1. Revenue from an artistic performance is recognized once
Sales Journal
a. The audience register for the event online
b. The tickets for the concert are sold
c. Cash has been received from the ticket sales
d. The event takes place
2. In recording transactions
a. The word “debit” means increase and the word “credit”
means decrease
b. Assets, expenses, and drawing accounts are credited for
decreases
c. Liabilities, revenue, and drawing accounts are credited for
decreases
d. Assets, expenses, and capital accounts are debited for
increases
3. Which of the following statements is true regarding debits and
credits?
a. On the income statement, debits are used to increase
account balances, whereas on 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 of debit and credit and the normal balance of
capital are the same as for liabilities.
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.
4. The double-entry accounting system means
a. Each transaction is recorded with two journal entries
b. Each item is recorded in a journal entry and then in a
general ledger account
c. The dual effect of each transaction is recorded with a debit
and a credit
d. More than one of the above
5. Debits
a. Increase assets and decrease expenses, liabilities,
revenue, and equity
b. Increase assets and expenses and decrease liabilities,
revenue and equity
c. Increase assets and equity and decrease liabilities,
expenses, and revenue
d. Decrease assets and expenses and increase liabilities,
revenue and equity
6. In an accrual accounting system
a. All accounts have normal debit balances
b. A debit entry is recorded on the left-hand side of an
account
c. Liability, capital and withdrawals all have normal credit
balances
d. Revenue is recorded only when cash is received
7. Basic steps in the recording process include all of the following,
except
a. Transfer the journal information to the appropriate account
in the statement of financial position
b. Analyze each transaction for the effect on the accounts
c. Enter the transaction information in a journal
d. All of the choices are correct regarding the basic steps in
the recording process
8. Which is not considered a book of original entry?
a. General Journal
FAR 2MC – THE ACCOUNTING PROCESS
b.
c. General Ledger
d. Purchases Journal
9. 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 account balance just before closing entries are
prepared
d. A listing of accounts of a subsidiary
10. Which of the following is not a principal purpose of an
unadjusted trial balance?
a. It proves that debits and credits of equal amounts are in the
ledger
b. It is the basis of any adjustments to the account balances
c. It supplies a listing of open accounts and their balances
d. It proves that debits and credits were properly entered in
the ledger accounts
11. Numerous errors may exist even though the trial balance
columns agree. Which of the following is not one of these
errors?
a. A transaction is not journalized
b. Transposition error related to the statement of financial
position
c. A journal entry is posted twice
d. A journal entry to purchase ₱10,000 worth of equipment is
recorded and posted as ₱100,000
12. Mindanao Transit has a ₱25,000 accounts receivable from
Davao Metro Enterprises. On March 20, Davao Enterprises
makes a partial payment of ₱15,000 to Mindanao Transit. The
journal entry made on March 20 by Davao Enterprises to record
this transaction include:
a. A debit to cash account of ₱15,000
b. A credit to cash account of ₱15,000
c. A debit to accounts payable of ₱10,000
d. A credit to accounts payable of ₱10,000
13. A transaction caused a ₱500,000 increase in both total assets
and total liabilities. This transaction could have been:
a. Purchase of a delivery truck for ₱500,000 on account
b. An asset with a cost of ₱500,000 was destroyed by fire
c. Repayment of a ₱500,000 bank loan
d. Collection with a ₱500,000 accounts receivable
14. A ₱100,000 cost of the machine was purchased on account,
gave a ₱20,000 down payment and a note was issued for the
balance. This transaction will –
a. Increase total assets by ₱100,000
b. Increase total liabilities by ₱100,000
c. Decrease total assets by ₱20,000
d. Increase total liabilities by ₱80,000
15. The ledger of Jamar Lopez Service Center showed the following
balances:
Accounts Receivable ₱150,000
Accounts Payable 100,000
R. Lopez, Capital 140,000
R. Lopez, Drawing 20,000
Expenses 30,000
