Chapter 1

Multiple Choice
1. If assets total P700,000 and liabilities total P400,000, how much are the net assets?
a. P300,000
b. P400,000
c. P700,000
d. P1,100,000
2. What are increases in resources that a firm earns by providing goods or services to its
customers?
a. Assets
b. Income
c. Expenses
d. Liabilities
3. If assets increase by P100,000 and Liabilities decrease by P30,000, owner’s equity must
a. remained unchanged
b. increase by P130,000
c. decrease by P70,000
d. decrease by P130,000
4. Which of the following is true?
a. The debit is on the right side of an asset account.
b. The debit is on the left side of an asset account.
c. The credit is on the left side of a liabilities account.
d. The debit is on the right side of an expense account.
5. Which of the following accounts has a normal debit balance?
a. Accounts payable
b. Notes payable
c. Consulting revenues
d. Advertising expense

6. Which of the following accounts is increased by a credit?

a. Accounts receivable
b. Sales
c. Withdrawals
d. Advertising
7. Which of the following is true?
a. A debit will increase a liability account.
b. A credit will increase an asset account.
c. A credit will increase a revenue account.
d. A debit will decrease an expense account.
8. In applying the rules of debits and credits, which of the following statements is correct?
a. The word “ debit “ means to increase, and the word “credit” means to decrease.
b. Assets, expense and capital accounts are debited for increases.
c. Liability, revenue and capital accounts are debited for increases.
d. Asset, expense and withdrawals are debited for increases.
9. The entity purchases P10,000 fixtures for entity use on credit. Which of the following will be
affected?
1. Assets
2. Liabilities
3. Capital
a. (1) and (2) only
b. (1) and (3) only
c. (2) and (3) only
d. (1), (2) and (3)
10. Suppose a debtor repays his debt of P50,000 by transferring the money into the bank account
of the business. The effect of the transaction on the accounting equation would be:
a. Both assets and liabilities increase by P50,000.
b. Both assets and liabilities decrease by P50,000.
c. Only assets decrease by P50,000.
d. Assets and liabilities remain unchanged.
11. Under the double-entry system, what is the value of X if assets, current liabilities, non-current
liabilities and capital are X, P40,000, P60,000 and P350,000 respectively?
a. P250,000
b. P350,000
c. P370,000
d. P450,000
12. Which of the following is correct under the double-entry system?
a. Asset amount must be equal to liability amount.
b. The change in asset must be compensated by a change in liability.
c. The change in a debit- side entry must be compensated by a change in credit – side entry
d. A decrease in non-current asset means a credit entry in assets account.
Quiz 1

Chapter 2
Multiple Choice

1. Which of the following will cause a trial balance to be out of balance?

a. Mistakenly debiting an asset account instead of an expense account.
b. Posting P1,230 as P2,130 to both a debit and a credit account.
c. Posting the same transaction twice by mistake.
d. Posting only the debit part of a transaction.
2. A journal entry that contains more than just two accounts is called
a. A posted journal entry.
b. An adjusting journal entry.
c. An erroneous journal entry.
d. A compound journal entry.

3. Posting refers to the process of transferring information from

a. A journal to the general ledger accounts.
b. General ledger accounts to journal.
c. Source of documents to a journal.
d. A journal to source document.
4. A business bought a photocopier for office use. The payment was recorded in the photocopying
expense account. State the type of error made.
a. Compensating error.
b. Error of commission.
c. Error of complete reversal
d. Error of principle
5. ______________ refers to the process of transferring the debit and credit amounts from journals to
ledger accounts.
a. Balancing off
b. Transferring
c. Posting
d. Closing
6. _____________ refers to the process of entering transactions into the books of original entry.
a. Identifying
b. Classifying
c. Reporting
d. Recording
7. Which of the following items will not be included in a trial balance?
a. Opening inventory
b. Trade discounts
c. Accounts receivable
d. Accounts payable
8. The purpose of the ledger is to
a. Record chronologically the day’s transactions.
b. Keep a record of documentation to support each transaction.
c. Maintain a separate account for each balance sheet and income statement accounts.
d. Make sure that all balance sheet and income statement accounts have normal balances at all
times.
9. Which of the following does not directly or indirectly affect the owner’s capital account?
a. Paying an accounts payable
b. Withdrawals by the owner
c. Earning of revenues
d. Incurring of expenses
10. What function do general ledgers serve in the accounting process?
a. Summarizing
b. Recording
c. Classifying
d. Reporting

