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Fundamentals of Accounting Part I
The Double-Entry Bookkeeping System
ACCOUNTING CYCLE: Journalizing Preparation of Trial balance
I. CONCEPTUAL SKILLS
Multiple Choice
Choose the letter of the best answer.
1. The first step in the accounting cycle is to
A. Record transactions in a journal.
B. Analyze transactions from source documents.
C. Post journal entries to general ledger accounts.
D. Adjust the general ledger accounts.
2. Which is not among the first five steps in the accounting cycle?
A. Record transactions in a journal.
B. Analyze transactions from source documents.
C. Post journal entries to general ledger accounts.
D. Financial statements are prepared.
3. The manner in which the accounting record are organized and employed within a business is
referred to as
A. Accounting system
B. Business document
C. Voucher system
D. Special journals
4. 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.
5. Which is not true concerning the rules of debit and credit?
A. The left side of an account is always the debit side and the right side is always the credit side.
B. Increases in assets and expenses are debit entries and increases in liabilities, equity and
revenue are credit entries.
C. The normal balance of any account appears on the side for recording increases.
D. The word debit means to increase and the word credit means to decrease.
6. Debits
A. Increase assets and decrease expenses, liabilities, revenue and equity.
B. Increase assets and expenses and decrease liabilities, revenue and equity.
C. Increase assets and equity and decrease liabilities, expenses and revenue.
D. Decrease assets and expenses and increase liabilities, revenue and equity.
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7. In an accrual accounting system
A. All accounts have normal debit balances.
B. A debit entry is recorded on the left-hand side of an account.
C. Liability, capital, and withdrawal all have normal credit balances.
D. Revenue is recorded only when cash is received.
8. A simple journal entry
A. Consists of one debit and one credit.
B. Consists of two debits and one credit.
C. Consists of one debit and two credits.
D. Is a memorandum entry.
9. A journal entry that contains more than two accounts is called
A. A posted journal entry
B. An adjusting journal entry
C. A compound journal entry
D. An erroneous journal entry
10. What function do accounting journals serve in the accounting process?
A. Recording
B. Classifying
C. Summarizing
D. Reporting
11. The debit and credit analysis of a transaction normally takes place
A. Before an entry is recorded in a journal.
B. When the entry is posted to the ledger.
C. When the trial balance is prepared.
D. At some other point in the accounting cycle.
12. Which of the following is not a possible combination of a journal entry?
A. Increase in asset and increase in liability.
B. Decrease in equity and increase in liability.
C. Decrease in liability and decrease in asset.
D. Increase in asset and decrease in equity.
13. The normal balance of an account is on the
A. Debit side of the account.
B. Credit side of the account.
C. Side represented by increases in the account balance.
D. Side represented by decreases in the account balance.
14. The purchase of equipment on account
A. Increases asset and decreases liability.
B. Increases asset and liability.
C. Decreases equity.
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D. Decreases asset and liability.
