Professional Documents
Culture Documents
Review Questions…
1. What is accounting?
It is a service activity. Its function is to provide quantitative information, primarily
financial in nature, about economic entities that is intended to be useful in
making economic decisions.
2. What are the (4) four phases of accounting?
Recording, classifying, summarizing, interpreting
3. What is the accounting cycle?
Is a collective process of identifying, analyzing, and recording the accounting
events of a company.
4. Discuss the relationships of bookkeeping and accounting.
The relationship of bookkeeping and accounting can be transcribed into a
common saying that “ one is useless without the other, while the bookkeeping
does the “how accounting is done” which refers to the mechanical aspects,
professional accountant does the “ why accounting is done”.
5. Enumerate the (9) nine steps of the accounting process.
Analyze business transaction
Journalize transaction
Posting to ledger account
Preparing trial balance
Journalize and post adjustments
Prepare adjusted trial balance
Prepare financial statements
Journalize and post-closing entries
Preparing post-closing trial balance
6. Define a business transaction.
A business transaction is an activity or event that can be measured in terms of
money and which affects the financial position or operations of the business
entity.
7. What is an account?
An account refers to assets, liabilities, income, expenses, and equity, as
represented by individual ledger pages, to which change in value are
chronologically recorded with debit and credit entries.
8. What is an account balance?
Is the amount of money you have available in your checking or savings account.
9. What is debit entry? A credit entry?
Debit entry increase asset or expense accounts and decrease liability, revenue or
equity accounts.
Credit entry is used to decrease the value of an asset or increase the value of a
liability.
10. State the rules of debit and credit in accounting.
A debit is an entry made on the left side of an account. Debits increase an asset
or expense account or decrease equity, liability, or revenue account.
A credit is an entry made on the right side of an account. Credits increase equity,
liability, and revenue accounts and decrease asset and expense account.
11. What are the factors that will increase an owner’s equity?
Investment of owner
Revenues
12. What are the factors that will decrease an owner’s equity?
Withdrawal by owner
Expenses
13. Does the word “debit” mean increase?
Increase in costs and expenses
14. Does the word “credit” mean an decrease?
Decrease costs and expenses
15. What account that is used to effect reduction of owner’s equity due owner’s drawing?
Drawing or personal
2.1 QUIZZERS……
Instructions: write letter “T” if the statement is correct and letter “F” if incorrect.
__ F 1. The left-hand side of an account refers to its credit side while the right-hand side
refers to the debit side.
_T__ 2. The debit side of an account is for the value received while the credit side is for the value
parted with in an transaction analysis.
F__ 3. Business transactions are analyzed from the point of the business rather than the owner.
_T__4. The term “value” refers to the 3 (three) accounting elements which are the assets, liabilities,
and owner’s equity.
__T_ 5. An asset’s normal balance is a debit while that of a liability, credit.
____ 6. To debit an asset is to increase the balance of its account while to credit is to decrease its
balance.
__T_ 7. Accounting cycle refers to the steps of the accounting process.
__T_ 8. Creditors are given the first priority over the assets of the business in case of liquidation.
__F_ 9. The fundamental accounting equation is A = L + P or can be expressed as A – L= P.
__T_10. Operating cycle is the interval of time from the date merchandise is acquired, sell the
merchandise to the customers and the ultimate collection of cash from the sale.
__T_ 11. The reason why land is not subjected to depreciation because it is expected to be useful to
the business enterprise for an indefinite period of time.
__T_ 12. When drawing account is debited, the balance of the account decreased.
__F_ 13. The expanded accounting equation is A = L+P (income-expenses).
__T_ 14. When a debit entry is bigger that the credit entry, the account is said to have a debit
balance.
__T_ 15. Withdrawals by the proprietor has the effect of reducing profit for the period.
__T_ 16. Payment of a liability has the effect of reducing cash balance.
__T_ 17. Prepaid expenses are assets and must be shown in the balance sheet.
__T_ 18. Collection from a customer’s account will affect the balance sheet account only.
__T_ 19. Unearned income is an account title for an income collected or received in advance
although not yet earned.
