WEEK 3

SAMPLE
EXERCISES
ANSWERS
1. Suppose an entity recorded an expense when it was paid,
but the expense was incurred one year before the payment
date. Which of the following accounting principles has been
violated?
a. Consistency concept
b. Historical Cost Concept
c. Accrual Concept
d. Entity Concept
1. Suppose an entity recorded an expense when it was paid,
but the expense was incurred one year before the payment
date. Which of the following accounting principles has been
violated?
a. Consistency concept
b. Historical Cost Concept
c. Accrual Concept
d. Entity Concept

ANSWER: C
 2. At the beginning of the financial year, Gwenchana
Company paid a 3-year insurance premium of P720,000. At
the end of the financial year, ______

a. P720,000 should be treated as an expense

b. P720,000 should be treated as prepaid expenses
c. P240,000 should be treated as an expenses
d. P240,000 should be treated as prepaid expenses
 2. At the beginning of the financial year, Gwenchana
Company paid a 3-year insurance premium of P720,000. At
the end of the financial year, ______

a. P720,000 should be treated as an expense

b. P720,000 should be treated as prepaid expenses
c. P240,000 should be treated as an expenses
d. P240,000 should be treated as prepaid expenses

ANSWER: C
3. Accrued Expenses should be reported as

a. Assets on the balance sheet

b. Expenses on the income statement
c. Liabilities on the balance sheet
d. Revenues on the income statement.
3. Accrued Expenses should be reported as

a. Assets on the balance sheet

b. Expenses on the income statement
c. Liabilities on the balance sheet
d. Revenues on the income statement.

ANSWER: C
 4. An accrued revenue should be recorded by a

a. Buyer when a service is received on payment of cash

b. Seller when a customer pays for a service before the
service is rendered.
c. Seller when a service is rendered before receipt of cash
d. Seller when a service is rendered on receipt of cash
 4. An accrued revenue should be recorded by a

a. Buyer when a service is received on payment of cash

b. Seller when a customer pays for a service before the
service is rendered.
c. Seller when a service is rendered before receipt of cash
d. Seller when a service is rendered on receipt of cash

ANSWER: C
5. Salaries Payable were P3,500 at the end of September
and P2,800 at the end of October. Salaries Expense for
October was P18,000. How much cash was paid for salaries
during October?

a. P18,700
b. P24,100
c. P17,300
d. P11,700
5. Salaries Payable were P3,500 at the end or September
and P2,800 at the end of October. Salaries Expense for
October was P18,000. How much cash was paid for salaries
during October?

a. P18,700
b. P24,100
c. P17,300
d. P11,700

ANSWER: A
Correction 6 - 10
6. If on Dec 31, 2023, supplies on hand were P2,000, the
adjust entry would contain a

a. Credit to supplies expense for P13,000

b. Credit to supplies for P2,000
c. Debit to Supplies Expense for P13,000
d. Debit to Supplies for P2,000
6. If on Dec 31, 2023, supplies on hand were P2,000, the
adjust entry would contain a

a. Credit to supplies expense for P13,000

b. Credit to supplies for P2,000
c. Debit to Supplies Expense for P13,000
d. Debit to Supplies for P2,000

ANSWER: C
7. If on Dec 31, 2023, the insurance still unexpired amounted
to P2,000, the adjusting entry would contain a

a. Credit to Prepaid Insurance for P2,000

b. Credit to Prepaid Insurance for P3,000
c. Debit to Insurance Expense for P2,000
d. Debit to Prepaid Insurance for P3,000
7. If on Dec 31, 2023, the insurance still unexpired amounted
to P2,000, the adjusting entry would contain a

a. Credit to Prepaid Insurance for P2,000

b. Credit to Prepaid Insurance for P3,000
c. Debit to Insurance Expense for P2,000
d. Debit to Prepaid Insurance for P3,000

