Basic Accounting Reviewer

1.
An accounting record into which the essential facts and figures in connection with all
transactions are initially recorded is called the
a) trial balance
b) none of these
c) account
d) ledger
2. The debit and credit analysis of a transaction normally takes place

a) when the trial balance is prepared
b) when the entry is posted to the ledger
c) before an entry is recorded in a journal
d) at some other point in the accounting cycle
3. Which of the following is a recordable event or item?

a) Exchange of investment
b) The value of human resources
c) Changes in managerial policy
d) Changes in personnel
4. Which of the following is not an internal event?

a) Depreciation
b) Using raw materials in the production process
c) All of these are internal transactions.
d) Dividend declaration and subsequent payment
5. A common business transaction that would not affect the amount of owners' equity is
a) payment of dividends
b) signing a note payable to purchase equipment
c) payment of property taxes
d) billing of customers for services rendered
6. On January 5, 2016, Mr. Naruto Uzumaki opened a business called "X2, X2, X2" by
investing cash of P300,000, land valued at P500,000 and an equipment with original cost
of P500,000 but with fair market value of P200,000. The land is subject to a mortgage
payable of P100,000 which is to be assumed by the business. In analyzing the January 5
business transaction, Uzumaki, Capital should increase by:
a) P1,000,000
b) P1,100,000
c) P1,200,000
d) P900,000
7. On February 1, 2016, Mr. A. Sanchez, a good-looking and young businessman

established a store along Monumento area selling customized couple shirts and jackets
under the name "Archious Couple" by investing P150,000 cash and P60,000 equipment.
Transactions for the month of February were as follows:
Feb. 2 Signed a 1-year lease contract, P30,000 per year.
Purchased t-shirts and jackets amounting to P100,000. 50% was paid at the time
5
of purchase and the balance after one month.
7 Paid Company operating expenses for cash P15,000.
Purchase a bouquet of pink roses using the business fund to be given to Ms. P.
14
Agpoon, Mr. Sanchez’s girlfriend, P5,000.
Sold all merchandise for P200,000. The buyer paid 25% and the balance after two
15
weeks.
MERALCO bill consumed by the business for the month was paid by Mr. Sanchez
28
from his personal cash, P10,000.
28 February depreciation of equipment (using 5 years useful life), P1,000.
a) P90,000
b) P100,000
c) P130,000
d) P120,000
8. On December 31, 2016, Jerald Company had the following trial balance:
Debit Credit
Cash P57,000
Accounts receivable 20,000
Equipment 100,000
Accounts payable P3,000

Jerald, Capital 50,000
Sales 170,000
Other Income -
Expenses 55,000
Total P232,000 P223,000
Per review, it was noted that the general ledger balance of cash is P75,000 and accounts
payable is P30,000. Interest income of P2,000 was posted to sales account instead of
other income account.
What is the correct total of credit column in the Company's 2016 trial balance?
a) P250,000
b) P223,000
c) P232,000
d) P248,000
9. Sales on cash should be recorded on what type of journal?

a) General Journal
b) Cash Receipt Journal
c) Sales Journal
d) Cash Disbursement Journal
10. Payment of bill which was originally payable last month should be recorded on what
type of Journal?
a) General Journal
b) Cash Disbursement Journal
c) Accounts Payable Journal
d) Purchase Journal
11. Which of the following regarding accrual versus cash-basis accounting is true?
a) The cash basis requires a complete set of double-entry records
b) Application of the cash basis results in an income statement reporting revenues and
expenses
c) The cash basis is less useful in predicting the timing and amounts of future cash
flows of an enterprise
d) The FRSC believes that the cash basis is appropriate for some smaller companies,
especially those in the service industry
12. Which of the following would not be a correct form for an adjusting entry?
a) A debit to a revenue and a credit to a liability
b) A debit to an asset and a credit to a liability
c) A debit to a liability and a credit to a revenue
d) A debit to an expense and a credit to a liability
13. As entity paid 1,000,000 for supplies during 2011. The full amt of 1,000,000 was debited
to supplies inventory. The Jan 1,2011 bal of supplies inventory was 360,000. A physical
count of the supplies on hand on Dec 31,2011 revealed an amt of 600,000. What is the
Dec 31,2011 adjusting entry for supplies expense?
a) Debit supplies expense and credit supplies inventory for 760,000.
b) Debit supplies inventory and credit supplies expense for 600,000
c) Debit supplies expense and credit supplies inventory for 600,000.
d) Debit supplies inventory and credit supplies expense for 240,000.
14. On Dec 31,2011, the prepaid insurance acct showed a debit bal of 500,000. The bal on
Jan 1,2011 was 600,000. During the year, the entity paid insurance premium of 800,000.
If insurance premium payment is initially entered in the prepaid insurance acct, what is
the adjusting entry on Dec 31,2011?
a) Debit to insurance expense for 700,000.
b) Credit to prepaid insurance for 1,000,000.
c) Debit to prepaid insurance for 900,000
d) Debit to insurance expense for 900,000.
15. For the year 2011, 1,100,000 of wages expense was reported in the income statement.
The previous year’s balance sheet reported 100,000 of wages payable. An analysis of the
payroll records 100,000 of wages payable. An analysis of the payroll records showed
wage payments during the year of 950,000. If the previous year’s adjusting entry for
unpaid wages was reversed on Jan 1,2011, what is the amt of the adjusting entry for
accrued wages payable on Dec 31,2011?
a) 400,000
b) 150,000
c) 250,000
d) 850,000
16. The liabilities of Sengko Repair Services are equal to three-fourth of the total assets and
owner’s equity is P100,000. What is the amount of liabilities?
a) P150,000
b) P300,000
c) P400,000
d) P200,00
17. Which of the following is NOT a relevant economic event?

