PROBLEM 1 : TRUE OR FALSE

1. Chart of accounts is the basic storage of information in accounting.

- Account is the basic storage of information in accounting.

2. Debit means the left side of an account, while credit means the right. TRUE

3. The difference between the total debits and total credits in the account represents
the balance of that account. TRUE

4. An account has total debits of ₱80 and total credits of ₱20. This account has a
balance of ₱60. TRUE

5. The balance of the account in #4 above is referred to as a credit balance.

- The balance of the account in #4 above is referred to as a debit balance.

6. If the total debits in an account exceed the total credits, the account would have a
debit balance. TRUE

7. There are five major types of accounts used in accounting. TRUE

8. Income and expenses are the balance sheet accounts.

- Income and expenses are the income statement account.

9. The "used up" portion of a prepayment (e.g., prepaid rent) is an expense, while the
"unused" portion is an asset. TRUE

10. The "used up" portion of supplies bought during the period is called "Prepaid
supplies."
- The "used up" portion of supplies bought during the period is called
"Supplies expense."

PROBLEM 2 : TRUE OR FALSE

1. The right side of an account is called credit. TRUE

2. Accounts payable and accounts receivable are opposites, meaning if I have an

account payable to you, you, in turn, have an account receivable from me. TRUE

3. You are selling banana cue. If I buy your banana cue and informally promise to pay
for it tomorrow, your account payable' will increase.
- You are selling banana cue. If I buy your banana cue and informally
promise to pay for it tomorrow, your account receivable will increase.

4. In conjunction with #3 above, my accounts receivable will increase.

- In conjunction with #3 above, my accounts payable will increase.
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5. If after sometime, I haven't paid yet my dues to you in #3 above, and you don't
expect that I can pay you, you will recognize an expense called bad debt expense.
TRUE

6. An entity that borrows money from the bank would most likely present interest
income in its income statement.
- An entity that borrows money from the bank would most likely present
interest expense in its income statement.

7. The terms "receivable" and "prepaid" connote an asset, while the terms "payable"
and "unearned" connote a liability. TRUE

8. Collectively, land, building and equipment are referred to as "Property, plant and
equipment." TRUE

9. Gains are income that arises in the ordinary course of business activities.
- Revenues are income that arises in the ordinary course of business
activities.

10. Mr. Monkey's main business activity involves selling bananas. One time, Mr. Monkey
sold an iPhone with carrying amount of ₱17 for ₱20. Mr. Monkey recognizes a gain
of ₱3 on this transaction rather than revenue. TRUE

PROBLEM 3 : FOR CLASSROOM DISCUSSION

The Account

1. Account is the basic storage of information in accounting. An account may be

depicted through a 'T-account'. Which of the following is not one of the parts of a T-
account?
a. Account title
b. Left side or debit side
c. Right side or credit side
d. Upside down or bottoms up

The Five Major Accounts

2. Which of the following is not one of the five major accounts?

a. Assets
b. Income
c. Equity
d. Losses

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3. Which of the following is not one of balance sheet (statement of financial position)
accounts?
a. Assets
b. Liabilities
c. Equity
d. Income

Chart of Accounts

4. It is a list of all the accounts used by a business.

a. Trial balance
b. Contact list
c. Chart of accounts
d. Organizational chart

5. An account with the following account numbering ‘2100’ is most likely to be a(an)
a. asset account
b. liability account.
c. equity account
d. expense account.

