FAR Testbank with answers
BS Accountancy (Harvard University)
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, CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
BATCH 98 OCTOBER 2025 LECPA
ACCOUNTING PROCESS
1. Which is done first in the accounting process considering the following?
A. Financial statements are prepared.
B. Nominal accounts are closed
C. Adjusting entries are recorded.
D. A postclosing trial balance is prepared.
2. Debits
A. Increase assets and decrease expenses, liabilities, revenue and equity.
B. Increase assets and expense and decrease liabilities, revenue and equity.
C. Increase liabilities, revenue and equity and decrease assets and expenses credits
D. Increase assets and equity and decrease liabilities and revenue
3. A general journal
A. Chronologically lists transactions and other events in terms of debit and credit 1. transaction date
2. accounts / amounts debited
B. Contains one record for each asset, liability, equity, revenue and expense 3. accounts / amounts credited
4. brief description
C. Lists all increases and decreases in each account in one place
D. Contains only adjusting entries and closing entries
4. Which is not a possible combination of a journal entry?
A. Increase in asset and increase in liability
B. Decrease in equity and increase in liability Dr & Cr
C. Decrease liability and decrease in asset
D. Increase in asset and decrease in equity Dr & Dr
5. Posting is the process of transferring information from
A. Source document to the journal
B. Journal to the source document
C. Journal to the general ledger
D. General ledger to the journal
6. A general ledger is defined as
A. A group of transactions
B. A group of real accounts
C. A group of nominal accounts
D. The entire group of accounts
7. A trial balance may prove that debits and credits are equal, except
A. An amount could be entered in the wrong account.
B. A transaction could have been entered twice. errors but can still show equal Dr & Cr
C. A transaction could have been omitted.
D. All of these may prove that debits and credits are equal.
8. Adjusting entries affect
A. One nominal account and one real account 7 adjusting entries
B. Two nominal accounts
C. Two real accounts
D. No particular combination of nominal and real accounts
9. What is the adjusting entry for ending inventory?
A. Debit ending inventory and credit beginning inventory
B. Debit beginning inventory and credit ending inventory
C. Debit ending inventory and credit income summary real & nominal account
D. Debit income summary and credit ending inventory
10. What is the a djusting entry for doubtful accounts?
A. Debit doubtful accounts and credit accounts receivable
B. Debit doubtful accounts and credit allowance for doubtful accounts.
C. Debit allowance for doubtful accounts and credit doubtful accounts.
D. Doubtful accounts do not require an adjusting entry.
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11. What is the adjusting entry for depreciation?
A. Debit depreciation and credit asset
B. Debit asset and credit accumulated depreciation
C. Debit depreciation and credit accumulated depreciation
D. An adjusting entry is not required for depreciation
12. What is the adjusting entry for accrued expenses? a liability; not yet paid
A. Debit accrued expenses and credit expense.
B. Debit expenses and credit accrued expense
C. Debit expenses and credit income
D. No need to adjust accrued expense.
13. What is the adjusting entry for prepaid expenses assuming the expense method is used?
A. Debit prepaid expenses and credit expenses. Recognize asset or the unused portion
B. Debit expenses and credit prepaid expenses
C. Debit prepaid expenses and credit accrued expense
D. It is not necessary to adjust prepaid expenses.
14. What is the adjusting entry for prepaid expenses assuming the asset method is used?
A. Debit prepaid expenses and credit accrued expenses
B. Debit expenses and credit accrued expenses
C. Debit expenses and credit prepaid expenses Recognize used portion
D. No adjusting entry
15. What is the adjusting entry for accrued income? an asset
A. Debit accrued income and credit income
B. Debit income and credit accrued income
C. Debit accrued income and credit accrued expenses
D. No adjusting entry
a liability
16. What is the adjusting entry for unearned income if the income method is used?
A. Debit unearned income and credit income
B. Debit income and credit unearned income Recognize the unearned portion
C. Debit accrued income and credit unearned income
D. No adjusting entry
an asset
17. What is the adjusting entry for unearned income if the liability method is used?
A. Debit income and credit unearned income
B. Debit accrued income and credit unearned income
C. Debit unearned income and credit income Recognize the earned portion
D. No adjusting entry
18. Closing entries are
A. Made at the end of accounting period
B. Prepared after adjusting entries and financial statements have been prepared
C. Prepared for the purpose of reducing all nominal accounts to zero
D. All choices are correct about closing entries
19. Reversing entries apply to
A. All adjusting entries
B. All deferrals conditional; expense & income method only asset & liability, no reversing
C. All accruals
D. All closing entries
20. A reversing entry should never be made for an adjusting entry that
A. Accrues unrecorded revenue
B. Accrues unrecorded expenses
C. Adjusts expired costs from an asset account to an expense account prepaid expense, asset method → no need to reverse
D. Adjusts unexpired costs from expense account to an asset account prepaid expense, expense method
END
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BS Accountancy (Harvard University)