a) An agent who attended to the concern of a complaining customer.
b) Company Y which borrowed ₱5M from a bank due to tight financial conditions.
c) Company Z which paid its employees their salaries for the month of January.
d) Patricia, manager of Company X, who sold an abandoned building of her company.
18. Which accounting process is the recognition or non-recognition of business activities as

accountable events?
a) Identifying
b) Measuring
c) Recording
d) Communicating
19. Accountable events of an entity are collected by means of

a) journals
b) source documents
c) accounting process
d) accounts
20. What function do accounting journals serve in the accounting process?

a) summarizing
b) classifying
c) reporting
d) recording
21. What function do accounting ledgers serve in the accounting process?

a) classifying
b) recording
c) reporting
d) summarizing
22. Decrease in asset may

a) Decrease another asset
b) Increase liabilities
c) Increase capital
d) Decrease liabilities
23. Debits
a) Increase assets and decrease expenses, liabilities, revenue and owner’s equity
b) Decreases assets and expenses and increase liabilities, revenue and Owner’s equity
c) Increase assets and expenses and decrease liabilities, revenue and Owner’s equity
d) Increase assets and owner’s equity and decrease liabilities, expenses and revenue
24. In recording transactions,

a) The word “debit” means increase and the word credit means “decrease”
b) Assets, expenses, and drawing accounts are debited for increases
c) Liabilities, revenue and drawing accounts are debited for increases
d) Assets, expenses and capital accounts are debited for increases
25. A trial balance may prove that debits and credits are equal, but
a) an amount could be entered in the wrong account
b) a transaction could have been entered twice
c) a transaction could have been omitted
d) all of these
26. Adjusting entries are necessary to

1. Obtain a proper matching of revenue and expense.
2. Adjust assets and liabilities to their fair market value
a) 1 only
b) 2 only
c) both 1 and 2
d) neither 1 nor 2
27. When an item of expense is paid and recorded in advance, it is normally called a(n)
a) accrued expense
b) estimated expense
c) cash expense
d) prepaid expense
28. When an item of revenue or expense has been earned or incurred but not yet collected
or paid, it is normally called a(n)
a) adjusted
b) prepaid
c) accrued
d) estimated
29. When an item of revenue is collected and recorded in advance, it is normally called a(n)
___________ revenue
a) cash
b) prepaid
c) unearned
d) accrued
30. An accrued expense can best be described as an amount

a) paid and currently matched with earnings
b) not paid and not currently matched with earnings.
c) not paid and currently matched with earnings.
d) paid and not currently matched with earnings.
31. At the beginning of the year, assets of DEF were P 420,000 and P 150,000 worth of
equity. During the year, assets decreased by P 120,000 and liabilities increased by P
10,000. What was the net increase/ decrease in equity at the end of the year?
Answer: -130,000
32. On April 1, 2018, GHI sets up a firm and brings in office equipment of P 50,000 and
inventory of P 30,000 to the business. GHI puts P 80,000 into the firm's cash box and P
100,000 into the firm's bank account. Meanwhile, the firm lends P 50,000 cash to JKL
and borrows P 200,000 from the bank to acquire a piece of premises. What is the
amount of the firm's capital?
Answer: 260,000
33. MNO lends P 500,000 cash to the entity. At the same time, the entity uses part of the
money to repay the amount owed to a creditor and holds the remaining amount of P
400,000 in the bank account. What is the effect of the transaction to total assets of the
entity?
Answer: 400,000
34. MNO lends P 500,000 cash to the entity. At the same time, the entity uses part of the
money to repay the amount owed to a creditor and holds the remaining amount of P
400,000 in the bank account. What is the effect of the transaction to total liabilities of
the entity?
Answer: 400,000
35. Suppose an entity purchases P 50,000 computer as goods on credit from a supplier. The
accounts on the journal entry should be:
a) Dr. Purchases Cr. Accounts Payable
b) None of the choices
c) Dr. Computer Cr. Accounts Payable
d) Dr. Accounts Receivable Cr. Computer
e) Dr. Purchases Cr. Accounts Receivable
36. Which of the following is not included in a trial balance?

a) Credit balances
b) Debit balances
c) Ledger accounts
d) None of the choices
e) Dates of transactions
37. Which of the following situations will cause the total debit balance to be greater than
the total credit balance?
a) Either Scenario A or B
b) Scenario A - The amount extracted from accounts receivable is posted to the wrong
side of the trial balance.
c) Both Scenarios A and B
d) Scenario B - The amount extracted from machinery account is posted wrongly as P
4,000 instead of P 40,000.
e) None of the choices
38. If furniture is overvalued by P 1,000 in the trial balance, ________.

a) The total debit balance is the same as the total credit balance in the trial balance.
b) None of the choices
c) The value of assets on the credit side of the trial balance should be reduced.
d) Total debit balance is less than the total credit balance in the trial balance.
e) Total debit balance is greater than total credit balance in the trial balance.
39. If accounts payable is undervalued by P 3,000 in the trial balance, _______.