15. What is the effect if an entity collected in full an account receivable?
A. Assets increase
B. Assets decrease
C. Assets are not be affected
D. Equity increases
16. A common business transaction that would not affect the amount of equity is
A. Signing a note payable to purchase machinery.
B. Incurrence and payment of water bill.
C. Billing of customers for services rendered.
D. Withdrawal of the owner.
17. The double entry accounting system means
A. Each transaction is recorded with two journal entries.
B. Each item is recorded in a journal entry and then in a general ledger account.
C. The dual effect of each transaction is recorded with a debit and credit.
D. All of these describe the double entry system.
18. The accounting equation must remain in balance
A. Throughout each step in the accounting cycle.
B. Only when journal entries are recorded.
C. Only at the time the trial balance is prepared.
D. Only when formal financial statements are prepared.
19. The book of original entry is also known as
A. Subsidiary ledger
B. Trial balance
C. General ledger
D. Journal
20. A general journal
A. Chronologically lists transactions and other events expressed in terms of debit and credit.
B. Contains one record for each of the asset, liability, equity, revenue, expense.
C. Lists all the increases and decreases in each account in one place.
D. Contains only adjusting entries.
21. Posting is to the process of transferring information from
A. Journal to the general ledger.
B. General ledger to the journal.
C. Source document to the journal.
D. Journal to the source document.
22. What function do general ledgers serve in the accounting process?
A. Reporting
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B. Summarizing
C. Classifying
D. Recording
23. A chart of accounts is
A. A flowchart of all transactions.
B. An accounting procedure manual
C. A journal
D. A list of all account titles in the general ledger
24. The trial balance
A. Proves that debits are greater than credits when the entity has net income.
B. Uncovers any errors in journalizing and posting prior to preparation of financial statements.
C. Is useful in preparing the financial statements.
D. All of the choices are correct.
25. Which of the following is not a principal purpose of an unadjusted trial balance?
A. It proves that debits and credits of equal amounts are in the ledger.
B. It is the basis for any adjustments to the account balances.
C. It supplies a listing of open accounts and their balances.
D. It proves that debits and credits were properly entered in the ledger accounts.
26. Which of the following statements is true regarding the trial balance?
A. Preparation of the trial balance ensures that all amounts have been posted to the correct
accounts.
B. Preparation of the trial balance is a step in the recording process.
C. Preparation of the trial balance determines that total debits equal total credits.
D. Preparation of the trial balance determines that total debits equal total credits and that all
amounts have been posted to the correct accounts.
27. Which of the following statements regarding a trial balance is false? A trial balance…
A. Is a test of the equality of the debit and credit balances in the ledger.
B. Is a list of all of the open accounts in the ledger with their balances.
C. Proves that no errors of any kind have been made in the accounts during the accounting
period.
D. Helps to localize errors within an identifiable time period.
28. Numerous errors may exist even though the trial balance columns agree. Which of the following
is not one of these errors?
A. A transaction is not journalized.
B. Transposition error
C. A journal entry is posted twice.
D. A transaction is recorded and posted at an incorrect amount.
29. 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.
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C. A transaction could have been omitted.
D. All of these.
30. Which of the following errors will cause an imbalance in the trial balance?
A. Omission of a transaction in the journal.
B. Posting an entire journal entry twice to the ledger.
C. Posting a credit to accounts payable as a credit to accounts receivable.
D. Listing the balance of an account with a debit balance in the credit column of the trial
balance.
II. COMPUTATIONAL AND ANALYTICAL SKILLS
Supply the answer.
Problem 1: On April 5, Bag Ong Bookas established an interior decorating business, Bag Ong Deko
Rasyon. During the remainder of the month, Bag Ong completed the following transactions related to the
business:
Apr. 5
Bag Ong transferred cash from a personal bank account to an account to be used for the
business, P18,000
6
Paid rent for the period of April 6 to end of month, P2,000 (an expense account was debited)
7
Purchased office equipment on account, P10,500
8
Purchased a used truck by paying P10,000 cash, which represents 125% of the amount on
credit.
10
Purchased supplies for cash, P1,315 (an asset account was debited)
12
Received cash for job completed, P7,300
20
Paid annual premiums on property insurance, P1,200 (an asset account was debited)
23
Recorded jobs completed on account and sent invoices to customers, P4,950
24
Received an invoice for truck expenses, to be paid next month, P450
29
Paid utilities expense, P750
Paid miscellaneous expenses, P210
30
Received cash from customers who owe, P2,200
Paid salaries of employees, P3,000
Paid creditor a portion of the amount owed for equipment purchased on April 7, P1,800.
Withdrew cash for personal use, P3,500
1.
How much is the total assets as of Apr. 30, 2013?
2.
How much is the profit (loss) for the month ended Apr. 30, 2013?
3.
How much is the business’ equity as of Apr. 30, 2013?
4.
What is the trial balance debit column total?
Problem 2: Transactions of Chris’ Computer Repair Shop are as follows:
June
1
Chris invested P 210,000 in Chris’ Computer Repair Shop.
