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of equal length thus enabling the financial users to periodically evaluate the results of business operation- The periodicity concept

19. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES- They encompass the conventions, rules, and procedures necessary to define what is accepted accounting practice
20. EXTERNAL AUDITING- which area of public accounting means the examination of financial statements by a CPA for the purpose of expressing an opinion as to the fairness of the statements?
21. STABLE MONETARY UNIT CONCEPT- Accountants do not recognize that the value of the peso changes over time. This concept is called the
22. COST PRINCIPLE- the records of properties acquired and services availed of by a business are maintained in accordance with the
23. ADEQUATE DISCLOSURE- this principle requires relevant information to form part of financial statements for decision-making purposes.
24. VERIFIABILITY- the principle of objectivity include the concept of
25. To provide quantitative financial information about a business enterprise that is useful in making economic decisions- the basic purpose of accounting is
    26. PERIODICITY- during the lifetime of an entity, accountants produce financial statement at arbitrary points in time in accordance with which basic accounting concept
    27. OBJECTIVITY- which of the following accounting concepts states that an accounting transaction should be supported by sufficient evidence to allow two or more qualified individuals to arrive at essentially similar conclusion.
    28. PRACTICE IN COMMERCE AND INDUSTRY- accountants employed by a particular business firm or not- forprofit organization, perhaps as chief accountant, controller, or financial vice president, are said to be engaged in
    29. FINANCIAL REPORTING STANDARDS COUNCIL- the main functions is to establish and improve accounting standards that will be generally accepted in the Philippines
    30. Limited liability to raise capital, unlimited personal liability of owners- Which of the following choices best describes the attributes of a partnership?
    31. IDENTIFYING- which accounting process is the recognition or nonrecognition of business activities as accountable events.
    32. The effect of changes in accounting upon income be properly disclosed the consistency standard of reporting requires that

33. RECORDING DATA- the measurement phase of accounting is accomplished by
34. To provide information that is useful in making economic decisions- The main purpose of accounting is
35. COMMUNICATING- the process refers to the reporting of the information processed in the accounting system to interested users
36. JOURNALIZING- in accounting, the term “recording” is also called
37. Only accountable events are recorded in the accounting books- which of the following statements regarding the recording of events is valid?
38. Whether to obtain additional capital from outside creditors or to generate it internally- the following are decisions made by external users except
39. A customer that buys goods from the entity on credit- which of the following users of financial information is not considered a creditor of the business?
40. Assets= Liability - Equity- which of the following is not a correct variation of the basic accounting equation
41. Must be owned by a business- which of the following is not an essential element of an asset?
42. Arising from a future event- which of the following is not an essential element of a liability
43. Assets = Liability + Equity + Income + Expenses- which of the following is not a correct expanded accounting equation
44. Income increases equity- which of the following statements is correct?
45. If expense is greater than income, the difference is profit- which of the following statements is incorrect?
46. SPECIAL JOURNAL- which of the following is not an example of a source document?
47. A detailed narrative of the reason why management entered into the transaction- which of the following is not one of the important parts of a journal entry
48. CASH AND OWNER’S CAPITAL- which of the following accounts are affected when a business owner invests cash to the business?
49. Inventory is increased and Accounts payable is increased- which of the following is the effect of purchasing inventory on account?
50. Accounts receivable is increased and Sales is increased- which of the following is the effect of a sale of goods on account?
51. ACCOUNTS PAYABLE- this account represents the reverse relationship of the accounts receivable. By