a) Total debit balance is less than the total credit balance in the trial balance.
b) The value of liability on the credit side of the trial balance should be reduced.
c) Total debit balance is greater than total credit balance in the trial balance.
d) The total debit balance is the same as the total credit balance in the trial balance.
40. When a business receives cash, it is always recorded as an increase to Cash and an
increase to Liability
a) True
b) False
41. Both sides of the fundamental accounting equation must be equal in all circumstances
with no exceptional case at all.
a) True
b) False
42. The normal balance of an account, regardless of its classification, is not the side where
decreases are recorded.
a) True
b) False
43. Every transaction is recorded in terms of increases and/or decrease in two or more
accounts.
a) True
b) False
44. When a business pays using cash, it is always recorded as a decrease to cash and either
as a decrease to a liability or an increase to an expense.
a) True
b) False
45. A net increase in asset can be a counterpart result of a net increase in equity and net
decrease in liability.
a) True
b) False
46. A noncurrent asset can be a current asset as time goes by.
a) True
b) False
47. If the owner of an entity borrows P 30,000 in the name of the entity and deposits it into
the entity's bank account, the capital of the entity increases by P 30,000.
a) True
b) False
48. If an entity purchases a property paying the downpayment and the rest of the total price
on account, there will be a net increase in asset.
a) True
b) False
49. A transaction with more than one debit and/or more than one credit is called a
compound entry.
a) True
b) False
50. An increase in equity is not recorded as a debit.

a) True
b) False
51. A decrease in asset is not recorded as a credit.

a) True
b) False
52. An increase in asset and a decrease in liability should result to an increase in equity.
a) True
b) False
53. An increase in liability is recorded as a debit.

a) True
b) False
54. Accounts receivable is an asset account whose normal balance is not credit.
a) True
b) False
55. The process of recording a transaction in a journal is called journalizing.

a) True
b) False
56. The journal is used to classify and summarize transactions, and to prepare data for basic
financial statements.
a) True
b) False
57. A credit entry to an expense will not decrease it.

a) True
b) False
58. If equipment is bought by paying P 20,000 as a down payment and the remaining P
40,000 in 30 days, total liabilities are not increased by P 20,000.
a) True
b) False
59. In some transactions, the accounting equation may not be maintained.

a) True
b) False
60. An account titled Unearned Revenues is not a liability account.

a) True
b) False
61. In any transaction, the total peso amount of debits must equal the total peso amount of
credits.
a) True
b) False
62. A debit entry to an equity will not increase it.

a) True
b) False
63. Complete the statement: ________ shows the changes in the balance and the ending
balance of elements of financial statements.
a) T- Account
b) Accounting Equation
c) Double- Entry System
d) Account Title
64. Which of the following elements does not actually relate to financial position?
a) Amount owed to creditors
b) Net interest in the company of the owners
c) Increases in equity other than investments
d) Resources of the company
65. Which of the following accounts is commonly classified as current?
a) Accumulated Depreciation
b) Mortgage Payable
c) Intangible Assets
d) Equity
66. Which of the following elements properly relate to financial performance?

a) Either Income or Expense
b) Income
c) Both Expense and Income
d) Expense
67. Which of these steps is executed during the accounting period?

a) Reversing entries preparation
b) Preparation of worksheet
c) Journalizing and posting adjusting entries
d) Analyzing transactions
68. Which of these steps is executed at the end of the accounting period?
a) Both preparation of financial statements, and journalizing and posting of daily
entries
b) Either preparation of financial statements or journalizing and posting of daily entries
c) Preparation of financial statements
d) Journalizing and posting of daily entries
69. Which of the following properly depicts the points considered in analyzing a business
transaction?
a) Identify the incorrect side to reflect the effect of transaction to indicated accounts
b) Ascertain the effect of the indicated accounts to the transaction
c) Indicate the accounts not affected by the transaction
d) Two of these properly depict the points considered in analyzing a business
transaction
e) Identify the transaction based on document presented
70. Which of the following is not a part of a journal?

a) Date Column
b) Account titles and explanation column
c) Debit amount column
d) Pre-referencing column
e) None of these because all of these are parts of a journal
71. Analyze the set of statements:

I –The balance seen in the accounting equation is observed in most cases of business
transactions.
II – A decrease in asset is not a debit.
III – Analyzing business transactions is done during the period.
Given these statements, we can say that:
a) Most of the statements are false.
b) Most of the statements are true.
c) All of these statements are true.
d) All of these statements are false.

