Dagupan Review of Accounting

Accountancy Review
FAR – QUIZ 1 Process and Cash and Cash
Equivalents
- DARe
FAR Quiz #1
FAR-1001 Review of Accounting Process
1. Which of following steps in the accounting cycle are listed in logical order?
a. Post the journal entries to ledger accounts, prepare a worksheet, and then take a trial balance.
b. Journalize the closing entries, prepare financial statements, , and then take a post closing trial balance
c. Prepare the worksheet, prepare reversing entries and then prepare a post-closing trial balance
d. Prepare financial statements, journalize the closing entries, take a post-closing trial balance.
2. The normal balance of an account is on the
a. Debit side of the account
b. Credit side of the account
c. Side represented by increases in the account balance
d. Side represented by decreases in the account balance
3. Which of the following types of accounts measure economic flows over a period of time?
a. Real accounts c. Mixed accounts
b. Nominal accounts d. Summary accounts
4. Which of the following statements regarding a trial balance is incorrect?
a. A trial balance should always balance.
b. A trial balance is a test of the equality of the debits and credits in the ledger.
c. A trial balance that is in balance proves that no error of any kind has been made in the accounts during the
accounting period.
d. A trial balance is useful in the preparation of the income statement and the balance sheet.
5. Which of the errors listed below would cause the unadjusted trial balance to be out of balance?
a. Failure to record an adjusting entry
b. Overstating a liability balance by P100 and expense balance by the same amount.
c. Posting only the debit portion of a journal entry.
d. Interest on a 60-6% note payable for P6,000 was recorded and posted as a debit to Interest Expense of P600
and a credit to Cash of P600,
6. Which one of the following is a purpose of adjusting entries?
I. To apportion the proper amounts of revenue and expense to the current accounting period.
II. To establish the proper amounts of assets and liabilities in the balance sheet.
III. To accomplish the objective of offsetting the revenue of the period with all the expenses incurred in
generating that revenue.
IV. To prepare the revenue and expense accounts for recording transactions of the following period.
a. I and II only c. I, II and III only
b. II and III only d. All of these
7. Which one of the following items least resembles a typical adjusting entry?
A. Debit an asset and credit revenue C. Debit an expense and credit liability
B. Debit revenue and credit liability D. Debit an asset and credit liability
8. Assume that a company’s fiscal year ends on December 31. Which of the following events involves an adjusting
entry that would be affected by how the event was originally recorded?
a. Sale of merchandise on account
b. Signing a one-year lease for machinery to be used in production of goods for sale.
c. Salaries earned by employees this year will be paid next year.
d. Payment of advertising for six months coverage starting October 1 of current year.
9. If the advance payment of an expense was initially recorded in an expense account, the adjusting entry will involve
a. A debit to the asset account and a credit to the expense account in the amount of the unexpired portion.
b. A debit to the asset account and a credit to expense in the amount of the expired portion.
c. A debit to expense and a credit to the asset account in the amount of the unexpired portion
d. A debit to expense and a credit to the asset account in the amount of the expired portion.
10. The premium on a three-year insurance policy expiring on December 31, Year 3, was paid in full on January 1, Year
1. Assuming that the original payment was received as a prepaid asset, how would each of the following be
affected in Year 3?
Prepaid Asset Expense Prepaid Asset Expense
A. Decrease Increase C. No change Increase
B. Decrease No change D. No change No change
11. An entity initially records prepayments in nominal accounts. Which of the following year-end adjusting entries may
be reversed?
A. The entry to record inventory at year-end
B. The entry to record the portion of rental received in advance that is unearned at year-end
C. The entry to record the portion of supplies previously acquired that is consumed as of year-end
D. The entry to record the portion of interest paid in advance that expired at year-end
12. A worksheet consisted of the five pairs of debit and credit columns. The peso amount of one item appeared in
both the debit column of the income statement and the credit column of the balance sheet. The item is
a. Net income for the period c. Net loss for the period
b. Beginning inventory d. Ending inventory