a. A sole proprietor purchases a car through the bank account of the entity

72. Example of non-current assets: a. A second-hand computer used in the office b. A van that is purchased through installments the total amount of which is not fully settled c. A building bought by the entity
73. Not an example of non- current assets: a. P40,000 cash
74. Which of the following statements are correct? a. The total amount of liabilities can be greater than the total amount of capital. b. Assets = Capital + Liabilities i. Not correct: The total amount of assets can be greater than the sum of liabilities and capital
75. The entity purchases P10,000 fixtures for entity use on credit. Which of the following will be affected? Assets and Liabilities
76. Suppose a debtor repays his debt of P50,000 by transferring the money into the bank account of the business. The effect of the transaction on the accounting equation would be: Assets and liabilities remain unchanged
77. Under the double-entry system, what is the value of X if assets, current liabilities, non-current liabilities and capital are X, P40,000, P60,000 and P350,000 respectively? 450,
78. Which of the following is correct under the double- entry system? The change in a debit-side entry must be compensated by a change in creditside entry
79. Which of the following statements regarding the double-entry system is incorrect? An increase in asset means a credit entry in asset account.
80. Which of the following statements regarding the double-entry system is correct? a. A decrease in liability means a debit entry in liabilities account. b. An increase in drawings means a debit entry in capital account. c. A decrease in non-current asset means a credit entry in asset account
81. Which of the following transactions affects the total value of liabilities of a firm? Office equipment bought on credit
82. FALSE- A trial balance with equal debit and credit totals proves that all transactions have been correctly journalized and posted to the proper ledger accounts
83. FALSE- Double posting of a transaction cause the debits and credits not to balance
84. FALSE- The sequence of the account titles in a trial balance depends upon the size of the account balances
85. TRUE- An expense may be recognized and recorded although no cash outlay has been made
86. TRUE- A journal entry may include debits to more than one account

and credits to more than one account, but the total of the debits must always equal the total of the credits

87. FALSE- The double-entry system means that transactions are recorded both in the journal and in the ledger
88. TRUE- The accounting cycle begins with the recording of the transactions and ends with the preparation of the financial statements
89. FALSE- Debits means decrease and credit means increase
90. FALSE- The T-account is sometimes called the book of original entry
91. FALSE- In some transactions, the accounting equation may not be maintained
92. TRUE- Income statement accounts are also known as temporary accounts
93. FALSE- Amounts entered on the left side of an account, regardless of the account title, are called credits or charges to the account
94. TRUE- The chart of accounts is a system of organizing and numbering the accounts in the general ledger
95. TRUE- Notes receivable are claims against debtors evidenced by a written promise to pay a certain sum of money at a definite time to the order of a specified person or to bearer
    96. TRUE- A trial balance may balance but may not be correct
    97. FALSE- A transposition error means a posting of a journal entry to the wrong ledger account
    98. FALSE- The normal balance of any account refers to the side of the account-debit or credit - where decreases are recorded
    99. TRUE- A recording error caused by the erroneous rearrangement of digits, such as writing P627 as P672, is called a transposition
    100. TRUE- The process of recording a transaction in a journal is called journalizing
    101. TRUE- The journal is used to classify and summarize transactions, and to prepare data for basic financial statements
    102. TRUE- Transactions are analyzed on the basis of source documents
    103. TRUE- Every business transaction affects a minimum of two accounts
    104. FALSE- A credit entry to an expense account will increase it
    105. FALSE- Normally, income accounts have debit balances
    106. TRUE- An account titled Unearned revenues is a liability Account
    107. FALSE- A group of accounts in a ledger is called a chart of accounts
    108. TRUE- A listing of the

14. The worksheet helps the accountant discover existing posting and calculation errors.
15. An income statement relates to a specified period while a balance sheet shows the financial position of the entity at a particular date.
16. Financial flexibility is the ability to take effective actions to alter the amounts and timings of cash flows so that it can respond to unexpected needs and opportunities.
17. When the Balance Sheet columns of theworksheet are initially footed, they should be in balance.
18. The worksheet is a convenient device for completing the accounting cycle.
19. The excess of expenses over revenues is called loss.
20. The statement of changes in equity relates the income statement to the balance sheet by showing how the owner's Capital account changed during the accounting period.
21. Accounting policies are the specific principles, bases, conventions, rules and practices adopted by an enterprise in preparing and presenting financial statements.
22. Paying taxes to the government is an example of a financing activity.
23. On a worksheet, the balance of the owners Capital account is its ending amount for the period.
24. An important use of the worksheet is as an aid in the preparation of financial statements.
25. The statement of cash flows discloses significant events related to the operating, investing, and financing activities of a business.
26. The purchase of land is an example of an investing activity.
27. Solvency refers to the availability of cash over the longer term to meet financial commitments as they fall due.
28. The purchase of equipment is an example of a financing activity.
29. The balance sheet is also known as the statement of financial position.
    30. The statement of changes in equity discloses the withdrawals during the period. 31. The post-closing trial balance will have fewer accounts than then- adjusted trial balance.
        32. In the accounting cycle, closing entries are prepared before adjusting entries. 33. After all closing entries have been entered and posted, the balance of the Income Summary account will be zero.
        33. A reversing entry is a journal entry which is the exact opposite of a related adjusting entry made at the end of the period. 35. Closing entries clear income and expense accounts at the end of the period. 36. Closing entries result in the transfer of profit or loss into the owner's Capital account.
        34. The final trial balance is called a post- closing trial balance.
        35. Nominal account balances are reduced to zero by closing entries.
        36. The post-closing trial balance contains asset, liability, withdrawal and capital accounts.
        37. The adjusting entries involving Rent Receivable and Salaries Payable could be reversed.
        38. The post-closing trial balance will contain only real accounts.
        39. The Income Summary account appears in the income statement.
        40. The Income Summary account is used to close the income and expense accounts. 44. An expense account is closed with a debit to the expense account and a credit to Income Summary.
        41. Post-closing trial balance tests the equality of the accounts after the adjustments and the closing entries are posted.
        42. Reversing entries can be made for deferrals but not for accruals.
        43. The purpose of reversing entries is to simplify the bookkeeping process.
        44. During the closing process, revenues are transferred to the

