FINANCIAL ACCOUNTING AND REPORTING (VALIX/SIY/) TEST BANK.
ACCOUNTING PROCESS
1. Which is a logical order in the accounting cycle?
a. Posting, financial statements and unadjusted trial balance
b. Financial statements, closing entries and reversing entries
c. Financial statements, adjusting entries and recording
d. Closing entries, reversing entries and adjusting entries
2. 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.
3. In recording transactions
a. The word "debit" means increase and the word "credit" means decrease
b. Assets, expenses and retained earnings are debited for increases
c. Liabilities, revenue and share capital are credited for increases
d. Assets, revenue and share capital are debited for decreases
4. 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
5. 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
6. A simple journal entry
a. Consists of one debit and one credit
b. Consists of two debits and one credit
c. Consists of one debit and two credits
d. Contains more than two accounts
7. Posting
a. Accumulates the effects of ledger entries and transfers them to the generaljournal.
b. Is done only for income statement activity related to the statement of financial
position does not require posting.
c. Is done every year.
d. Transfers journal entries to the ledger accounts.
8. 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.
9. 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.
,10. Adjusting entries effect
a. One nominal account and one real account
b. Two nominal accounts
c. Two real nominal accounts
d. No particular combination of nominal and real accounts
11. Adjusting entries
a. Are often prepared after the statement of financial position date, but dated as ofthe
statement of financial position date.
b. Are necessary to enable the financial statements to conform with IFRS.
c. Include both accruals and deferrals.
d. All of the choices are correct regarding adjusting entries.
12. 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
13. 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
14. 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
15. 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.
16. Closing entries
a. Are optional in the accounting cycle
b. Affect only real accounts
c. Determine the amount of net income or net loss for the period
d. Reduce the balances of temporary accounts to zero
17. Which closing procedure is unique to a corporation?
a. Close each revenue account to the income summary account
b. Close each expense account to the income summary account
c. Close the income summary account to retained earnings
d. Close the drawing account to the capital account
18. The post – closing 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
,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 2019, the entity collected P600,000 of cash and recorded thereceipt by recognizing
unearned revenue. The entity had earned one – third of this amount and the other two – thirds will be
earned during January 2020. What is the impact of the adjusting entry on December 31, 2019?
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 Boracay. During December 2019, PICPA held an annual conference
at the resort. The charges related to the conference totaled P4,000,00, of which25% had been paid.
The entity failed to make the appropriate adjusting entry on December31, 2019 for the uncollected
balance. 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 unused
amounted to P500,000. What is the impact of the adjusting entry on storesupplies?
a. Increase in net income P1,500,000
b. Increase in expenses P1,500,000
c. Decrease in assets P500,000
d. Decrease in expenses P500,000
24. An entity reported supplies unused at the beginning of the year with a balance of P400,000before
the reversing entry. Payments for supplies during the year amounted to P2,500,000and were
recorded as expense. A physical count at the end of the year revealed supplies unused costing
P500,000. Reversing entries are made by the entity. What is the adjusting entry at year – end?
a. Debit supplies unused and credit supplies expense P100,000
b. Debit supplies expense and credit supplies unused P100,000
c. Debit supplies expense and credit supplies unused P2,400,000
d. Debit supplies unused and credit supplies expense P500,000
25. An entity reported wages expense of P3,500,000 for 2019. The wages payable at the beginning of
year amounted to P500,000. Wage payments during the year totaled P3,200,000. The previous year’s
adjusting entry for unpaid wages was reversed on January1, 2020. What is the adjusting entry for
accrued wages on December 31, 2019?
a. Debit wages expense and credit wages payable P500,000
b. Debit wages expense and credit wages payable P300,000
c. Debit wages expense and credit wages payable P800,000
d. Debit wages payable and credit wages expense P500,000
, REVISED CONCEPTUAL FRAMEWORK
1. Which statement is true about the Conceptual Framework for Financial Reporting?
a. The Conceptual Framework is not a Standard.
b. The Conceptual Framework describes the objective of financial reporting and he
concepts for general purpose financial statements.
c. In cases of conflict, the requirements of the relevant IFRS prevail over those ofthe
Conceptual Framework.
d. All of these statements are true about the Conceptual Framework.
2. The Revised Conceptual Framework Comprises how many chapters?
a. Five
b. Six
c. Seven
d. Eight
3. Which is not a purpose of the Revised Conceptual Framework?
a. To assist the IASB to develop IFRS based on consistent concepts.
b. To assist preparers to develop consistent accounting policy when no standardapplies
to a particular transaction or when Standard allows a choice of accounting policy.
c. To assist all parties to understand and interpret the Standards.
d. To assist regulatory agencies in issuing rules and regulations for a
particular industry.
4. What provides “the why” or the goal and purpose of accounting?
a. Measurement and recognition concept
b. Qualitative characteristic of accounting information
c. Element of financial statements
d. Objective of financial reporting
5. The objective of financial reporting in the Conceptual Framework
a. Is the foundation for the Conceptual Framework.
b. Includes the qualitative characteristics that make accounting information useful.
c. Is not found in the Conceptual Framework.
d. All of the choices are correct regarding the objective of financial reporting.
6. The overall objective of financial reporting is to provide information
a. That is useful for decision making
b. About asset, liability and equity
c. About financial performance
d. That allows owners to assess management performance
7. Which statement is not a specific objective of financial reporting?
a. To provide information that is useful in investment and credit decisions.
b. To provide information about entity resources, claims against those resourcesand
changes in those resources.
c. To provide information on the liquidation value of an entity.
d. To provide information that is useful in assessing cash flow prospects.
