Quiz 1

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Chapter 1
The Accounting Process
NAME: Date:
Professor: Section: Score:
QUIZ
1. It is the basic storage of information in accounting.
a. Journal entry c. Debit or Credit
b. T-account d. Account
2. A trial balance
a. proves that debits and credits are equal in the ledger.
b. provides a listing of open accounts and their balances which are used in preparing financial
statements.
c. is usually prepared three times in the accounting cycle.
d. all of these.
3. When an item of expense is paid and recorded in advance before it is incurred, it is normally called
a(n)
a. prepaid asset/expense. c. estimated expense.
b. accrued expense. d. cash expense.
4. An accounting record into which the essential facts and figures in connection with all transactions
are initially recorded is called the
a. ledger. c. trial balance.
b. account. d. none of these.
5. These are entries made at the end of the accounting period to update certain amounts so that they
reflect correct balances at the designated time.
a. Correcting entries c. Reclassification entries
b. Adjusting entries d. Reversing entries
6. ABC Co. prepared its unadjusted trial balance and determined that the totals of debits and credits
do not equal. Further investigation revealed the following:
 The debit posting for a cash sale was omitted. 6,000
 The balance of Inventory was listed as a credit instead of debit 36,000
 The balance of Insurance expense was listed as Rent expense 9,000
 Unearned interest income was listed as a debit instead of credit 15,000
How much is the difference between the total debits and total credits in the trial balance?
a. 36,000
b. 42,000
c. 48,000
d. 55,000
7. The credit total of a trial balance exceeds the debit total by ₱700. In investigating the cause of the
difference, the following errors were determined:
(a) A credit to accounts receivable of ₱660 was not posted;
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(b) A ₱6,000 debit to be made to the Purchases account was debited to Accounts payable instead;
(c) A ₱3,600 credit to be made to the Sales account was credited to the Accounts receivable account
instead;
(d) The Interest payable account balance of ₱5,040 was included in the trial balance as ₱6,400.
The reconciled balance from the given information is

a. 8,490.
b. 8,640.
c. 8,940.
d. 9,240.
Use the following information for the next four questions:

On January 1, 20x1, an entity collects a 3-year advance rent of ₱360,000.
8. If the entity uses the liability method of initial recording, the 20x1 year-end adjusting journal entry
will include
a. a debit to rent income for ₱120,000.
b. a credit to unearned rent for ₱240,000.
c. a debit to unearned rent for ₱120,000.
d. a credit to rent income for ₱240,000.
9. If the entity uses the income method of initial recording, the 20x1 year-end adjusting journal entry
includes
a. a debit to rent income for ₱240,000
b. a credit to unearned rent for ₱120,000
c. a debit to unearned rent for ₱240,000
d. a credit to rent income for ₱120,000
10. If the entity uses the income method of initial recording, how much is the rent income for the year
20x1?
a. 240,000
b. 180,000
c. 120,000
d. 80,000
11. If the entity uses the liability method of initial recording, how much is the unearned rent as of
December 31, 20x1?
a. 240,000
b. 180,000
c. 120,000
d. 80,000
Use the following information for the next two questions:

On August 1, 20x1, an entity prepays one-year insurance for ₱240,000.
12. If the entity uses the asset method of initial recording, the 20x1 year-end adjusting journal entry will
include
a. a credit to prepaid insurance for ₱140,000.
b. a credit to insurance expense for ₱140,000.
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c. a credit to prepaid insurance for ₱100,000.

d. a debit to prepaid insurance for ₱140,000.
13. If the entity uses the expense method of initial recording, the 20x1 year-end adjusting journal entry
will include
a. a debit to prepaid insurance for ₱140,000.
b. a credit to insurance expense for ₱100,000.
c. a debit to prepaid insurance for ₱100,000.
d. a debit to insurance expense for ₱140,000.
14. The inexperienced accountant of Raymel Co. prepared the following closing entry on December 31,
20x1:
Dec. 31, 20x1 Sales 1,800,000
Interest income 40,000
Unrealized gain – OCI 20,000
Accrued interest income 32,000
Dividend income 16,000
Cost of goods sold 680,000
Prepaid insurance 18,000
Dividends 280,000
Accrued interest expense 70,000
Finance cost 50,000
Depreciation expense 60,000
Income summary 750,000
Dec. 31, 20x1 Income summary 750,000

Retained earnings 750,000
How much is the correct amount of “Income summary” to be closed to retained earnings?
a. 786,000
b. 1,028,000
c. 1,066,000
d. 1,048,000
15. Reversing entries are

1. normally prepared for prepaid, accrued, and estimated items.
2. necessary to achieve a proper matching of revenue and expense.
3. desirable to exercise consistency and establish standardized procedures.
a. 1 c. 3
b. 2 d. 1 and 2
“A wise man will hear and increase learning, and a man of understanding will attain
wise counsel.” (Proverbs 1:5)
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The reconciled balance from the given information is

Use the following information for the next four questions:

Use the following information for the next two questions:

c. a credit to prepaid insurance for ₱100,000.

Dec. 31, 20x1 Income summary 750,000

15. Reversing entries are

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