ACTG123 Financial Accounting and Reporting: Books of account and Double-

Entry System

OUR LADY OF FATIMA UNIVERSITY

Questionnaire with answers & Sample quiz

PROBLEM 1: TRUE OR FALSE

1. The three books of accounts are the journal, ledger and T-account.
2. The ledger is called the “books of original entries”
3. Journals can be classified into General Journal and Special Journal. Special
journals are used to record transactions of a similar nature. Those that cannot be
recorded in the special journals are recorded in the general journal.
4. Entity A hast total accounts receivable of ₱12M. This information is most likely to
have been taken from the General Journal.
5. Of Entity A’s total accounts receivable of ₱12M, ₱4.8M is due from Entity B.
This information is most likely to have been taken from the Special Journal.
6. An account that necessarily needs a breakdown is called a controlling account.
7. The normal balance of an asset or expense account is debit, while the normal
balance of a liability, equity or income account is credit.
8. Combining a debit amount with a debit amount results to addition.
9. The system of recording used in financial reporting is called multiple-entry
system.
10. Every transaction has a two-fold effect on values. This concept is called
“matching.”

PROBLEM 2: TRUE OR FALSE

1. Debit is simply the left side, while credit is the right aside, of an account.
2. When recording business transactions, you see to it that for every peso that you
debit, there is a corresponding peso that you credit. You are applying the concept
of equilibrium.
3. If you want to increase the balance of a liability account, you will debit it.
4. Under the double-entry system, sometimes a business transaction is recorded
through a debit alone or a credit alone.
5. Your general ledger shows total notes payable of ₱10M. You only have two bank
loans – one from Bank A and the other one from Bank B. If the loan from Bank A
has a balance of ₱4M, the loan from Bank B must be ₱8M.
6. The balance of an account is simply the difference between the total debits and
total credits in that account.
7. This morning, you had cash of ₱100. During the day, you collected accounts
receivable of ₱20 from your friend and you spent ₱70 for transportation, meals
and utilities expenses. The ending balance of your cash is ₱190.
8. The cash collection from your friend in #7 above is recorded in your personal
books of accounts as a credit to cash.
9. The collection from your in #7 above will increase your accounts receivable from
your friend.
10. If you are a liability and your mama tells you that she will debit you, this means
that she will either decrease your allowance or put you up for adoption.
PROBLEM 3: FOR CLASSROOM DISCUSSION
The Books of Accounts
Instruction for numbers 1 to 6: Indicate the type of book of account that is most relevant
to the items described below.

Example: A business sells goods on credit.

Answer: Sales journal

1. A business purchases goods on account

2. A business sells goods on cash basis
3. A business purchases goods in exchange for notes payable
4. A business purchases equipment for cash
5. A business wants to know the total amount that it owes to all of its suppliers
6. A business wants to know how much it owes to each supplier

Normal Balances of Accounts

Instruction for numbers 7 to 16: In COLUMN A, indicate whether the account is
ASSET, LIABILITY, EQUITY, INCOME or EXPENSE. If the account is a CONTRA or
ADJUNCT account, indicate that as well (e.g., CONTRA ASSET). In COLUMN B,
indicate the normal balance of the account, i.e., DEBIT or CREDIT.

ACCOUNTS COLUMN A COLUMN B

7. Cash
8. Owner’s equity
9. Accounts receivable
10. Prepaid supplies
11. Accounts payable
12. Salaries payable
13.Accumulated depreciation
14. Sales
15. Cost of sales
16. Depreciation

Rules of Debits and Credits

Instruction for numbers 17 to 20: Indicate how each of the accounts listed below are
increased below are increased (i.e., DEBIT or CREDIT).

17. Accounts receivable

18. Allowance for bad debts
19. Owner’s equity
20. Service fees

Ending Balance of an Account

1. At the beginning of the period, Addy had a cash balance of ₱20,000 and a notes
payable of ₱15,000. During the period, Addy collected ₱11,000 accounts
receivable, paid ₱8,000 notes payable, and issued additional notes payable of
₱5,000 in exchange for cash. How much are the ending balances of cash and notes
payable, respectively?