__T_ 20. Accrued expenses has a semblance of a liability account.
__T_ 21. Sales discounts and Sales Returns & Allowances are both reduction from Sales Account.
__T_ 22. Purchase discounts and purchase returns & allowances are reduction from purchase
account.
__T_ 23. Freight-in is an addition to purchase account.
__T_ 24. Freight-out is an addition to sales account.
__T_ 25. Sales like a service income account has a credit balance.
__T_ 26. Purchase discount has a credit balance.
__T_ 27. Sales discount has a credit balance.
__T_ 28. Purchases and sales accounts have a normal balances of debit and credit respectively.
__T_ 29. When merchandise is purchased for cash, it is debited to “purchase” account.
__T_ 30. When merchandise is sols on account, collection should be credited to accounts payable.
2.2 MULTIPLE CHOICE
Instructions: Encircle the letter of the correct answer in each of the given questions:
1. It is the assigning of peso or monetary values involved in a transaction-
a. identifying c. classifying
b. measuring d. summarizing
2. The phase of accounting which involves the routine and mechanical process of writing down
the business transactions and events in a chronologically manner in the books of accounts-
a. recording c. summarizing
b. classifying d. interpreting
3. The phase of accounting which involves the sorting or grouping of similar transactions events
into their respective kinds and classes-
a. recording c. summarizing
b. classifying d. interpreting
4. The interpreting phase of accounting relates to-
a. gathering of information data c. recording of the data gathered
b. processing of data gathered d. communicating of the analyzed data
5. Bookkeeping is the process of recording business transaction is a systematic manner.
Systematic means-
a. it is based on accountant’s judgement c. reliability of the accounting data
b. free from bias d. it follows procedures and principles
6. Chronological recording of transactions is very essential in bookkeeping process.
Chronological means-
a. the debit is equal to credit c. based on accounting document
b. based on the date of occurrence d. based on timely recording
7. The financial statements rely information which are based on past events and transactions of
the business, hence financial statements are-
a. historical in nature c. systematic in nature
b. financial in character d. informative in nature
8. The accounts that are used to effect reduction of capital other than drawings are-
a. income and expenses c. only expense
b. only income d. all of the above
9. Which of the following statements about an “account” is not true-
a. an account consists of two parts c. the left-side is the debit side
b. it is a T-account form d. the right-side is the increase side
10. An account is said to have a debit balance when-
a. total debit and total are equal c. total debit exceeds total credit
b. total credit exceeds total debit d. they are “in balance”
11. A liability account has a normal balance of a-
a. debit balance c. debit entry
b. credit balance d. credit entry
12. The “give and take” process of accounting is referred to as –
a. analysis of transaction c. accounting function
b. recording function d. business operation
13. Are identification or brief description of items that fall to same kind, class or nature-
a. account tittle c. accounting procedure
b. accounting terminologies d. accounting standards
14. “Debere” and Credere” are taken from-
a. Japanes words c. Latin words
b. Greek words d. Arabic words
15. The left-hand side of an account refers to-
a. debit side c. increase side
b. credit side d. decrease side
16. A debit entry may signify an increase in-
a. revenue c. asset
b. owner’s equity d. liability
17. A debit entry may signify a decrease in-
a. asset c. expense
b. liability d. drawing
18. A credit entry may signify an increase in-
a. asset c. owner’s equity
b. drawing d. drawing
19. A credit entry may signify a decrease in-
a. revenue c. owner’s equity
b. expense d. liability
20. When a customer’s account is collected in full-
a. total asset increases c. total asset remained the same
b. total asset decreases d. none of the above
21. When supplier’s account is paid in full, there will be a-
a. decrease in liability and increase in asset
b. increase in asset and decrease in liability
c. decrease in liability and decrease in asset
d. none of the above
22. Sales Returns & Allowances and Sales Discounts are both reduction from the sales account.
what is the normal balance of sales account?