Service Revenue 160,000
Cash ?
What is the cash balance?
a. ₱200,000
Page 1 of 5
 b. ₱250,000 c. Adjusting entries are not recorded in the journal if it is
c. ₱300,000 already in the adjustments column of the worksheet.
d. ₱350,000 d. All accrual and deferral adjustments are to be reversed at
the beginning of the next accounting period.
Use the following to answer the next two questions:
On July 31, 2016, the Accounts Receivable and Accounts 23. Rara Company paid ₱72,000 to renew its only insurance policy
Payable ledgers of Misdeal Machine Shop owned and managed for three years on March 1, 2016, the effective date of the
by Monster Partaken revealed the following balances: policy. On March 31, 2016, Rara’s unadjusted trial balance
Debit Credit showed a balance of ₱3,000 for prepaid insurance and
Accounts Receivable ₱60,000 ₱72,000 for insurance expense. What amount should be
Accounts Payable ₱70,000 reported for prepaid insurance and insurance expense,
respectively, for the three months ended March 31, 2016?
The summary of transactions that took place during the month a. ₱70,000 and ₱3,000
of August 2016 that affect the balances of both accounts are b. ₱72,000 and ₱3,000
given below: c. ₱70,000 and ₱5,000
 Collection from customers’ accounts, ₱25,000. d. ₱73,000 and ₱2,000
 Supplies bought on account from various suppliers,
₱20,000. 24. An entity paid ₱1,000,000 for supplies during 2016. The full
 Services rendered to various customers on accounts, amount of ₱1,000,000 was debited to supplies inventory. The
₱15,000. January 1, 2016 balance of supplies inventory was ₱360,000. A
 Payment of account to various suppliers, ₱50,000. physical count of the supplies on hand on December 31, 2016
revealed an amount of ₱600,000. What is the December 31,
16. What balance will the ledger of Accounts Receivable show on 2016 adjusting entry for supplies expense?
August 31, 2016? a. Debit supplies expense and credit supplies inventory for
a. ₱35,000 ₱760,000
b. ₱45,000 b. Debit supplies expense and credit supplies inventory for
c. ₱40,000 ₱600,000
d. ₱50,000 c. Debit supplies inventory and credit supplies expense for
₱600,000
17. If the trial balance is prepared on August 31, 2016, what d. Debit supplies inventory and credit supplies expense for
balance will the Accounts Payable show? ₱240,000
a. ₱25,000
b. ₱45,000 25. For the year 2016, ₱1,100,000 of wages expense was reported
c. ₱30,000 in the income statement. The previous year’s statement of
d. ₱40,000 financial position reported ₱100,000 of wages payable. An
analysis of the payroll records showed wage payments during
18. When the entity records adjustments for accrued income, then the year of ₱950,000. If the previous year’s adjusting entry for
a. Income will decrease unpaid wages was reversed on January 1, 2016, what is the
b. Assets will decrease amount of the adjusting entry for accrued wages payable on
c. Liabilities will increase December 31, 2016?
d. Owner’s Equity will increase a. ₱250,000
b. ₱150,000
19. When the entity fails to record adjustments for depreciation, c. ₱400,000
then d. ₱850,000
a. Income is not affected
b. Assets is understated 26. Reynaldo San Mateo decided to invest ₱1,200,000 excess cash
c. Expenses is overstated in a certificate of deposit on April 1, 2016. The certificate carried
d. Owner’s Equity is not affected an 8% annual rate of interest and a 1-year term to maturity.
20. When the entity fails to record adjustments for unearned Interest will be withdrawn monthly. How much is the accrued
income, then interest income to be recorded as adjustments on December 31,
a. Income is overstated 2016?
b. Liabilities is overstated a. ₱96,000
c. Owner’s Equity is overstated b. ₱72,000
d. Assets is understated c. ₱8,000
d. ₱0
21. What type of adjustment that will increase the accounts involve?
a. Accruals 27. On February 28, 2016, Shaw Company purchased a machine
b. Deferrals for ₱514,000. The estimated useful life of the asset was 10
c. Both accruals and deferrals years and has an estimated salvage value of ₱34,000. How
d. Neither accruals nor deferrals much is the book value of the machine as of December 31,
2016?
22. Which of the following is true about adjusting entries? a. ₱40,000
a. Adjusting the accounts will always happened at the end of b. ₱474,000
the year. c. ₱48,000
b. Adjustments for accruals and deferrals will always involve a d. ₱432,000
balance sheet and an income statement account.