ANSWER: B
8. If the estimated depreciation for office equipment were
P20,000, the adjusting entry would contain a

a. Credit to Accumulated Depreciation-Office Equipment for

P20,000
b. Credit to Depreciation Expense-Office Equipment P20,000
c. Credit to Office Equipment for 20,000
d. Debit to Accumulated Depreciation-Office Equipment for
P20,000
8. If the estimated depreciation for office equipment were
P20,000, the adjusting entry would contain a

a. Credit to Accumulated Depreciation-Office Equipment for

P20,000
b. Credit to Depreciation Expense-Office Equipment P20,000
c. Credit to Office Equipment for 20,000
d. Debit to Accumulated Depreciation-Office Equipment for
P20,000

ANSWER: A
9. If as of Dec 31, 2023 the rent of P10,000 for December had
not been recorded or paid, the adjusting entry would include
a

a. Credit to Accumulated Rent for P10,000

b. Credit to Cash for P10,000
c. Debit to Rent Expense for P10,000
d. Debit to Rent Payable for P10,000
9. If as of Dec 31, 2023 the rent of P10,000 for December had
not been recorded or paid, the adjusting entry would include
a

a. Credit to Accumulated Rent for P10,000

b. Credit to Cash for P10,000
c. Debit to Rent Expense for P10,000
d. Debit to Rent Payable for P10,000

ANSWER: C
10. If services totaling P12,500 had not been performed but
not yet billed, the adjusting entry to record this would
include

a. Credit to Service Revenues for P12,500

b. Credit to Service Revenues for P62,500
c. Credit to Unearned Service Revenues for P12,500
d. Debit to Service Revenues for P12,500
10. If services totaling P12,500 had not been performed but
not yet billed, the adjusting entry to record this would
include

a. Credit to Service Revenues for P12,500

b. Credit to Service Revenues for P62,500
c. Credit to Unearned Service Revenues for P12,500
d. Debit to Service Revenues for P12,500

ANSWER: A
LIT EM AP 2.0
(CHAPTER 4)
 WEEK 4
WORKSHEET &
FINANCIAL
STATEMENTS
 STEP 6: PREPARATION OF THE
WORKSHEET
Worksheet: pertains to a multi-column sheet used in compiling
and summarizing the information necessary to facilitate the
process of adjusting and closing entries, including the preparation
of financial statements.

- It is not part of the formal accounting records and only serves as

a tool used by the accountants.
EXAMPLE OF A WORKSHEET:
RULES OR GUIDE IN COMPLETING THE
WORKSHEET

Under the income statement column of worksheet:

IF: Total Debits > Total Credits = Net Loss

Total Debits < Total Credits = Net Income
 RULES OR GUIDE IN COMPLETING THE
WORKSHEET

Under the balance sheet column of worksheet:

IF: Total Debits > Total Credits = Net Income

Total Debits < Total Credits = Net Loss

Note: The capital account in the balance sheet should be based on

the Adjusting Trial Balance
STEP 7: PREPARATION OF FINANCIAL
STATEMENTS

Financial Statements: are a set of reports

intended to be communicated to interested
users.
ACCORDING TO PAS 1, HERE ARE THE COMPLETE SET
OF GENERAL-PURPOSE FINANCIAL STATEMENTS:

1. Statement of Financial Position - It is also known as the

Balance Sheet
- It shows all of the assets, liabilities, and equities of an entity
STEP 7: PREPARATION OF FINANCIAL
STATEMENTS

2. Statement of Comprehensive Income - A

report that shows all the income and
expenses of an entity.
STEP 7: PREPARATION OF FINANCIAL
STATEMENTS

3. Statement of Changes in Equity - It refers to the reconciliation

of the opening and closing balance of the entity. It also shows the
summary of all the transactions related to the equity
STEP 7: PREPARATION OF FINANCIAL
STATEMENTS

4. Statement of Cash Flows

- Refers to the report that primarily reflects all the cash inflows
and outflows of an entity.
COMPREHENSIVE PROBLEM!