A CC T G 1 01 A

Question 1
Statement 1: A worksheet is financial statement that aids bookkeepers and accountants
in the preparation of the Income Statement and Balance Sheet.
Statement 2: An error exists in the preparation of the worksheet when the total debits
and credits of the Income Statement are not equal before adding the profit/loss.
a. Only Statement 1 is true
b. Only Statement 2 is true
c. Both Statements are true
d. Both Statements are false

Correct Answer: D
Statement 1 is false because a worksheet is not a financial statement, all other information in that statement is true.
Statement 2 is also false because there will always be unequal amounts of debits (expenses) and credits (revenue) if the entity is
experiencing either a gain or loss unless total revenue realized is equal to the total expenses incurred.
 Question 2
In which columns of a worksheet would the adjusted balance of the accumulated
depreciation account appear.
a. Adjusted Trial Balance Credit, Balance Sheet Debit, Income Statement Debit
b. Adjusting Entry Debit, Adjusted Trial Balance Debit, Balance Sheet Debit
c. Adjusting Entry Credit, Adjusted Trial Balance Credit, Balance Sheet Credit
d. Adjusted Trial Balance Credit, Balance Sheet Credit
Correct Answer: D
The Accumulated Depreciation account is a contra-asset account having a normal balance in the credit side and is located in the
Statement of Financial Position. Since the problem involves only the adjusted amount, it can only be found in both the Trial Balance
(credit) and subsequently, the Balance Sheet (credit).
 Question 3
A bookkeeper can prepare the following financial statements from the worksheet,
except;
a. Statement of Financial Position
b. Statement of Financial Performance
c. Statement of Cash Flows
d. None of the above
Correct Answer: C
The Statement of Cash Flows cannot be determined using the worksheet since it involves the classification of transaction into
operating, financing, and investing, and such information cannot be provided with the worksheet.
 Question 4
It lists all the business accounts before year-end adjusting journal entries are made.
a. General Journal
b. Unadjusted Trial Balance
c. Worksheet
d. Balance Sheet

Correct Answer: B
The Unadjusted Trial Balance lists all the accounts at year-end before any adjustments are made.
 Question 5
ABC Company is a sole proprietorship owned by Mr. Dela Cruz. The worksheet
shows that the company had a total debit balance in its 2021 Balance Sheet of Php
1,500,000, total liabilities is Php 950,000, Accumulated Depreciation is Php 25,000.
The company realized a total profit of Php 250,000 for the year. Based on the given
data, by what amount should Dela Cruz, Capital increase in 2021? (Accumulated
Depreciation is the only contra-asset account of the company)
a. Php 525,000
b. Php 250,000
c. Php 270,000
d. Php 0
Correct Answer: B
The amount realized in the Income Statement is transferred to the Owner’s Equity account at year-end so the amount by which Dela
Cruz, Capital should increase is equal to the total profit of Php 250,000.
 Question 6
A complete set of Financial Statements includes the all of the following components
except
A. Statement of Financial Position
B. Statement of Changes in Equity
C. Environmental reports and value-added statements
D. Notes to Financial Statements
Correct Answer: C
A complete of financial statements comprises the following components:
1. Statement of Financial Position as at the end of the period
2. Statement of profit or loss and other comprehensive income for the period (Presented as a single combined statement of profit and loss
and other comprehensive income or two separate statements)
3. Statement of Changes in Equity for the period
4. Statement of Cash Flows for the period
5. Notes, comprising a summary of significant accounting policies and other explanatory information
Environmental reports and value-added statements are reports presented outside the scope of IFRS.
 Question 7
Which statement indicates a going concern?
A. Management intends to liquidate the entity
B. Management intends to cease the operations of the entity
C. Management has no realistic alternative but to cease the operations of the entity
D. None of these would indicate going concern

Correct Answer: D
Going concern assumes that the entity will continue in operation for the foreseeable future. Hence, it will not liquidate and cease
operations.
 Question 8
Which statement in relation to financial statements is incorrect?
A. General Purpose Financial Statements do not and cannot provide all of the information
that primary users need
B. General Purpose Financial Statements are designed to show the value of the reporting
entity
C. General Purpose Financial Statements are intended to provide common information to
users
D. Financial Statements are largely based on estimate and judgment rather than exact
depiction

