CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING
VALIX/VALIX/ESCALA/SANTOS/DELA CRUZ
BATCH 92
OCTOBER 2022 CPALE
ACCOUNTING PROCESS
1. Which is done first in the accounting process considering the following?
a. Financial statements are prepared.
b. Nominal accounts are closed
c. Adjusting entries are recorded.
d. A postclosing trial balance is prepared.
2. Which is done last in the accounting process considering the following?
a. Journalize and postclosing entries
b. Analyze transactions from source documents.
c. Prepare reversing entries
d. Record the transactions in a journal
3. Which is optional in the accounting cycle?
a. Reversing entries
b. Closing entries
c. Adjusting entries
d. Adjusted trial balance
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.
c. The dual effect of each transaction is recorded with a debit and a credit.
d. All of these are choices regarding double entry system.
5. The normal balance of an account is on the
a. Debit side
b. Credit side
c. Side represented by the increase in the account balance
d. Side represented by the decrease in the account balance
6. Debits
a. Increase assets and decrease expenses, liabilities, revenue and equity.
b. Increase assets and expense and decrease liabilities, revenue and equity.
c. Increase liabilities, revenue and equity and decrease assets and expenses
d. Increase assets and equity and decrease liabilities and revenue
7. The debit and credit analysis of a transaction normally takes place
a. Before an entity is recorded in a journal.
b. When the entry is posted to the ledger.
c. When the trial balance is prepared.
d. At some other point in the accounting cycle.
8. The book of original entry is known as
a. Subsidiary ledger
b. Trial balance
c. General ledger
d. Journal
9. A general journal
a. Chronologically lists transactions and other events in terms of debit and credit
b. Contains one record for each asset, liability, equity, revenue and expense
c. Lists all increases and decreases in each account in one place
d. Contains only adjusting entries and closing entries
10. A journal entry that contains more than two accounts is called
a. Simple journal entry
b. Compound journal entry
c. Erroneous journal entry
d. Adjusting entry
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11. Which is not a possible combination of a journal entry?
a. Increase in asset and increase in liability
b. Decrease in equity and increase in liability
c. Decrease liability and decrease in asset
d. Increase in asset and decrease in equity
12. A chart of accounts is
a. A flowchart of all transactions
b. An accounting manual
c. A journal
d. A list of all account titles in the general ledger
13. Temporary accounts are known as
a. Real accounts
b. Nominal accounts
c. Mixed accounts
d. Contra accounts
14. Real accounts include all of the following, except
a. Dividend paid
b. Asset
c. Liability
d. Equity
15. Posting is the process of transferring information from
a. Source document to the journal
b. Journal to the source document
c. Journal to the general ledger
d. General ledger to the journal
16. A general ledger is defined as
a. A group of transactions
b. A group of real accounts
c. A group of nominal accounts
d. The entire group of accounts
17. A subsidiary ledger is a
a. Listing of the components of the account balances
b. Backup system to protect against destruction of records
c. Listing of accounts before closing entries
d. Listing of accounts of a subsidiary
18. What function do ledgers serve in the accounting process?
a. Reporting
b. Recording
c. Classifying
d. Summarizing
19. 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.
d. All of these may prove that debits and credits are equal.
20. Which of the following is not correct about an unadjusted trial balance?
a. It proves that debits and credits of equal amounts are in the ledger.
b. It is the basis for 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.
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21. An unadjusted trial balance
a. Provides information helpful when making adjusting entries
b. Proves that no errors have been made
c. Usually contains the account balances that should appear in the income statement
d. Is a summary taken directly from the general journal
22. 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
23. What is the adjusting entry for ending inventory?
a. Debit ending inventory and credit beginning inventory
b. Debit beginning inventory and credit ending inventory
c. Debit ending inventory and credit income summary
d. Debit income summary and credit ending inventory
24. What is the adjusting entry for doubtful accounts?
a. Debit doubtful accounts and credit accounts receivable
b. Debit doubtful accounts and credit allowance for doubtful accounts.
c. Debit allowance for doubtful accounts and credit doubtful accounts.
d. Doubtful accounts do not require an adjusting entry.
25. What is the adjusting entry for depreciation?
a. Debit depreciation and credit asset
b. Debit asset and credit accumulated depreciation
c. Debit depreciation and credit accumulated depreciation
d. An adjusting entry is not required for depreciation
26. What is the adjusting entry for accrued expenses?
a. Debit accrued expenses and credit expense.
b. Debit expenses and credit accrued expense
c. Debit expenses and credit income
d. No need to adjust accrued expense.
27. What is the adjusting entry for prepaid expenses assuming the expense method is used?
a. Debit prepaid expenses and credit expenses.
b. Debit expenses and credit prepaid expenses
c. Debit prepaid expenses and credit accrued expense
d. It is not necessary to adjust prepaid expenses.
28. What is the adjusting entry for prepaid expenses assuming the asset method is used?
a. Debit prepaid expenses and credit accrued expenses
b. Debit expenses and credit accrued expenses
c. Debit expenses and credit prepaid expenses
d. No adjusting entry
29. What is the adjusting entry for accrued income?
a. Debit accrued income and credit income
b. Debit income and credit accrued income
c. Debit accrued income and credit accrued expenses
d. No adjusting entry
30. What is the adjusting entry for unearned income if the income method is used?
a. Debit unearned income and credit income
b. Debit income and credit unearned income
c. Debit accrued income and credit unearned income
d. No adjusting entry
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31. What is the adjusting entry for unearned income if the liability method is used?
a. Debit income and credit unearned income
b. Debit accrued income and credit unearned income
c. Debit unearned income and credit income
d. No adjusting entry
32. 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 asset
d. A debit to asset and a credit to revenue
33. Which statement 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.
34. Accrual is best defined as adjusting entries where
a. Cash flow precedes revenue or expense recognition
b. Revenue or expense recognition precedes cash flow
c. Cash flow and revenue or expense recognition are simultaneous
d. Revenue and expenses are recognized in the absence of cash flow evidence
35. Closing entries are
a. Made at the end of accounting period
b. Prepared after adjusting entries and financial statements have been prepared
c. Prepared for the purpose of reducing all nominal accounts to zero
d. All choices are correct about closing entries
36. The postclosing trial balance
a. Provides a convenient listing of balances that can be used to prepare 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
37. Reversing entries
a. Are normally prepared for accruals and prepayments
b. Are necessary to achieve proper matching of revenue and expense
c. Are desirable to exercise consistency and establish standardized procedure
d. Must be made at year-end
38. Reversing entries apply to
a. All adjusting entries
b. All deferrals
c. All accruals
d. All closing entries
39. A reversing entry should never be made for an adjusting entry that
a. Accrues unrecorded revenue
b. Accrues unrecorded expenses
c. Adjusts expired costs from an asset account to an expense account
d. Adjusts unexpired costs from expense account to an asset account
40. Which of the following should be reversed assuming prepayments are initially recorded in nominal
accounts?
a. Adjusting entry to record ending inventory
b. Adjusting entry to record doubtful accounts
c. Adjusting entry to record depreciation
d. Adjusting entry to record portion of rental received in advance that is unearned at year-end
End
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