3
Purchased repair equipment from XYZ equipment for P 30,000. A check was issued in the
amount equal to ¼ of the said amount, with the balance being placed on account.
6
Repaired a customer’s computer, billing him P 5,250 on billing #500.
8
Repaired a customer’s computer, received 80% of the total amount due and P 1,760 of
which was placed on account. The billing slip was #501
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11
Received and paid the telephone bill by issuing check in the amount of P 3,300.
15
Purchased repair supplies by issuing check in the amount of P 1,900.
17
Collected the amount due from the customer of billing slip #500.
18
Issued check in the amount equal to ¾ of the remaining amount to XYZ equipment as
payment for the equipment purchased on May 3.
21
Repaired a customer’s computer and collected P 7,000.
24
Received electric bill for the month of May in the amount of P 1,990.
Determine the correct amount of the following for the month of May:
5. Total cash collections.
6. Total cash available.
7. Total Assets.
8. Profit (loss).
9. Owner’s equity.
Problem 3: Ms. Bartolome established an enterprise to be known as Kakaibabe Designs, on April of the
current year. During the year, she completed the following business transactions:
April
1
Ms. Bartolome transferred cash from her personal bank account to an account to be used
for the business, P 500,000.
3
Purchased supplies for cash, P 25,000. (An asset account was used)
7
Purchased equipment on account, P 50,000.
10
Purchased a truck for P 175,000, paying P 80,000 cash and giving a note payable for the
remainder.
11
Received cash for job completed, P 200,000.
12
Purchased supplies on account, P 40,000. (An asset account was used)
14
Paid wages of workers, P 60,000.
16
Paid premiums of property and casualty insurance, P 2,000 (an asset account was debited).
17
Paid half to creditor for equipment purchased on April 7.
19
Recorded services to customers on account and sent invoices to customers, P 250,000.
21
Received cash for job completed, P 90,000. The amount had not been recorded previously.
24
Received an invoice for truck repairs, P 4,000.
25
Paid utilities expense, P 1,500.
27
Paid miscellaneous expense, P 500.
28
Received cash from customers on account, P 100,000.
30
Paid wages of workers, P 80,000
Withdrew cash for personal use, P 20,000.
Determine the following:
10.
Cash balance as of April 30.
11.
Service Revenue earned during April.
12.
Net income for the month of April.
13.
Total Assets as of April 30.
14.
Owner’s Equity as of April 30.
15.
Trial balance credit column total.
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Problem 4: On December 1, 2015, the existing accounts and balances of Julia Oliveros, attorney-at-law,
show the following:
AMOUNT:
P 678,232
1,781,400
229,200
875,300
1,655,228
1,300,000
2,433,000
2,510,000
1,500,000
900,000
450,000
368,778
265,918
Transactions during December 2015:
Dec.
5
Issued check in the amount of P 100,000 in payment of an account payable.
11
Issued check in the amount of P 23,689 for the purchase of office supplies.
13
Recorded the week’s cash receipts from customers on account, P 151,500.
20
Issued check in the amount of P 170,000 to Julia Oliveros to pay personal expenses.
22
Provided civil legal services in the amount of P 17,500 issuing billing slip #1333.
25
Recorded the week’s cash receipts from clients on account, P 99,000
27
Issued check in the amount of P 42,500 in payment of an account payable.
29
Provided criminal legal services to a client in the amount of P 312,000. The billing slip was
#952.
30
Received the electric and telephone bill for the month of December in the amount of P
18,954 and P 35,712, respectively.
Determine the following:
16.
Total Assets as of December 31, 2015.
17.
Total Revenues earned during 2015.
18.
Oliveros, Capital as of December 31, 2015.
19.
Trial balance debit column total.
Problem 5: Selected information for Storm Spirit Company for the year 2013 follows:
December 31, 2013
December 31, 2012
Cash
11,200
P51,250
Accounts Receivable trade
P302,450
287,600
Collections from customers on
credit
P595,500
20.
How much was the cash payments during 2013?
21.
How much revenue on credit was earned during 2013?