Common Account Titles

6. The money held by a business, including the increases or decreases thereto, is

recorded in this account.
a. Cash
b. Accounts receivable
c. Owner's equity
d. Sales

7. Receivables that are supported only by oral or informal promises to pay.

a. Cash
b. Accounts receivable
c. Accounts payable
d. Notes receivable

8. Contributions by the business owner to the business and profits or losses of the
business are recorded in this account
a. Owner's equity
b. Owner's drawings

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c. Sales
d. Salaries expense

9. Revenues earned from the sale of goods are recorded in this account.
a. Inventory income
b. Goods income
c. Sales
d Service fees

10. This represents the value of inventories that have been sold, and consequently
charged as expense, during the accounting period.
a. Inventory
b. Goods income
c. Sales
d. Service fees

PROBLEM 4 : IDENTIFICATION
Instruction: Indicate the classifications of the accounts listed below as either an ASSET,
LIABILITY, EQUITY, INCOME or EXPENSE account under COLUMN A and as either a
BALANCE SHEET account or an INCOME STATEMENT account under COLUMN B.

Account Titles COLUMN A COLUMN B

1. Account receivable ASSET BALANCE SHEET

2. Bad debt expense EXPENSE INCOME STATEMENT

3. Building ASSET BALANCE SHEET

4. Notes payable LIABILITY BALANCE SHEET

5. Rent expense EXPENSE INCOME STATEMENT

6. Owner’s equity EQUITY BALANCE SHEET

7. Interest income INCOME INCOME STATEMENT

8. Cash ASSET BALANCE SHEET

9. Gain INCOME INCOME STATEMENT

10. Computer equipment ASSET BALANCE SHEET

11. Depreciation EXPENSE INCOME STATEMENT

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12. Utilities payable LIABILITY BALANCE SHEET

13. Freight-out EXPENSE INCOME STATEMENT

14. Rent income INCOME INCOME STATEMENT

15. Unearned income LIABILITY BALANCE SHEET

PROBLEM 5 : IDENTIFICATION
Instruction : Same as PROBLEM 4 above

Account Titles COLUMN A COLUMN B

1. Taxes and licenses EXPENSE INCOME STATEMENT
2. Furniture & fixture ASSET BALANCE SHEET
3. Supplies expense EXPENSE INCOME STATEMENT
4. Interest expense EXPENSE INCOME STATEMENT
5. Inventory ASSET BALANCE SHEET
6. Land ASSET BALANCE SHEET
7. Accounts payable LIABILITY BALANCE SHEET
8. Notes receivable ASSET BALANCE SHEET
9. Prepaid insurance ASSET BALANCE SHEET
10. Loss EXPENSE INCOME STATEMENT
11. Prepaid supplies ASSET BALANCE SHEET
12. Rent payable LIABILITY BALANCE SHEET
13. Sales INCOME INCOME STATEMENT
14. Interest receivable ASSET BALANCE SHEET
15. Transportation
ASSET BALANCE SHEET
equipment

PROBLEM 6 : IDENTIFICATION
Instruction : Identify the account title/accounting term referred to in each of the statements
below.

1. Increases in assets or decreases in liabilities resulting in increases in equity, other

than those relating to transactions with the business owner. INCOME

2. These represent claims for cash that are supported by oral or informal promises to
pay by a customer. ACCOUNTS RECEIVABLE

3. This represents the goods that are held for sale by a business. INVENTORY

4. This account is used to record the costs incurred in marketing or promoting the
products or services of a business. ADVERTISING EXPENSE
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5. The financial that presents the assets, liabilities and equity of a business. BALANCE
SHEET OR STATEMENT OF FINANCIAL POSITION

6. The expense account used to record the uncollectible portion of accounts receivable.
BAD DEBTS EXPENSE

7. The revenue earned from the sale of goods is recorded in this account. SALES

8. The cost of inventories sold is charged as expense using this account. COST OF
SALES OR COST OF GOODS SOLD

9. This is used to record the cost of supplies used during the period. SUPPLIES
EXPENSE

10. This account pertains to the obligations supported by written or formal promises to
pay by the debtor. NOTES PAYABLE

PROBLEM 7 : IDENTIFICATION
Instruction : Same as PROBLEM 6 above

1. The financial statement that presents the income and expenses, and consequently
the profit or loss, of a business. INCOME STATEMENT OR STATEMENT OF
PROFIT OR LOSS