Cash Notes payable

a. 17, 000 20,000
b. 20,000 12,000
c. 28,000 12,000
d. 36,000 20,000
PROBLEM 4: IDENTIFICATION (BOOKS OF ACCOUNTS)
Instruction: Indicate the type of book of account that is most relevant to the items
described below.

Example: Sale on cash basis

Answer: Cash receipts journal

1. Sale on account
2. Purchases on account
3. Collection of accounts receivable
4. Payment of accounts payable
5. Purchases of inventory
6. Collection of interest income
7. Acquisition of land on cash basis
8. This book of account shows the balances of controlling accounts
9. The breakdown of each controlling account is shown in this book of account
10. It is called the “book of original entries” because transactions are first recorded here

PROBLEM 5: IDENTIFICATION (TYPES OF ACCOUNTS)

Instructions:
 In COLUMN A, indicate whether the account is ASSET, LIABILITY, EQUITY,
INCOME or EXPENSE. If the account is a CONTRA or ADJUNCT account,
indicate that as well (e.g., CONTRA ASSET).
 In COLUMN B, indicate the normal balance of the account, i.e., DEBIT or
CREDIT.

ACCOUNTS COLUMN A COLUMN B

1. Notes receivable
2. Salaries expense
3. Owner’s drawings
4. Building
5. Service fees
6. Advances from customers
7. Gains
8. Interest expense
9. Unearned income
10. Equipment
11. Interest receivable
12. Owner’s capital
13. Equipment
14. Freight-out
15. Loses
16. Service fees
17. Allowance for bad debts
18. Inventory
19. Depreciation
20. Utilities payable
PROBLEM 6: IDENTIFICATION (RULES OF DEBIT/CREDIT)
Instruction: Indicate how the accounts listed below are increased, i.e., DEBIT or
CREDIT

Account Titles INCREASED BY A

1. Cash
2. Sales
3. Accumulated depreciation
4. Depreciation
5. Inventory
6. Owner’s capital
7. Rent expense
8. Rent income
9. Interest receivable
10. Interest expense
11. Prepaid rent
12. Owner’s drawings
13. Accounts payable
14. Unearned income
15. Cost of sales
16. Equipment
17. Notes payable
18. Insurance expense
19. Prepaid insurance
20. Gains
21. Notes receivable
22. Land
23. Building
24. Furniture and fixtures
25. Freight out

PROBLEM 7: MULTIPLE CHOICE 3. You have various credit

Fact pattern: customers, including Ms. Oh
You have a business. Tang and Mr. Pah Lista. If you
want to know how much Ms. Oh
1. Your business will have which of Tang owes you, you will refer to
the following books of accounts? the
a. Journal a. General ledger.
b. Ledger b. Subsidiary ledger.
c. Scratchpad c. Special journal.
d. a and b d. reminder app.

2. When recording business 4. If you want to know the total

transactions, you will record them amount that your credit customers
first owe you, you will refer to the
a. in the Ledger. a. General ledger.
b. in the Journal. b. Subsidiary ledger.
c. on your phone’s reminder c. General journal.
app. d. Google.
d. on a scrap paper.
5. Your business purchases
inventory and issues a promissory
note to pay for the purchase price
after 30 days. This transaction is
most likely to be recorded in the
a. Purchase journal.
b. Sales journal.
c. Notes journal.
d. General journal.
6. You will record each business
transaction
a. in at least two parts – debit
and credit.
b. in equal amounts of debit
and credit.
c. using at least two accounts.
d. all of these
b. has a note payable to Mr.
Cell.
c. sells goods to Mr. Cell
d. likes Mr. Cell
10. Your business sells goods to Ms.
Vai, on account. If Ms. Vai
subsequently pays her account,
you will record this transaction in
the
a. Sales journal.
b. Purchases journal.
c. Cash disbursements
journal.
d. Cash receipts journal.
2.

