A.

Multiple Choices

1. Which of the following is an asset account?

a. Accumulated depreciation
b. Accrued interest income
c. Accrued taxes
d. Allowance for doubtful accounts

2. Which of the following is a liability account?

a. Allowance for doubtful accounts
b. Deferred rent expense
c. Accrued wages
d. Unused office supplies

3. Which of the following accounts will not appear in the balance sheet?
a. Interest receivable
b. Unexpired insurance
c. Accumulated depreciation
d. Doubtful accounts

4. Which of the following accounts will not appear in the income statement?
a. Amortization - franchise
b. Provision for taxes
c. Tools expense
d. Lost due to fire

5. Before the adjusting entries are not journalize and posted, which of the
following is the most likely to be a mixed account?
a. Cash
b. Drawing
c. Accounts payable
d. Prepaid rent

6. Upon the collection of the interest income, the accountant debited cash and
simultaneously credited the unearned interest income. The accountant uses
the:
a. Asset method
b. Liability method
c. Expense method
d. Income method

7. Upon the payment of the advertising expense, the accountant debited

advertising expense and simultaneously credited cash. The accountant uses
the:
a. Asset method
b. Liability method
c. Expense method
d. Income method
8. What is the effect of overstating the accrued wages at the end of the
reporting period?
a. Overstated expense and overstated owner's equity
b. Overstated expense and overstated liability
c. Overstated owner's equity and understated liabilities
d. Understated owner's equity and overstated profit

9. If the business uses the expense method and neglected as the proportion
of the expense, it will result to:
a. Overstated expense and overstated owner's equity
b. Understated expense and understated assets
c. Overstated expense and understated profit
d. Overstated asset and understated profit.

10. In computing for the depreciation of the machinery, if the estimated life
used was too short, it will result to:
a. Overstated expense and understated asset
b. Understated expense and overstated asset
c. Understated expense and overstated profit
d. Understated owner's equity and overstated asset

11. Which of the following errors would overstate the equity of the owner?
a. Income earned but not yet collected was not taken up
b. Expenses incurred but not paid were not recorded
c. Prepaid portion of the rent expense was not taken up
d. Expired portion of the advertising expense was overstated.

12. In recording the periodic depreciation of a fixed asset, it is an accepted

practice to credit accumulated depreciation account instead of making a direct
credit to the asset account. Which of the following is not a reason for doing
so?
a. It is the easier way in recording depreciation
b. The amount of depreciation taken up is only an estimate
c. The balance sheet would continue to show the full cost of the asset
d. The balance sheet would show the aggregate depreciation recorded
over the past years

13. Which of the following errors would understate the assets of the business
enterprise?
a. Deposition of the newly acquired equipment was not taken up
b. Expired portion of the prepaid insurance was not recognized
c. Accrued service income at the end of the period was overlooked
d. Doubtful accounts were not taken up

14. If the accountant disregards the doubtful accounts at the end of the
period, it will result to:
a. Overstated asset and overstated profit
b. Understated profit and understated owner's equity
c. Understated asset and understated profit
d. Overstated asset and understated profit
15. Adjusting for estimated doubtful accounts is in accordance with which
expense recognition criteria?
a. Associating cause and effect
b. Systematic and rational allocation
c. Immediate recognition
d. All of the above

16. If income is already earned but not recognized, this error will result to:
a. Understated profit and overstated owners’ equity
b. Understated profit and understated asset
c. Overstated profit and overstated owner's equity
d. Overstated profit and understated asset

B. Matching

__A__ 1. Already incurred but not yet paid.

__I__ 2. Portion of the cost of fixed assets that is allocated to expense.
__E__ 3. Already paid but not yet incurred.
__G__ 4. Debits an asset account upon payment of cash.
__N__ 5. Portion of the receivables that may not be collected.
__J__6. Credits an income account upon collection of cash.
__F__ 7. Already collected but not yet earned.
__Q__ 8. Debits an expense account upon payment of cash.
__B__ 9. Already earned but not yet collected.
__O__ 10. Credits a liability account upon collection of cash.
__D__ 11. Upon adjustment, credit an income account for the earned portion.
_K__ 12. Upon adjustment, credit a liability account for the unearned portion.
__C__ 13. Upon adjustment, debit an expense account for the used portion.
__L__ 14. Upon adjustment, debit an asset account for the unused portion.
__P__ 15. Contains permanent and temporary components.
__H__ 16. Direct association, Systematic and rational allocation, and
immediate recognition.
__M__ 17. Determination of profit requires that expenses incurred should be
subtracted from income earned.

a. Accrued expense j. Income summary

b. Accrued income k. Liability method
c. Expense method l. Asset method
d. Income method m. Matching Concept
e. Prepaid expense n. Doubtful accounts
f. Unearned income o. Change in estimates
g. Accrual basis accounting p. Mixed account
h. Expense recognition method q. Drawing account
i. Depreciation