FAR 2MC – THE ACCOUNTING PROCESS Page 2 of 5

28. On October 1, 2016, MM Realty Co. collected the amount of d. ₱1,340,000
₱180,000 representing advanced rental from a tenant who
occupies a space of the building. The advanced rental will cover 35. Presented below is selected information pertaining to the Bone
the period from Oct. 31, 2016 to Oct. 31, 2017. The accounting Company:
period end on December 31, 2016. Assuming that Income
Method is used, the adjusting entry will include a debit to: Cash balance, January 1, 2016 ₱13,000
a. Rent Income, ₱30,000 Accounts receivable, January 1, 2016 19,000
b. Unearned Rent Income, ₱30,000 Collections from customers in 2016 210,000
c. Rent Income, ₱150,000 Capital account balance, January 1, 2016 38,000
d. Unearned Rent Income, ₱150,000 Total assets, January 1, 2016 75,000
Cash investment added, July 1, 2016 5,000
Total assets, December 31, 2016 101,000
29. On August 1, 2016 Mr. VC, owner of Debonair Salon borrowed
Cash balance, December 31, 2016 20,000
money from a bank and issued a 6-month note amounting to
Accounts Receivable, December 31, 2016 36,000
₱50,000 for a 12% interest rate. The required adjusting entry in Merchandise taken for personal use during 2016 11,000
the book of Mr. VC to record the interest has been accruing on Total liabilities, December 31, 2016 41,000
the note as of December 31, 2016 would be:
a. Debit, Interest Expense; Credit, Interest Payable, ₱3,000 How much is the net income for 2016?
b. Debit, Interest Expense; Credit, Interest Payable, ₱2,500 a. ₱22,000
c. Debit, Interest Expense; Credit, Interest Payable, ₱5,000 b. ₱28,000
d. Debit, Interest Expense; Credit, Interest Payable, ₱6,000 c. ₱26,000
d. ₱30,000
30. Which of the following is not true of a worksheet?
a. The worksheet is included as part of the published financial Use the following questions to answer the next five questions:
statements The following accounts and its adjusted balances are extracted
b. The worksheet provides a place where adjusting entries from the ledgers of Claire & Nemar Weddings:
can be made informally before they are journalized and
posted Claire & Nemar Weddings
c. The worksheet provides a balancing mechanism that helps Adjusted Trial Balance
to uncover accounting errors For the Month Ended May 31, 2016
d. The worksheet helps facilitate the preparation of financial
statements Account Title Debit Credit
Cash ₱22,200
31. In preparing a worksheet and the entity is profitable in the Accounts Receivable 17,300
current period, the total of the statement of financial position Supplies 15,000
credit column will be Prepaid Rent 4,000
Prepaid Insurance 13,200
a. Larger than the total of the statement of financial position
Services Vehicle 420,000
debit column Accumulated Depreciation – Service ₱4,000
b. Smaller than the total of the statement of financial position Vehicle
debit column Office Equipment 60,000
c. Larger than the total of the income statement debit column Accumulated Depreciation – Office 1,000
d. Larger than the total of the income statement credit column Equipment
Notes Payable 210,000
32. An entity is preparing the annual financial statements based on Accounts Payable 53,000
the adjusted trial balance. Which financial statement shall be Salaries Payable 1,800
prepared first? Utilities Payable 1,400
a. Statement of financial position Interest Payable 3,500
b. Statement of cash flows Unearned Referral Revenues 6,000
CN, Capital 250,000
c. Income statement
CN, Withdrawals 14,000
d. There is no particular order
Consulting Revenues 67,700
Referral Revenues 4,000
33. Profit for Jeffrey Franco’s Treasures is ₱250,000 for the current Salaries Expenses 15,600
year. The owner withdrew ₱30,000 per month for personal living Supplies Expense 3,000
expenses. The owner’s Capital account will show a net Rent Expense 4,000
a. Decrease of ₱110,000 Insurance Expense 1,200
b. Decrease of ₱360,000 Utilities Expense 4,400
c. Increase of ₱610,000 Depreciation Expense – Service 4,000
d. Increase of ₱110,000 Vehicle
Depreciation Expense – Office 1,000
34. Sunshine Company had total assets of ₱4,000,000 and Equipment
shareholders’ equity of ₱2,080,000 at the beginning of the year. Interest Expense 3,500 ________
₱602,400 ₱602,400
During the year, assets increased by ₱520,000 and liabilities
Based on the above given data, determine the amount of the
decreased by ₱820,000. What is the owner’s equity at the end
following:
of the year?
36. Profit for the month of May
a. ₱3,420,000
a. ₱35,000
b. ₱3,380,000
b. ₱41,000
c. ₱3,700,000
c. ₱21,000