a. debit balance c. debit and credit balance
b. credit balance d. none of the above
23. The adjunct account of purchase is the-
a. freight-in c. purchase discount
b. freight-out d. purchase returns and allowances
24. Purchase Returns & Allowances and Purchase Discount are both reduction from Purchases
account. What is the normal balance of the account, “Purchase”?
a. debit balance c. debit and credit balance
b. credit balance d. none of the above
25. Freight out is recorded in the book of the business-seller-
a. as an expense c. as a liability
b. as an asset d. as cost
26. Freight-in is recorder in the book of business as forming part of-
a. cost c. expense
b. asset d. none of these
27. When merchandise, goods or commodities are purchased, the account purchases will be-
a. debited to an asset account c. debited to liability account
b. debited to cost account d. debited to equity account
28. When sales account increased its balance, it should have been-
a. debited c. no effect
b. credited d. VAT is not recorded
29. When a company collects in full a merchandise sold on account-
a. Sales is credited c. Cash account is credited
b Accounts Receivable is credited d. VAT is not recorded
30. When a company sold merchandise on account, the account credited is-
a. Sales c. Cash in Bank
b. Accounts Receivable d. Vat input
The following were the transactions of Mrs. Jane Matero during the month of September 20A:
Sept. 1 Jane Matero invested cash in the business.
3 Rendered service on account.
5 Borrowed money from a bank with a note issued.
8 Received cash from services rendered.
10 Jane Matero withdraw cash from the business.
12 Paid business permits.
14 Received a promissory note for services rendered.
16 Made additional investment-Computer.
17 Collected a customer’s account.
20 Paid postage and stamps.
22 Paid light and water bills (Utilities Expenses)
29 Collected cash for promissory note received in Sept. 14.
30 Paid salaries to employees.
2-3
Instructions: The following “paired” transactions are related to each others. Determine the value
received or debit and the value parted with of credit. (Assume that periodic system
is used for merchandising)
Debit Credit
Instructions: The following account titles are given for a Merchandising Business. Determine the
accounts debited and credited with their respective amounts.
ASSETS REVENUE
LIABILITIES Purchases
Purchase Discounts
Notes Payable Purchase Returns & Allowances
Accounts Payable Freight-In
CAPITAL EXPENSES
4. Returned P2,000 cost of merchandise to F. Solis Supermart due to bad replacements were
made.
Debit, ________________________
Credit, _____________________________
6. Paid the account with V. Ruben Mall, P85,000 less 5% discount for early payment.
Debit, ________________________
Credit, ____________________________
7. Mr. F. Opiso has withdrawn P20,000 for his personal use.
Debit, _______________________
Credit, ____________________________
11. Paid cash of P1,000 for freight and handling on merchandise shipped to L. Medina
Convenience Store.
Debit, ____________________
Credit, ________________________
12. Collected the account of C. Fornillos Superstore the amount of P60,000 less 3% discount for
early payment of account.
Debit, ____________________
Credit,_________________________
13. Purchased merchandise on account costing P100,000 from Judylaine Berhay Market Basket
and issued a promissory note.
Debit, ___________________
Credit, ________________________
14. Paid the account with Judylaine Berhay Market Basket and get the promissory note.
Debit, ___________________
Credit, ________________________
15. Sold merchandise on account worth P35,000 to B. Sorima Company and received a
promissory note.
Debit, __________________
Credit, _______________________
16. Collected cash of P35,000 from payment of B. Sorima Company account and returned the
promissory note.
Debit, __________________
Credit, ______________________
2–5
Instructions: On the space provided, indicate a “check mark” as to what normal balance the
following account have.
Debit Credit
Increased Decreased
Original New
Balance Balance
1 Sales
2 Freight-in
3 Freight-out
4 Kareem
Palmes,capital
5 purchases
6 Kareem palmes,
drawing
7 Purchase
discounts
8 Sales ret. &
allow.
9 Purchase ret. &
allow.
1 Sales discounts
0
1 Income from
1 repairs
1 Taxes and
2 license
1 Service income
3
1 Gas & oil
4
1 Utilities expense
5