BASIC ACCOUNTING REVIEWER

1. It is known as the language of business

A. Accounting

B. English

C. Financial Statements

D. All of these

2. Which of the following describes Credit?

I. It always decreases asset accounts

II. It is always on the right side of the T-account, regardless when the account is an asset, liability or equity

III. It is the normal balance of all contra accounts

IV. It is used to close all revenue accounts for the period

A. I only B. II only C. I, II D. I, II, II E. All of these

3. Select the incorrect equation. If Assets= Liabilities + Capital, then

A. Assets- Liabilities = Net Assets

B. Net Increase in Capital = Increase in Assets - Increase in Liabilities - Drawings

C. Change in Capital = Additional Investments Net Income/loss for the period - Drawings

D. Assets=Liabilities + Owners Investments + Drawing + Net Income

E. Choices A and D are correct

4. If a company uses special journals, purchases of merchandise should be recorded using

A. Purchase journal only B. Purchase journal or Cash payments journal

C. Cash payments journal only D. Voucher register E. General journal

5. They encompass the conventions, rules and procedures necessary to define what is accepted accounting practice

A. Generally Accepted Accounting Principles

B. Accounting Constraints

C. Conceptual Framework

D. Accounting Assumptions

6. Which type of accounts needs to be closed at the end of the accounting period?

A. Real accounts C. Mixed accounts E. Adjunct accounts

B. Nominal accounts D. Contra accounts

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

A. Classifying B. Summarizing

C. Reporting E. Communicating

D. Recording

8. Under the income method, the adjusting entry for income not yet earned but already collected or

recorded will

A. Increase asset, increase in revenue

B. Decrease asset, increase in liability

C. Increase liability, decrease in revenue

D. Increase liability, increase in expenses

E. Increase in Cash, increase in revenue

9. After the accounts have been closed,

A. all the accounts will have zero balance

B. the real accounts will have zero balances

C. the revenue, expense, income summary and retained earnings accounts will have zero balances

D. the revenue, expense and income summary accounts will have zero balances

E. adjusting entries will have to be journalized

10. Which of the following account titles appear in the Income Statement columns of the worksheet?

A. Unearned Fees C. Accumulated Depreciation E. Owner, Drawing

B. Freight-out D. Accrued Expenses

11. Adjusting entries are dated in the journal as of:

A. First day of the accounting period

B. Middle of the accounting period

C. Last day of the accounting period

D. Date they are actually journalized

E. First day of the next accounting period

12. An entry to recognize accrued income in a partnership business involves

A. A debit to Cash

B. A credit to Cash

C. A debit to Accounts Receivable

D. A credit to partners Capital accounts

E. A credit to Drawing

13. To arrive at Cost of Sales,

A. sales discounts and sales returns and allowances must be deducted from gross sales net of VAT

B. sales discounts and sales returns and allowances must be added back to net sales

C. Add beginning inventory balance and purchases for the period and freight-in

D. Deduct cost of ending inventory from the sum of beginning inventory and net purchases for the period

E. Correct answer not given

14. The major expense of a merchandising business is

A. Purchases C. Selling Expense E. Cost of Goods Sold

B. Delivery Expense D. Advertising Expense

15. Which of the following statements regarding trade discounts and sales discounts is incorrect?

A. Trade discounts are presented as deductions from sales price in Statement of

Comprehensive Income.

B. Trade discounts are usually offered to customers who buy in large volumes.

C. Sales discounts are usually offered to regular customers on credit only.

D. Sales discounts reduce the risk of uncollectibility of receivables because it encourages early payment of accounts.

E. None of the above

16. A certain VAT-registered grocery store uses Point-of-Sale (POS) terminals (with barcode reader and cash register) in its cash sale of merchandise. The machines keep a database of all sales transactions punched. At the end of every business day, the cashier prepares a report of all sale transactions during the day. Assuming the company uses special journals, the information reported on POS daily summaries will most properly make its way to