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Problem 6: Selected information for Necrolyte Company for the year 2013 follows:
December 31, 2012
December 31, 2013
Cash
P45,550
P32,400
Cash payments during the year
P234,700
22.
How much was collected from customers during 2013?
Problem 7: Some information that was taken from the books of Earth Spirit Corporation are as follows:
Beginning
End
Cash
P131,250
204,340
Accounts receivable
93,000
234,500
Service income for the year (all are on credit)
P312,000
Kaolin, Capital
?
312,500
Liabilities
42,520
?
Assuming there were no additional investments nor withdrawal during the year.
23.
How much was collected from customers during the year?
24.
What is the total amount of cash disbursements during the year?
25.
Assuming total assets, beginning and end is P451,200 and P502,300 respectively, How
much is the net income (loss) during the year?
26.
Based on #25, How much is the net increase / decrease in liabilities during the year?
Problem 8: Below is a trial balance of Butcher, Inc. as of December 31. It was full of errors:
Butcher Inc.
Trial Balance
December 31, 2013
Cash
75,350
Accounts Receivables
23,600
Prepaid insurance
3,300
Equipment
86,000
Accounts payable
9,450
Unearned rent
2,570
Pudge, capital
91,615
Pudge, drawing
10,000
Service revenue
64,940
Salaries expense
33,400
Advertising expense
5,200
Miscellaneous expense
1,380
291,765
115,040
When the ledger and other records are reviewed, you discover the following: (a) the debits and credits in
the cash account total P75,350 and P53,975, respectively. (b) a billing of P1,000 to a customer on account
was not posted to the accounts receivable account. (c) a payment of P1,500 made to a creditor on
account was not posted to the accounts payable account. (d) the balance of the unearned rent account is
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P2,750. (e) the correct balance of the equipment account is P68,000. (f) some accounts were placed in the
wrong side of the trial balance.
27.
How much is adjusted total assets as of December 31, 2013?
28.
How much is the net income (loss) for the year ended December 31, 2013?
29.
What is the adjusted trial balance debit column total?
Problem 9: Given is a trial balance of Mortred Corporation as of October 31, 2013:
Mortred Corporation
Trial balance
October 31, 2013
Cash
8,010
Accounts receivable
16,400
Prepaid insurance
2,400
Equipment
52,000
Accounts payable
1,850
Salaries payable
750
Mortred, capital
39,600
Drawing
5,000
Service revenue
78,700
Salaries expense
28,400
Advertising expense
7,200
Miscellaneous expense
1,490
94,150
94,150
30.
What is the adjusted trial balance total?
Problem 10: Enigma Co. has the following trial balance as of March 31:
Cash
7,315
Accounts Receivable
5,545
Supplies
1,010
Prepaid insurance
250
Equipment
25,000
Bank loan
20,000
Accounts payable
4,960
Capital
18,800
Drawing
5,500
Fees earned
54,790
Salaries expense
31,100
Rent expense
7,455
Advertising expense
320
Miscellaneous expense
1,505
85,000
98,550
The debit and credit totals are not equal as a result of the following errors:
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a. The balance of cash was understated by P900
b. A cash receipt of P1,750 was posted as a debit to cash of P7,150
c. A debit of P2,500 for a withdrawal by the owner was posted as a credit to capital
d. The balance of P3,200 in advertising expense was entered as P320 in the trial balance
e. A debit of P580 to accounts receivable was not posted.
f. A return of P125 of defective supplies was erroneously posted as a P215 credit to supplies
g. The balance of bank loan was overstated by P5,000
h. An insurance policy acquired at a cost of P150 was posted as a credit to prepaid insurance.
i. Utilities expense, with a balance of P3,150. Was omitted from the trial balance
j. A debit of P1,050 in accounts payable was overlooked when determining the balance of the
account.
31.
How much is the correct owner’s equity as of March 31?
32.
How much is the adjusted prepaid insurance account?
33.
What is the correct trial balance total?
Problem 11: The trial balance of Armada Corporation as of November 30 is presented below:
Cash
19,500
Accounts receivable
28,600
Prepaid insurance
?