credit side of the Income Summary account.

49. Reversing entries are made to correct errors in the accounts.
50. There is sufficient information on a postclosing trial balance to prepare income statement.
51. T
52. F
53. T
54. T
55. F
56. F
57. T
58. T
59. T
60. T
61. T
62. T
63. F
64. T
65. T
66. T
67. F
68. T
69. T
70. T
71. T
72. F
73. T
74. T
75. F
76. T
77. T
78. F
79. T
80. T
81. T
82. F
83. T
84. T
85. T
86. T
87. T
88. T
89. F
90. T
91. T
92. F
93. T
94. F
95. F
96. F
97. T
98. F
99. F
100. F All nominal accounts must be closed before the Income Summary account can be closed- F The post-closing trial balance will have fewer accounts than the adjusted trial balance - T Closing entries deal primarily with the balances of real accounts- F To simplify the recording of regular transactions in the next accounting period, all adjusting journal entries are reversed - F A revenue account is closed with a credit to the revenue account and a debit to Income Summary - F During the closing process, revenues are transferred to the credit side of the Income Summary account- T Reversing entries are never required- T Reversing entries can be made for deferrals but not for accruals- F Reversing entries are made to correct errors in the accounts - F Closing entries can be prepared by referring solely to the Income Statement columns of the worksheet- T After the adjusting and closing entries have been recorded and posted, the general ledger accounts that appear on the balance sheet have no balances- F General ledger account balances agree with those in the financial statements even before adjusting and closing entries are recorded and posted - F

During the closing process, expenses are transferred to the credit side of the Income Summary account- F Reversing entries are never required- T Reversing entries can be made for deferrals but not for accruals- F Reversing entries are made to correct errors in the accounts- F The income summary account is used to close the income and expense accounts- T FISCAL YEAR CALENDAR YEAR NATURAL BUSINESS YEAR ADJUSTING ENTRIES IMPORTANCE OF ADJUSTING ENTRIES DEFERRALS DEFERRAL OF EXPENSES (PREPAID EXPENSES) DEFERRAL OF REVENUES (ACCRUED REVENUES) ACCRUALS ACCRUAL OF EXPENSES (ACCRUED LIABILITIES) ACCRUAL OF REVENUES (ACCRUED ASSETS) CONTRA ACCOUNT EXAMPLES OF CONTRA ACCOUNT DEPRECIATION FACTORS OF DEPRECIATION Accounting Cycle Part 2: Adjusting Entries Time period principle- the life of the business is divided into equal periods, to uniform the coverage of each financial statement of a business. ACCOUNTING PERIOD

1. Calendar Year a. starts January 1; ends December 31 b. Generally used by business c. Companies report financial statements with December 31 year-end 2. Fiscal Year a. Any 12-month period than those ending December 31 b. Ex. April 1- March 31 3. Natural business year a. Accounting periods with year- end at its lax season Remember! Before preparing financial statement, it is required to update all the balances of an entity or also called as the “ Adjusting Process” ACCRUAL BASIS- the accounting that companies use

• Revenues are recorded when earned
• Expenses are recorded when incurred
• NOT when cash is received (revenue) or cash is paid (expense) CASH BASIS- Revenue is recorded when Cash is received (revenue) and Expense is recorded when Cash is paid (expense) Why Adjust? Because of the accrual basis of accounting, accounts need to be adjusted to report revenues and expense at the proper period ACCRUALS & DEFERRALS 6 types of adjusting items: ● Type 1- Prepaid Asset or Asset Method (def) ● Type 2- Unearned Revenue or Liability Method (def) ● Type 3- Accrued Expenses (acc) life and 10,000 salvage value 110,000 - 10, 10 years Yearly Depreciation = 10, Dec. 31 Depreciation Expense 10, 000 Accumulated Depreciation 10,