Correct Answer: B
General Purpose Financial Statements are not designed to show the value of the reporting entity since it is largely based on estimate
and judgment rather than exact depiction and it only consists common information.
 Question 9
Assets to be sold or realized as part of the operating cycle are
A. Current Assets
B. Noncurrent Assets
C. Property, Plant and Equipment
D. Noncurrent Investments
Correct Answer: A
An entity shall classify assets as current when:
1. The asset is cash or cash equivalent unless it is restricted to settle a liability for more than 12
months after the reporting period.
2. The entity holds the asset for the purpose of trading
3. The entity expects to realize the asset within 12 months after the reporting period
4. The entity expects to realize the asset within the entity’s normal operating cycle.
Property, Plant and Equipment, Noncurrent Assets and Investments are classified as noncurrent since it is not realizable within a
year or within normal operating cycle.
 Question 10
Which is an essential characteristic of an asset
A. The claims to the benefits are legally enforceable
B. An asset is tangible
C. An asset is intangible
D. An asset is a present economic resource
Correct Answer: D
An asset can be tangible such as Property, Plant and Equipment or intangible such as Franchise. Hence, the correct answer is D
because an asset is a present economic resource since it has a potential to produce economic benefits.
 Question 11
Which is an essential characteristic for a liability to exist
A. There must be a past event
B. The exact amount must be known
C. The identity of the party to whom the liability is owed must be known
D. There must be an obligation to pay cash in the future
Correct Answer: A
The essential characteristics of a liability are:
1. The entity has a present obligation
2. The obligation is to transfer an economic resource
3. The liability arises from past event
It is not necessary that the payee to whom the obligation is owed be identified. However, the entity liable must be identified. The
exact amount need not be known and the obligation is not necessarily paying cash in the future, it can be a transfer of noncash asset
or providing service. Hence, the correct answer is A because the liability is not recognized until it is incurred, so it arises from a past
event.
 Question 12
An entity whose financial statements comply with PFRS shall
A. Make an explicit statement of compliance in the notes
B. Make an unreserved statement of compliance in the notes
C. Not describe financial statements as complying with PFRS
D. Make an explicit and unreserved statement of compliance in the notes
Correct Answer: D
PAS 1, paragraph 114, provides that an entity whose financial statements comply with Financial Reporting Standards shall make an
explicit and unreserved statement of such compliance in the notes.
 Question 13
Net Income equals
A. Assets minus Liabilities
B. Revenue minus cost of Goods Sold
C. Revenue minus expenses
D. Cash receipts minus cash payments
Correct Answer: C
Assets minus Liabilities = Equity
Revenue minus COGS = Gross Income
Cash Receipts minus Cash Payments = Net cash
 Question 14
The effects of transactions and other events on economic resources and claims are
depicted in the periods in which those effects occur even if the resulting cash
receipts and payments occur in a different period
A. Modified Accrual Accounting
B. Cash Accounting
C. Accrual Accounting
D. Modified Cash Accounting
Correct Answer: C
The main difference between accrual and cash basis accounting lies in the timing of when revenue and expenses are recognized.
Accrual Accounting recognized the effect of transactions and events when they occur and not as cash is received or paid. Hence,
revenues are recorded as they are earned and expenses are recognized as they are incurred. On the other hand, Cash Accounting
does not record a transaction until cash is received or paid.
 Question 15
A third statement of Financial Position as at the beginning of the earliest
comparative period presented is required
A. When an entity applies an accounting policy retrospectively
B. When an entity makes a retrospective restatement of items in the financial
statements
C. When an entity reclassifies items in the financial statements
D. Under all of these circumstances.
Correct Answer: D
A statement of financial position as at the beginning of the earliest comparative period is presented when an entity applies an
accounting policy retrospectively or makes a retrospective restatement of items in its financial statements or when it reclassifies
items in its financial statements.
 Question 16
The statement of Financial Position presents a structured summary of the
A. Cash Receipts and Cash Payments during the period
B. Profits and losses during the period
C. Disclosures that do not qualify for recognition
D. Assets, Liabilities and Equity at the reporting date

Correct Answer: D
A Statement of Financial Position shows the three elements comprising financial position namely assets, liabilities and equity at a
specific date and their corresponding net balances. It is an expansion of the accounting equation “asset equals liabilities plus
equity.”
Cash receipts and Cash Payments during the period are shown in the Statement of Cash Flows while profit and losses during the
period are shown in the Statement of Financial Performance while disclosures are in the Notes to Financial Statements.
 Question 17
Items of dissimilar nature or function
A. Must always be presented separately in financial statements.
B. Must not be presented
C. Must be presented separately in financial statements if those items are material.
D. Must be presented separately in financial statements even if those items are
immaterial