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13. If expenses are greater than revenues, the Income summary account will be closed by a debit to
A. Income summary ; credit to Cash C. Retained earnings; credit Income summary
B. Income summary ; credit to Retained Earnings D. Cash ; credit to Income summary
14. An appropriate reversing entry for which of the following adjusting entries at year-end might be made on the first
day of the next accounting period?
a. Entry to transfer a portion of Unexpired insurance to expense.
b. Entry to accrue interest income on note receivable
c. Entry to record depreciation of building
d. Entry to transfer a portion of Unearned management fees to revenue
15. The following six adjusting entries were recorded by RTQ Corp. at the end of the fiscal year:
(1) Bank service charge expense xx (4) Wages expense xx
Cash xx Wages payable xx

(2) Unearned rent xx (5) Insurance expense xx

Rent revenue xx Prepaid insurance xx

(3) Bad debts expense xx (6) Prepaid rent xx

Allowance for bad debts xx Rent expense xx
If the firm reverses all adjusting journal entries which should be appropriately reversed, which of the six adjusting
journal entries would be reversed?
a. (3), (4) and (6) c. (4), (6) .
b. (1), (2) and (5) d. All six adjustments should be reversed

16. The beginning-of-the-year total equity for a firm was P40,000. During the year, the firm issued ordinary shares for a
total proceeds of P20,000, earned P20,000 net income, and paid P5,000 in cash dividends. If ending total liabilities
are P100,000, what is ending total assets?
a. P165,000 c. P175,000
b. P 45,000 d. P100,000

17. On January 1, 2018, the statement of financial position of Richway Company showed total assets of P5,000,000
total liabilities of P2,000,000 and contributed capital of P2,000,000. During the current year, the corporation issued
share capital of P500,000 par value at a premium of P300,000. Dividend of P250,000 was paid on December 31,
2018. The statement of financial position on December 31, 2018 showed total assets of P7,500,000 and total liabilities
of P3,200,000. Net income for the current year is
A. 1,750,000 C. 750,000
B. 1,000,000 D. 500,000
18. The trial balance prepared at December 31 did not balance. Dr total was P159,250 and Cr total was P153,200. In
determining the cause of the difference, you discovered the following errors: a credit to cash of P650 was not
posted; a P2,000 credit to be made to the Sales account was credited to the Accounts receivable account
instead; the wages payable account balance of P9,300 was listed in the trial balance as P3,900. The correct trial
balance is
a. 153,200 c. 160,600
b. 159,250 d. 161,250
19. Shiena Company purchased equipment on November 1, 2018, by giving its supplier a 12-month, 9 percent note
with a face value of P48,000. The December 31, 2018, adjusting entry is
a. debit Interest Expense and credit Cash, P720.
b. debit Interest Expense and credit Interest Payable, P720.
c. debit Interest Expense and credit Interest Payable, P1,080.
d. debit Interest Expense and credit Interest Payable, P4,320.
20. Xyrelle Corporation loaned P60,000 to another corporation on December 1, 2018 and received a 3-month, 8%
interest-bearing note with a face value of P60,000. What adjusting entry should Rice make on December 31, 2018?
a. Debit Interest Receivable and credit Interest Income, P1,200.
b. Debit Cash and credit Interest Income, P400.
c. Debit Interest Receivable and credit Interest Income, P400.
d. Debit Cash and credit Interest Receivable, P1,200.
21. Jinky Corporation renewed an insurance policy for 3 years beginning July 1, 2018 and recorded the P81,000
premium in the prepaid insurance account. The P81,000 premium represents an increase of P23,400 from the
P57,600 premium charged 3 years ago. Assuming Jinky’s records its insurance adjustments only at the end of the
calendar year, the adjusting entry required to reflect the proper balances in the insurance accounts at December
31, 2018, Jinky’s year-end is to
A. Debit insurance expense for P13,500 and credit prepaid insurance for P13,500.
B. Debit prepaid insurance for P13,500 and credit insurance expense for P13,500
C. Debit insurance expense for P67,500 and credit prepaid insurance for P67,500.
D. Debit insurance expense for P23,100 and credit prepaid insurance for P23,100.
22. Xyrelle Company received P9,600 on April 1, 2018 for one year's rent in advance and recorded the transaction with
a credit to a nominal account. The December 31, 2018 adjusting entry is
a. debit Rent Income and credit Unearned Rent, P2,400.
b. debit Rent Income and credit Unearned Rent, P7,200.
c. debit Unearned Rent and credit Rent Income, P2,400.