Accumulated Depreciation- is a contraasset accoun Dec 1 Cash 75,000 Unearned Revenue 75, Adjusting entry (Dec. 31) 75,000 x ⅓ months= 25, Dec 31 Unearned Revenue 25, Service Revenue 25,

4. Type 6- Revenue Method Cash is received in advance for revenues not yet rendered (initial entry involves recording a revenue account) Example: During December 1, 2020, ABC Co. received 75,000 as advance payment from customer good for 3 months of services ● Type 4- Accrued Revenue (acc) ● Type 5- Expense Method (def) ● Type 6- Revenue Method (def) **DEFERRAL

1. Type 1- Prepaid Asset or Asset Method** Cash is paid in advance for expenses not yet incurred (initial entry involves recording a prepaid asset) Example: ABC Co. paid on Oct. 30,000 for a 5-month rent in advance. Oct 1 Prepaid Rent 30, 000 Cash 30, Adjusting entry (Dec. 31) 30,000 x ⅗ months= P18,000 (Rent expense) Dec 31 Rent Expense 18, Prepaid Rent 18, DEPRECIATION- a systematic allocation of expenses of particular assets due to wear and tear METHODS OF DEPRECIATION There are many ways to depreciate an asset. The most common is the StraightLine Method (SLM) Formula of Periodic Depreciation: Cost - Salvage Value Useful life Example: ABC Co. purchased an equipment on January

Type 5- Expense Method Cash is paid in advance for expenses not yet incurred (initial entry involves recording an expense account) Expenses xxxxxx Cash xxxxxx Oct 1 Rent Expense 30,000 Cash 30, Adjusting entry (Dec. 31) 30,000 x ⅖ months= 12, Dec 31 Prepaid Rent 12, Rent Expense 12, Type 2- Unearned Revenue or Liability Method Cash is received in advance for revenues not yet rendered (initial entry involves recording a liability account) Example: During December 1, 2020, ABC Co. received 75,000 as advance payment from customer good for 3 months of services. 1, 2019 costing 110,000 with 10 years useful

If the last term on a trial balance reads "Owner's Equity", this must be the - postclosing trial balance If a trial balance were to be prepared on the first day of the new year, and the account Salaries Expense had a credit balance, you would know that - a reversing entry has been made Reversing entries are - optional Which of the following comes last in the accounting process? - preparation of a postclosing trial balance An important purpose of closing entries is to - set nominal account balances to zero at the start of the next period Which of the following sequences of documents or records describes the proper sequence in the accounting cycle? - Source documents, journal, ledger, financial statements Closing entries will - either increase or decrease the Owner's Capital Balance Which of the following accounting cycle steps comes before the others? - Source documents are analyzed Closing entries ultimately will affect - the Owner's capital account If no adjustments are needed for a particular entity, its - trial balance will be identical to its adjusted trial balance Which of the following accounts is not closed during the closing process? - Owner's Capital Which of the following could not possibly be a closing entry? - Debit Income Summary and credit Owner's Withdrawals In preparing closing entries, which of the following columns of the worksheet are most helpful? - Income statement columns The primary objective of reversing entries is to - simplify bookkeeping associated with accruals from the prior period Which of the following accounts could appear in an adjusting entry, closing entry and reversing entry? - Interest income When an entity has earned a profit, the profit amount is entered on the worksheet on the - debit side of the Income Statement columns and the credit side of the Balance Sheet columns Probably the last account to be listed on a post-closing trial balance would be - Owner's capital When there is a loss, the entry to close the Income Summary account is - debit owner's capital and credit income summary On the completed worksheet, which set of columns usually should be out of balance after the initial footing? - Both Income Statement and Balance Sheet columns The post-closing trial balance contains - real accounts only In which financial statement does Income Summary appear? - It does not appear in any financial statement When an entity has a suffered a loss, the loss amount is entered on the worksheet on the - credit side of the income statement columns and the debit side of the balance sheet columns file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/LESSONS/Chapter %201%20Accounting%20and%20Its %20Environment.pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/LESSONS/The %20Accounting%20Equation%20and %20The%20Double-Entry %20System.pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20&

