Jaypaul Ocampo Acidera, CPA 2016

CPA REVIEW SCHOOL OF THE PHILIPPINES

M a it i I a

FINANCIAL ACCOUNTING AND REPORTING VALIX STY VALIX FERRER LACO

ACCOUNTING PROCESS
1. What is the logical order of the following steps in the accounting cycle?
a. Post the journal entries to the ledger accounts, prepare a worksheet, and then take a trial
balance.
b. Journalize the closing entries, post the closing entries, and then take a postclosing trial
balance.
c. Prepare the income statement, prepare the statement of financial position and then prepare a
worksheet.
d. Post the closing entries, take a postclosing trial balance, then journalize the closing entries.
2. An optional step in the accounting cycle is the preparation of
a. Adjusting entries and closing entries .
b. Posting to the ledger and unadjusted trial balance
c. Analyzing the transactions and journal entries
d. Postclosing trial balance and reversing entries
3. Which of the following statements 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 share capital are the same for
liabilities.
d. In the income statement, revenue is increased by a debit whereas in the statement of
financial position retained earnings account is increased by a credit.
4. 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 its 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.
5. Posting
a. Accumulates the effects of ledger entries and transfers them to the general journal.
b. Is done only for income statement activity because activity related to the statement of
financial position does not require posting.
c. Is done once every year.
d. Transfers journal entries to the ledger accounts.
6. A trial balance may prove that debits and credits are equal, except
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.
All of these may prove that debits and credits are equal.
7. Adjusting entries
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 to Philippine Financial
Reporting Standard.
C. Include both accruals and deferrals.
d. All of the choices are correct regarding adjusting entries.
8. 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 tegarding adjusting entries.
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9. Adjusting entries affect
a. One nominal account and one real account
b. Two nominal accounts
C . Two real accounts
d. No particular combination of nominal and real accounts
10. An adjusting entry should never include?
a. A debit to revenue and a credit to liability
b. A debit to expense and a credit to liability
C . A debit to liability and a credit to revenue
d A debit to expense and a credit to revenue
11 . 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 sirnOtaneous
d. Adjusting entries where revenue and expenses are recognized in the absence of cash flow
12. The adjusting entry for depreciation has the same effect as the adjusting entry for
a. An unearned revenue
b. A prepaid expense
c. An accrued revenue
d. An accrued expense
13. If an expense has been incurred but not yet recorded, the adjusting entry would involve
a. A liability and an asset
b. A liability and a revenue
c. An expense and an asset
d. An asset and a revenue
14, Which of the following statements is not true about accrual and deferral?
a, An accrued expense is an amount not paid and currently matched with earnings,
b. A prepaid expense is an amount paid and not currently matched with earnings.
C . An accrued income is an amount not collected and currently matched with expenses.
d A deferred income is an amount collected and currently matched with expenses.
15. 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 MRS.
d. Cannot be used to prepare financial statements.
16. Which of the following statements best describes the purpolMcloshig -entries?
a. To faciliate posting and taking a trial balance.
b. To determine the amount of net income or net loss for the period,
ce To reduce the balances of temporary accounts to zero so that they may be used to
accumulate the revenue, expenses and dividends of the next period.
d. To complete the record of various transactions that were started in a prior period.
17. The closing process
a. Is done each time a transaction takes place and is journalized.
b. Transfers all income statement items to their related statement of financial position account.
ce Posts all closing entries to the appropriate general ledger account.
cl. All of the choices are correct regarding the closing process.
18. The postclosing trial balance
a. Consists of statement of financial position accounts only
J. O. A.
b. Will balance if a transaction is not journalized and posted, or if a transaction is journalized
and posted twice. _
c._ Shows that the accounting equation is in balance at the end of the accounting period.
d. All of the choices are correct regarding the postclosing trial balances
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19. Adjusting entries that should be reversed include
a. All accrued revenue
b. • All accrued expenses
C. Those that debit an asset or credit a liability
d. All of these adjusting entries require reversal.
20. Reversing entries apply to
a. All adjusting entries
b. All deferrals
c. All accruals
d. All closing entries

21. An entity is a resort located in Palawan. The entity collects cash when guests make a
reservation. During December 2016, the entity collected P600,000 of cash and recorded the
receipt by recognizing unearned revenue. The entity had earned one-third of this amount and the
other two-thirds will be earned during January 2016. What is the impact of the adjusting entry
on December 31, 2016?
a. 400,000 increase in equity
b. 200,000 decrease in liability
C. 600,000 increase in asset
d. 200,000 decrease in equity

22. An entity is a resort located in Catician. During December 2016, PICPA held an annual
conference at the resort. The charges related to the conference totaled P4,000,000, of which
25% had been paid. The entity failed to make the appropriate adjusting entry on December 31,
2016. Which of the following statements is true?
a. Equity is overstated by P3,000,000
b. Equity is understated by P1,000,000
C. Assets are understated by P3,000,000
d. Assets are overstated by P1,000,000

23. During the first year of operations, an entity recorded all purchases of supplies as assets. Store
supplies in the amount of P2,000,000 were purchased. Actual year-end store supplies amounted
to P500,000. What is the impact of the adjusting entry on store supplies?
a. Increase . in net income P1,500,000.
b. Increase in expenses P1,500,000
C. Decrease in store supplies P500,000
d. Decrease in accounts payable P500,000
24. An entity reported the office supplies account at the beginning of the year with a balance of
P40,000 before the reversing entry. Payments for office supplies during current year amounted
to P250,000 and were recorded as expense. A physical count at the end of year revealed office
supplies costing P50,000. Reversing entries are made by the entity. What is debited in the
adjusting entry at year-end?
a. Office supplies expense P10,000
b. Office supplies P10,000
. C. Office supplies expense P240,000
d. Office supplies P50,000
25. An entity reported wages expense of P1,100,000 for 2016. The wages payable at the beginning
of year amounted to P 1 00,000. Wage payments during the year totaled P950,000. The previous
year's adjusting entry for unpaid wages was reversed on January 1, 2017. What is the adjusting
entry for accrued wages payable on December 31, 2016?
a, Debit wages expense P950,000
b. Debit wages expense P150,000
c. Credit wages payable P250,000 J. O. A.
d. Credit wages payable P150,000
EN D
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