MIDTERMS REVIEW Flashcards
Entity A uses the income method of initial recording of advanced collections of income. During the period, Entity A collects P10 for an item of income. By the end of the period, P3 of the collection is earned. The year-end adjusting entry involves a debit to a liability account for P7.00.
(TRUE OR FALSE)
FALSE
The set of guidelines and procedures that constitute acceptable accounting practice at a given time is GAAP, which stands for generally accepted accounting process.
(TRUE OR FALSE)
FALSE
Entity A uses the income method of initial recording of advanced collections of income. During the period, Entity A collects P10 for an item of income. By the end of the period, P3 of the collection is earned. The Adjusting entry made can be reversed in the next accounting period.
(TRUE OR FALSE)
TRUE
The first step in Accounting cycle is the preparation of journal entries.
(TRUE OR FALSE)
FALSE
PFRSC is composed of 14 members.
(TRUE OR FALSE)
TRUE
The Board of Accountancy shall be composed of a chairman and six members to be appointed by the President of the Philippines.
(TRUE OR FALSE)
FALSE
A P10 erroneous debit to Advertising Expense, which should have been debited to Transportation Expense, would make the trial balance out of balance.
(TRUE OR FALSE)
FALSE
The entity’s adjusting entry related to a prepayment of expense during the period involves a debit to an expense account. The entity must be using the expense method of initial recording of prepayments.
(TRUE OR FALSE)
FALSE
Monthly and quarterly time periods are called:
a. calendar periods
b. fiscal periods
c. interim periods
d. quarterly periods
c. interim periods
Which of the following will be shown in the balance sheet, except:
a. Assets
b. Liabilities
c. Equity
d. Expenses
d. Expenses
Which of the following is a characteristics of a sole proprietorship, except:
a. Sole proprietor can pay salary for himself from the business operation
b. Sole proprietor need not directly engaged in business operation.
c. Sole proprietor provide his own capital
d. Proprietor absorbed all losses of the business.
a. Sole proprietor can pay salary for himself from the business operation
The following will increase the amount of capital for the period, except for:
a. Withdrawal
b. Additional investment
c. Profit
d. Additional contribution in kind
a. Withdrawal
These are resources controlled by the entity as a result of past transactions or events from which future economic benefits will flow to the entity.
a. Assets
b. Liabilities
c. Equity
d. Expense
a. Assets
The time period assumption states that:
a. a transaction can only affect one period of time.
b. estimates should not be made if a transaction affects more than one time period.
c. adjustments to the enterprise’s accounts can only be made in the time period when the business terminates its operations.
d. the economic life of a business can be divided into artificial time periods.
d. the economic life of a business can be divided into artificial time periods.
Which of the following is a real account?
a. cash shortage or overage
b. Unearned income
c. freight in
d. depreciation expense
b. Unearned income
Which of the following statements is correct?
a. Transposition refers to the transfer of information from the journal to the ledger.
b. The general ledger is a chronological record of transactions.
c. The trial balance provides the primary evidence transactions for recording in the general journal.
d. The ledger is used to classify the effects of transactions recorded in the journal on the accounts.
d. The ledger is used to classify the effects of transactions recorded in the journal on the accounts.
Which of the following may be reversed in the next financial reporting period?
a. An Adjusting Entry to decrease the Unearned income account for the earned portion of advance collections during the year.
b. An Adjusting Entry to record bad debts expense on accounts receivable.
c. An Adjusting Entry to record depreciation expense
d. An Adjusting Entry to take up the unexpired portion of prepayments during the year
d. An Adjusting Entry to take up the unexpired portion of prepayments during the year
A prepaid expense can best be described as an amount that is:
a. paid and currently matched with revenues.
b. paid and not currently matched with revenues.
c. not paid and currently matched with revenues.
d. not paid and not currently matched with revenues.
a. paid and currently matched with revenues.
The premium on a three-year insurance policy was paid in total on January 1, 20x1. Upon payment. PREPAID Asset Account was debited. The appropriate journal entry has bee recorded on December 31; therefore, the balance of Prepaid Asset account should be:
a. higher, if the original payment had been debited initially to an expense account.
b. the same as the original payment
c. the same even if the original payment had been debited initially to an expense account
d. zero
c. the same even if the original payment had been debited initially to an expense account
Trial balance (Choose the best answer)
a. is a formal financial statement.
b. is used to prove that there are no errors in the journal or ledger
c. provides a listing of all the accounts used by an entity.
d. provides a listing of the balance of each account in active use.
d. provides a listing of the balance of each account in active use.
The best interpretation of the word CREDIT is the:
a. increase side of an account
b. decrease side of an account.
c. left side of an account.
d. right side of an account.
d. right side of an account.
The basic sequence in the accounting process can best be described as:
a. Transaction, journal entry, source document, ledger account, trial balance.
b. source document, Transaction, ledger account, journal entry, trial balance.
c. transaction, source document, journal entry, trial balance, ledger account.
d. transaction, source document, journal entry, ledger account, trial balance.
d. transaction, source document, journal entry, ledger account, trial balance.
A twelve month accounting period
Fiscal Year
Expenses paid before they are incurred
Prepaid Expenses
Cost less accumulated Depreciation
Carrying Amount
Divides the economic life a business into equal intervals.
Time period Assumption
Efforts are related to accomplishments
Matching Principle
A contra asset account
Accumulated Depreciation
Recognition of revenue when it is recorded when earned.
Revenue Recognition Principle
Expenses incurred but not yet paid.
Accrued Expenses
A cost allocation process
Depreciation
Revenues earned but not yet received.
Accrued Income