FAR 2MC – THE ACCOUNTING PROCESS Page 3 of 5

 d. ₱0 b. Less than ₱1,350,000.
c. More than ₱1,350,000.
37. CN, Capital – May 31, 2016 d. Depending upon the circumstances.
a. ₱285,000
b. ₱271,000 46. When the Post Closing Trial Balance will show a total debit and
c. ₱277,000 total credit of ₱1,350,000 then
d. ₱257,000 a. Total Liabilities and Owner’s Equity is ₱1,350,000.
b. The sum of Assets, Withdrawals, and Expenses is
38. Total Assets as of May 31, 2016 ₱1,350,000.
a. ₱602,400 c. It has no significance.
b. ₱71,700 d. The sum of Contra-Assets, Liabilities and Owner’s Equity is
c. ₱546,700 ₱1,350,000.
d. ₱475,000
47. The adjustments for Accrual of Salaries, Debit – Salaries
39. The account “income summary” is a Expense; Credit – Salaries Payable of ₱24,000, were presented
a. Nominal account in the adjustments column of the worksheet but the accountant
b. Capital account did not journalize and post the entry in the records then
c. Real account a. As long as the accountant won’t also journalize and post
d. Mixed account it’s the related reversing entry, no problem will arise.
b. The Post Closing Trial Balance won’t balance by ₱24,000.
40. Closing entries will ultimately affect – c. The Owner’s Capital account would be overstated by
a. Total asset ₱24,000.
b. Total liabilities d. All of the above statements are correct.
c. Owner’s equity
d. None of these 48. The Income Summary account showed the following:
41. Which of the following is not included in the post-closing trial
balance preparation? Income Summary
a. Estimated uncollectible account Dec. 31 ₱197,000 Dec. 31 ₱190,000
b. Unearned rent income Dec. 31 7,000
c. Drawing account Total ₱197,000 Total ₱197,000
d. Accumulated depreciation
Based on the above, then
42. Which of the following adjusting entries that not need reversing a. Income for the period is ₱197,000.
entry? b. Expenses for the period is ₱190,000.
Debit Credit c. Profit for the period is ₱197,000.
a. Cash in Bank Service Income d. Loss for the period is ₱7,000.
b. Salaries Expense Accrued Salaries Payable
c. Rent Income Unearned Rent Income 49. Which of the following accounts would not appear on a
d. Prepaid Insurance Insurance Expense worksheet for a merchandising company that uses the perpetual
inventory system?
43. All of the following statements about reversing entries are false, a. Sales returns and allowances
except b. Cost of Goods Sold
a. Reversing entries are usually prepared at the end of the c. Transportation Out
accounting period because it is placed as the last step of d. Purchases
the accounting cycle.
b. Reversing entries are prepared whenever there are 50. Which of the following accounts is closed by debiting the
adjusting entries. account?
c. To facilitate the recording of the subsequent transactions, a. Sales returns and allowances
all adjusting entries must be reversed. b. Purchases returns and allowances
d. When accrued expenses are reversed, the expense c. Transportation in
account at the beginning of the next accounting period not d. Purchases
be in its normal balance.
51. The worksheet consisted of five pairs of debit and credit
44. When there is a loss of ₱15,000, the entry to close the Income columns. The amount of one item appeared in both the credit
Summary account is column of the income statement section and the debit column of
a. Debit Loss and credit Income Summary, ₱15,000. the statement of financial position section. What is this item?
b. Debit Owner’s Capital and credit Income Summary, a. Net income for the period
₱15,000. b. Cost of goods sold
c. Debit Income Summary and credit Owner’s Capital, c. Beginning inventory
₱15,000. d. Net loss for the period
d. Cannot be determined.
52. In preparing a 10-column worksheet
45. If the Balance Sheet will show total assets of ₱1,350,000, then a. The beginning inventory is extended as a credit in the
the Post Closing Trial Balance will have a total debit and credit income statement columns
of always b. The beginning inventory is extended as a credit in the
a. Equal to ₱1,350,000. statement of financial position columns

FAR 2MC – THE ACCOUNTING PROCESS Page 4 of 5

 c. The ending inventory is extended as a debit in the income
statement columns and as a credit in the statement of 56. The receipt of cash arising from a sales transaction would be
financial position columns recorded in the
d. The ending inventory is extended as a credit in the income a. Cash receipts journal
statement columns and as a debit in the statement of b. Sales journal
financial position columns c. Cash payments journal
d. Purchases journal
53. Bren Company’s beginning inventory on January 1 was
understated by ₱260,000 and the ending inventory was 57. Which of the following items would be recorded in the purchases
overstated by ₱520,000. What was the effect of the errors on journal?
the cost of goods sold for the current year? a. Supplies purchased for cash
a. ₱260,000 understated b. Merchandise purchased for cash
b. ₱780,000 understated c. Equipment purchased for cash
c. ₱260,000 overstated d. None of the above
d. ₱780,000 overstated
58. The controlling account in the general ledger that summarizes
54. When special journals are used, adjusting and closing entries the individual accounts with customers in a subsidiary ledger is
are recorded in the called
a. Cash disbursements journal a. Accounts payable
b. General journal b. Accounts receivable
c. Cash receipts journal c. Purchases
d. Purchases journal d. Sales returns and allowances

55. When special journals are used, which of the following is true? 59. Cost of goods sold is
a. A general journal is not used a. An expense
b. All sales transactions should be recorded in the sales b. Is an asset
journal c. A period cost
c. All cash receipts should be recorded in the cash receipts d. None of the above
journal
d. All purchase transactions should be recorded in the
purchase journal

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