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d. debit Unearned Rent and credit Rent Income, P7,200.
23. Daphnie Company sublet a portion of its warehouse for 5-years at an annual rental of P15,000, beginning on March
1. The tenant paid 1 year’s rent in advance, which Daphnie recorded as a credit to unearned rental income.
Daphnie reports on a calendar-year basis. The adjustment on December 31, of the first year should be
a. No entry.
b. Unearned rental income P2,500
Rental income P2,500
c. Rental income P2,500
Unearned rental income P2,500
d. Unearned rental income P12,500
Rental income P12,500
24. On December 31 of the current year, Norielyn Company's bookkeeper made an entry debiting Supplies Expense
and crediting Supplies on Hand for P12,600. The Supplies on Hand account had a P15,300 debit balance on
January 1. The December 31 balance sheet showed Supplies on Hand of P11,400. Only one purchase of supplies
was made during the month, on account. The entry for that purchase was
a. debit Supplies on Hand, P8,700 and credit Cash, P8,700.
b. debit Supplies Expense, P8,700 and credit Accounts Payable, P8,700.
c. debit Supplies on Hand, P8,700 and credit Accounts Payable, P8,700.
d. debit Supplies on Hand, P16,500 and credit Accounts Payable, P16,500.
25. A 3-year insurance policy was purchased on October 1 for P6,000, and prepaid insurance was debited. Assuming
a December 31, year-end, what is the reversing entry at the beginning of the next period?
a. None is required.
b. Prepaid insurance P5,500
Prepaid insurance P5,500
c. Prepaid insurance P500
Insurance expense P500
d. Insurance expense P500
Prepaid insurance P500
FAR-1002 Cash and Cash Equivalents
26. According to IAS 7 – Statement of Cash Flows, Cash equivalents are
A. Short-term and highly liquid investments that are readily convertible into cash
B. Short-term and highly liquid investments that are readily convertible into cash with remaining maturity of
three months
C. Short-term and highly liquid investments that are readily convertible into cash and acquired three months
before maturity
D. Short-term and highly liquid marketable equity securities
27. All of the following can be classified as cash and cash equivalents, except?
a. Redeemable preference shares acquired and due in 60 days
b. Commercial papers held and due for repayment in 90 days
c. Equity investments
d. Bank overdraft
28. Which of the following shall not be considered “cash” for financial reporting purposes?
A. Petty cash funds and change funds C. Coin, currency and available funds
B. Money orders, certified checks and bank drafts D. Postdated checks and IOUs.
29. Bank overdraft
A. is a debit balance in a cash in bank account
B. is offset against demands deposit account in another bank
C. which cannot be offset is classified as current liability
D. which cannot be offset is classified as noncurrent liability
30. Cash set aside for a particular purpose (i.e. restricted) is
A. Immediately classified as non-current
B. May be classified as current or non-current depending on the purpose for its establishment
C. Still classified as current asset regardless of the purpose for its establishment
D. Recorded in off-balance sheet records
31. Which of the following statements is incorrect?
A. The accounting functions should be separate from the custodianship of entity assets
B. Certain clerical personnel in an entity should be rotated among various jobs.
C. The responsibility for receiving merchandising and paying for it should usually be given to one person.
D. An entity personnel should be given well defines responsibilities.
32. When a petty cash fund is used, which of the following is true?
A. The balance of the petty cash fund should be reported on the balance sheets as investment.
B. The petty cashier summaries of petty cash payments serve as a journal entry that is posted to the
appropriate general ledger account.
C. The reimbursement of the petty cash fund should be credited to the cash account.
D. Entries that include a credit to the cash account should be recorded at the time the payment from the
petty cash fund is made.
33. A bank reconciliation is
A. A formal statement that lists all of the bank account balances of an entity.
B. A merger of two banks that previously were competitors.

