INTERMEDIATE ACCOUNTING 1

“ASSESSMENT”
1. The first step in the accounting cycle is to
A Adjust the general ledger accounts.
B Post journal entries to general ledger accounts.
C Analyze transactions from source documents.
D Record transactions in a journal.

2. What is the correct order of the following events in the accounting process?
I. Nominal accounts are closed.
II. Adjusting entries are recorded.
III. Financial statements are prepared.
A I, II, III
B II, I, III
C III, II, I
D II, III, I

3. Which of the following is not among the first five steps in the accounting cycle?
A Post entries to general ledger accounts.
B Adjust the general ledger accounts.
C Record closing entries.
D Record transactions in journals.

4. What is the logical order of the following steps in the accounting cycle?
A Post the closing entries, take a post-closing trial balance, then journalize the closing
entries.
B Prepare the earnings statement, prepare the statement of financial position and then
prepare a worksheet.
C Journalize the closing entries, post the closing entries, and then take a post-closing
trial balance.
D Post the journal entries to the ledger accounts, prepare a worksheet, and then take a
trial balance.

5. An optional step in the accounting cycle is the preparation of

A A post-closing trial balance
B A statement of cash flows
C Closing entries
D Adjusting entries

6. The manner in which the accounting records are organized and employed within a business is
referred to as
A Special journals
B Voucher system
C Business document
D Accounting system

7. Basic steps in the recording process include all of the following, except
A Analyze each transaction for the effect on the accounts.
B Enter the transaction information in a journal.
C Transfer the journal information to the appropriate account in the statement of
financial position.
D All of the choices are correct regarding the basic steps in the recording process.

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8. The use of computers in processing accounting data
A May result in the elimination of document trails used to verify accounting records.
B Eliminates the need for financial reporting standards.
C Eliminates the double entry system as a basis for analyzing transactions.
D Eliminates the need for accountants.

9. Which is false concerning the rules of debit and credit?

A The word debit means to increase and the word credit means to increase.
B The normal balance of any account appears on the side of recording increases.
C Increases in assets and expenses are debit entries and increase in liabilities, equity and
revenue are credit entries.
D The left side of an account is always the debit side and the right side is always the
credit side.

10. Debits
A Decrease assets and expenses and increase liabilities, revenue and equity.
B Increase assets and equity and decrease liabilities, expenses and revenue.
C Increase assets and expenses and decrease liabilities, revenue and equity.
D Increase assets and decreases expenses, liabilities, revenue and equity.

11. Which of the following statements is true regarding debits and credits?
A In the income statement, revenue is increased by a debit whereas in the statement of
financial position, retained earnings account is increased by a credit.
B The rules for debit and credit and the normal balance of share capital are the same as
for liabilities.
C Before adjustments, debits will not equal credits in the trial balance.
D On the income statement, debits are used to increase account balances, whereas on the
statement of financial position, credits are used to increase account balances.

12. In accrual accounting system

A Revenue is recorded only when cash is received.
B Liability, share capital and dividend all have normal credit balances.
C A debit entry is recorded on the left-hand side of an account.
D All accounts have normal debit balances.

13. Which is not considered a book of original entry?

A Purchases journal.
B Sales journal
C General ledger
D General journal

14. A journal entry that contains more than two accounts is called
A A compound journal entry
B An erroneous journal entry
C An adjusting journal entry
D A posted journal entry

15. What function do accounting journals serve in the accounting process?

A Reporting
B Summarizing
C Classifying
D Recording

16. Which of the following accounts would be increased by a debit?

A Share capital
B Notes payable
C Accounts payable
D Dividends

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17. The debit and credit analysis of a transaction normally takes place
A At some point in the accounting cycle.
B When the trial balance is prepared.
C When the entry is posted to the ledger.
D Before an entry is recorded in a journal.

18. Which of the following types of accounts measure economic flows over a period of time?
A Contra accounts
B Mixed accounts
C Nominal accounts
D Real accounts

19. The purchase of equipment on account

A Decrease asset and liability
B Decrease equity
C Increases asset and liability
D Increases asset and decreases liability

20. What is the effect if an entity collected in full an account receivable?

A Equity increase
B Assets are not be affected
C Assets decrease
D Assets increase

21. A common business transaction that would not affect the amount of equity is
A Payment of dividends
B Billing of customers for services rendered
C Payment of property taxes
D Signing a note payable to purchase equipment

22. An example of a nominal and contra account is

A Freight in
B Freight out
C Accumulated depreciation
D Sales return

23. Which one of the following is an adjunct account that should not be closed at the end of
every accounting period?
A Share premium
B Discount on bonds payable
C Freight in
D Allowance for doubtful accounts

24. Premium on bonds payable is an example of

A Real and contra account
B Nominal and contra account
C Real and adjunct account
D Nominal and adjunct account

25. 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 account.
C The dual effect of each transaction is recorded with a debit and a credit.
D More than one of the above.