Office supplies
625
Accounts payable
3,250
Sarah, capital
12,625
Sarah, drawing
?
Fees earned
158,725
Salaries expense
83,075
Rent expense
16,000
Advertising expense
10,500
Miscellaneous expense
4,550
Prepaid insurance is equal to 17.5% of the drawing account balance. The trial balance columns agree on
November 30.
The following business transactions were completed by Armada during December:
Dec. 1
Purchased office supplies on credit, P1,100
2
Paid rent on office for the month, P1,600 (An expense account was debited)
3
Received cash from clients on credit, P24,200
8
Paid annual insurance premiums, P1,925
14
Paid advertising expense, P2,150
23
Paid creditors, 1,650
29
Paid miscellaneous expense, P1,065
31
Paid salaries for the month, P10,850.
Recorded revenue earned and billed to clients during the month, P26,200
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Purchased land for a future building site for P50,000, paying P10,000 in cash and the balance
is payable on January.
Withdrew cash for personal use, P2,500.
34.
What is the balance of the prepaid insurance as of Nov. 30?
35.
How much is the total assets as of December 31?
36.
How much is the net increase / decrease in total liabilities?
37.
What is the December 31 trial balance credit column total?
Problem 12: Selected information for Masterpiece Company for the year follows:
Collections from customers
2,100,000*
Increase (decrease) in cash account during the year
30,000
Owner’s Equity, Jan. 1
50 2/3% of assets
Increase (decrease) in Accounts receivable account during the year
170,000
*including P340,000 cash income from customers.
Additional information:
On January 1, the amount of liabilities is P 10,000 lower than owner’s equity.
Assets increased by 17 1/3 % throughout the year.
On December 31, the amount of owner’s equity is P 100,000 higher than its liabilities.
There were no additional investments or withdrawal by the owner during the year.
38.
What is the Net profit for the current year?
39.
What is the amount of expenses incurred for the current year?
40.
What is the amount of cash disbursement for the current year?
Compute the following balances on January 1.
41.
Total assets
42.
Total liabilities
43.
Owner’s equity
Compute the following balances on December 31.
44.
Total assets
45.
Total liabilities
46.
Owner’s equity
Problem 13: the following trial balance of ABC Services as of December 31 of the current year does not
balance because of a number of errors:
Cash
P 13,000
Accounts receivable
30,840
Supplies
8,700
Prepaid insurance
2,140
Equipment
69,400
Notes payable
14,000
Accounts payable
5,650
ABC, Capital
31,200
ABC, Drawing
2,000
Service income
147,500
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Wages expense
46,500
Rent expense
6,000
Advertising expense
510
Utility expense
1,920
P 181,010
P 198,350
In the process of comparing the amounts in the trial balance with the ledger, re-computing the balances
of the accounts, and comparing the postings with the journal entries, the errors described below were
discovered:
(a) The balance of cash was understated by P 5,000.
(b) The cash receipt of P 1,200 was posted as debit to cash of P 2,100.
(c) A credit of P 600 to accounts receivable was not posted.
(d) A return of P 750 of defective supplies was erroneously posted as P 570 credit to supplies.
(e) An insurance policy acquired at cost of P 1,480 was posted as a credit to prepaid insurance.
(f) A debit of P 2,250 in accounts payable was overlooked when determining the balance of the
account.
(g) The balance of notes payable was overstated by P 1,000.
(h) A debit of P 5,100 in advertising expense was entered as P 510 in the trial balance.
(i) Miscellaneous expense with a balance of P 3,220 was omitted from the trial balance.
Determine the following:
47.
Adjustments made to total assets to bring it to its correct balance.
48.
Adjusted net income (loss) for the current year.
49.
Adjusted liabilities.
50.
Adjusted owner’s equity.
51.
Adjusted total assets.
52.
Adjusted trial balance total.
Always do your best. What you plant now, you will harvest later.