I – The normal balance of an account, regardless of its classification, is not the side
where increases are not recorded.
II – Notes payable is usually a current asset.
III – An increase in income is not a credit.
a) Only statement II is true.
b) Most of the statements are true.
c) All statements are not true.
d) Only statement III is false.
e) Statement II is false.
73. At the beginning of the year, ABC Company’s liabilities equal P 60,000. During the year,
assets increased by P 80,000, and at year- end, assets increased to P 180,000. Liabilities
decreased to P 50,000 during the year. How much is the net change in ABC, Capital?
Answer: 90,000
74. DEF Company’s equity at the beginning of the year amounted to P 45,000. Considering
all transactions and elements, equity balance increased by P 55,000 throughout the
year. Additional investment from the owner amounted to P 80,000 while quarterly
withdrawals totaled P 20,000. If total expense equaled to P 107,000, how much is the
income of DEF Company?
Answer: 102,000
inventory of P 35,000 to the business. GHI puts total of P 205,000 to the company, P
80,000 into the firm's cash box and the remaining into the firm's bank account.
Meanwhile, the firm lends P 55,000 cash to JKL and the firm borrows P 300,000 from the
bank to acquire a piece of premises. What is the amount of the firm’s assets?
Answer: 610,000
76. At the beginning of the year, JKL company’s liabilities equal P 660,000. During the year,
assets increased by P 800,000. Liabilities decreased by P 100,000 during the year. Ending
balance of equity is P 1,620,000. How much is the total assets of JKL at the beginning of
the year?
Answer: 1,380,000
77. At the end of the year, MNO Company has assets equal to P 6,150,000 and liabilities
equal to P 2,650,000. Before the year ended, cash was borrowed from the bank
amounting to P 1,500,000, half of which was used to buy equipment and the other half
to pay for liabilities which were already past due. What is the total equity of MNO at
year- end?
Answer: 3,500,000
78. PQR Company had the following transactions for the month of October:
(1) Purchase of equipment worth P 45,000, 20% of it is paid via cash and the remaining
is to be paid next month- this is recorded as a debit to equipment and a credit to
liability, both for P 45,000.
(2) Loan of P 20,000 from the bank of which 25% is used to settle another liability – this
is recorded as debit to cash of P 20,000 and credit to liability of P 20,000 and a follow up
entry of a debit to liability of P 5,000 and a credit of cash for the same amount.
(3) Purchase of office supplies worth P 2,000 to be paid next month – this is recorded as
a debit to office supplies of P 20,000 and a credit to liability of P 2,000.
(4) Purchase of machine worth P 10,000, P 3,000 of it is already paid and the remaining
balance is to be paid next month – this is recorded as a debit to machine of P 10,000, a
debit to cash of P 3,000 and credit to liability of 7,000.
Considering all transactions provided, balance of debit and credit would not be equal.
Given that, which of the two sides is greater in terms of amount and how much is that
side greater than the other side?
Answer: 24,000
For questions No. 79- 93
Emily Cruz completed the transactions below for the month of December 2020. The company
uses the following chart of accounts:
Transactions:
December
1 – invested P 120,000 to start an accounting practice, Emily Cruz, CPA
2 – paid monthly office rent, P 5,000
3 – Paid cash for an Apple computer, P 30,000. The computer is expected to remain in service
for 5 years
4 – purchased office furniture on account, P 36,000. The furniture should last for five years
5 – purchased supplies on account, P 3,000
9 – performed tax service for a client and received cash for the full amount of P 8,000
12- paid utility expenses, P 2,000
18 – performed consulting service for a client on account, P 17,000
21 – received P 9,000 in advance tax work to be performed evenly over the next 30 days
23 – hired a secretary to be paid P 15,000 on the 20th of each month
26 – paid for the supplies purchased on December 5
28 – collected P 6,000 from the consulting client on December 18
30 – withdrew P 16,000 for personal use
Required:
1. Journalize the above- mentioned transactions. Write the entries following the format of a
usual 37-line journal with journal page and number, date, account titles and explanation, P.R.,
debit, and credit columns.
2. Post the entries in ledger. Simply apply the T- account format to shorten the time consumed.
Double rule the ending balances. Examples are as follows:
3. Prepare an unadjusted trial balance with proper heading and account title, account number,
debit and credit columns.
79. Analyze the following statements:

I – Total debits to cash account amounts to P 134,000.
II – Total credits in the whole accounting equation is P 149,000.
III – December 31 balance of unearned service revenue is P 9,000.
Given this, we can conclude that:
a) Most of the statements are false
b) All statements are true
c) All statements are false
d) Most of the statements are true

I – Service revenue December 31 balance is P 25,000.
II – December 23 transaction would not affect liabilities.
III – December 28 transaction would not affect total assets.
a) All statements are true
b) All statements are false
c) Most of the statements are true
d) Most of the statements are false

I – Total debits to unadjusted trial balance is P 190,000.
II – December 31 balance of accounts payable is P 36,000 debit.
III – December 4 transaction would include a debit to accounts payable.

I – There are five accounts listed in the chart of accounts which are not affected by the
transactions.
II – Cruz, capital December 31 balance amounts to P 120,000.
III – December 31 balance of cash is P 87,000.
a) Most of the statements are false
b) All statements are true
c) All statements are false
d) Most of the statements are true
83. Question: Analyze the following statements:

I – December 23 transaction would include a debit to salaries expense of P 15,000.
II – December 28 transaction would include a debit to accounts receivable of P 6,000.
III – The last account listed in the unadjusted trial balance is salaries expense.
84. How much is the total current assets?
Answer: 101,000
85. How much is the total expenses?

Answer: 7,000
86. How much is the total net equity?