26. The accounting equation must remain in balance

A Only when formal financial statements are prepared.
B Only at the time the trial balance is prepared.
C Only when journal entries are recorded.
D Throughout each step in the accounting cycle.
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27. Which of the following is a real account?
A Goodwill
B Sales
C Accounts receivable
D Both goodwill and accounts receivable.

28. Which of the following is a nominal account?

A Retained earnings.
B Inventory
C Salary expenses
D Unearned revenue

29. Equity is not affected by all

A Expenses
B Revenue
C Dividends
D Cash receipts

30. Which is false concerning use of special journals?

A Only cash purchase are recorded in the cash disbursement journal.
B Transactions that cannot be appropriately recorded in a special journal are recorded in
the general journal.
C Purchases of any items on account are recorded in the purchases journal. Acquisitions
of any items for cash are recorded in the cash disbursement journal.
D Only sale of merchandise on account are recorded in the sales journal. Cash sales are
recorded in the cash receipts journal.

31. Bob Corporation uses special journals, in which journal would the sale of merchandise for
cash be recorded?
A Cash disbursements journal
B General journal
C Cash receipts journal
D Sales journal

32. When special journals are used, which of the following is true?
A All purchase transactions should be recorded in the purchase journal.
B All cash receipts should be recorded in the cash receipts journal.
C All sales transactions should be recorded in the sales journal.
D A general journal is not used.

33. When special journals are used, adjusting and closing entries are recorded in the
A Purchases journal
B General journal
C Cash receipts journal
D Cash disbursements journal

34. Posting refers to the process of transferring information from

A Journals to source documents
B Source documents to journals
C General ledger accounts to journals
D Journals to general ledger accounts

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

A Recording
B Classifying
C Summarizing
D Reporting

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36. A subsidiary ledger is
A A listing of accounts of a subsidiary
B A listing of account balances just before closing entries are prepared
C A backup system to protect against the record destruction
D A listing of the components of account balances

37. A chart of accounts

A A list of all account titles in the general ledger.
B A journal
C An accounting procedure manual.
D A flowchart of all transactions.

38. Which of the following is not a principal purpose of an unadjusted trial balance?
A It proves that debits and credits were properly entered in the ledger accounts.
B It supplies a listing of open accounts and their balances.
C It is the basis for any adjustments to the account balances.
D It proves that debits and credits of equal amounts are in the ledger.

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

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

40. The trial balance

A Is used to prepare the statement of financial position while the general ledger is used
to prepare the income statement.
B Can be used to uncover errors in journalizing and posting.
C Has as the primary purpose of proving that all journal entries were made for the
period.
D Is a listing of all the accounts and their balances in the order the accounts appear on
the statement of financial position.

41. Numerous errors may exist even though the trial balance columns agree. Which of the
following is not one of these errors?
A A journal entry to purchase P20,000 worth of equipment is recorded and posted as
P200,000.
B A journal entry is posted twice.
C Transposition error related to the statement of financial position.
D A transaction is not journalized.

42. Which of the following errors will cause an imbalance in the trial balance?
A Listing the balance of an account with a debit balance in the credit column of the trial
balance.
B Posting a credit to accounts payable as a credit to accounts receivable.
C Posting an entire journal entry twice to the ledger.
D Omission of a transaction in the journal.

43. The postclosing trial balance

A Proves that accounts have been closed properly.
B Is identical to the statement of financial position.
C Does not include nominal amounts.
D Provides a convenient listing of account balances that can be used to prepare the
financial statements.

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44. A voucher system is used in connection with transactions that involve only
A Revenue and expense
B The purchase and sale of merchandise
C The payment of cash
D The receipt of cash

45. It is the business paper which is prepared by an entity for every cash payment
A Official receipt
B Journal
C Voucher
D Check

46. All vouchers are recorded in numerical sequence in the

A Cash disbursement journal
B General journal
C Voucher register
D Check register

47. After vouchers are recorded, they are filed in an “unpaid vouchers file”
A No regular order
B Chronologically
C In the order of payment
D Numerically

48. Adjusting entries involve

A One real and one nominal account
B Only real accounts
C Only capital accounts
D Only nominal accounts

49. Which of the following is an example of an adjusting entry?

A Recording the payment of wages to employees.
B Recording the billing of customers for services rendered.
C Recording depreciation of a truck.
D Recording the purchase of supplies on account.

50. An adjusting entry to accrue wages incurred but not yet paid is an example of
A Reflecting unrecorded revenue earned during an accounting period.
B Reflecting unrecorded expenses incurred during an accounting period.
C Aligning recorded revenue with appropriate accounting periods.
D Aligning recorded costs with appropriate accounting periods.

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