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Multiple Choice

1. Which of the following steps in the accounting cycle are listed in a logical order?
a. Post the closing entries, take a post-closing trial, and journalize the closing entries.
b. Post the journal entries to the general ledger accounts, prepare a worksheet, and then
take a trial balance.
c. Take a trial balance, prepare a worksheet, then prepare financial statements.
d. Prepare the income statement, prepare the balance sheet and then prepare a trial
balance.
2. The debit and credit analysis of a transaction normally takes place
a. Before an entry is recorded in a journal.
b. When the entry is posted to the ledger.
c. When the trial balance is prepared.
d. At some other point in the accounting cycle.
3. A sale on account would be recorded by
a. Debiting revenue
b. Crediting assets
c. Crediting liabilities
d. Debiting assets
4. Incurring an expense for advertising on account would be recorded by
a. Debiting liabilities
b. Crediting assets
c. Debiting an expense
d. Debiting assets
5. A trial balance
a. Proves that debits and credits are equal in the ledger.
b. Supplies a listing of open accounts and their balances that are used in preparing
financial statements.
c. Is normally prepared three times in the accounting cycle.
d. All of these
6. First statement: A ledger is where the entity initially records transactions and selected other
events.
Second statement: Nominal (temporary accounts) are income and expense accounts and are
periodically closed.
a. True, True b. True, False c. False, True d. False, False
7. First statement: The withdrawals account is considered a real account.
Second statement: The “book of original entry” is also known as the journal.
a. True, True b. True, False c. False, True d. False, False
8. First statement: The first step in the accounting cycle is the journalizing of transactions and
selected other events.
Second statement: Basic steps in the recording process include transferring the journal
information to the appropriate account in the statement of financial position.
a. True, True b. True, False c. False, True d. False, False
9. First statement: The trial balance uncovers any errors in journalizing and posting prior to
preparation of the statement of financial position.
Second statement: The trial balance is a listing of all the accounts and their balances in the
order the accounts appear on the statement of financial position.
a. True, True b. True, False c. False, True d. False, False
10. First statement: One purpose of a trial balance is to prove that debits and credits of an equal
amount are in the general ledger.
Second statement: A general journal chronologically lists transactions and other events,
expressed in terms of debits and credits to accounts.
 a. True, True b. True, False c. False, True d. False, False
11. The first step in recording a transaction in a journal is to
a. Record the debit
b. Record the date
c. Record the credit
d. Write an explanation
12. Which of the following accounts is classified differently from the others listed?
a. Notes payable
b. Unearned revenues
c. Mortgage payable
d. Art revenues
13. Which of the following accounting steps is accomplished after the others listed?
a. Post the entry
b. Prepare the trial balance
c. Apply the rules of double entry
d. Record the entry
14. Which of the following is a business event that is not considered a recordable transaction?
a. An entity receives a product previously ordered.
b. An entity pays an employee for work performed.
c. A customer inquiry about the availability of a service.
d. A customer purchases a service.
15. Which of the following is a business event that is also considered a recordable transaction?
a. An entity hires a new employee.
b. A customer purchases merchandise.
c. An entity orders a product from a supplier.
d. An employee sends a purchase requisition to the purchasing department.
16. Balance sheet accounts are
a. Permanent accounts
b. Temporary accounts
c. Accounts with debit balances only
d. Adjusting accounts
17. A journal entry that contains more than two accounts is called
a. A posted journal entry
b. A compound journal entry
c. An adjusting journal entry
d. An erroneous journal entry
18. When accounting information is accumulated in individual accounts, a chart of accounts is
a. Limited to those accounts that will appear in the balance sheet.
b. Changed each year by an entity depending on the results of operations.
c. A listing of each account that will be used to accumulate information.
d. Used to determine whether a debit or credit balance will appear in each of the accounts
at the end of the accounting period.
19. Which of the following events would not be considered an accounting transaction?
a. Payment of fees to a tax consultant.
b. Purchase of print advertising space for a new service.
c. Sales of a new product during the first month of operations.
d. Tabulation of the results of a customer satisfaction survey.
20. The term footing refers to the
a. Process of obtaining the top number in an account.
b. Process of obtaining the bottom number in an account.
c. Process of posting.
d. Addition of a column of figures.
21. What function do general ledgers serve in the accounting process?
a. Summarizing c. Classifying
b. Recording d. Reporting
22. A chart of accounts is a (an)
a. Journal c. List of names of all account titles
b. Flowchart of all transactions d. Accounting procedure manual
23. The purpose of the ledger is to
a. Record chronologically the day’s transactions.
b. Keep a record of a documentation to support each transaction.
c. Maintain a separate account for each balance sheet and income statement accounts.
d. Make sure that all balance sheet and income statement accounts have normal balances at
all times.
24. Which of the following does not directly or indirectly affect the owners’ capital account?
a. Paying an accounts payable c. Earning of revenues
b. Withdrawals by the owner d. Incurring of expenses
25. Which of the following transactions correctly maintains the equality in the accounting
equation?
a. To record collections on account, cash and accounts receivable are increased by
P160,000.
b. To record the purchase of computer equipment, computer equipment is increased and
cash is decreased by P46,000.
c. To record payment of notes, notes payable is decreased and cash is increased by P70,000.
d. To record payment of rent, rent expense and cash are increased by P80,000.
26. Which of the following combinations of trial balance totals suggest the presence of either a
transposition error or a number slide?
a. P65,470 debit and P68,170 credit
b. P33,220 debit and P35,420 credit
c. P25,670 debit and P26,670 credit
d. P14,517 debit and P15,477 credit
27. The first financial statement that is prepared from the trial balance is the
a. Statement of cash flows c. Income statement
b. Statement of changes in equity d. Balance sheet
28. The amount of cash received or paid during a period is not an adequate measure of the
economic consequences of an organization’s activities because
a. Many activities may not involve the use of cash.
b. Cash inflows may represent the result of activities completed in a previous period.
c. Cash outflows may precede or follow the activities with which they are associated
d. All of the above reasons are correct.
29. At the end of an accounting period, the equation Assets = Liabilities + Owner’s Equity does
not necessarily balance. Which of the following actions balances the equation?
a. Subtract revenues and add expenses to owners’ equity.
b. Subtract revenues from owners’ equity and add expenses to assets.
c. Add the difference between revenues and expenses to owners’ equity.
d. Add revenues and subtract expenses from assets.
30. Which of the following steps in the accounting cycle are listed in logical order?
a. Prepare income statement, prepare the statement of financial position and then prepare
worksheet.
b. Post the journal entries to the ledger accounts, prepare worksheet, and then take a trial
balance.
c. Journalize the closing entries, post the closing entries, and then take a post-closing trial
balance.
d. Post the closing entries, take a post-closing trial balance, then journalize the closing
entries.