Accounting Cycle

Theory of Accounts Quizzer
Gloria/Moreno
Instruction: Select the best answer for each of the following items
relating to a variety of issues in financial accounting.
1
Which of the following sequences of action describes the

proper sequence in the accounting cycle?
a. Post, close, prepare, adjust, analyze, journalize.
b. Journalize, post, close, prepare, adjust, analyze.
c. Prepare, journalize, post, adjust, analyze, close.
d. Analyze, journalize, post, adjust, prepare, close.
If no adjustments are needed for a particular company

a. Its trial balance will be identical to its adjusted trial balance.
b. Its trial balance, adjusted trial balance, and post-closing trial
balance will be identical.
c. Its post-closing trial balance will be identical to its trial
balance.
d. Its adjusted trial balance will be identical to its post-closing
trial balance.
In the accounting cycle, which of the following steps is

considered the output document or record?
a. The journal.
b. The worksheet.
c. Financial statements.
d. The ledger.
An important purpose of the worksheet is to

a. Accompany the financial statements in the companys
annual report.
b. Aid the accountant in the daily preparation of journal
entries.
c. Replace the journal when making adjusting and closing
entries.
d. Check the accuracy of adjusting entries before they are
formally entered into the accounting record.
Which of the following accountant will have an amount in the

Adjustments column of the worksheet, but probably not in the
Trial Balance column?
a. Revenue from Services.
b. Depreciation Expense, Machinery.
1

c. Utilities Expense.
d. Juan dela Cruz, Capital.
Gloria/Moreno
Which of the following accounts would not be found in the

closing entries?
a. Reyes, Capital.
b. Reyes, Withdrawals.
c. Accumulated Depreciation, Equipment.
d. Income Summary.
The normal account balances for Villa, Capital, and Villa,

Withdrawals, are
a. Credit and debit, respectively.
b. Debits.
c. Credits.
d. Debit and credit, respectively.
Which of the following types of entries is made primarily to help

conform to the matching principle?
a. Reversing entries.
b. Adjusting entries.
c. Closing entries.
d. Correcting entries.
Reversing entries occur at the beginning of the accounting

period. The primary objective of reversing entries is to
a. Place the expenses for the current period in the proper
accounts.
b. Transfer the balance of the expense account to the capital
account and set the accounts equal to zero.
c. Simplify the bookkeeping associated with accruals from the
prior period.
d. Correct errors.
10
Which of the following accounts could appear in an adjusting

entry, closing entry, and reversing entry?
a. Accumulated Depreciation, Buildings.
b. Salaries Payable.
c. Depreciation Expense, Buildings.
d. Advertising Fees Earned.
2

Gloria/Moreno
11
.
Which of the following could not possibly be a closing entry?
a. Debit J. Rizal, Capital and credit Income Summary.
b. Debit Income Summary and credit J. Rizal, Capital.
c. Debit J. Rizal, Capital and credit J. Rizal, Withdrawals.
d. Debit Income Summary and credit J. Rizal, Withdrawals.
12
When a company suffered a net loss, the net loss amount is

entered into the worksheet in the
a. Credit side of both the Income Statement column and the
Balance Sheet column.
b. Debit side of both the Income Statement column and the
c. Credit side of the Income Statement column and the debit
side of the Balance Sheet column.
d. Debit side of the Income Statement column and the credit
13
After all closing entries have been posted, which of the

following accounts is most likely to have a nonzero balance?
a. Wages Payable.
b. Income Summary.
c. Service Revenue.
d. Interest Expense.
14
The post-closing trial balance would not include which of the

following accounts?
a. Accumulated Depreciation, Office Equipment.
b. A. Bonifacio, Capital.
c. A. Bonifacio, Withdrawals.
d. Unearned Legal Fees.
15
Which of the following is the most useful aid in the accountant

in preparing closing entries?
a. Work Sheet.
b. Financial Statements.
c. Ledger.
d. Journal.
16
Which work sheet column should contain key letters?

a. Trial Balance.
b. Adjustments.
c. Balance Sheet.