7. If you want to increase an asset

account, what should you do?
a. Debit that account
b. Credit that account
c. Double that account
d. any of these

8. Your bookkeeper is confused on

the rules of debits and credits.
Which of the following would
you advise him/her?
a. Assets, liabilities and
equity have normal debit
balances.
b. To combine a credit
amount with another credit
amount means you
subtract.
c. The normal balance of an
account determines the side
in which the account is
decreased.
d. The normal balance of a
contra account is the
opposite of its related
account.

9. Mr. Cell, a supplier, has an

account receivable from your
business. This means that your
business
a. has an account payable to
Mr. Cell.
PROBLEM 8: MULTIPLE CHOICE
1. Which of the following is not one 6. If you kick your right foot to
of the essential parts of a general touch your right hand, what
journal? happens?
a. Date column a. Addition
b. Account titles column b. Subtraction
c. Debit and credit columns c. Multiplication
d. Running balance column d. Sorry, I can’t.

2. Debit and credit equals 7. If you clap your hands, what

a. debit.
b. credit.
c. kupit.
d. the difference between the
two amounts.
Use the following information for the
next five questions: Imagine facing a
mirror with both of your arms raised
sideways to shoulder level.
3. Your left arm is
a. debit.
b. credit.
c. clean and bright.
d. good to see.
4. If you were an asset, how would
you be increased?
a. through my left arm
b. through my right arm
c. through my toes
d. through my forehead
5. If you were a liability, how would
you be decreased?
a. through my left arm
b. through my right arm
c. by bending my knees
d. by sitting down
happens?
a. Addition
b. Subtraction
c. Division
d. There would be sound.
8. An account title with the word
“receivable” or “prepaid” in it
most likely to be
a. an asset account.
b. a liability account.
c. an income account.
d. an expense account.
9. If you debit this account, its
balance will be decreased.
a. Cash
b. Accounts receivable
c. Accounts payable
d. Owner’s drawings
10. All of the following accounts are
increased by a debit except
a. Accounts receivable
b. Owner’s drawings
c. Bad debts expense
d. d. Accumulated
depreciation

ANSWERS:

PROBLEM 1
1. False
2. False
3. True
4. False
5. False
6. True
7. True
8. True
9. False
 10. False

PROBLEM 2
1. True
2. True
3. False
4. False
5. False
6. True
7. False
8. False
9. False
10. True

PROBLEM 3
1. Purchases journal
2. Cash receipts journal
3. General journal
4. Cash disbursement journal
5. General ledger
6. Subsidiary ledger

COLUMN A COLUMN B

7. Asset Debit
8. Equity Credit
9. Asset Debit
10. Asset Debit
11. Liability Credit
12. Liability Credit
13. Contra asset Credit
14. Income Credit
15. Expense Debit
16. Expense Debit

17. Debit
18. Credit
19. Credit
20. Credit

21. C

PROBLEM 4
1. Sales journal
2. Purchases journal
3. Cash receipt journal
4. Cash disbursements journal
5. Cash disbursements journal
6. Cash receipt journal
7. Cash disbursements journal
8. General ledger
9. Subsidiary ledger
10. Journal
PROBLEM 5

COLUMN A COLUMN B

1. Asset Debit
2. Expense Debit
3. Equity (contra) Debit
4. Asset Debit
5. Income Credit
6. Liability Credit
7. Income Credit
8. Expense Debit
9. Liability Credit
10. Asset Debit
11. Asset Debit
12. Equity Credit
13. Asset Debit
14. Expense Debit
15. Expense Debit
16. Income Credit
17. Contra asset Credit
18. Asset Debit
19. Expense Debit
20. Liability Credit

PROBLEM 6
Increased by,

1. Debit
2. Credit
3. Credit
4. Debit
5. Debit
6. Credit
7. Debit
8. Credit
9. Debit
10. Debit
11. Debit
12. Debit
13. Credit
14. Credit
15. Debit
16. Debit
17. Credit
18. Debit
19. Debit
20. Credit
21. Debit
22. Debit
23. Debit
24. Debit
25. Debit
PROBLEM 7
1. D
2. B
3. B
4. A
5. D
6. D
7. A
8. D
9. A
10. D

PROBLEM 8
1. D
2. D
3. A
4. A
5. A
6. A
7. B
8. A
9. C
10. D