8. The assumption that an entity will not be sold or liquidated in the near future is known as
a. Economic entity assumption
b. Monetary unit assumption
c. Time period assumption
d. Going concern assumption
ACCOUNTING PROCESS
1. Which is a logical order in the accounting cycle?
a. Posting, financial statements and unadjusted trial balance
b. Financial statements, closing entries and reversing entries
c. Financial statements, adjusting entries and recording
d. Closing entries, reversing entries and adjusting entries
2. 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.
3. In recording transactions
a. The word "debit" means increase and the word "credit" means decrease
b. Assets, expenses and retained earnings are debited for increases
c. Liabilities, revenue and share capital are credited for increases
d. Assets, revenue and share capital are debited for decreases
4. 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
5. 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
6. A simple journal entry
a. Consists of one debit and one credit
b. Consists of two debits and one credit
c. Consists of one debit and two credits
d. Contains more than two accounts
7. Posting
a. Accumulates the effects of ledger entries and transfers them to the generaljournal.
b. Is done only for income statement activity related to the statement of financial
position does not require posting.
c. Is done every year.
d. Transfers journal entries to the ledger accounts.
8. 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.
9. 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.
,10. Adjusting entries effect
a. One nominal account and one real account
b. Two nominal accounts
c. Two real nominal accounts
d. No particular combination of nominal and real accounts
11. Adjusting entries
a. Are often prepared after the statement of financial position date, but dated as ofthe
statement of financial position date.
b. Are necessary to enable the financial statements to conform with IFRS.
c. Include both accruals and deferrals.
d. All of the choices are correct regarding adjusting entries.
12. 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
13. 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
14. 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
15. 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.
16. Closing entries
a. Are optional in the accounting cycle
b. Affect only real accounts
c. Determine the amount of net income or net loss for the period
d. Reduce the balances of temporary accounts to zero
17. Which closing procedure is unique to a corporation?
a. Close each revenue account to the income summary account
b. Close each expense account to the income summary account
c. Close the income summary account to retained earnings
d. Close the drawing account to the capital account
18. The post – closing 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
,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 2019, the entity collected P600,000 of cash and recorded thereceipt by recognizing
unearned revenue. The entity had earned one – third of this amount and the other two – thirds will be
earned during January 2020. What is the impact of the adjusting entry on December 31, 2019?
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 Boracay. During December 2019, PICPA held an annual conference
at the resort. The charges related to the conference totaled P4,000,00, of which25% had been paid.
The entity failed to make the appropriate adjusting entry on December31, 2019 for the uncollected
balance. 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 unused
amounted to P500,000. What is the impact of the adjusting entry on storesupplies?
a. Increase in net income P1,500,000
b. Increase in expenses P1,500,000
c. Decrease in assets P500,000
d. Decrease in expenses P500,000
24. An entity reported supplies unused at the beginning of the year with a balance of P400,000before
the reversing entry. Payments for supplies during the year amounted to P2,500,000and were
recorded as expense. A physical count at the end of the year revealed supplies unused costing
P500,000. Reversing entries are made by the entity. What is the adjusting entry at year – end?
a. Debit supplies unused and credit supplies expense P100,000
b. Debit supplies expense and credit supplies unused P100,000
c. Debit supplies expense and credit supplies unused P2,400,000
d. Debit supplies unused and credit supplies expense P500,000
25. An entity reported wages expense of P3,500,000 for 2019. The wages payable at the beginning of
year amounted to P500,000. Wage payments during the year totaled P3,200,000. The previous year’s
adjusting entry for unpaid wages was reversed on January1, 2020. What is the adjusting entry for
accrued wages on December 31, 2019?
a. Debit wages expense and credit wages payable P500,000
b. Debit wages expense and credit wages payable P300,000
c. Debit wages expense and credit wages payable P800,000
d. Debit wages payable and credit wages expense P500,000
, REVISED CONCEPTUAL FRAMEWORK
1. Which statement is true about the Conceptual Framework for Financial Reporting?
a. The Conceptual Framework is not a Standard.
b. The Conceptual Framework describes the objective of financial reporting and he
concepts for general purpose financial statements.
c. In cases of conflict, the requirements of the relevant IFRS prevail over those ofthe
Conceptual Framework.
d. All of these statements are true about the Conceptual Framework.
2. The Revised Conceptual Framework Comprises how many chapters?
a. Five
b. Six
c. Seven
d. Eight
3. Which is not a purpose of the Revised Conceptual Framework?
a. To assist the IASB to develop IFRS based on consistent concepts.
b. To assist preparers to develop consistent accounting policy when no standardapplies
to a particular transaction or when Standard allows a choice of accounting policy.
c. To assist all parties to understand and interpret the Standards.
d. To assist regulatory agencies in issuing rules and regulations for a
particular industry.
4. What provides “the why” or the goal and purpose of accounting?
a. Measurement and recognition concept
b. Qualitative characteristic of accounting information
c. Element of financial statements
d. Objective of financial reporting
5. The objective of financial reporting in the Conceptual Framework
a. Is the foundation for the Conceptual Framework.
b. Includes the qualitative characteristics that make accounting information useful.
c. Is not found in the Conceptual Framework.
d. All of the choices are correct regarding the objective of financial reporting.
6. The overall objective of financial reporting is to provide information
a. That is useful for decision making
b. About asset, liability and equity
c. About financial performance
d. That allows owners to assess management performance
7. Which statement is not a specific objective of financial reporting?
a. To provide information that is useful in investment and credit decisions.
b. To provide information about entity resources, claims against those resourcesand
changes in those resources.
c. To provide information on the liquidation value of an entity.
d. To provide information that is useful in assessing cash flow prospects.
8. The assumption that an entity will not be sold or liquidated in the near future is known as
a. Economic entity assumption
b. Monetary unit assumption
c. Time period assumption
d. Going concern assumption