~Og Mandino
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Suggested Key
I. CONCEPTUAL SKILLS
1. B
16. A
2. D
17. C
3. A
18. A
4. B
19. D
5. D
20. A
6. B
21. A
7. B
22. C
8. A
23. D
9. C
24. C
10. A
25. D
11. A
26. C
12. D
27. C
13. C
28. B
14. B
29. D
15. C
30. D
II. COMPUTATIONAL AND ANALYTICAL SKILLS
1. P37,490
27. P117,275
2. P5,840
28. P24,960
3. P20,340
29. P167,255
4. 47,400
30. P120,900
5. P 19,290
31. P16,680
6. P 199,715
32. P550
7. P 233,375
33. P90,000
8. P 15,760
34. P1,750
9. P 225,760
35. P97,960
10. 596,000
36. P39,450
11. P 540,000
37. P240,250
12. P 394,000
38. P110,000
13. P 1,038,000
39. P2,160,000
14. P 874,000
40. P 2,070,000
15. P 1,204,000
41. 750,000
16. P 2,705,832
42. 370,000
17. P 5,272,500
43. 380,000
18. P 1,918,366
44. 880,000
19. P 7,715,194
45. 390,000
20. P635,550
46. 490,000
21. P610,350
47. P 6,280 increase
22. P221,550
48. P 84,760
23. P170,500
49. P 16,400
24. P97,410
50. P 113,960
25. (P96,180)
51. P 130,360
26. P147,280 increase
52. P 195,100

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ACCT 1A&B: Fundamentals of Accounting BCSV Fundamentals of Accounting Part I The Double-Entry Bookkeeping System ACCOUNTING CYCLE: Journalizing – Preparation of Trial balance I. CONCEPTUAL SKILLS Multiple Choice Choose the letter of the best answer. 1. The first step in the accounting cycle is to A. B. C. D. Record transactions in a journal. Analyze transactions from source documents. Post journal entries to general ledger accounts. Adjust the general ledger accounts. 2. Which is not among the first five steps in the accounting cycle? A. B. C. D. Record transactions in a journal. Analyze transactions from source documents. Post journal entries to general ledger accounts. Financial statements are prepared. 3. The manner in which the accounting record are organized and employed within a business is referred to as A. Accounting system B. Business document C. Voucher system D. Special journals 4. In recording transactions A. B. C. D. The word debit means increase and the word credit means decrease. Assets, expenses, and drawing accounts are debited for increases. Liabilities, revenue, and drawing accounts are debited for increases. Assets, expenses, and capital accounts are debited for increases. 5. Which is not true concerning the rules of debit and credit? A. The left side of an account is always the debit side and the right side is always the credit side. B. Increases in assets and expenses are debit entries and increases in liabilities, equity and revenue are credit entries. C. The normal balance of any account appears on the side for recording increases. D. The word debit means to increase and the word credit means to decrease. 6. Debits A. B. C. D. Increase assets and decrease expenses, liabilities, revenue and equity. Increase assets and expenses and decrease liabilities, revenue and equity. Increase assets and equity and decrease liabilities, expenses and revenue. Decrease assets and expenses and increase liabilities, revenue and equity. Page 1 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV 7. In an accrual accounting system A. B. C. D. All accounts have normal debit balances. A debit entry is recorded on the left-hand side of an account. Liability, capital, and withdrawal all have normal credit balances. Revenue is recorded only when cash is received. 8. A simple journal entry A. B. C. D. Consists of one debit and one credit. Consists of two debits and one credit. Consists of one debit and two credits. Is a memorandum entry. 9. A journal entry that contains more than two accounts is called A. B. C. D. A posted journal entry An adjusting journal entry A compound journal entry An erroneous journal entry 10. What function do accounting journals serve in the accounting process? A. B. C. D. Recording Classifying Summarizing Reporting 11. The debit and credit analysis of a transaction normally takes place A. B. C. D. Before an entry is recorded in a journal. When the entry is posted to the ledger. When the trial balance is prepared. At some other point in the accounting cycle. 12. Which of the following is not a possible combination of a journal entry? A. B. C. D. Increase in asset and increase in liability. Decrease in equity and increase in liability. Decrease in liability and decrease in asset. Increase in asset and decrease in equity. 13. The normal balance of an account is on the A. B. C. D. Debit side of the account. Credit side of the account. Side represented by increases in the account balance. Side represented by decreases in the account balance. 