Chapter 4

Types of Major Accounts

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QUIZ: MULTIPLE CHOICE

1. This includes money or its equivalent that is readily available for unrestricted use.
a. Money expense
b. Cash expense
c. Cash
d. Cash payable

2. For a sole proprietorship, this represents the residual amount after deducting total liabilities
from total assets.
a. Owner’s drawing
b. Salaries payable
c. Owner’s equity
d. Interest expense

3. Revenues earned from sales of goods are recorded in this account.

a. Sales
b. Service fees
c. Interest income
d. Gains

4. This represents the value of inventories that have been sold during the accounting period.
a. Interest Expense
b. Travel expense
c. Rent expense
d. Cost of sales

5. It is the aggregate of estimated losses from uncollectible accounts receivable.

a. Bad debts expense
b. Allowance for bad debts
c. Accounts receivable
d. Notes receivable

6. This represents the costs incurred when travelling on business trips.

a. Interest expense
b. Travel expense
c. Rent expense
d. Cost of sales

7. This represents the rentals that have been used up during the accounting period.
a. Prepaid rent

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 b. Travel expense
c. Rent expense
d. Cost of sales

8. This represents the cost of business and local taxes required by the government for the conduct
of business.
a. Insurance expense
b. Utilities expense
c. Taxes and licenses
d. Government expense

9. This account is used to record the temporary withdrawals of the owner during the period.
a. Owner’s drawing
b. Owner’s capital
c. Owner’s equity
d. Interest expense

10. Revenues earned from rendering services are recorded in this account.
a. Sales
b. Service fees
c. Interest income
d. Gains

11. The business sells goods to a customer who orally promises to pay for the purchase price after 30
days.
a. Accounts receivable
b. Accounts payable
c. Cash
d. Cost of sales

12. The customer in Question 1 above is subsequently found to be in financial distress. The business
estimates that only half of the purchase price will be collected from the customer.
a. Owner’s equity
b. Accumulated depreciation
c. Allowance for bad debts
d. Interest expense

13. The business purchases goods to be held for resale in the ordinary course of business activities.
a. Building
b. Inventory
c. Accounts receivable
d. Owner’s capital

14. The business acquires equipment for a total cost of ₱1M. Instead of expensing right away the
₱1M cost, the business allocates it over the 5-year useful life of the equipment. Meaning, the

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 business will recognize the ₱1M cost as expense on a piecemeal basis or ₱200K per year (1M ÷ 5
years). The portion of the cost that is expensed during the period is recorded as
a. Bad debts expense.
b. Equipment.
c. Allowance for bad debts.
d. Depreciation expense.

15. The business purchases inventory on account (on credit).

a. Cash
b. Accounts receivable
c. Accounts payable
d. Prepaid supplies

16. The business borrowed ₱1M from the bank. At maturity date, the business pays the bank ₱1.4M
to settle the loan. The ₱.4M difference between the settlement amount and the principal (i.e.,
1.4M – 1M = .4M difference) is recorded as
a. Prepaid rent.
b. Notes payable.
c. Interest expense.
d. Utilities expense.

17. The business pays its employees compensation for the services they have rendered during the
period.
a. Rent expense
b. Cost of sales or Cost of goods sold
c. Freight-out
d. Salaries expense

18. The business owner invested cash to the business.

a. Owner’s equity
b. Owner’s drawings
c. Salaries expense
d. Loss

19. The business renders services to clients.

a. Sales
b. Service fees
c. Interest income
d. Gain

20. The business receives billing for electricity used during the period. Before the bill is paid, it is
initially recorded in this account.
a. Utilities payable
b. Interest payable

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 c. Accounts payable
d. Salaries payable

“Be joyful in hope, patient in affliction, faithful in prayer.” (Romans 12:12)

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