%20REPORTING/Chapter4-Adjusting %20the%20Accounts%20(1).pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/DRILLS/ DLSAU_abm1_ module_2.docx.pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/Chapter %203%20%20Recording %20Business %20Transactions.pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/Chapter %204%20practice%20exam%20and %20answer%20key.pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/pdfcoffee.com_acc- 111examination-for-students-pdf- free.pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/docx.pdf file:///D:/Documents/FINANCIAL %20ACCOUNTING%20& %20REPORTING/ ACCOUNTING_1092.pdf Transaction involving the payment of cash for any purpose are usually recorded in a cash journal- FALSE Special journals are modified in practice to adapt to the specific needs of an entity- TRUE The primary ledger that contains all of the balance sheet and income statement accounts is called the general ledger- TRUE At the end of each month, the total of the amount column of the sales journal is posted as a debit to accounts receivable and a credit to sales- FALSE After postings have been completed for the month, if the sum of the balances in the accounts receivable subsidiary ledger does not agree with the balance of the accounts receivable account in the general ledger, the errors must be located and corrected- TRUE Sales on account of office equipment used in the business would be recorded in the sales journal- FALSE Each amount in the other accounts column of the cash receipts journal must be posted individually to the appropriate general ledger account- TRUE When there are numerous accounts with a common characteristics, it is common to place them in a separate ledger called a detail ledger- FALSE The sale of merchandise for cash is recorded in the sales journal- FALSE The total of the other accounts column o the cash receipts journal is not posted to the general ledger- TRUE When special journal, control accounts and subsidiary ledgers are used, no posting to any ledger is performed until the end of the month - FALSE For each transaction recorded in the purchases journal, the credit is entered in the accounts payable column - TRUE Acquisition on account which are not provided for in special debit columns are recorded in the other accounts column in the purchases journal - TRUE Debits to creditors' accounts for invoices paid are recorded in the accounts payable debit column of the cash payments journal - TRUE Comparing the purchase order with the receiving report will show that all of the goods ordered actually arrived and that all goods that arrived were actually ordered. - TRUE The total of the accounts payable column in the cash payments journal is posted at the end of the month as a debit to accounts payable and a credit to cash - FALSE When customers are allowed to return merchandise for credit to their accounts,

_____3. Under this basis of accounting, revenues and expenses are reported in the income statement in the period in which cash is received or paid _____4. Expenses that have been incurred but not recorded in the accounts. _____5. Revenues that have been earned but not recorded in the accounts _____6. Items that have been Initially recorded as liabilities but are expected to become revenues over time or through the normal operations of the business. _____7. Items that have been initially recorded as assets but are expected to become expenses over time or through the normal operations of the business. _____8. Physical resources that are owned and used by a business and have a long life _____9. The portion of the cost of a fixed asset that is recorded as an expense each year of its useful life. ____10. The account credited when recording the depreciation of a fixed asset ____11. The difference between the cost of a fixed asset and its accumulated depreciation ____12. The trial balance prepared after all the adjusting entries have been posted ____13. An account offset against another accounts II. Classify the following items as (a) deferred expense (prepaid expense) (b) deferred revenue ( unearned revenue) (c) accrued expense (accrued liability) (d) accrued revenue ( accrued asset) _____1. Fees earned but not yet received. ____2. Salary owed but not yet paid _____3. Taxes owed but payable in the next period ____4. Supplies on hand_____5. Fees received but not yet earned ____6. A two-year premium paid on the insurance _____7. Utilities owed but not yet paid _____8. Subscriptions received in advance by a newspaper publisher III. Answer as required

1. If the supplies account before adjustments on May 31 indicated a balance of 2,250 and supplies on hand at May 31 totaled 950. Give the adjusting entry.
2. An equipment was acquired on September 30, 2018 at a cost of 200,000. It is estimated that the asset willhave a productive life of 10 years with no salvage value at the end. Give the adjusting entry to record depreciation at the end of calendar year December 31, 2018. 3.If the equipment account has a balance of 22,500 and its accumulated depreciation account has a balanceof 14,000. What is the net book value of the equipment? . 4 The balance of supplies and supplies expense accounts at December 31, after adjusting entries have been posted at the end of the first year of operations are 418 and 1,943, respectively. Determine the amount of supplies purchased during the year. 5 The balance in the supplies expense account before adjustment at the end of the first year is 1,475. Journalize the adjusting entry required if the amount of supplies on hand at the end of the year is 241