2. Transport costs of delivering goods to customers are recorded in this account.

FREIGHT OUT ( (Delivery expense, Transportation-out, or Carriage outwards)

3. Obligations supported by oral or informal promises to pay. ACCOUNT PAYABLE

4. This account is used to record the cost of unused supplies. PREPAID SUPPLIES OR
OFFICE SUPPLIES

5. It is a liability account that is used to record amounts received from customers in

advance of providing goods or services. UNEARNED INCOME ( (Unearned
revenue or Advances from customers)

6. This represents various small expenditures that do not warrant separate

presentation. MISCELLANEOUS EXPENSE

7. This account may be used to describe expenses for water, electricity, internet,
telephone, and the like. UTILITIES EXPENSE

8. This represents the aggregate amount of estimated losses from uncollectible

accounts receivable. ALLOWANCE FOR BAD DEBTS
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9. This represents the portion of the cost of a depreciable asset (e.g., building or
equipment) that has been charged as expense in the current accounting period.
DEPRECIATION EXPENSE

10. The aggregate cost of a depreciable asset that has been charged as expense since
the asset was made available for use. ACCUMULATED DEPRECIATION

PROBLEM 8 : MULTIPLE CHOICE

1. Receivables that are supported by written or formal to pay in the form of promissory
notes.
a. Inventory
b. Accounts receivable
c. Notes payable
d. Notes receivable
2. Goods that are held for sale by a business.
a. Cash
b. Accounts receivable
c. Accounts payable
d. Inventory
3. The unused portion of rent paid in advance.
a. Prepaid rent
b. Rent expense
c. Cash
d. Inventory
4. Salaries earned by employees but not yet paid.
a. Salaries expense
b. Salaries payable
c. Employee points
d. Employee credits
5. Salaries earned by employees, whether paid or not.
a. Salaries expense
b. Salaries payable
c. Employee points
d. Employee credits
6. Temporary withdrawals of the owner from the business during the period are
recorded in this account.
a. Owner's equity
b. Owner’s drawings
c. Withdrawal expense

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d. Salaries expense
7. Income collected in advance but not yet earned.
a. Unearned income
b. Early income
c. Sales
d. Service fees
8. Obligations supported by oral or informal promises to pay by the debtor.
a. Cash
b. Accounts receivable
c. Accounts payable
d. Notes payable
9. The cost of inventories that have been sold during the period.
a. Cost of sales
b. Cost of inventories
c. Inventory
d. Selling expense
10. The amount of estimated losses from uncollectible accounts receivable during the
period.
a. Good expense
b. Bad expense
c. Ugly expense
d. Bad debts expense

PROBLEM 9 : MULTIPLE CHOICE

1. A merchandising or manufacturing business uses this account to record revenues
earned from primary business activities.
a. Sales
b. Service fees
c. Gains
d. Seals

2. Obligations supported by written or formal promises to pay by the debtor in the form
of promissory notes.
a. Notes receivable
b. Accounts receivable
c. Accounts payable
d . Notes payable

3. The structure owned and being used by a business in its operations.

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a. Building
b. Base
c. Castle
d. Kingdom

4. The portion of the cost of a building that is already recognized as expenses since the
building was acquired and made available for use.
a. Accumulated depreciation - building
b. Upkeep
c. Accumulated upkeep
D. Repairs and maintenance expense

5. The cost of unused once and other supplies.

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

6. Interest incurred by a borrower but not yet paid.

a. Interest payable
b. Interest expense
c. Notes payable
d. Notes receivable

7. Interest incurred by a borrower, whether paid or not.

a. Interest payable
b. Interest expense
c. Notes payable
d. Notes receivable

8. The seller's cost of delivering goods to customers.

a. Freight-out
b. Freight-in
c. Freight-good
d. Freight-bad

9. The cost of promotional or marketing activities during the period.

a. Market expense
b. Advertising expense
c. Groceries

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d. Insurance expense

10. The cost of gasoline, hotel accommodation, taxi fare, and similar expenditures.
a. Transportation and travel expense
b. Interest expense
c. Taxi expense
d. Gas expense

PROBLEM 10 : MULTIPLE CHOICE

1. The cost of the lot on which the building of a business been constructed is recorded
in an account described as
a. Realm.
. b. Ground
c. Land
d. Earth

2. Entity A sells an asset that is not an inventory for ₱100. The carrying amount of the
asset is ₱180. The ₱80 difference represents a
a. Gain.
b. Loss.
C. revenue.
d. interest income.