Chapter 3
1. Which of the following is an example of an adjusting entry?
a. Recording the purchase of supplies on account.
b. Recording depreciation expense on a truck
c. Recording the billing of customers for services rendered
 d. Recording the payment of wages to employees
2. An adjusting entry to utilities used during a month for which no bill has yet been received is an
example of
a. Allocating assets to expense to reflect the actual operating expenses incurred during the
accounting period.
b. Allocating revenues received in advance to revenue to reflect actual revenues earned during
the accounting period.
c. Accruing expenses to reflect expenses incurred during the accounting period that are not yet
paid or recorded.
d. Accruing revenues to reflect revenues earned during the accounting period that are not yet
received or recorded.
3. The ending balance of the accounts receivable account was P120,000. Services billed to customers for
the period were P215,000 and collections on account from customers were P236,000. What was the
beginning balance of accounts receivable?
a. P335,000
b. P141,000
c. P99,000
d. P331,000
4. On January 2019, a P140,000 check was paid for rental expense of fourteen months. The amount was
recorded in the rent expense account. How much is the rent expense incurred for the year ended
December 31, 2019?
a. P10,000
b. P20,000
c. P120,000
d. P140,000
5. Daisy Dangayo will rent a warehouse from Realty from May 1, 2018 to April 30, 2020. On April 1,
2018, Daisy Dangayo paid P360,000. It included a cleaning fee of P10,000, two month’s rent, and a
rental deposit amounting to three months’ rent. What should be the related rental expense recorded on
the income statement for the year ended March 31, 2019?
a. P770,000
b. P792,000
c. P840,000
d. P980,000
6. Which of the following is not an application of accrual accounting?
a. Adjusting the accounts
b. Applying the cash basis of accounting
c. Applying the matching rule
d. Recognizing revenues when earned and expenses when incurred
7. The going concern assumption is not applied to
a. Entities about to file for bankruptcy.
b. Entities that have been in existence for less than a year.
c. Entities that have sustained losses for the previous two years
d. The partnership form of business.
8. A service vehicle might be depreciated over 5 years because
a. Income tax provisions require depreciation over the next 5 years.
b. It will be paid for in 5 years.
c. It will help generate revenue for the company over the next 5 years.
d. It will lose most of its market value in 5 years.
9. The journal entry to record an accrued expense results in which of the following types of accounts
being debited and credited?
a. Asset and income
b. Asset and liability
c. Expense and asset
d. Expense and liability
10. If a P2,500 adjustment for depreciation is omitted, which of the following financial statement errors
will occur?
a. Assets will be understated
b. Expenses will be overstated
c. Owner’s equity will be overstated
d. Profit will be understated
11. The amount of accrued but unpaid expenses at the end of the period is both an expense and
a. A deferral
b. A liability
c. An asset
d. An income
12. Accrued revenues
a. decrease assets
b. decrease liabilities
c. increase assets
d. increase liabilities
13. Accrued expenses
 a. decrease assets
b. decrease liabilities
c. increase assets
d. increase liabilities
14. An item that represents services received by the firm for which it will pay for in the future is called
a. an accrued expense.
b. An accrued revenue.
c. An unearned revenue.
d. A prepaid expense.
15. An item that represents services provided by a firm for which it will receive payment in the future is
called
a. a prepaid expense
b. an accrued expense
c. an accrued revenue
d. an unearned revenue

Chapter 4
Multiple Choice
1. Which of the following types of information is not found in financial statements?
a. Profits
b. Revenue
c. Selling prices
d. Assets
2. Accounting data flow from the
a. Balance sheet to the income statement
b. Income statement to the statement of owner’s equity
c. Statement of owner’s equity to the balance sheet
d. Both b and c are correct
3. Consider the steps in the accounting cycle. Which part of the accounting cycle provides information
to help a business decide whether to expand its operations?
a. Post-closing trial balance
b. Adjusting entries
c. Closing entries
d. Financial statements
4. Which columns of the accounting work sheet show unadjusted amounts?
a. Trial balance
b. Adjustments
c. Income statement
d. Balance sheet
5. Which columns of the work sheet show profit?
a. Trial balance
b. Adjustments
c. Income statement
d. Both b and c
6. Which situation indicates a loss on the income statement?
a. Total debits equal total credits
b. Total credits exceed total debits
c. Total debits exceed total credits
d. None of the above
7. Which of the following is a cash inflow from financing activities?
a. Receipt from collections on notes receivable.
b. Receipt from interest on notes receivable.
c. Receipt from issuance of notes payable.
d. Receipt from sale of property and equipment.