A. Sales journal C. Cash receipts journal E. Choices A and C are correct

B. General journal D. Cash payments journal

17. All of these are terms of shipment except

A. FOB Shipping Point

B. FOB Seller

C. Free Along Side (FAS)

D. Cost, Insurance, Freight (CIF)

E. Express Delivery

18. In performing an aging of receivables, the resulting amount computed by multiplying the receivable balance classified by age by the probability of collection is

A. Bad Debts Expense to be presented in the periods Income Statement

B. Required ending balance of Allowance for Bad Debts

C. Required adjustment for Allowance for Bad Debts account

D. Net Accounts Receivable balance to be presented in the Balance Sheet

E. It serves no meaningful amount

19. When a company issues a credit memorandum, it means that

A. The company sold merchandise on credit to a customer

B. The company credited Cash account

C. The company credited customers Accounts Receivable account

D. The supplier credited customers Accounts Payable account

E. The company is informing the bank that there is an erroneous bank charge

20. Select the Incorrect statement

A. The Balance Sheet has two forms, account form and report form.

B. Friar Luca Pacioli discovered the use of double-entry bookkeeping in 1494.

C. A merchandise shipped through FOB Shipping Point, transfer the legal title from the

seller to the buyer at point of receipt of goods.

D. In a merchandising business, Output VAT minus Input VAT is equals to VAT Payable

E. One of the advantages of a Sole Proprietorship is easy to establish a dissolve

21. Accountants prepare financial statements at arbitrary points in time during the lifetime of an entity. This is in accordance with which basic accounting concept?

A. Going concern

B. Periodicity

C. Unit of measure

D. Accrual

22. Which of the following is an adjunct account?

A. Cash

B. Accounts Receivable

C. Premium on bonds payable

D. Allowance for bad debts

23. The correct order of the following steps of the accounting cycle is

A. Posting, closing, adjusting, reversing

B. Posting, adjusting, closing, reversing

C. Posting, reversing, adjusting, closing

D. Adjusting, posting, closing, reversing

24. What is the purpose of nominal accounts?

A. To provide temporary accumulations of certain account balances for a meaningful period of

time

B. To facilitate accounting for small amounts

C. To correct errors as they are detected

D. To record all transactions initially

25. The purchase of office equipment on account will

A

increase an asset and increase owners

equity

C increase an asset and increase a liability

B

increase one asset and decrease another

asset

D increase an asset and decrease a liability

26. The performance of service for a customer or client and immediate receipt of cash will

A. increase one asset and decrease another

asset

C. decrease an asset and decrease a

liability

B. increase an asset and increase owners

equity

D. increase an asset and increase a liability

27. Regarding one purchase of merchandise, the following entries were made by Z Company.

Purchases 17,000

Accounts Payable - Supplier 17,000

Transportation - in 1,900

Accounts Payable - Supplier 1,900

What are the shipping terms regarding this transaction?

A FOB destination, freight prepaid C FOB destination, freight collect

B FOB shipping point, freight prepaid D FOB shipping point, freight collect

28. Failing to post the transaction of purchasing P 600 of office supplies on account would have what

effect on the trial balance?

A debit total would equal the credit total

B debit total would be P 600 greater than the credit total

C debit total would be P 1,200 greater than the credit total

D debit total would be P 600 less than the credit total

29. A company declared a cash dividend on its common stock on December 15, 2013, payable on January 12,2012. How would this dividend affect stockholders equity on the following dates?

December 15,2011 December 31,2011 January 12,2012

A. Decrease No effect Decrease

B. Decrease No effect No effect

C. No effect Decrease No effect

D. No effect No effect Decrease

30. To arrive at the book value of a PPE, you should:

A Divide the cost of the PPE by its estimated useful life and not deducting a trade-in value, if there is a given amount

B Multiply the semi-annual depreciation by two, then multiply that amount by the useful life

C Deduct the salvage value and the accumulated depreciation to the cost of PPE

D Add all depreciation expense from prior years and current years, then deduct the sum to the cost of PPE