14. The purchase of equipment on account A. Increases asset and decreases liability. B. Increases asset and liability. C. Decreases equity. Page 2 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV D. Decreases asset and liability. 15. What is the effect if an entity collected in full an account receivable? A. B. C. D. Assets increase Assets decrease Assets are not be affected Equity increases 16. A common business transaction that would not affect the amount of equity is A. B. C. D. Signing a note payable to purchase machinery. Incurrence and payment of water bill. Billing of customers for services rendered. Withdrawal of the owner. 17. The double entry accounting system means A. B. C. D. Each transaction is recorded with two journal entries. Each item is recorded in a journal entry and then in a general ledger account. The dual effect of each transaction is recorded with a debit and credit. All of these describe the double entry system. 18. The accounting equation must remain in balance A. B. C. D. Throughout each step in the accounting cycle. Only when journal entries are recorded. Only at the time the trial balance is prepared. Only when formal financial statements are prepared. 19. The book of original entry is also known as A. B. C. D. Subsidiary ledger Trial balance General ledger Journal 20. A general journal A. B. C. D. Chronologically lists transactions and other events expressed in terms of debit and credit. Contains one record for each of the asset, liability, equity, revenue, expense. Lists all the increases and decreases in each account in one place. Contains only adjusting entries. 21. Posting is to the process of transferring information from A. B. C. D. Journal to the general ledger. General ledger to the journal. Source document to the journal. Journal to the source document. 22. What function do general ledgers serve in the accounting process? A. Reporting Page 3 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV B. Summarizing C. Classifying D. Recording 23. A chart of accounts is A. B. C. D. A flowchart of all transactions. An accounting procedure manual A journal A list of all account titles in the general ledger 24. The trial balance A. B. C. D. Proves that debits are greater than credits when the entity has net income. Uncovers any errors in journalizing and posting prior to preparation of financial statements. Is useful in preparing the financial statements. All of the choices are correct. 25. Which of the following is not a principal purpose of an unadjusted trial balance? A. B. C. D. It proves that debits and credits of equal amounts are in the ledger. It is the basis for any adjustments to the account balances. It supplies a listing of open accounts and their balances. It proves that debits and credits were properly entered in the ledger accounts. 26. Which of the following statements is true regarding the trial balance? A. Preparation of the trial balance ensures that all amounts have been posted to the correct accounts. B. Preparation of the trial balance is a step in the recording process. C. Preparation of the trial balance determines that total debits equal total credits. D. Preparation of the trial balance determines that total debits equal total credits and that all amounts have been posted to the correct accounts. 27. Which of the following statements regarding a trial balance is false? A trial balance… A. Is a test of the equality of the debit and credit balances in the ledger. B. Is a list of all of the open accounts in the ledger with their balances. C. Proves that no errors of any kind have been made in the accounts during the accounting period. D. Helps to localize errors within an identifiable time period. 28. Numerous errors may exist even though the trial balance columns agree. Which of the following is not one of these errors? A. A transaction is not journalized. B. Transposition error C. A journal entry is posted twice. D. A transaction is recorded and posted at an incorrect amount. 29. 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. Page 4 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV C. A transaction could have been omitted. D. All of these. 