d. Adjusted Trial balance.
Gloria/Moreno
17
In the work sheet, under what circumstances will the 1st two
columns be in balance after the initial footing?
a. When no adjustments have been entered into the work
sheet.
b. Under no circumstances.
c. Under all circumstances, assuming no arithmetical errors
has been made.
d. When net income equals exactly P0.
18
The preparation of formal adjusting entries

a. Is difficult, and therefore must first be entered into the
general journal in pencil.
b. Typically precedes the preparation of the financial
statements.
c. Typically precedes the preparation of the work sheet.
d. Is easy because they are simply copied from the work
sheet.
19
In the work sheet, account balances are extended from

a. The Income Statement and Balance Sheet columns to the
Financial Statements.
b. The Trial Balance columns and the Adjusted Trial Balance
columns.
c. The Adjusted Trial Balance columns to the Income
Statement and Balance Sheet columns.
d. The Trial Balance and Adjustments columns to the Adjusted
Trial Balance columns.
20
In the completed work sheet, which set of columns should

usually be out of balance after the initial footing?
a. The Balance Sheet column.
b. The Adjusted Trial Balance columns.
c. The Income Statements columns.
d. Both a and c are correct.
21
Which of the following accounts would probably have a smaller

balance in the Adjusted Trial Balance columns of a work sheet
than in the Trial Balance columns?
a. Prepaid Advertising.
b. Wages Payable.

c. Wages Expense.
d. Accumulated Depreciation, Equipment.
Gloria/Moreno
22
Which of the following sequences of documents or records

describes the proper sequence in the accounting cycle?
a. Source documents, work sheet, journal, ledger, financial
statements.
b. Source documents, journal, ledger, work sheet, financial
statements.
c. Source documents, ledger, journal, work sheet, financial
statements.
d. Work sheet, source documents, journal, ledger, financial
statements.
23
The process of posting is most closely associated with the

a. Ledger.
b. Source documents.
c. Work sheet.
d. Financial statements.
24
On which financial statements will Income Summary appear?

a. Balance Sheet.
b. Statements of owners equity.
c. On no financial statement.
d. Income statement.
25
In preparing closing entries, which of the following columns of

the work sheet are the most helpful?
a. The Income Statement columns.
b. The Balance Sheet columns.
c. The Adjustments columns.
d. The Adjusted Trial Balance columns.
26
Which of the following financial statements cannot be prepared

by referring solely to the completed work sheet?
a. Statement of Cash Flows.
b. Statement of owners equity.
c. Balance Sheet.
d. Income Statement.
27
When accompany has earned a net income, the net income

amount is entered into the work sheet in the

Gloria/Moreno
a. Credit side of both the Income Statement column and the
b. Debit side of both the Income Statement column and the
c. Credit side of the Income Statement column and the debit
d. Debit side of the Income Statement column and the credit
28
An amount would not appear opposite the owners withdrawals

account in which work sheet column?
a. Adjusted Trial Balance.
b. Balance Sheet.
c. Trial Balance.
d. Income Statement.
29
In preparing adjustments in the work sheet, which of the

following accounts could be added to the accounts column?
a. Interest Receivables.
b. Notes Payable.
c. Interest Income.
d. Depreciation Expense.
30
Which of the following accounts is not closed during the closing

procedure?
a. J. Luna, Withdrawals.
b. Commission Earned.
c. J. Luna, Capital.
d. Income Summary.
31
The post-closing trial balance differs from the adjusted trial

balance in that
a. Does not take into account closing entries.
b. Does not include balance sheet accounts.
c. Does not include income statement accounts.
d. Does not take into account adjusting entries.
32
Which of the following entries could not be a legitimate

reversing entry?
a. Debit Interest Receivable and credit Interest Income.
b. Debit Wages Payable and credit Wages Expense.
c. Debit Fees Earned and credit Accounts Receivable.

Gloria/Moreno
d. Debit Interest Payable and credit Interest Expense.
33
.
A reversing entry would be acceptable for which of the
following?
a. Accrual of interest expense.
b. Correction of an error.
c. Depreciation of building.
d. Allocation of prepaid rent to the current period.
34
An important purpose of closing entries is

a. To help in preparing financial statements.
b. To set real account balances to zero in order to begin the
next period.
c. To adjust the account in the ledger.
d. To set nominal account balances to zero in order to begin
the next period.
35
A work sheet is useful for all but which of the following?

a. Preparing financial statements.
b. Recording closing entries.
c. Recording adjusting entries.
d. Recording transaction from source documents.
36
Typically, formal adjusting entries

a. Are prepared prior to completion of the work sheet.
b. Need not be prepared if a work sheet has been completed.
c. Are prepared at the same time as formal closing entries.
d. Are entered directly into the ledger.
37
The process of cross footing in the work sheet results in the

a. Trial Balance columns.
b. Adjustments columns.
c. Adjusted Trial Balance columns.
d. Income Statement columns.
38
Which of the following adjustments would most likely be

reversed if a company used reversing entries?
a. The adjustment to determine supplies expense for the
period.
b. The adjustment to accrue salaries payable.
c. The adjustment to allocate prepaid insurance to the current
period.

