REVIEW OF THE ACCOUNTING PROCESS
Fees earned
I. Theories
1. Which of the following statements is not true
as it pertains to the accounting process?
a. The established system for recording
transactions and other events as they
occur is referred to as a double-entry
accounting.
b. Events are of two types: external and
internal. Accountants record events
that affect the financial position of the
enterprise.
c. Adjustments are necessary to
achieve a proper matching of
revenues and expenses to determine
net income for the current period and
to achieve an accurate statement of
the assets and the equities existing at
the end of the period.
d. Posting is the initial recording of all
transactions in chronological order.
2. Which of the following does not initiate an
entry to be made in the books of accounts?
a. Purchase invoice
b. Purchase order
c. Sales invoice
d. Official receipt
3. The genera journal, sales journal, purchases
journal, cash receipts journal and cash
disbursements journal are collectively known
as
a. Books of final entry
b. Books of original entry
c. Books of account
d. Business documents
4. What function do general ledger serves in the
accounting process?
a. Recording
b. Classifying
c. Summarizing
d. Reporting
5. Which of the following statements regarding
trial balance is incorrect?
a. A trial balance should always balance
b. A trial balance is a test of equality of
debits and credits in the ledger.
c. The trial balance is an assurance that
all accountable events have been
correctly recorded.
d. The trial balance is useful in the
preparation of financial statements.
6. A credit balance in which of the following
accounts listed in the trial balance indicates
a likely error?
a. Sales discount
b. Purchase discount
c.
d. Revaluation surplus
7. If, during a reporting period an expense items
has been incurred and consumed but not yet
paid for or recorded, the end-of-period
adjusting entry would involve
a. A liability and an asset account
b. An asset or contra-asset account and
an expense account
c. A liability and an expense account
d. A receivable account and a revenue
account.
8. Year-end net assets would be understated
and current expenses would be overstated
as a result of failure to record which of the
following adjusting entries?
a. Expiration of prepaid insurance
b. Depreciation of fixed assets
c. Accrued wages payable
d. Unexpired portion of insurance
premiums paid.
9. XYZ Company prepares a worksheet to
facilitate the preparation of its financial
statements. The company’s operations for
the year 2019 resulted in profit, if before
considering profit
a. The total debits exceed total credits in
the income statement
b. The total debits are equal to total
credits in the income statement
columns.
c. The total debits exceed total credits in
the statement of financial position
columns
d. The total debits are equal to total
credits in the statement of financial
position columns
10. Which of the following accounts will not
appear in a post-closing trial balance?
a. Premium on bonds payable
b. Unrealized gain/loss on financial
assets at fair value through profit or
loss
c. Accumulated depreciation
d. Unrealized loss on financial assets at
fair value through other
comprehensive income
11. Which of the following steps may be omitted
in the completion of the accounting cycle?
i. Entries are posted to the general ledger
ii. Adjusting entries are journalized
iii. Financial statements are prepared
iv. Post-closing trial balance is prepared
v. Certain adjustments are reversed
a. I, iv, and v December November
34567 9,600
b. Iv and v 1, 2015 30, 2017
c. Ii, iv, and v April 1, March 31,
56789 11,200
d. I, ii, iv, and v 2016 2018
P 35,200
12. Jay Company prepares reversing entries at
the beginning of the accounting period. The adjusting entry required on November
Which of the following adjusting entries 30, 2017 would be?
prepared by Jay will be reversed? 2. On November 1, 2017, Blue Company paid
a. The entry to take up the expired P 36,000 to renew its insurance policy for
portion of the insurance premium three years. At December 31, 2017, Blue’s
paid in advance unadjusted trial balance showed a balance of
b. The entry to take up the earned P 900 for prepaid insurance and P 44,100 for
portion of rent collected in advance insurance expense. What amount should be
c. The entry to take up the unused reported for prepaid insurance and insurance
supplies at the end of the period expense respectively in Blue’s 2017 financial
d. The entry to provide doubtful statements?
accounts expense. 3. Only three adjustments appear in the
13. After posting the closing entries, adjustment column of a worksheet for Rat
a. All the accounts have zero balances Company: 1) to record P 15,000 depreciation
b. The income accounts, expense of office equipment; 2) to record the use P
accounts and income summary 12,000 office supplies; and 3) to record
accounts have zero balances accrued interest on notes payable of P 2,800.
c. The asset, liability and equity If the trial balance column totals are P
accounts have zero balances 729,000, what are the totals of the adjusted
d. The income accounts, expense trial balance columns?
accounts, income summary accounts 4. Green company collected P 12,350 in
and retained earnings accounts have interest during 2017. Green showed P 1,850
zero balances. in interest receivable on its December 31,
14. Adjusting entries are necessary in order 2017 statement of financial position and P
a. Measure properly the period’s profit 5,300 on December 31, 2016. How much is
b. Bring the asset accounts to correct the interest revenue reported on Green’s
balances statement of comprehensive income for
c. Bring liability accounts to correct 2017?
balances
d. All of these
15. The accounting equation A = L + E must
remain balance
a. Throughout each step in the
accounting cycle
b. Only when the journal entries are
recorded
c. Only at the time the trial balance is
prepared
d. Only when the financial statements
are prepared.
II. Problems
1. Orange Inc.’s fiscal year ended on November
30, 2017. The balance in the prepaid
insurance account as of November 30, 2017
was P35,200.00 (before adjustments) and
considered the following policies:
Balance
Policy Date of Expiration
in
number purchase date
account
July 1, June 30,
12345 P 14,400
2017 2018