 isn't posted in the supply account (Debit side), then the TB will not be
equal.
20.) The post reference contains the abbreviated name of the ledger, as well as the page on
which it appears.
21.) To record the sales, you need to debit cash and credit the revenue account.
22.) ending invty. plus cogs is equal to total goods available for sale. (29,000+245,000)
23.) Revenue + Expense - Withdrawal (400+300-50)
24.) 11,000+3,000-9,000
25.) NCL+CL+E (40+60+350)
26.) Numbers 4 and 5 in the amounts interchanged.