Gloria/Moreno
d. The adjustment to record depreciation expense.
39
The adjustment on 12/31/x1 to accrue interest payable would

most likely be reversed by which of the following entries?
a. Debit Interest Payable and credit Interest Expense on
1/1/x2.
b. Debit Interest Expense and credit Interest Payable on
12/31/x2.
c. Debit Interest Expense and credit Interest Payable on
1/1/x2.
d. Debit Interest Payable and credit Interest Expense on
12/31/x1.
40
A net income will result if gross margin exceeds

a. Operating expenses.
b. Purchases.
c. Cost of goods sold plus operating expenses.
d. Cost of goods sold.
41
A merchandiser will earn a net income of exactly P0 when

a. Operating Expenses equal Revenue from Sales.
b. Gross Margin from Sales equals Operating expenses.
c. Revenue from Sales equals Cost of Goods Sold.
d. Cost of Goods sold equals Gross Margin from Sales.
42
An amount deducted from the catalog price for an item of

merchandise is called a
a. Customer discount.
b. Purchase discount.
c. Trade discount.
d. Sales discount.
43
Inventory becomes part of cost of goods sold when a company

a. Sells the inventory.
b. Receives payment from the customer.
c. Pays fro the inventory.
d. Purchases the inventory.
44
The periodic inventory method is most commonly used by

companies
a. High-priced, high-volume merchandise.
b. High-priced, los-volume merchandise.

c. Low-priced, los-volume merchandise.
d. Low-priced, high-volume merchandise.
Gloria/Moreno
45
Which of the following would not be considered an operating

expense?
a. Advertising.
b. Freight Out.
c. General Office Expense.
d. Cost of Goods Sold.
46
Under the perpetual inventory method, which account would

not be used?
a. Purchase.
b. Cost of Goods Sold.
c. Merchandise Inventory.
d. Sales.
47
Under the perpetual inventory method, in addition to making

the entry to record a sale, a company would
a. Debit Cost of Goods Sold and credit Merchandise
Inventory.
b. Make no additional entry until the end of the period.
c. Debit Merchandise Inventory and credit Cost of Goods
Sold.
d. Debit cost of Goods Sold and credit Purchases.
48
Which of the following companies would be most likely to use a

perpetual inventory system?
a. A clothes store.
b. A used car dealer.
c. A grain company.
d. A grocery store.
49
A physical count of inventory is usually taken

a. Just after the end of the fiscal year.
b. When the perpetual inventory method, but not the periodic
method, is being used.
c. At the peak of the busy season.
d. Right at the middle of the fiscal year.
50
Under the adjusting entry method of dealing with inventory, the

adjusting entries would include a

Gloria/Moreno
a. Debit to Merchandise Inventory for the beginning inventory
amount.
b. Debit to income Summary for the ending inventory amount.
c. Credit to Income Summary for the beginning inventory
amount.
d. Debit to Merchandise Inventory for the ending inventory
amount.
51
Under a work sheet for a merchandising company using the

adjusting entry method, both beginning and ending inventory
figures appear opposite Merchandise Inventory in the
a. Trial Balance columns.
b. Balance Sheet columns.
c. Adjustments columns.
d. Income Statements columns.
52
In the closing entries for a merchandising company that uses

the closing entry method, the entries for beginning
merchandise inventory and ending merchandise inventory
would be
a. Credits.
b. Debits.
c. Credit and debit, respectively.
d. Debit and credit, respectively.
53
In the work sheet for a merchandising company that uses the

adjusting entry method, the adjusting entries for beginning
merchandise inventory and ending merchandise inventory
would result in a debit and credit, respectively, to
a. Income Summary.
b. Cost of Goods Available for Sale.
c. The capital Account.
d. Merchandise Inventory.
54
A company would properly classify land held for a planned

manufacturing facility as.
a. An investment.
b. Property, plant, and equipment.
c. An intangible asset.
d. A current asset.
55
An investment is classified as short-term or long-term based on
10

