part 4

• 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 P10,000 worth of equipment is recorded and posted as P100,000.

  b. Transposition error related to the statement of financial position.
• A trial balance may prove that debits and credits are equal but

  a. An amount. could be entered in the wrong account.

  b. A transaction could have been entered twice.

  c. A transaction could have been omitted.

  d. All of these

  d. All of these
• Which of the following errors will cause an imbalance in the trial balance?

  a. Omission of a transaction in the journal.

  b, Posting an entire journal entry twice to the ledger.

  c. Posting a credit to accounts payable as a credit to accounts receivable.

  d. Listing the balance of an account with a debit balance in the credit column of the trial balance.

  d. Listing the balance of an account with a debit balance in the credit column of the trial balance.
• The postclosing trial balance

  a. Provides a convenient listing of account balances that can be used to prepare the financial statements.

  b. Does not include nominal accounts.

  c. Is identical to the statement of financial position.

  d. Proves that accounts have been closed properly.

  b. Does not include nominal accounts.
• A voucher system is used in connection with transactions that involve only

  a.The receipt of cash

  b. The payment of cash

  c. The purchase and sale of merchandise

  d. Revenue and expense

  b. The payment of cash
• It is the business paper which is prepared by an entity for every cash payment.

  a. Check

  b. Voucher

  c. Journal

  d. Official receipt

  b. Voucher
• All vouchers are recorded in numerical sequence in the

  a. Check register

  b. Voucher register

  c. General journal

  d. Cash disbursements journal

  b. Voucher register
• After vouchers are recorded, they are filed in an "unpaid vouchers file"

  a. Numerically

  b. In the order of payment

  c. Chronologically

  d. No regular order

  b. In the order of payment
• A file of unpaid vouchers (choose the incorrect one)

  a. May be used to replace the accounts payable subsidiary ledger.

  b. Is controlled by the vouchers payable account in the general ledger.

  c. Shows during the year the total amount of all recorded outstanding liabilities for goods and services.

  d. Shows only the total amount of outstanding liabilities for merchandise purchased.

  d. Shows only the total amount of outstanding liabilities for merchandise purchased.
• Adjusting entries involve

  a.Only real accounts

  b Only nominal accounts

  c. Only capital accounts

  d. One real and one nominal account

  d. One real and one nominal account
•  Why are adjusting entries necessary?

  a. Transactions take place over more than one accounting period

  b. To make debits equal credits

  c. To close nominal accounts at year-end

  d. To correct erroneous balances in accounts

  a. Transactions take place over more than one accounting period
• Which of the following is an example of an adjusting entry?

   

  a. Recording the purchase of supplies on account

  b. Recording depreciation of a truck

  c. Recording the billing of customers for services rendered

  d. Recording the payment of wages to employees

  b. Recording depreciation of a truck
• An adjusting entry to accrue wages incurred but not yet paid is an example of

  a. Aligning recorded costs with appropriate accounting periods

  b. Aligning recorded revenue with appropriate accounting periods

  c. Reflecting unrecorded expenses incurred during an accounting period

  d. Reflecting unrecorded revenue earned during an accounting period

  c. Reflecting unrecorded expenses incurred during an accounting period
• Which one of the following items least resembles a typical adjusting entry?

   

  a. Debit an asset and credit revenue

  b. Debit an expense and credit liability

  C. Debit revenue and credit liability

  d. Debit an asset and credit liability

  d. Debit an asset and credit liability
• An adjusting entry in which a revenue is recognized before the related cash receipt occurs is called

  a. Deferral

  b. Nominal

  c. Accrual

  d. Special item

  c. Accrual
• Which of the following best defines an accrual?

  a. Adjusting entries where cash flow precedes revenue or expense recognition

  b. Adjusting entries where revenue or expense recognition precedes cash flow

  c. Adjusting entries where cash flow and revenue or expense recognition are simultaneous

  d. Adjusting entries where revenue or expenses are recognized in the absence of cash flow evidence

  b. Adjusting entries where revenue or expense recognition precedes cash flow
• If during an accounting period an expense item has been incurred but not yet paid, the adjusting entry would involve

  a. A liability account and an asset account.

  b. An asset or contra-asset and an expense account.

  c. An expense account and a liability account.

  d. A receivable account and a revenue account.

  c. An expense account and a liability account.
• If an expense has been incurred but not yet recorded, then the end-of-period adjusting entry would involve

  a. A liability account and an asset account

  b. A liability account and a revenue account

  c. An expense and an asset account

  d. A receivable account and a revenue account

  c. An expense and an asset account
• Adjusting entries are based primarily on the principles of

  a. Revenue realization and materiality

  b. Revenue realization and matching

  c. Matching and historical cost

  d. Matching and monetary unit

  b. Revenue realization and matching
• Adjusting entries accounting

  a. Are often prepared after the statement of financial position date but dated as of the statement of financial position date.

  b. Are necessary to enable the financial statements to conform with Philippine Financial Reporting Standards.

  c. Include both accruals and deferrals.

  d. All of the choices are correct regarding adjusting entries.

  d. All of the choices are correct regarding adjusting entries.
•  Adjustments are often prepared

  a. After the statement of financial position date and dated as of that date.

  b. After the statement of financial position date and dated after that date.

  c. Before the statement of financial position date and dated as of that date.

  d. Before the statement of financial position date and dated after that date.

  a. After the statement of financial position date and dated as of that date.
• Which of the following statements is false regarding adjusting entries?

