Acctg 1101- Financial Accounting and Reporting
True or False
1. One of the forms of business organization is a partnership which is formed by two or more persons like sole
proprietorship. False
2. Bookkeeping is the systematic and chronological recording of business transactions and events.
True
3. A twelve-month period that starts at any month of the year other than January is a calendar year.
True
4. Goodwill is an example of unidentifiable intangible asset. True
5. Accounts Payable, deferred revenue, and mortgage payable are classified as current liabilities.
False
6. Expense decreases asset and liabilities that results to decrease in equity, other than distribution or dividend
paid to owners. False
7. Current assets plus current liabilities equals equity. False
8. Debit means increases while credit means decreases. False
9. The normal balance of capital, income, and liabilities is credit. True
10. The trial balance does not give us the complete proof that postings in the ledger accounts are accurate.
True
11. Transplacement refers to interchange in the order of digits. False
12. Payment to a supplier’s account may result to debit to a payable account. True
13. The amount of accrued but unpaid expenses at the end of the period is both an expense and a liability.
True
14. Overstated profit may result from failure to prepare an adjusting entry to record accrued income.
False
15. Accrued income is an income already earned and received. False
Multiple Choice Theory
1. Statement 1- Income is recorded when cash is received regardless of when earned. Statement 2- Expense is
recorded when incurred regardless of when paid.
Which of the following statements is false?
A. Statement 1 only (ans)
B. Statement 2 only
C. Both 1 & 2
D. Neither 1 & 2
2. An organizational unit for which financial and economic data are gathered and processed is ____.
a. Accounting System
b. Accounting Postulates
c. Economic System
d. Accounting Entity (ans)
3. The following are false except
a. Revenue includes gain from sale of equipment
b. Revenue encompasses both income and gain
c. Noncurrent assets include goodwill (ans)
d. Gain encompasses both income and revenue
4. The elements directly related to the measurement of financial position are
a. Assets and owners’ equity
b. Assets, income and expenses
c. Assets, liabilities, and owners’ equity (ans)
d. Assets, liabilities, owners’ equity, income and expenses
5. The following accounts have debit normal balances except for
a. Accumulated Depreciation (ans)
b. Income tax expense (ans)
c. Owners’ Drawings
d. Goodwill
6. A business activity is accountable once it has an effect on
a. Assets
b. Liabilities
c. Capital
d. All of the above (ans)
7. A collection from a customer’s account may result to a
a. Debit to accounts payable
b. Credit to cash
c. Credit to accounts receivable
d. Debit to accounts receivable
8. Which of the following errors cannot be revealed by a trial balance?
a. Omission in posting of either a debit or credit entry in the journal.
b. A journal entry that has not been posted in its entirety.
c. Erroneous computation of an account balance.
d. Posting the amount of an item to a wrong side of the account or ledger.
9. If a P10,000 adjustment for depreciation is omitted, the following financial statements will occur except
a. Assets will be overstated
b. Expenses will be understated
c. Net income will be overstated
d. Owner’s equity will be understated
10. From the point of view of the firm providing services, an item that represents cash that have not yet been
paid for by the customer, but service have been provided to that customer by the firm is called
a. Unearned revenue
b. Accrued revenue
c. Prepaid expense
d. Accrued expense
Multiple Choice Problems
1. Prepaid insurance account has a balance of 10,800 before adjustment. this amount represents insurance
premium for three months beginning November 1, 2020. Based on this data, the amount of insurance
expense as of December 31 2020 is
a. 7,200
b. 3,600
c. 10,800
d. 5,400
2. Breakthrough Enterprise has an unpaid rental in the amount of 9,000. The bookkeeper mistakenly record
adjustment at 900. The journal entry to correct the balances of accounts affected in the entry would be
a. debit accrued rent expense 9,000 and credit rent expense 9,000
b. debit rent expense 9,000 and credit accrued rent expense 9,000
c. debit accrued rent expense 8100 and credit rent expense 8,100
d. debit rent expense 8,100 and credit accrued rent expense 8,100
3. If total assets increased 20,000 during a period of time , and total liabilities increased by 12,000 during the
same period , the amount and direction (increase or decrease) of the periods change in capital is
a. 32,000 increase
b. 8,000 increase
c. 8,000 decrease
d. 32,000 decrease
4. BSAAP organizers purchased an equipment costing 50,000 on July 1, 2020 . The equipment had an estimated
useful life of 10 years with an estimated salvage value of 5,000 . The balance of the accumulated
depreciation account on December 31, 2021 is
a. 6,750
b. 2,250
c. 4,500
d. 9,500
5. Crossfire accounting firm began its march operations with office supplies of 12,000. During the month, the
firm purchased supplies of 35,000 . On march 31 , supplies on hand totaled 15,000. Supplies expense for
the period is
a. 15,000
b. 32,000
c. 35,000
d. 12,000
6. Apple Company pays cash for three months of rent in advance at a rate of 30,000 per month. The balance of
the prepaid rent account two months later would be
a. 30,000
b. 60,000
c. 0
d. 90,000
Transactions’ Effects on Accounts
Set A
1. Received cash from customers on services rendered and billed last month.
2. The owner invested land and machinery to the business.
3. The owner purchased office supplies on account.
4. Paid the creditor for the balance on merchandise purchased last month.
5. Paid utilities expense and salaries.
Set B
A. Increase in one asset, decrease in another asset.
B. Increase in asset, increase in liability.
C. Increase in asset, increase in capital.
D. Decrease in asset, decrease in liability.
E. Decrease in asset, decrease in capital
F. Increase in one liability, decrease in another liability.