Gloria/Moreno
a. The length of time the company expects to hold it.
b. Whether the investment can be sold immediately.
c. The length of time it has been held.
d. The peso amount of the investment.
56
Freight paid on merchandise shipped to customers would be

entered on the multi-step income statement into the account
called
a. Financial Expense.
b. General and Administrative Expense.
c. Selling Expense.
d. Cost of Goods Sold.
57
Which of the following methods of recording uncollectible

accounts expense would best be described as the income
statement method?
a. Direct charge-off method.
b. Accounts receivable aging method.
c. Percentage of net sales method.
d. Both b and c are correct.
58
The allowance for uncollectible accounts is necessary because

a. A liability results when a credit sale is made.
b. Management should know how many credit losses have
been sustained over the years.
c. When recording uncollectible accounts expense, it is not
possible to know which specific accounts will not be
collected.
d. Uncollectible accounts that are written off must be
accumulated in a separate account.
59
Which of the following methods of recording uncollectible

accounts expense would best be described as a balance sheet
method?
a. Account receivable aging method.
b. Direct charge-off method.
c. Percentage of net sales method.
d. Both a and b are correct.
60
The balance in Allowance for Uncollectible Accounts must be

carefully considered prior to end-of-period adjustment when
applying which method?
11

a. Percentage of net sales method.
b. Accounts receivable aging method.
c. Direct charge-off method.
Gloria/Moreno
61
Under the allowance method, when a specific account is written

off
a. Net income will decrease.
b. Total assets will be unchanged.
c. Total assets will decrease.
62
A company writes off a specific account as uncollectible, but

then the customer pays. The journal entry (ies) that ensue will
a. Increase Allowance for Uncollectible accounts.
b. Decrease accounts Receivable.
c. Decrease Cash.
d. Decrease Uncollectible Accounts Expense.
63
One might infer from a debit balance in Allowance for

Uncollectible Accounts that
a. The accounts receivable aging method is apparently being
used.
b. More has been written off that has been estimated.
c. The account has over estimated bad debt losses.
d. A posting error has been made.
64
Interest on a note may be calculated without knowledge of

a. The principal amount.
b. The notes duration.
c. The notes maturity date.
d. The rate of interest.
65
Rex Corporation discounts a note at a bank, which is

subsequently dishonored by the maker. Upon making good on
the note, Rex Corporation would
a. Debit Notes Receivable.
b. Debit cash.
c. Debit Accounts Receivable.
d. Credit Notes receivable.
66
The proceeds from discounting a note equal
12

a. Maturity value minus principal.
b. Principal plus discount.
c. Maturity value minus discount.
d. Principal minus discount.
Gloria/Moreno
67
All of the following are nonmonetary assets except

a. Inventory.
b. Prepaid rent.
c. Natural resources.
d. Cash.
68
An understatement of year 1s ending inventory will

a. Have no effect on year 2s ending owners equity.
b. Have no effect on year 2s net income.
c. Cause year 2s cost of goods sold to be overstated.
d. Result in an overstatement of year 2s beginning inventory.
69
All of the following are short-term nonmonetary assets except

a. Machinery.
b. Prepaid rent.
c. Supplies.
d. Inventory.
70
Inventory costing methods place primary reliance

assumptions about
a. Flow of values.
b. Flow of goods or costs, depending on the method.
c. Flow of goods.
d. Flow of costs.
71
In a period of declining prices, which of the following inventory

methods generally results in the lowest balance sheer figure for
inventory?
a. LIFO method.
b. FIFO method.
c. Average-cost method.
d. Cannot tell without more information.
72
Given equal circumstances, which inventory method would

probably be the most time-consuming?
a. Average cost.
b. LIFO.
13
on

c. Specific identification.
d. FIFO.
Gloria/Moreno
73
In which of the following cases would the gross profit inventory

method most likely be used?
a. In estimating market value of inventory for application of the
lower-of-cost-or-market rule.
b. In estimating an inventory loss from fire.
c. In a company with good accounting records.
d. In applying the average costs method.
74
A check for P890 is incorrectly recorded by a company as

