BASIC ACCOUNTING, PART 1 PRELIM DEPARTMENTAL EXAM REVIEWER

THEORIES

 For numbers 1 to 5, identify each of the following accounts as either:

A. Asset account
B. Liability account
C. Owner’s Equity account
D. Revenue account
E. Expense account  

1. Unearned Rent _____
2. Prepaid Insurance _____
3. Fees Earned _____
4. Prepaid Rent Expense _____
5. Drawings ______

For numbers 6 to 10, use the following choices:

A. Both statements are true

B. Both statements are false
C. Only statement I is true
D. Only statement II is true 

6. 
a. Posting a transaction twice will cause the trial balance totals to be equal
b. Journalizing a transaction with transposition error for both the debit and
credit of P69 instead of P96 will cause the trial balance to be out of balance

7. 
 
a. When an owner invests assets in the business, the capital account increases
due to revenue being earned
b. Debits will increase Unearned Revenues and Revenues

 8. 
a. The general journal is also called the book of original entry
b. The special journal is also called the book of final entry 
9. 
 a. Accrual basis recognizes income when it is earned regardless of collection
b. Cash basis recognizes expense upon payment regardless of when it is
incurred 
10. 

a. Financing activities include borrowings from a bank for the business

b. Investing activities include personal investment by the owner of a business

11. Which of the following group of accounts increase with a credit?

a. Assets, capital, revenue
b. Liabilities, capital, revenue