Correct Answer: C
Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated
only if they are individually immaterial
 Question 18
Which of the following best describes the term “financial performance”?
A. The revenue, expenses and net income or loss for a period of an entity.
B. The assets, liabilities and equity of an entity
C. The total assets minus total liabilities
D. The total cash inflows minus total cash outflows

Correct Answer: A
The financial performance of an entity is primarily measured in terms of level of income earned by the entity through the effective
utilization or resources. It is also known as the result of operations and it provides information about profitability. Hence, it includes
revenue, expenses and net income or loss for the period.
 Question 19
The Statement of Financial Position of Uchiha Enterprise showed a total asset of
P100,000 and total Equity of P35,000. How much is its Liabilities?
A. P135,000
B. P75,000
C. P65,000
D. P 0
Correct Answer: C
A Statement of Financial Position is an expansion of the accounting equation “asset equals liabilities plus equity.” In order to get
liabilities, total asset of 100,000 is deducted with 35,000 equity which results to P65,000 liabilities.
 Question 20
The overall objective of financial reporting is to provide information.
A. That is useful for decision making
B. About assets, liabilities and equity
C. About financial performance during a period
D. That allows owners to assess performance of management
Correct Answer: A
The objective of General-Purpose Financial Statements is to provide information about the financial position, financial performance
and cash flows of an entity that is useful to a wide range of users in making economic decisions.
 Question 21
Which of the following accounts does not require a closing entry?
A. Maintenance Expense
B. Income Summary
C. Fees
D. Klaus Brown, Capital
Correct Answer: D
Only temporary or nominal accounts require a closing entry. This includes the income, expense, income summary, and withdrawal
accounts. These temporary accounts are being closed to the capital account, which is a permanent account.
 Question 22
An important purpose of closing entries is to
A. adjust the accounts in the ledger.
B. set nominal account balances to zero at the start of the next period.
C. set real account balances to zero at the start of the next period.
D. help in preparing financial statements.
Correct Answer: B
Nominal or temporary accounts are accounts that show balances over a single accounting period. Closing entries are there to reset
the balances of these accounts to zero, to prevent them from being mixed with the balances of the next accounting period.
 Question 23
Closing entries ultimately will affect
A. the cash account
B. total assets
C. the owner’s capital
D. total liabilities
Correct Answer: C
Temporary accounts are being closed to the capital account. Setting these accounts to zero means transferring their balances to the
capital, which in turn increases or decreases the total balance of the said account.
 Question 24
When there is a loss, the entry to close the income summary account is
A. debit Owner’s Capital and credit Income Summary
B. debit Loss and credit Income Summary
C. debit Income Summary and credit Owner’s Capital
D. debit Income Summary and credit Loss
Correct Answer: A
The income summary has a debit balance when there is a loss. To set this balance to zero, the income summary account should be
credited. The capital account, with a normal credit balance, is debited, indicating a decrease in the account since it is a loss.
 Question 25
Transferring the expense account balances to the Income Summary account is the
A. first closing entry
B. second closing entry
C. third closing entry
D. fourth closing entry
Correct Answer: B
The sequence of closing entries includes first closing the income accounts, followed by the expense accounts, to the income
summary account. Then the income summary account and lastly the withdrawal account are closed to the capital account.
 Question 26
Which among the following accounts is included in the post-closing trial balance?
A. Interest Expense
B. Consulting Revenues
C. Prepaid Insurance
D. Rent Income
Correct Answer: C
Post-closing trial balance only includes permanent accounts, such as the accounts that can be found in the Statement of Financial
Position. Among all of the choices, Prepaid Insurance is the only real account. All the other choices are temporary accounts (income
and expenses) that can be found in the Income Statement.
 Question 27
The purpose of the post-closing trial balance is to
A. provide the account balances for the preparation of the balance sheet
B. ensure that the ledger is in balance for completion of the worksheet
C. aid the journalizing and posting of the closing entries
D. ensure that the ledger is in balance for the start of the next period.
Correct Answer: D
The post-closing trial balance is the last step in the accounting process, unless the entity opts to prepare reversing entries. Thus, it is
a crucial process that ensures debits and credits remain in balance after closing entries were made, so that, no potential inequalities
or errors in the general ledger will be carried forward to the new accounting period.
 Question 28
Which of the following accounts is/are not included in the post-closing trial balance?
A. Fernandez, Capital
B. B. Fernandez, Drawing
C. Both A and B
D. Accumulated Depreciation