3. Interest earned by a lender but not yet collected.

a. Interest receivable
b. Interest income
c. Notes payable
d. Notes receivable

4. Interest earned by a lender, whether collected or not.

a. Interest receivable
b. Interest income
c. Notes payable
d. Notes receivable

5. Revenues earned from rendering services.

a. Unearned income
b. Rendering income

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c. Sales
d. Service fees

6. The cost of supplies used in an accounting period.

a. Prepaid supplies
b. Supplies cost
c. Supplies expense
d. Surprise expense

7. The portion of the cost of a building or equipment that has been charged as expense
in the current accounting period.
a. Accumulated deduction
b. Deduction expense
c. Accumulated depreciation
d. Depreciation expense

8. You opened up a business. Your initial investment to the business will be recorded in
which of the following accounts?
a. Owner's payable
b. Owner's equity
c. Notes payable
d. Accounts payable
9. In conjunction with #8 above, which of the following would most likely be your first
expense?
a. Equipment
b. Inventory
c. Taxes and licenses
d. Utilities expenses

10. You purchased goods that will be held for sale in the ordinary course of your
business activities. You will record the good as
a. Expense
b. Income
c. Accounts receivable
d. Inventory

PROBLEM 11 : MULTIPLE CHOICE

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1. You are business owner. Your business needed additional capital so you obtained a
loan from a bank made. The bank made you sign a contract promising to repay the
loan after a year. Which of the following accounts is increased by this transaction?
a. Accounts payable
b. Notes payable
c. Accounts receivable
d. Notes receivable

2. From the point of view of the bank who lent you the loan in #1 above, which of the
following accounts is increased?
a. Accounts payable
b. Notes payable
c. Accounts receivable
d. Notes receivable

3. A customer bought goods from your business, on credit. The customer orally
promised to pay the sale price next week. Which of the following accounts is
increased by this transaction?
a. Account payable
b. Notes payable
c. Accounts receivable
d, Notes receivable

4. From the point of view of the customer who bought goods from your business in #3
above, which of the following accounts increased?
a. Account payable
b. Notes payable
c. Accounts receivable
d, Notes receivable

5. When you collected the dues of the customer in #3 above, which of the following
increased?
a. Account payable
b. Cash
c. Accounts receivable
d, Notes receivable

6. From the point of view of the customer who paid in #5 above, which of the following
decreased?
a. Inventory
b. Cash
c. Accounts receivable
d, Notes receivable

7. You purchased a computer for ₱100,000. Which of the following accounts is

increased by this transaction?
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a. Cash
b. Owner’s Capital
c. Computer equipment
d. Inventory

8. You expect to use the computer in #7 above over the next 5 years. How much is the
depreciation expense per year?
` a. 10,000
b. 20,000
c. 7,143
d. 100,000
Solution :
100,000 / 5 yrs = 20,000

9. After using the computer in #'s 7 and 8 above for the three years, how much is the
balance of the "Accumulated depreciation - Computer equipment" account?
a. 60,000
b. 30,000
c. 20,000
d. 90,000
Solution :
20,000 x 3 yrs = 60,000

10. At the end Year 2, how much is the carrying amount of the computer equipment in
#'s 7 and 8 above?
a. 50,000
b. 40,000
c, 60,000
d.0
Solution :
100,000 cost - ( 20,000 x 2 yrs ) = 60,000

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