4. A business bought a photocopier for office use. The payment was recorded in the photocopying expense account. State the type of error made.

1. Compensating Error
2. Error of Commission
3. Error of Complete Reversal
4. Error of Principle

5. Which of the following is an example of an error of original entry?

1. A P20,000 check paid for purchase of supplies was debited to the supplies account at P200 and credited from cash in bank account at P2,000.
2. A payment of P10,000 made to supplier Francis & Co. was debited to Benedict & Co.
3. Payment for rent was debited to the cash in bank account and credited from the rent expense account?
4. A check received from customer Luther Corp. was not recorded in the books.

6. Utilities payment of P7,800 was recorded in both the utilities expense account and cash on hand account as P8,700. What is the journal entry the correct the error?

Debit Credit

a. Cash on Hand P8,700 Utilities Expense P8,700

b. Utilities Expense P8,700 Cash on Hand P8,700

c. Cash on Hand P900 Utilities Expense P900

d. Utilities Expense P900 Cash on Hand P900

7. Bank charges of P800 has been debited to the rent expense account. The cash in bank account was correctly credited. What is the journal entry to correct the error?

Debit Credit

a. Rent Expenses P800 Bank Charges P800

b. Bank Charges P800 Rent Expenses P800

c. Bank Charges P1,600 Rent Expenses P1,600

d. Rent Expenses P1,600 Bank Charges P1,600

9. Suppose a sole proprietor settles the rental expenses of the entity amounting to P10,000 through his personal bank account. The journal entry should be:

Account to be credited Account to be debited

a. Rental expense Capital

b. Rental expense Bank

c. Rental expense Cash

d. Rental expense Drawings

11. Suppose Mr. Chan lends P500,000 cash to the entity. At the same time, the entity uses part of the money to repay the amount owed to a creditor and holds the remaining amount of P400,000 in the bank account. Which of the following effects on the accounting equation is correct?

1. Assets increase by P400,000 and liabilities increase by P400,000.
2. Assets increase by P500,000 and liabilities increase by P500,000.
3. Assets increase by P400,000 and liabilities decrease by P500,000.
4. Assets decrease by P500,000 and liabilities increase by P400,000.

12. Refer to Question 11, the journal entry should be:

Account(s) to be debited Account(s) to be credited

a. Cash, P500,000 Accounts payable, P900,000

Bank, P400,000

b. Cash, P100,000 Loan from Mr. Chan, P500,000

Bank, P400,000

c. Cash, P400,000 Bank, P500,000

Accounts payable, P100,000

d. Accounts payable, P100,000 Loan from Mr. Chan, P500,000

Bank, P400,000

13. Suppose an entity purchases P50,000 computer as goods on credit from a supplier.

The journal entry should be:

Account to be debited Account to be credited

. Computer Accounts Payable

b. Accounts Receivable Computer

. Purchases Accounts Payable

d. Purchases Accounts Receivable

14. Which of the following is/are the purpose(s) of preparing a trial balance?

1. prevent fraud
2. ensure the equality of debit and credit balances among the journal entry
3. detect errors in the ledgers

a. (1) only

b. (2) only

c. (1) and (3) only

d. (2) and (3) only

15. Without the use of a trial balance,_____

1. double-entry system will not be applied in accounting
2. there are no other ways to identify whether there are any problems
3. accounting ratios cannot be calculated
4. inequality between debit and credit balances cannot be easily found

16. Which of the following items will not be included in a trial balance?

1. opening inventory
2. trade discounts
3. accounts receivable
4. accounts payable

17. Which of the following is not included in a trial balance?

1. dates of transactions
2. ledger accounts
3. debit balances
4. credit balances

18. Which of the following situations will cause the total debit balance to be greater

than the total credit balance?

1. The amount extracted from a debtor's account is posted to the wrong side of the trial balance.
2. The amount extracted from the machinery account is posted wrongly as P4,000 instead of P40,000.
3. The sales of goods are regarded as purchases of goods.
4. The sales of goods to a debtor, Mr. Lee, are recorded in the account of another debtor, Mr. LI.

19. Which of the following situations will cause total debit balance to be smaller than

the total credit balance?

1. The amount extracted from a creditor's account is posted to the wrong side of the trial balance.
2. The amount extracted from the account of a debtor, Mr. Lee, is posted as P1,000 instead of P1,100 in the trial balance.
3. Sales of goods are recorded as purchases of goods in the ledger accounts.
4. The purchase of fixture is recorded in furniture account.

20. If furniture is overvalued by P1,000 in the trial balance,________

1. the total debit balance is greater than the total credit balance in the trial balance
2. the total debit balance is smaller than the total credit balance in the trial balance
3. the total debit balance is the same as the total credit balance in the trial balance
4. the value of assets on the credit side of the trial balance should be reduced

21. If the debit side of the trial balance is undervalued by P2,000 with the correct debit

balance, which of the following are not the possible reasons?