messages.studocu_not_sponsored_or_endorsed_by_college
messages.downloaded_by
, CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS
BATCH 98 OCTOBER 2025 LECPA
ACCOUNTING PROCESS
1. Which is done first in the accounting process considering the following?
A. Financial statements are prepared.
B. Nominal accounts are closed
C. Adjusting entries are recorded.
D. A postclosing trial balance is prepared.
2. Debits
A. Increase assets and decrease expenses, liabilities, revenue and equity.
B. Increase assets and expense and decrease liabilities, revenue and equity.
C. Increase liabilities, revenue and equity and decrease assets and expenses credits
D. Increase assets and equity and decrease liabilities and revenue
3. A general journal
A. Chronologically lists transactions and other events in terms of debit and credit 1. transaction date
2. accounts / amounts debited
B. Contains one record for each asset, liability, equity, revenue and expense 3. accounts / amounts credited
4. brief description
C. Lists all increases and decreases in each account in one place
D. Contains only adjusting entries and closing entries
4. Which is not a possible combination of a journal entry?
A. Increase in asset and increase in liability
B. Decrease in equity and increase in liability Dr & Cr
C. Decrease liability and decrease in asset
D. Increase in asset and decrease in equity Dr & Dr
5. Posting is the process of transferring information from
A. Source document to the journal
B. Journal to the source document
C. Journal to the general ledger
D. General ledger to the journal
6. A general ledger is defined as
A. A group of transactions
B. A group of real accounts
C. A group of nominal accounts
D. The entire group of accounts
7. A trial balance may prove that debits and credits are equal, except
A. An amount could be entered in the wrong account.
B. A transaction could have been entered twice. errors but can still show equal Dr & Cr
C. A transaction could have been omitted.
D. All of these may prove that debits and credits are equal.
8. Adjusting entries affect
A. One nominal account and one real account 7 adjusting entries
B. Two nominal accounts
C. Two real accounts
D. No particular combination of nominal and real accounts
9. What is the adjusting entry for ending inventory?
A. Debit ending inventory and credit beginning inventory
B. Debit beginning inventory and credit ending inventory
C. Debit ending inventory and credit income summary real & nominal account
D. Debit income summary and credit ending inventory
10. What is the a djusting entry for doubtful accounts?
A. Debit doubtful accounts and credit accounts receivable
B. Debit doubtful accounts and credit allowance for doubtful accounts.
C. Debit allowance for doubtful accounts and credit doubtful accounts.
D. Doubtful accounts do not require an adjusting entry.
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11. What is the adjusting entry for depreciation?
A. Debit depreciation and credit asset
B. Debit asset and credit accumulated depreciation
C. Debit depreciation and credit accumulated depreciation
D. An adjusting entry is not required for depreciation
12. What is the adjusting entry for accrued expenses? a liability; not yet paid
A. Debit accrued expenses and credit expense.
B. Debit expenses and credit accrued expense
C. Debit expenses and credit income
D. No need to adjust accrued expense.
13. What is the adjusting entry for prepaid expenses assuming the expense method is used?
A. Debit prepaid expenses and credit expenses. Recognize asset or the unused portion
B. Debit expenses and credit prepaid expenses
C. Debit prepaid expenses and credit accrued expense
D. It is not necessary to adjust prepaid expenses.
14. What is the adjusting entry for prepaid expenses assuming the asset method is used?
A. Debit prepaid expenses and credit accrued expenses
B. Debit expenses and credit accrued expenses
C. Debit expenses and credit prepaid expenses Recognize used portion
D. No adjusting entry
15. What is the adjusting entry for accrued income? an asset
A. Debit accrued income and credit income
B. Debit income and credit accrued income
C. Debit accrued income and credit accrued expenses
D. No adjusting entry
a liability
16. What is the adjusting entry for unearned income if the income method is used?
A. Debit unearned income and credit income
B. Debit income and credit unearned income Recognize the unearned portion
C. Debit accrued income and credit unearned income
D. No adjusting entry
an asset
17. What is the adjusting entry for unearned income if the liability method is used?
A. Debit income and credit unearned income
B. Debit accrued income and credit unearned income
C. Debit unearned income and credit income Recognize the earned portion
D. No adjusting entry
18. Closing entries are
A. Made at the end of accounting period
B. Prepared after adjusting entries and financial statements have been prepared
C. Prepared for the purpose of reducing all nominal accounts to zero
D. All choices are correct about closing entries
19. Reversing entries apply to
A. All adjusting entries
B. All deferrals conditional; expense & income method only asset & liability, no reversing
C. All accruals
D. All closing entries
20. A reversing entry should never be made for an adjusting entry that
A. Accrues unrecorded revenue
B. Accrues unrecorded expenses
C. Adjusts expired costs from an asset account to an expense account prepaid expense, asset method → no need to reverse
D. Adjusts unexpired costs from expense account to an asset account prepaid expense, expense method
END
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