P980. On the bank reconciliation, the P90 error should be
a. Deducted from the balance per bank statement.
b. Added to the balance per bank statement.
c. Deducted from the balance per books.
d. Added to the balance per books.
75
On a bank reconciliation, interest earned on a checking

account should be
a. Deducted from the balance per bank statement.
b. Added to the balance per bank statement.
c. Deducted from the balance per books.
d. Added to the balance per books.
76
During the month, a company learns that a check it issued has

been accidentally destroyed. On the bank reconciliation, the
company would
a. Add the amount to the balance per bank statement.
b. Deduct the amount from the balance per bank statement.
c. Add the amount to the balance per books.
d. Deduct the amount from the balance per books.
77
The check register would not contain

a. Debit column for Vouchers Payable.
b. Credit column for Cash.
c. Credit column for Vouchers Payable.
d. Payee column.
78
Under a voucher system, the amount to appear in the Accounts

Payable account on the balance sheet is determined by
referring to
14

a. The unpaid vouchers file.
b. The receiving reports file.
c. The accounts payable subsidiary ledger.
d. Invoices received from suppliers.
79
Gloria/Moreno
Under the perpetual inventory system, which transaction would

require two journal entries?
a. The payment for inventory purchased on credit.
b. The sale of inventory.
c. The purchase of inventory.
d. The return of inventory.
15

80
.
Sales Tax Payable is an example of
a. A trade liability.
b. An estimated liability.
c. A definitely determinable liability.
d. A contingent liability.
Gloria/Moreno
81
How would the adjusting entry for a note payable which has the
interest included in the face amount?
a. Debit Interest Expense and credit Discount on Notes
Payable.
b. Debit Notes Payable and credit Interest Expense.
c. Debit Discount on Notes Payable and credit Notes Payable.
d. Debit Interest Expense and credit Notes Payable.
82
The Discount on Notes Payable is classified on the financial

statement as
a. Revenue.
b. A contra account to Interest Expense.
c. An Expense.
d. A contra account to Notes Payable.
83
Failure to record a liability will probably

a. Result in overstated total assets.
b. Have no effect on net income.
c. Result in overstated total liabilities and owners equity.
d. Result in an overstated net income.
84
Which of the following would not typically be done to satisfy a

current liability?
a. Take on another current liability to satisfy the liability.
b. Render a service to satisfy the liability.
c. Use long-term assets to satisfy the liability.
d. Use current asset to satisfy the liability.
85
A company has a credit balance of P5,000 in Estimated

Property tax Payable just prior to paying P7,200 in property
taxes. The journal entry upon payment would include a
a. Credit to Cash for P5,000.
b. Debit to Estimated Property Tax Payable for P7,200.
c. Debit to Prepaid Property Taxes for P2,200.
d. Debit to Property Tax Expense for P7,200.
16

Gloria/Moreno
86
.
Which of the following is a contingent liability?
a. Product warranty liability.
b. Disputed additional tax assessment.
c. Property tax liability.
d. Note payable with interest included in face amount.
87
A contingent liability would be recorded in the accounting

records if it is
a. Probable and can be reasonably estimated.
b. Probable but cannot be estimated.
c. Not probable but can be reasonably estimated.
d. Not probable but cannot be estimated.
88
The term used to describe the allocation of the cost of an

intangible asset to time period is
a. Amortization.
b. Depletion.
c. Depreciation.
d. Usage.
89
Which of the following is not a characteristic of all long-term

nonmonetary assets?
a. Used in operations of business.
b. Possess physical substance.
c. Useful life of more than one year.
d. Not for resale.
90
.
Which of the following would not be included in the cost of
land?
a. Cost of paving the land for parking.
b. Assessment from local government for sewer.
c. Cost of clearing an unneeded building from the land.
d. Commission to real estate agent.
91
Interest costs are included in the cost of an asset in conjunction

with
a. Long-term assets being constructed.
b. Long-term assets acquired for speculative purposes.
c. Natural resources and intangible assets.
d. Long-term assets being purchased.
17