8. In the adjusted trial balance, the owner’s equity account reflects

a. The beginning of the period balance.
b. The increase to income and expense.
c. The period ending balance.
d. The results of adjusting entries.
9. Which of the following steps comes first in worksheet preparation?
a. Compute each account’s adjusted balance by combining the trial balance and adjustment
figures.
b. Compute profit or loss as the difference between total revenues and total expenses on the
income statement.
c. Enter the account balances in the unadjusted trial balance columns and total the amounts.
 d. Enter the adjusting entries in the adjustment columns and total the amounts.
10. If the income statement debit and credit columns are not equal after adding the respective columns,
a. an error has been made.
b. The entity either generated a profit or incurred a loss.
c. The entity generated a profit.
d. The entity incurred a loss.
e. The liabilities must exceed the assets.
11. Worksheets are prepared because
a. They aid in the preparation of the financial statements, adjusting entries, and closing entries.
b. They are necessary for the preparation of the financial statements.
c. They are required by generally accepted accounting principles.
d. They constitute a permanent record of all adjusting entries made for the period.
12. Which of the following is an example of an investing activity?
a. Obtaining a bank loan
b. Paying taxes to the government
c. Producing goods and services
d. Purchasing a building
13. Which of the following is an example of a financing activity?
a. Acquiring land
b. Employing workers
c. Paying off a loan
d. Selling equipment
14. The statement of changes in equity would not show
a. revenues and expenses
b. the owner’s ending capital balance
c. the owner’s initial capital balance
d. the owner’s withdrawals for the period

Chapter 5
Multiple Choice
1. Some entities adjust their accounts and close their books only on an annual basis.
a. worksheets may be prepared on an interim basis.
b. Worksheets are not needed.
c. Worksheets are prepared only on an annual basis.
d. Worksheet are not prepared.
2. The purpose of the post-closing trial balance is to
a. provide the account balances for the preparation of the balance sheet.
b. Ensure that the ledger is in balance for completion of the worksheet.
c. Aid the journalizing and posting of the closing entries.
d. Ensure that the ledger is in balance for the start of the next period.
3. Which of the following accounts will appear on the post-closing trial balance?
a. Building
b. Depreciation expense – building
c. Owner withdrawals
d. Service revenues
4. A final check on the adjusting and closing process is provided by the
a. Worksheet
b. Financial statement
c. Post-closing trial balance
d. Adjusted trial balance
5. If the last item on a trial balance reads “Owner’s equity”, this must be the
a. post –closing trial balance
b. unadjusted trial balance
c. adjusted trial balance
d. reversed trial balance
6. If a trial balance were to be prepared on the first day of the new year, and the account salaries expense
had a credit balance, you would know that
a. the trial balance is a post-closing trial balance.
b. The adjusting entries have been recorded.
c. The trial balance is an adjusted trial balance.
d. A reversing entry has been made
7. Reversing entries are
a. Optional
b. Made to record a change in corporate objectives.
c. Required by generally accepted accounting principles.
d. Made prior to preparing a post-closing trial balance.
8. Which of the following comes last in the accounting process?
a. preparation of a post –closing trial balance
b. preparation of an adjusted trial balance
 c. worksheet preparation
d. journalizing external transactions
9. Which of the following accounts could appear in an adjusting entry, closing entry and reversing entry?
a. interest income
b. salaries payable
c. depreciation expense-buildings
d. accumulated depreciation-buildings
10. When an entry has earned a profit, the profit amount is entered on the worksheet on the
a. debit side of the income statement columns and the credit side of the balance sheet columns
b. credit side of the income statement columns and the debit side of the balance sheet columns
c. debit side of both the income statement and the balance sheet columns
d. credit side of both the income statement and the balance sheet columns
11. Probably the last account to be listed on a post-closing trial balance would be
a. salaries payable
b. salaries expense
c. owner’s equity
d. income summary
12. When there is a loss, the entry to close the Income summary account is
a. debit loss and credit income summary account
b. debit owner’s capital and credit income summary
c. debit income summary and credit loss
d. debit income summary and credit owner’s capital
13. The post- closing trial balance contains
a. real account only.
b. Nominal account only.
c. Both real accounts and nominal accounts.
d. Neither real accounts nor nominal accounts.
14. In which financial statement does income summary appear?
a. Income statement
b. Statement of changes in equity
c. Balance sheet
d. It does not appear in any financial statement
15. An important purpose of closing entries is to
a. adjust the accounts in the ledger.
b. Set nominal account balances to zero at the start of the next period.
c. Set real account balances to zero at the start of the next period.
d. Help in preparing financial statements.