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C. A statement sent by the bank to depositor on a monthly basis.
D. A schedule that accounts for the differences between an entity’s cash balance as shown in the bank
statement and the cash balance shown in the general ledger.
34. Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation
which ends with adjusted cash balance?
A. Note receivable collected by the bank in favor of the depositor and credited to the account of the
depositor
B. NSF customer check
C. Service charge
D. Erroneous bank debit
35. A proof of cash
A. is a physical count of currencies on hand at the end of reporting period.
B. is a formal statement showing the total cash receipts during the year.
C. is a four-column bank reconciliation showing reconciliation of cash balances per book and per bank at the
beginning and end of the current month and reconciliation of cash receipts and cash disbursement of the
bank and the depositor during the current month.
D. is a summary of cash receipts and cash payments.
36. On December 31, 2018, the cash account of Marissa Company has a debit balance of P3,500,000. An analysis of
the cash account shows the following details:
Undeposited collections P 60,000
Cash in bank-PCIB checking account 500,000
Cash in bank-PNB (overdraft) (50,000)
Undeposited NSF check received from a customer, dated December 1, 2018 15,000
Undeposited check from a customer, dated January 15, 2019 25,000
Cash in bank-PCIB (fund for payroll) 150,000
Cash in bank-PCIB (savings deposit) 100,000
Cash in bank-PCIB (money market instrument, 90 days) 2,000,000
Cash in foreign bank (restricted) 100,000
IOUs from officers 30,000
Sinking fund cash 450,000
Listed stock held as temporary investment 120,000
P3,500,000
Cash and cash equivalents on Jen’s December 31, 2018 statement of financial position should be
a. P2,760,000 c. P2,885,000
b. P2,810,000 d. P2,935,000
37. The following pertains to Erwin, Inc. on April 30, 2018: Correct cash balance in a general checking account with
PCI Bank – P32,000; overdraft in a special checking account with Family Bank (Erwin does not have another
account with Family Bank) – P2,000; Cash accumulated in a special fund that will be used for plant expansion in
five years – P15,000; cash surrender value of life policy – P3,200; cash travel advances in the hands of sales
personnel- P1,200; currency and coins in a petty cash fund (the company has not replenished the fund to the
imprest amount of P2,000) – P58. How much cash should Erwin report as cash on the statement of financial position?
a. P33,258 c. P32,200
b. P32,058 d. P30,200
38. The following items were included as cash in the books of Gotch Co.:
Checking account at Security Bank (P1,200)
Checking account at BPI 5,335
Checking account at Citytrust used for payment of salaries 5,500
Postage stamps 107
Employee’s post-dated check 2,300
I.O.U. from an employee 200
A check marked “DAIF” 1,250
Postal money order 500
Petty cash fund (P324 in expense receipts) 500
Certificate of time deposit with BPI 5,000
A gold ring surrendered as security by a customer who lost his
wallet (at market value) 1,500
The correct amount that should be reported as cash is
a. P11,835 c. P16,511
b. P11,011 d. P11,511
39. Diversity Corporation's checkbook balance on December 31, 2018, was P800,000. In addition, Diversity held the
following items in its safe on December 31:
Check payable to Diversity Corporation, dated January 2, 2019, not included in December 31
checkbook balance P200,000
Check payable to Diversity Corporation, deposited December 20, and included in December
31 checkbook balance, but returned by bank on December 30, stamped "DAIF." The check
was redeposited January 2, 2019, and cleared January 7 40,000
Check drawn on Diversity Corporation's account, payable to a vendor, dated and recorded
December 31, but not mailed until January 15, 2019 100,000
The proper amount to be shown as cash on Diversity's statement of financial position at December 31, 2018, is
a. P760,000 b. P800,000
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c. P860,000 d. P975,000
40. If a petty cash fund is established in the amount of P250, and contains P200 in cash and P45 in receipts for
disbursements when it is replenished, the journal entry to record replenishment should include credit to the following
accounts
a. Petty Cash, P45. c. Cash, P45; Cash Over and Short, P5.
b. Petty Cash, P50. d. Cash, P50.