Answer: 122,000
87. How much is the total assets?
Answer: 167,000
88. How much is the total debits in the unadjusted trial balance?
Answer: 190,000
89. How much is the total income?
Answer: 25,000
90. How much is the total liabilities?
Answer: 45,000
91. How much is the total non-current assets?
Answer: 66,000
92. How much is the total credits in the unadjusted trial balance?
Answer: 190,000
93. How much is the net income considering the given transactions?
Answer: 18,000
94. Which of the following is true about the adjusting entry?

a) It is done whenever the entity wants to
b) It is done at December 31
c) It is done at end of the reporting period
d) All of the following is true about the adjusting entries
95. Which of the following is false when it comes to recording of Accrued Interest as part of
accrual adjusting entries
a) Interest is computed as Principal x Rate x Time
b) Principal is the entire debt, and serves as the basis of the interest
c) Interest expense is credited in the adjusting entries
d) Interest payable will increase after the adjusting entries
96. Which of the following is true regarding the adjustments for Salaries?
a) Salaries are recorded when paid
b) Accrued salaries are salaries already paid but not yet incurred
c) Recording of accrued salaries will increase the total asset
d) Recording of accrued salaries will increase total expense
97. Which of the following is false regarding the reclassifying entries?

a) It is done to correct errors in the journal entry regarding the account titles
b) It is done to correct an incorrect entry
c) It is done at December 31
d) None of the above is false
98. Which of the following is trues regarding correcting entries?
a) it involves always one nominal and one real account
b) it is done at year end
c) It is done to record transaction that already happened but is still unrecorded as of
the
d) All of the above is true
99. During the year, the entity purchase an equipment amounting to P1,000,000 on
account. After some time, the entity paid half of the amount.
The journal entry made was
At date of purchase
Equipment 1,000,000
Cash 1,000,000
At date of payment
No entry
What is the correcting entries to be made by the entity?
a) Debit Cash 1,000,000 Credit Accounts Payable 1,,000,000
b) Debit Cash 500,000 Credit Accounts Payable 1,000,000
c) Debit Cash 500,000 Credit Accounts Payable 500,000
d) Debit Accounts Payable 500,000 Credit Cash 500,000
100. On May 1,2020, the entity issued a notes payable to its supplier amounting to
P4,000,000. The interest is 12% per annum. The notes and the interest is payable on
May 1,2022 . What is interest receivable for the year 2021?
Answer: 800,000
101. On December 31,2020 the entity had a 20 employee. The salary of one employee
is P36,000 a month. During the end of the year, the entity had an unpaid salary of 5 days
per employee. Compute for the Salaries expense for the year assuming that there is 30
day working period every month.
Answer: 120,000
102. On June 30,2020, the entity received a note from its customer amounting to
P5,000,000. The interest is 40% per quarter and the note is payable after 3 years.
Compute for the interest expense for the year 2022.
Answer: 0
103. On June 30, 2020, the entity received a note from its customer amounting to
P4,000,000. The interest is 5% per quarter. If the note is payable on June 30,2022.
Compute for the interest income on 2022.
Answer: 400,000
104. Tom Jones is the owner and operator of Jones Enterprise, a motivational
consulting business. At the end of its accounting period, December 31, 2019, Jones
Enterprise has assets of P760,000 and liabilities of P240,000.
Tom Jones, capital, as of December 31, 2019?

a) P250,000
b) P520,000
c) P560,000
d) P960,000
Enterprise has assets of P760,000 and liabilities of P240,000
Tom Jones, capital, as of December 31, 2020, assuming that assets increased by
P120,000 and liabilities increased by P72,000 during 2020?
a) P520,000
b) P568,000
c) P586,000
d) P880,000
Enterprise has assets of P760,000 and liabilities of P240,000.
Tom Jones, capital, as of December 31, 2020, assuming that assets decreased by
P60,000 and liabilities increased by P21,600 during 2020?
a) P478,400
b) P438,400
c) P520,400
d) P568,400
Enterprise has assets of P760,000 and liabilities of P240,000
Tom Jones, capital, as of December 31, 2020, assuming that assets increased by
P100,000 and liabilities decreased to P38,400 during 2020?
a) P438,400
b) P821,600
c) P658,400
d) P539,600
108. Indicate the effect of transaction. Choose the letter that corresponds to the
effect.
Elizabeth Salvador Freight Services during July 2020:
"Cash received from delivery services"

a) Increase asset and decrease another asset
b) Increase asset and increase liability
c) Decrease assets and decrease owner’s equity
d) Increase assets and increase Owner’s equity
109. It is a decrease in economic benefit during the acctg period related to a

decrease in asset or an increase in liability that results in decrease in equity other than
distribution to owners.
a) Liability
b) Asset
c) Income
d) Expense
110. Indicate the effect of the transaction. Choose the letter that corresponds to the
effect.
"Received cash from the additional investment of the owners"

effect.
"Paid advertising expense"

effect.
"Billed customers for delivery services on account"

effect.
"Purchased supplies for cash"

effect.
"Received cash from customers on account"

115. The theory of accounting which best describes the accounting equation
expressed assets= liabilities + equity is the
a) Residual equity theory
b) Proprietary theory
c) Entity theory
d) Fund theory
116. Which of the ff best describes financial performance of an entity?

a) The total assets minus total liabilities
b) The total cash inflows minus cash outflows
c) The assets, liabilities and equity of an entity
d) The revenue, expenses and net income or loss for a period of an entity
117. Which one of the ff is an adjunct acct that should not be closed at the end of
every accounting period?
a) Allowance for doubtful accts
b) Share premium
c) Discount on bonds payable
d) Freight in
118. Which of the ff accounts would be increased by debit?

