Financial Accounting and Reporting

Which of the following is correct regarding adjusted trial balance?

• An adjusted trial balance proves the equality of the total debit and credit balances in the ledger after all adjustments are made.

• The adjusted trial balance lists the account balances segregated by assets and liabilities.

• The adjusted trial balance is prepared before the adjusting entries have been journalized and posted.

• The adjusted trial balance doesn’t prove the basis for preparation of financial statements.

Which of the following is an incorrect formula for a merchandising business?

• List price less trade discount is equal to gross invoice price.

• Sales less cost of goods available for sale is equal to gross profit.

• Sales less sales returns and allowances less sales discounts is equal to net sales.

• Gross margin less expenses is equal to net income.

The end-of-the-month balance in Belgium cash receipt journal “Sundry Account” column is P25,250. How will the column be posted and what is the posting reference will be entered?

• The total will be posted to cash as debit, and the cash general ledger account number is the posting reference.

• The total is posted rather than the individual items an account number is entered as a posting reference.

• The total will not be posted and there will be no posting reference.

• None of these.

Statement 1: The primary function of accounting is to prepare the financial reports and provide them for the economic decision makers.

Statement 2: The purpose of accounting is to help financial users see the true picture of the business in social and psychological terms.

• Only statement 1 is correct.

• Only statement 2 is correct.

• Both statements are correct.

• Both statements are not correct.

The following relate to the capital share of a partner in a partnership

• Proportionate to a partner’s capital contribution

• The percentage % of equity that a partner has on the net assets

• May not be proportionate to capital contribution due to bonus

• All of the above

When a partnership cannot pay its debts with business assets, the partners

• Are not personally liable for the debts

• Have limited personal liability

• Must convert the partnership to a joint venture

• Must use their personal assets to meet the debts

Allen, Thea, Julia, & Abbie are partners in Albanian Company. Not having established yet their credit standing, the four partners requested Leddah, a well-known businesswoman, to help them negotiate a loan from Grace, a money lender. With the consent of Allen, Thea, Julia, & Abbie, Leddah represented herself as a partner of Albanian Company. Thereafter, Grace granted a loan of P 1,200,000 to Albanian Company. What kind of partner is Leddah?

• Managing partner

• Liquidating partner

• Ostensible partner

• Partner by estoppel

One of the following is not a characteristic of contract of partnership

• Real, in that the partners must deliver their contributions in order for the partnership contract to be perfected

• Principal, because it can stand by itself

• Preparatory, because it is a means by which other contracts will be entered into

• Onerous, because the parties contribute money, property or industry to the common fund

As independent or external auditors, CPAs are primarily responsible for

• Preparing financial statements in conformity with GAAP

• Certifying the accuracy of financial statements

• Expressing an opinion as to the fairness of financial statements

• Filing financial statements with the SEC

A decree by the court is necessary to dissolve a general partnership based on three of the following grounds. Which one will not require such decree but will cause the automatic dissolution of the partnership?

• The business of the partnership can only be carried on at a loss

• A partner is shown to be of unsound mind

• A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business

• A partner is civilly interdicted