1. The cash payment for the electricity bill of P2,000 is recorded as the payment for rates in the ledgers.
2. The transaction regarding the settlement of debt by Mr. Lee by cash of P2.000 in the ledger accounts is completely omitted.
3. The receipt of income in cash of P1,000 is recorded in the cash book as payment by cash of P1,000, while the entry in the income account is made correctly.

a. (1) and (2) only

b. (1) and (3) only

c. (2) and (3) only

d. (1), (2) and (3)

1. The first financial statement that is prepared from the trial balance is the

1. statement of cash flows.
2. statement of changes in equity.
3. income statement.
4. balance sheet.

2. The amount of cash received or paid during a period is not an adequate measure of the economic consequences of an organization's activities because

1. many activities may not involve the use of cash.
2. cash inflows may represent the result of activities completed in a previous period.
3. cash outflows may precede or follow the activities with which they are associated.
4. All of the above reasons are correct.

3. At the end of an accounting period, the equation Assets = Liabilities + Owner's Equity does not necessarily balance. Which of the following actions balances the equation?

1. Subtract revenues and add expenses to owners' equity.
2. Subtract revenues from owners' equity and add expenses to assets.
3. Add the difference between revenues and expenses to owner's equity.
4. Add revenues and subtract expenses from assets.

5. The purpose of the ledger is to

1. record chronologically the day's transactions.
2. keep a record of documentation to support each transaction.
3. maintain a separate account for each balance sheet and income statement accounts.
4. make sure that all balance sheet and income statement accounts have normal balances at all times.

6. Which of the following does not directly or indirectly affect the owner's Capital account?

1. Paying an accounts payable
2. Withdrawals by the owner
3. Earning of revenues
4. Incurring of expenses

7. Which of the following transactions correctly maintains the equality in the accounting equation?

1. To record collections on account, cash and accounts receivable are increased by P160,000.
2. To record the purchase of computer equipment, computer equipment is increased and cash is decreased by P46,000.
3. To record payment of notes, notes payable is decreased and cash is increased by P70,000.
4. To record payment of rent, rent expense and cash are increased by P8.000.

8. Which of the following combinations of trial balance totals suggest the presence of either a transposition error or a number slide?

1. P65,470 debit and P68,170 credit
2. P33,220 debit and P35,420 credit
3. P25,670 debit and P26,670 credit
4. P14,517 debit and P15,477 credit

14. The first step in recording a transaction in a journal is to

1. record the debit.
2. record the date.
3. record the credit.
4. explanation

15. Which of the following accounts is classified differently from the others listed?

1. Notes Payable
2. Unearned Revenues
3. Mortgage Payable
4. Art Revenues

16. Which of the following accounting steps is accomplished after the others listed?

1. Post the entry.
2. Prepare the trial balance.
3. Apply the rules of double entry.
4. Record the entry.

17. Which of the following is a business event that is not considered a recordable transaction?

1. An entity receives a product previously ordered.
2. An entity pays an employee for work performed.
3. A customer inquires about the availability of a service.
4. A customer purchases a service.

18. Which of the following is a business event that is also considered a recordable transaction?

1. An entity hires a new employee.
2. A customer purchases merchandise.
3. An entity orders a product from a supplier.
4. An employee sends a purchase requisition to the purchasing department.

19. The term footing refers to the process of

1. obtaining the top number in an account.
2. process of obtaining the bottom number in an account.
3. process of posting.
4. addition of a column of figures.

20. What function do general ledgers serve in the accounting process?

1. Summarizing
2. Recording
3. Classifying
4. Reporting

21. A chart of accounts is a (an)

1. journal.
2. flowchart of all transactions.
3. list of names of all account titles.
4. accounting procedure manual.

22. Balance sheet accounts are

1. permanent accounts.
2. temporary accounts.
3. accounts with debit balances only.
4. adjusting accounts.

23. A journal entry that contains more than two accounts is called

1. posted journal entry.
2. a compound journal entry.
3. an adjusting journal entry.
4. an erroneous journal entry.

24. When accounting information is accumulated in individual accounts, a chart of accounts is

1. lirnited to those accounts that will appear in the baiance sheet.
2. changed each year by an entity depending on the results of operations.
3. a listing of each account that will be used to accumulate information.
4. used to determine whether a debit or credit balance will appear in each of the accounts at the end of the accounting period

25. Which of the following events would not be considered an accounting transaction?

1. Payment of fees to a tax consultant.
2. Purchase of print advertising space fot a new service.
3. Sales of a new product during the first month of operations.
4. Tabulation of the results of a customer satisfaction survey.

26. The primary function of an account in the accounting system is to

1. store accounting transactions until they are classified.
2. identify the type of organization.
3. accumulate accounting information.
4. determine at what point a transaction should be recorded.

27. When a customer buys services on credit, the contract is regarded as complete when

1. the services are rendered.
2. the bill is presented.
3. the cash payment is received.
4. the date specified in the contract is at hand.