  a. Cash is neither debited nor credited as a result of adjusting entries.

  b. Each adjusting entry affects one statement of financial position account and one income statement account.

  c. Each adjusting entry affects one revenue account and one expense account

  d. Adjusting entries involve accruals or deferrals.

  c. Each adjusting entry affects one revenue account and one expense account
• An entity must make adjusting entries

  a. To ensure that the revenue recognition and expense recognition principles are followed.

  b. Each time it prepares an income statement and a statement of financial position.

  c. To account for accruals or deferrals.

  d. All of the choices are correct regarding adjusting entries.

  d. All of the choices are correct regarding adjusting entries.
• Adjusting entries are necessary to

  a. Obtain a proper matching of expense with revenue.

  b. Achieve an accurate measurement of assets and equity.

  c. Adjust assets and liabilities to fair value.

  d. Obtain a proper matching of expense with revenue and achieve an accurate measurement of assets and equity.

  d. Obtain a proper matching of expense with revenue and achieve an accurate measurement of assets and equity.
• When an item of expense is paid and recorded in advance, it is normally called

  a. Prepaid expense

  b. Accrued expense

  c. Estimated expense

  d. Cash expense

  a. Prepaid expense
• When an item of revenue is collected and recorded in advance, it is normally called

  a. Accrued revenue

  b. Prepaid revenue

  c. Unearned revenue

  d. Cash

  c. Unearned revenue
• An adjusting entry should never include

  a. A debit to an expense account and a credit to a liability account.

  b. A debit to an expense account and a credit to a revenue account.

  c. A debit to a liability account and a credit to revenue account.

  d. A debit to a revenue account and a credit to a liability account.

  b. A debit to an expense account and a credit to a revenue account.
• Which of the following is an example of an accrued expense?

  a. Equipment purchased at the beginning of the year and debited to an expense account

  b. Property tax incurred during the year to be paid next year

  c. Depreciation expense

  d. Rent earned during the current year to be received at the end of next year

  b. Property tax incurred during the year to be paid next year
• An adjusting entry to record an accrued expense involves a debit to

  a. Expense account and a credit to a prepaid account.

  b. Expense account and a credit to cash.

  c. Expense account and a credit to a liability account.

  d. Liability account and a credit to an expense account.

  c. Expense account and a credit to a liability account.
• A prepaid expense can best be described as an amount

  a. Paid and currently matched with earnings

  b. Paid and not currently matched with earnings

  c. Not paid and currently matched with earnings

  d. Not paid and not currently matched with earnings

  b. Paid and not currently matched with earnings
• An accrued expense can best be described as an amount

   

  a. Paid and currently matched with earnings

  b. Paid and not currently matched with earnings

  c. Not paid and not currently matched with earnings

  d. Not paid and currently matched with earnings

  d. Not paid and currently matched with earnings
• An accrued revenue can best be described as an amount

   

  a. Collected and currently matched with expenses

  b. Collected and not currently matched with expenses

  c. Not collected and currently matched with expenses

  d. Not collected and not currently matched with expenses

  c. Not collected and currently matched with expenses
• An unearned revenue can best be described as an amount

  a. Collected and currently matched with expenses

  b. Collected and not currently matched with expenses

  c. Not collected and currently matched with expenses

  d. Not collected and not currently matched with expenses

  b. Collected and not currently matched with expenses
• Which of the following properly describes a deferral?

  a. Cash is received after revenue is earned.

  b. Cash is received before revenue is earned.

  c. Cash is paid after expense is incurred.

  d. Cash is paid at the same time period that an expense is incurred.

  b. Cash is received before revenue is earned.
• A document prepared to prove the equality of debits and credits after all adjustments have been prepared is

   

  a. Adjusted statement of financial position

  b. Adjusted trial balance

  c. Adjusted financial statements

  d. Postclosing trial balance

  b. Adjusted trial balance
• An adjusted trial balance

  a. Is prepared after the financial statements are completed.

  b. Proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.

  c. Is a required financial statement under financial reporting standards.

  d. Cannot be used to prepare financial statements.

  b. Proves the equality of the total debit balances and total credit balances of ledger accounts after all adjustments have been made.
• Which of the following statements is false?

  a. Entities can prepare the income statement and the statement of financial position directly from the adjusted trial balance.

  b. Entities can prepare the statement of cash flows directly from the adjusted trial balance.

  c. The adjusted trial balance proves the equality of total debits and total credits after all adjustments.

  d. Each adjusting entry affects one statement of financial position account and one income statement account.

  b. Entities can prepare the statement of cash flows directly from the adjusted trial balance.
• An entity is preparing the annual financial statements based on the adjusted trial balance. Which financial statement shall be prepared first?

  a. Statement of financial position

  b. Income statement

  c. Statement of cash flows

  d. There is no particular order

  b. Income statement
• Closing entries

  a. Are optional step in the accounting cycle

  b. Affect only real accounts

  c. Permit an entity to analyze routine and repetitive transactions the same way all the time

  d. Remove the balances from the entity's temporary accounts

  d. Remove the balances from the entity's temporary accounts
• Which of the following closing procedures is unique to a corporation?

  a. Close each revenue account to the income summary account

  b. Close each expense account to the income summary account

  C. Close the income summary account to the retained earnings account

  d. Close the owner's drawing account to the owner's capital account

  C. Close the income summary account to the retained earnings account