Correct Answer: B
Fernandez, Drawing or the withdrawal account is not included in the post-closing trial balance because it is one of the accounts that
are closed to zero when we made the closing entries. The closing entry being a debit to the Capital account and a credit to the
Drawing account. Thus, only the Capital account will be shown in the post-closing TB with its amount reduced by the withdrawals.
 Question 29
What is shown in the post-closing trial balance?
A. Zero balances of balance sheet accounts
B. Only the real accounts
C. Only the nominal accounts
D. The same with what is in the Trial Balance
Correct Answer: B
The post-closing trial balance only shows real or permanent accounts, such as the assets, liabilities, and equity. The temporary
accounts were previously closed to zero in the closing entries.
 Question 30
Which among the following would show the correct year-end Capital balance?
A. Post-Closing Trial Balance
B. Adjusted Trial Balance
C. Unadjusted Trial Balance
D. Worksheet
Correct Answer: A
Among all the choices, the post-closing trial balance is the last to be prepared, which means that all the necessary adjustments to the
Capital account are already reflected in its balance in the post-closing TB. In comparison to the balance in the Adjusted or
Unadjusted Trial Balance, the post-closing trial balance already shows the Capital account balance net of withdrawal.
 Question 31
What is most likely the reason why temporary accounts do not appear in the post-
closing trial balance?
A. GAAP requires them to be ignored
B. Some temporary accounts may have remaining balances but only permanent ones
are material
C. All temporary accounts have been closed; hence, have zero balances
D. Only real accounts are relevant for the year-end.
Correct Answer: C
Prior to the preparation of the post-closing trial balance is the journalizing and posting of closing entries where all temporary
accounts (income and expenses) have already been closed, so, at the time of post-closing trial balance preparation, all these income
and expenses accounts, including the Drawing account already have zero balances.
 Question 32
Which of the following accounts could appear in an adjusting entry, closing entry and
reversing entry?
A. Salaries Expense
B. Withdrawals
C. Depreciation Expense – Buildings
D. Accumulated Depreciation – Buildings
Correct Answer: A
Salaries expenses being a nominal account can be appeared in the adjusting entry, closing entry and reversing entry.
 Question 33
The primary objective of reversing entry is to
A. correct errors.
B. simplify the bookkeeping associated with accruals from the prior period
C. transfers the balance of the expense accounts to the Owner’s Capital account and
set the accounts equal to zero
D. place the expenses for the current period in the proper accounts.
Correct Answer: B
Reversing entry is basically a bookkeeping technique made to simplify the recording of regular transactions in the next accounting
period. Reversing entry greatly reduces the chance of double-counting revenues and/or expenses, and it allows for more efficient
processing of the actual invoices that will be processed in the new accounting period.
 Question 34
Final step in the accounting cycle:
A. Preparation and Posting of Adjusting Entry
B. Preparation and Posting of Closing Entry
C. Preparation and Posting of Reversing Entry
D. None of the choices
Correct Answer: C
There are 10 steps in the accounting cycle namely:(1) analyzing and classify data about an economic event, (2) journalizing the
transaction, (3) posting from the journals to general ledger, (4) preparing the unadjusted trial balance, (5) recording adjusting
entries, (6) preparing the adjusted trial balance, (7) preparing financial statements,(8) recording closing entries,(9) preparing a
closing trial balance, (10) recording reversing entries.
 Question 35
If an entity utilizes reversing entries, they will
A. not actually be posted to the general ledger accounts
B. be made at the beginning of the next accounting period
C. be made before the post-closing trial balance is prepared
D. effect only statement of financial position accounts
Correct Answer: B
Reversing entries are journal entries made at the beginning of each accounting period. The sole purpose of a reversing entry is to
cancel out a specific adjusting entry made at the end of the prior period.
 Question 36
I. Reversing entries are the exact opposite of the adjusting entry in the previous period.
II. Recording of reversing entries is optional.
A. True, True
B. True, False
C. False, True
D. False, False

Correct Answer: A
• Reversing entry is a journal entry in which the exact opposite of a related adjusting entry made at the end of the period. It is
basically a bookkeeping technique made to simplify the recording of regular transactions in the next accounting period.
• Reversing entries are optional accounting procedures which may sometimes prove useful in simplifying record keeping. A
reversing entry is a journal entry to “undo” an adjusting entry.
thank YOU!