41. The cash account shows a balance of P38,000 before reconciliation. The bank statement does not include a
deposit of P2,300 made on the last day of the month. The bank statement shows a collection by the bank of P940
and a customer's check for P220 was returned because it was NSF. A customer's check for P450 was recorded on
the books as P540, and a check written for P79 was recorded as P97. The correct balance in the cash account
was
a. P38,612 c. P38,648
b. P38,828 d. P40,948
42. The bookkeeper of Santa Clara Co. recently prepared the following bank reconciliation:
Santa Clara Co.
Bank Reconciliation
December 31, 2018

Balance per bank statement P126,420

Add:
Deposit in transit P8,700
Checkbook printing charge 210
Error made in recording check No. 25 (issued in
December) 1,600
NSF check 5,000 15,510
P141,930
Deduct:
Outstanding checks P4,480
Note collected by bank (includes P50 interest 9,500 13,980
Balance per books P127,950
Santa Clara has P9,100 cash on hand on December 31, 2018.
The amount Santa Clara should report as cash on the statement of financial position as of December 31, 2018
should be
a. P120,260 c. P130,640
b. P139,740 d. P132,240

43. As of June 30, 2018, the bank statement of Ang Po Trading had an ending balance of P373,612. The following data
were assembled in the course of reconciling the bank balance:
 The bank erroneously credited Ang Po Trading for P2,150 on June 22.
 During the month, the bank charged back NSF checks amounting to P2,340 of which P800 had been
redeposited by the 25th of June.
 Collection for June 30 totalling P10,330 was deposited the following month.
 Checks outstanding as of June 30 were P30,205.
 Notes collected by the bank for Ang Po Trading were P8,150 and the corresponding bank charges were P50.
The adjusted bank balance on June 30, 2018 is
a. P351,587 c. P353,927
b. P358,147 d. P359,687
44. Part of Tsibog Co.’s unadjusted trial balance at December 31, 2018 showed a Cash balance of P17,400. The
balance per bank statement was P12,000 on December 31, 2018. Outstanding checks amounted to P6,900.
Interest of P40 was credited to the enterprise's account by the bank during December, but has not yet been
entered on the company’s books.
Assuming no errors exist in the company’s cash balance, deposits in transit at December 31, 2018 amount to
a. P 5,400 c. P12,300
b. P12,260 d. P12,340
45. Information pertaining to Cole Company appears below.
Balance per bank statement July 31 1,240,000
Balance per ledger, July 31 750,000
Deposit of July 30 not recorded by bank 280,000
Debit memo – service charges 10,000
Credit memo – collection of note by bank for Cole 300,000
Outstanding checks ?
An analysis of the canceled checks returned with the bank statement reveals the following:
 Check for purchase of supplies was drawn for P 60,000 but was recorded as P 90,000.

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 The manager wrote a check for traveling expenses of P 100,000 while out of town. The check was not
recorded.
What is the amount of outstanding checks on July 31?
a. 970,000 c. 550,000
b. 270,000 d. 610,000

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Use the following information for the next two questions:
The following bank reconciliation is presented for Firenze Corp. for the month of November 2018:
Balance per bank statement, 11/30/2013 P18,040
Add: Deposit in transit P 4,150
Erroneous bank charge 1,500 5,650
Subtotal 23,690
Less: Outstanding checks 7,820
Balance per books, 11/30/2013 P15,870
Data for the month of December 2013 follow:
Per bank
December deposits/credits P 26,100
December charges/debits 22,420
Balance 12/31/2013 21,720
All items that were outstanding as of November 30 cleared through the bank in December, including the bank
charge. In addition, P2,500 in checks were outstanding as of December 31, 2018.
46. The amount of cash receipts per books in December 2018 is
a. P20,450 c. P24,600
b. P21,950 d. P31,750
47. The amount of cash disbursements per books in December 2018 is
a. P14,600 c. P24,920
b. P17,100 d. P27,740

😊 END 😊

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