Gloria/Moreno
92
.
In general, a cost incurred in conjunction with a long-term asset
is included in the long-term asset account when the cost
a. Will expire in less than one year.
b. Is incurred subsequent to asset use.
c. Exceeded a certain peso amount.
d. Is incurred prior to asset use.
93
All of the following are possible reasons for using accelerated

depreciation methods except
a. Increasing repair costs in later years.
b. Advantages afforded by tax laws.
c. Increasing used of an asset over the years.
d. Rapid changes in technology.
94
Which of the following methods would be the most logical for a

machine that produces discrete units?
a. Production.
b. Sum-of-the-years-digits.
c. Double-declining-balance.
d. Straight-line.
95
The amortization period for organization costs of a corporation

for financial reporting purposes should be
a. A reasonable period of time not to exceed forty years.
b. Three years.
c. Forty years.
d. Five years.
96
Shares of treasury stock are

a. Shares held by the National Treasury.
b. Part of the total outstanding shares but are not a part of the
total issued shares of a corporation.
c. Issued shares which have been bought back by the
corporation and are being held by the corporation.
d. Unissued shares which are held by the treasurer of the
corporation.
97
How should dividends in arrears be shown in a corporations

balance sheet?
a. Decrease in assets.
b. Footnote.
c. Increase in stockholders equity.
18

d. Increase in liabilities.
Gloria/Moreno
98
If a corporation has issued common stock (with a P10 par

value) at various prices which exceed par value, legal capital
will be comprised of the
a. Total stockholders equity plus total liabilities.
b. Total amount of contributed capital plus retained earnings.
c. Par value of the shares issued.
d. Total amount of contributed capital.
99
Convertible preferred stock is preferred stock which may

a. Be exchanged for common stock at the option of the
corporation.
b. Be exchanged for cash at the option of the stockholder.
c. Be exchanged for common stock at the option of the
stockholder.
d. Be exchanged for cash at the option of the corporation.
100
Dividends in arrears are dividends on

a. Common stock which may never be declared.
b. Noncumulative preferred stock which has not been
declared for some specified period of time.
c. Cumulative preferred stock which have been declared but
have not yet been paid.
d. Cumulative preferred stock which has not been declared for
some specified period of time.
19
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Accounting Cycle

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Accounting Cycle

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Theory of Accounts Quizzer

Which of the following sequences of action describes the

If no adjustments are needed for a particular company

In the accounting cycle, which of the following steps is

An important purpose of the worksheet is to

Which of the following accountant will have an amount in the

Theory of Accounts Quizzer

Which of the following accounts would not be found in the

The normal account balances for Villa, Capital, and Villa,

Which of the following types of entries is made primarily to help

Reversing entries occur at the beginning of the accounting

Which of the following accounts could appear in an adjusting

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When a company suffered a net loss, the net loss amount is

After all closing entries have been posted, which of the

The post-closing trial balance would not include which of the

Which of the following is the most useful aid in the accountant

Which work sheet column should contain key letters?

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The preparation of formal adjusting entries

In the work sheet, account balances are extended from

In the completed work sheet, which set of columns should

Which of the following accounts would probably have a smaller

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Which of the following sequences of documents or records

The process of posting is most closely associated with the

On which financial statements will Income Summary appear?

In preparing closing entries, which of the following columns of

Which of the following financial statements cannot be prepared

When accompany has earned a net income, the net income

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An amount would not appear opposite the owners withdrawals

In preparing adjustments in the work sheet, which of the

Which of the following accounts is not closed during the closing

The post-closing trial balance differs from the adjusted trial

Which of the following entries could not be a legitimate

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An important purpose of closing entries is

A work sheet is useful for all but which of the following?

Typically, formal adjusting entries

The process of cross footing in the work sheet results in the

Which of the following adjustments would most likely be

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The adjustment on 12/31/x1 to accrue interest payable would

A net income will result if gross margin exceeds

A merchandiser will earn a net income of exactly P0 when

An amount deducted from the catalog price for an item of

Inventory becomes part of cost of goods sold when a company

The periodic inventory method is most commonly used by

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Which of the following would not be considered an operating

Under the perpetual inventory method, which account would

Under the perpetual inventory method, in addition to making

Which of the following companies would be most likely to use a

A physical count of inventory is usually taken

Under the adjusting entry method of dealing with inventory, the

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Under a work sheet for a merchandising company using the

In the closing entries for a merchandising company that uses

In the work sheet for a merchandising company that uses the

A company would properly classify land held for a planned

An investment is classified as short-term or long-term based on

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