28. Most companies use a chart of accounts prepared by the

1. Accounting Standards Council
2. Securities and Exchange Commission.
3. Bureau of internal Revenue
4. entity's accounting department

29. Which of the following accounts is classified differently from the others listed?

1. Prepaid Rent
2. Cash
3. Accounts Receivable
4. Owner's Capital

30. When owner's equity decreases, one of the following must occur:

1. withdrawals decreases
2. an asset increases
3. an income increases
4. a liability increases

31. What function that accounting journals serve in the accounting process?

1. Classifying
2. Summarizing
3. Reporting
4. Recording

32 The normal balance of an account is on the

1. side represented by decrease in the account balance.
2. debit side of the account.
3. side represented by increases in the account balance.
4. credit side of the account.

33. When cash is debited, a typical credit is to

1. withdrawals.
2. accounts payable.
3. accounts receivable.
4. expenses.

34. Payment of insurance premiums in advance gives rise to

1. prepaid expense.
2. unearned income.
3. accrued income.
4. accrued expense.

35. The manner in which the accounting records are organized and employed within a

business is referred to as

1. business document.
2. voucher system.
3. special journal.
4. accounting information system.

36. The accounting cycle is

1. the length of time it takes to complete set of financial statement after the books are closed.
2. process that begins with adjusting entries and ends with the preparation of the financial statements.
3. applicable only to manual systems, not to computerized systems.
4. the sequence of procedures used by a business to process economic information and to produce financial statements.

37. A ledger is defined as a collection of

1. all statement of financial position accounts.
2. all income statement accounts.
3. account titles - asset, liability, equity, income and expense accounts.
4. Transactions.

38. The equality of debits and credits in the ledger should be verified at the end of each

accounting period by preparing

1. an accounting statement.
2. an account verification report.
3. a trial balance.
4. a balance report.

39. Of the following errors, the one that will cause an inequality in the trial balance

totals is

1. failure to record a transaction.
2. recording the same transaction more than once.
3. posting a transaction to the wrong account.
4. ncorrectly computing an account balance.

40. Office supplies are expensed

1. at no time, since they are assets.
2. when they are paid for.
3. when they are purchased.
4. when they are consumed (used up).

41. Which of the following statements is false about a proper journal entry?

1. It may have more than one debit or credit entry,
2. A space should be skipped between journal entries.
3. Credits are always indented.
4. Accounts that are increased are always listed first.

42. Transactions are recorded chronologically in the

1. Ledger
2. T-account
3. Daybook.
4. journal.

43. When an entity pays for goods or services before actual receipt, the payment should be recorded as a decrease in Cash and an increase in

1. an asset.
2. an expense.
3. an owner's equity account.
4. a liability.

44. Entries recorded on the right side of any account are called

1. debits.
2. increases.
3. Credits.
4. Decreases.

45. Which of the following accounts probably would be listed after the others in a chart a

of accounts?

1. Unearned Art Fees
2. Prepaid Rent
3. Owner's Capital
4. Art Revenues

46. Unearned Revenues are recorded by companies that

1. pay money in advance of the performance of a service.
2. pay money at the time the performance of a service is complete.
3. receive money in advance of the performance of a service.
4. receive money at the time the performance of a service is complete.

47. Which of the following statements regarding a trial balance is incorrect?

1. A trial balance helps to localize errors within an identifiable time period.
2. A trial balance is a test of the equality of the debit and credit balances in the ledger.
3. A trial balance is a list of all of the open accounts in the ledger with their balances as of a given date.
4. A trial balance proves that no errors of any kind have been made in the accounts during the accounting period.

48. A simple journal entry

1. consists of two debits and one credit.
2. consists of one debit and two credits.
3. is a memorandum entry.
4. consists of one debit and one credit.

49. The Posting Reference column in the ledger shows that an item has been posted

when which of the foilowing is placed in it?

1. An "X"
2. The account number
3. The journal page number
4. A check mark

50. Which of the following transactions does not affect the balance sheet totals?

1. Purchasing P50,000 supplies on account
2. Collecting P40,000 from customers on account
3. Paying a P300,000 note payable
4. Withdrawal of PB0,000 by the firm's owner

51. The accrual basis of accounting recognizes

1. revenues when cash is received.
2. expenses when cash is paid.
3. revenues when products are produced as part of operating activities.
4. expenses when resources are consumed as part of operating activities.

52. An error of original entry occurs when

1. either the debit entry or the credit entry for a particular transaction is recorded in the wrong class of account.
2. a correct figure is entered in the double entry accounting records, once in the correct ledger account and once in the wrong person's account
3. an incorrect figure is entered on the correct sides of the correct ledger accounts
4. None of the above

53. Which of the following statements is true about a proper journal entry?

1. An explaination must follow each debit and each credit.
2. The name of the month should be reapeted for each entry.
3. The Posting Reference column is filled in prior to posting
4. All debits are listed before any credits.