a) Dividends
b) Notes payable
c) Share capital
d) Accounts payable
119. Cara Company’s acctg records provided the ff info:
1.1.2021
12.31.2021
Current assets 240,000 ?
Property, plant and equipment 1,600,000 1,700,000
Current liabilities ? 130,000
Noncurrent liabilities 580,000 ?
All assets and liabilities of the entity are reported at year-end, working capital of
P92,000 remained unchanged from 2020 to 2021. Net income in 2021 was P64,000. No
dividends were declared during 2021, and there were no other changes in capital. What
amt should be reported as noncurrent liabilities on Dec 31, 2021?
a) 580,000
b) 340,000
c) 432,000
d) 616,000
120. The ff acct balances were gathered from Pamela Company’s adjusted trial
balance on Dec 31,2011: wages payable- 250,000; cash- 200,000; mortgage payable-
1,500,000; dividends payable- 150,000; prepaid rent- 100,000; inventory- 800,000;
sinking fund- 500,000; short-term investments- 300,000; investment in subsidiary-
2,000,000; taxes payable- 220,000; accts payable- 240,000; accts receivable- 350,000.
What total amt should be reported as current assets in Pamela Company’s balance
sheet?
a) 2,250,000
b) 1,750,000
c) 3,750,000
d) 4,250,000
121. The trial balance of Quijada Company included the ff acct balances on Dec
31,2011:
Accts payable- 1,500,000
Bonds payable, due 2012- 2,500,000
Discount on bonds payable- 300,000
Dividends payable- 800,000
Note payable, due 2013- 2,000,000
a) 4,500,000
b) 6,500,000
c) 5,100,000
d) 7,800,000
122. Which of the ff statements is incorrect concerning assets?

a) There is a close association between incurring an expenditure and generating asset
but the two do not necessarily coincide.
b) In determining existence of an asset, the right of ownership is essential.
c) An asset results from past event
d) Physical form is not essential to the existence of an asset
123. It is an increase in economic benefit during the acctg period related to an increase
in asset or a decrease in liability that results in increase in equity other than contribution
from owners.
a) Income
b) Liability
c) Assets
d) expense
124. PQR Company had the following transactions for the month of October:
(1) Purchase of equipment worth P 45,000, 20% of it is paid via cash and the remaining
is to be paid next month- this is recorded as a debit to equipment and a credit to
liability, both for P 45,000.
(2) Loan of P 20,000 from the bank of which 25% is used to settle another liability – this
is recorded as debit to cash of P 20,000 and credit to liability of P 20,000 and a follow up
entry of a debit to liability of P 5,000 and a credit of cash for the same amount.
(3) Purchase of office supplies worth P 2,000 to be paid next month – this is recorded as
a debit to office supplies of P 20,000 and a credit to liability of P 2,000.
(4) Purchase of machine worth P 10,000, P 3,000 of it is already paid and the remaining
balance is to be paid next month – this is recorded as a debit to machine of P 10,000, a
debit to cash of P 3,000 and credit to liability of 7,000.
Considering all transactions provided, balance of debit and credit would not be equal.
Given that, which of the two sides is greater in terms of amount and how much is that
side greater than the other side?
Answer: 24,000
125. At the end of the year, MNO Company has assets equal to P 6,150,000 and
liabilities equal to P 2,650,000. Before the year ended, cash was borrowed from the
bank amounting to P 1,500,000, half of which was used to buy equipment and the other
half to pay for liabilities which were already past due. What is the total equity of MNO at
year- end?
Answer: 3,500,000
126. At the beginning of the year, JKL company’s liabilities equal P 660,000. During the
year, assets increased by P 800,000. Liabilities decreased by P 100,000 during the year.
Ending balance of equity is P 1,620,000. How much is the total assets of JKL at the
beginning of the year?
Answer: 1,380,000
inventory of P 35,000 to the business. GHI puts total of P 205,000 to the company, P
80,000 into the firm's cash box and the remaining into the firm's bank account.
Meanwhile, the firm lends P 55,000 cash to JKL and the firm borrows P 300,000 from the
bank to acquire a piece of premises. What is the amount of the firm’s assets?
Answer: 610,000
128. DEF Company’s equity at the beginning of the year amounted to P 45,000.
Considering all transactions and elements, equity balance increased by P 55,000
throughout the year. Additional investment from the owner amounted to P 80,000
while quarterly withdrawals totaled P 20,000. If total expense equaled to P 107,000,
how much is the income of DEF Company?
Answer: 102,000
129. At the beginning of the year, ABC Company’s liabilities equal P 60,000. During the
year, assets increased by P 80,000, and at year- end, assets increased to P 180,000.
Liabilities decreased to P 50,000 during the year. How much is the net change in ABC,
Capital?
Answer: 90,000
130. Which of the following elements does not actually relate to financial position?
a) Net interest in the company of the owners
b) Amount owed to creditors
c) Increases in equity other than investments
131. Which of the following accounts is commonly classified as current?
a) Equity
b) Intangible Assets
c) Mortgage Payable
132. Which of the following elements properly relate to financial performance?

a) Expense
b) Income
c) Both Expense and Income
d) Either Income or Expense
133. Which of these steps is executed during the accounting period?

a) Analyzing transactions
b) Journalizing and posting adjusting entries
c) Preparation of worksheet
d) Reversing entries preparation
134. Which of these steps is executed at the end of the accounting period?
a) Journalizing and posting of daily entries
b) Preparation of financial statements
c) Both preparation of financial statements, and journalizing and posting of daily
entries
d) Either preparation of financial statements or journalizing and posting of daily entries

135. Which of the following properly depicts the points considered in analyzing a
business transaction?
a) Identify the transaction based on document presented
b) Identify the incorrect side to reflect the effect of transaction to indicated accounts
c) Ascertain the effect of the indicated accounts to the transaction
d) Indicate the accounts not affected by the transaction
136. Which of the following is not a part of a journal?

a) Account titles and explanation column
b) Debit amount column
c) Pre-referencing column
d) None of these because all of these are parts of a journal

I –The balance seen in the accounting equation is observed in most cases of business
transactions.
II – A decrease in asset is not a debit.
III – Analyzing business transactions is done during the period.

a) Most of the statements are true.
b) All statements are not true.
c) Statement II is false.

I – The normal balance of an account, regardless of its classification, is not the side where
increases are not recorded.
II – Notes payable is usually a current asset.
III – An increase in income is not a credit.

a) Most of the statements are true.
b) All statements are not true.
c) Statement II is false.
e) Only statement II is true
139.
Statement 1. A listing of all the accounts and their account numbers in the journal is known as
the chart of accounts.
Statement 2. A general journal is the "reference book" of the accounting system and is used to
classify and summarize transactions, and to prepare data for basic financial statements.
Statement 3. The T-account is sometimes called the book of original entry.
c) Only 1 statement is true
d) Only 1 statement is false
140. Identify the correct statement

a) Assets equals equity plus liabilities
b) Assets less liabilities less drawings equals opening capital plus profit
c) Assets plus profit less drawings less liabilities equals closing capital
d) Assets less liabilities less opening capital plus drawings equals profit
141. Which of the following errors will cause a trial balance to be out of balance?
a) A journal entry was accidentally posted twice
b) The bookkeeper forgot to journalize a transaction
c) The account balance was carried to the wrong column of the trial balance
d) The bookkeeper forgot to post a journal entry to the ledger
142.
Statement 1. A cash account balance of 54,968 was accidentally written as 59,568. This
is an example of a transcription error.
Statement 2. A cash account balance of 38,470.00 is copied as 3,847.00. This is an
example of a slide error.
a) Both statements are correct
b) Both statements are wrong
c) Only statement 1 is correct
d) Only statement 2 is correct
143. When rent paid in advance, it

a) debits Cash and credits Rent Expense
b) debits Rent Expense and credits Cash
c) debits Prepaid Rent and credits Cash
d) debits Cash and credits Prepaid Rent

144. When liabilities decreases, one of the following must occur:
a) an asset decreases
b) withdrawals decreases
c) an income decreases
d) an asset increases
145. Paid a one-year insurance coverage on the service vehicle

a) debit Cash credit Insurance Expense
b) debit Insurance Expense credit Cash
c) debit Cash credit Prepaid Insurance
d) debit Prepaid Insurance credit Cash
146. Which of the following transactions correctly maintains the equality in the
accounting equation?
a) To record payment of rent, rent expense and cash are increased by 8,000
b) To record payment of expenses incurred, expense account increased and cash is
decreased
c) To record the purchase of computer equipment, computer equipment and cash is
increased by 46,000
d) To record payment of notes payable, notes payable is decreased and cash is
increased by 70,000
147. When an entity has performed a service but has not yet received payment, it
a) debits Accounts Receivable and credits Service Revenues
b) debits Service Revenues and credits Accounts Receivable
c) debits Service Revenues and credits Accounts Payable
d) makes no entry until the cash is received
148. The trial balance will not expose which of the following problems?
a) Recording half an entry
b) Leaving out an entire entry
c) Recording half an entry and leaving out an entire entry
d) Recording both halves of an entry on the same side
149. A business has the following items:

Land 2,000,000
Machinery 30,000
Loan 500,000
Cash 40,000
Owner's Equity 1,100,000
Creditors _____?
Answer: 470,000
150. A business has the following balance items

Cash 380,000
Patent ______?
Loan 400,000
Land 600,000
Owner's Equity 700, 000
Answer: 120,000
For Questions No. 151-153

The June 2016 trial balance for Davao Duplicators, owned by Allan Brillantes presented below.
The regular bookkeeper has resigned and left the following trial balance. It did not balance
Davao Duplicators
Trial Balance
June 20, 2016
Cash 50,000
Accounts Receivable 190,000
Supplies 70,000
Equipment 540,000
Accounts Payable 72,600
Brillantes, Capital 513,000
Brillantes, Withdrawals 50,000
Revenues 371,600
Salaries Expense 40,000
Rent Expense 10,000
Utilities Expense 16,600
Totals 916,600 1,017,200
Upon reviewing the trial balance and the process of transferring the amounts in the
ledger accounts to the trial balance, an error was discovered
a. The balance in the accounts payable ledger account of 62,700 was transferred as
72,600
When the balances of the ledger accounts were recomputed, two more errors were
discovered:
b. The utilities expense account balance was overstated by 1,800
c. The total debits in the Cash account amounted to 180,000 and the credits totaled
140,000
Discovered four more errors when postings were traced from the journal to the ledger:
d. A debit posting to Accounts Receivable in the amount of 52,000 should have been
5,200
e. A debit posting to Accounts Payable for 46,000 was missing
f. A credit posting to Revenues in the amount of 7,600 was missing
g. A credit of 31,000 was posted to Accounts Payab;e rather than 30,100

151. What is the correct amount of Accounts Payable
Answer: 15,800
152. What is the correct balance of cash?
Answer: 40,000
153. What is the total of the debit column of the correct trial balance?
Answer: 908,000
For Questions No. 154-155

The trial balance prepared by Remedios Palaganas Consulting as at Sept. 30, 2016 was not in
balance. In searching for the error, an employee discovered that a transaction for the purchase
of a typewriter for 6,800 has been recorded by a debit of 6,800 to the Office Equipment
account and a debit to Cash of 6,800. The credit column of the incorrect trial balance had a
total of 945,000
154. The Office Equipment account was?
a) Correctly stated
b) Understated
c) Overstated
155. The total of the debit column of the trial balance was?
a) Correctly stated
b) Understated
c) Overstated
Go, Capital 252,500

Insurance Expense 8,500
Accounts Payable 23,200
Service Revenues 262,000
Land 85,000
Cash 21,200
Salaries Expense 80,000
Building 385,000
Go, Withdrawals 20,000
Utilities Expense 38,500
Accounts Receivable 26,500
Notes Payable 140,000
Supplies Expense 13,000

156. Determine the correct debit balance
Answer: 677,700
The following errors occurred in posting transactions from the journal to the ledger
1. A payment of 3,600 for advertising was posted as 3,600 debit to advertising expense and a
6.300 credit to cash.
2. The purchase of supplies on account for 1,700 was posted twice as a debit to supplies and
once as a credits to accounts payable.
3. The payment of 5,300 to a creditor on account was posted as a credit to accounts payable for
5,300 and a credit to cash for 5,300
157. Which column in the trial balance is larger?
a) Credit
b) Debit
c) Balance
The following errors occurred in posting transactions from the journal to the ledger
1. A payment of 3,600 for advertising was posted as 3,600 debit to advertising expense and a
6.300 credit to cash.
2. The purchase of supplies on account for 1,700 was posted twice as a debit to supplies and
once as a credits to accounts payable.

158. What is the difference between the column totals in the trial balance?
Answer: 1,000

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1.

2. The debit and credit analysis of a transaction normally takes place

3. Which of the following is a recordable event or item?

4. Which of the following is not an internal event?

7. On February 1, 2016, Mr. A. Sanchez, a good-looking and young businessman

Feb. 2 Signed a 1-year lease contract, P30,000 per year.

7 Paid Company operating expenses for cash P15,000.

28 February depreciation of equipment (using 5 years useful life), P1,000.

Accounts receivable 20,000

Accounts payable P3,000

Total P232,000 P223,000

9. Sales on cash should be recorded on what type of journal?

17. Which of the following is NOT a relevant economic event?

18. Which accounting process is the recognition or non-recognition of business activities as

19. Accountable events of an entity are collected by means of

20. What function do accounting journals serve in the accounting process?

21. What function do accounting ledgers serve in the accounting process?

22. Decrease in asset may

24. In recording transactions,

26. Adjusting entries are necessary to

30. An accrued expense can best be described as an amount

36. Which of the following is not included in a trial balance?

38. If furniture is overvalued by P 1,000 in the trial balance, ________.

39. If accounts payable is undervalued by P 3,000 in the trial balance, _______.

50. An increase in equity is not recorded as a debit.

51. A decrease in asset is not recorded as a credit.

53. An increase in liability is recorded as a debit.

55. The process of recording a transaction in a journal is called journalizing.

57. A credit entry to an expense will not decrease it.

59. In some transactions, the accounting equation may not be maintained.

60. An account titled Unearned Revenues is not a liability account.

62. A debit entry to an equity will not increase it.

66. Which of the following elements properly relate to financial performance?

67. Which of these steps is executed during the accounting period?

70. Which of the following is not a part of a journal?

71. Analyze the set of statements:

72. Analyze the set of statements:

For questions No. 79- 93

79. Analyze the following statements:

80. Analyze the following statements:

81. Analyze the following statements:

82. Analyze the following statements:

83. Question: Analyze the following statements:

84. How much is the total current assets?

85. How much is the total expenses?

86. How much is the total net equity?

94. Which of the following is true about the adjusting entry?

97. Which of the following is false regarding the reclassifying entries?

Tom Jones, capital, as of December 31, 2019?

Elizabeth Salvador Freight Services during July 2020:

"Cash received from delivery services"

109. It is a decrease in economic benefit during the acctg period related to a

"Received cash from the additional investment of the owners"

Elizabeth Salvador Freight Services during July 2020:

"Paid advertising expense"

Elizabeth Salvador Freight Services during July 2020:

"Billed customers for delivery services on account"

Elizabeth Salvador Freight Services during July 2020:

"Purchased supplies for cash"

Elizabeth Salvador Freight Services during July 2020:

"Received cash from customers on account"

116. Which of the ff best describes financial performance of an entity?

118. Which of the ff accounts would be increased by debit?