30. Which of the following errors will cause an imbalance in the trial balance? A. B. C. D. II. Omission of a transaction in the journal. Posting an entire journal entry twice to the ledger. Posting a credit to accounts payable as a credit to accounts receivable. Listing the balance of an account with a debit balance in the credit column of the trial balance. COMPUTATIONAL AND ANALYTICAL SKILLS Supply the answer. Problem 1: On April 5, Bag Ong Bookas established an interior decorating business, Bag Ong Deko Rasyon. During the remainder of the month, Bag Ong completed the following transactions related to the business: Apr. 5 6 7 8 10 12 20 23 24 29 30 Bag Ong transferred cash from a personal bank account to an account to be used for the business, P18,000 Paid rent for the period of April 6 to end of month, P2,000 (an expense account was debited) Purchased office equipment on account, P10,500 Purchased a used truck by paying P10,000 cash, which represents 125% of the amount on credit. Purchased supplies for cash, P1,315 (an asset account was debited) Received cash for job completed, P7,300 Paid annual premiums on property insurance, P1,200 (an asset account was debited) Recorded jobs completed on account and sent invoices to customers, P4,950 Received an invoice for truck expenses, to be paid next month, P450 Paid utilities expense, P750 Paid miscellaneous expenses, P210 Received cash from customers who owe, P2,200 Paid salaries of employees, P3,000 Paid creditor a portion of the amount owed for equipment purchased on April 7, P1,800. Withdrew cash for personal use, P3,500 1. How much is the total assets as of Apr. 30, 2013? 2. How much is the profit (loss) for the month ended Apr. 30, 2013? 3. How much is the business’ equity as of Apr. 30, 2013? 4. What is the trial balance debit column total? Problem 2: Transactions of Chris’ Computer Repair Shop are as follows: June 1 Chris invested P 210,000 in Chris’ Computer Repair Shop. 3 Purchased repair equipment from XYZ equipment for P 30,000. A check was issued in the amount equal to ¼ of the said amount, with the balance being placed on account. 6 Repaired a customer’s computer, billing him P 5,250 on billing #500. 8 Repaired a customer’s computer, received 80% of the total amount due and P 1,760 of which was placed on account. The billing slip was #501 Page 5 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV 11 15 17 18 21 24 Received and paid the telephone bill by issuing check in the amount of P 3,300. Purchased repair supplies by issuing check in the amount of P 1,900. Collected the amount due from the customer of billing slip #500. Issued check in the amount equal to ¾ of the remaining amount to XYZ equipment as payment for the equipment purchased on May 3. Repaired a customer’s computer and collected P 7,000. Received electric bill for the month of May in the amount of P 1,990. Determine the correct amount of the following for the month of May: 5. Total cash collections. 6. Total cash available. 7. Total Assets. 8. Profit (loss). 9. Owner’s equity. Problem 3: Ms. Bartolome established an enterprise to be known as Kakaibabe Designs, on April of the current year. During the year, she completed the following business transactions: April 1 3 7 10 11 12 14 16 17 19 21 24 25 27 28 30 Ms. Bartolome transferred cash from her personal bank account to an account to be used for the business, P 500,000. Purchased supplies for cash, P 25,000. (An asset account was used) Purchased equipment on account, P 50,000. Purchased a truck for P 175,000, paying P 80,000 cash and giving a note payable for the remainder. Received cash for job completed, P 200,000. Purchased supplies on account, P 40,000. (An asset account was used) Paid wages of workers, P 60,000. Paid premiums of property and casualty insurance, P 2,000 (an asset account was debited). Paid half to creditor for equipment purchased on April 7. Recorded services to customers on account and sent invoices to customers, P 250,000. Received cash for job completed, P 90,000. The amount had not been recorded previously. Received an invoice for truck repairs, P 4,000. Paid utilities expense, P 1,500. Paid miscellaneous expense, P 500. Received cash from customers on account, P 100,000. Paid wages of workers, P 80,000 Withdrew cash for personal use, P 20,000. Determine the following: 10. Cash balance as of April 30. 11. Service Revenue earned during April. 12. Net income for the month of April. 13. Total Assets as of April 30. 14. Owner’s Equity as of April 30. 15. Trial balance credit column total. Page 6 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV Problem 4: On December 1, 2015, the existing accounts and balances of Julia Oliveros, attorney-at-law, show the following: ACCOUNT TITLE: Cash Accounts Receivable Office supplies Account payable Oliveros, Capital Oliveros, Drawings Civil legal fees earned Criminal legal fees earned Office rental expense Office furniture rental expense Office equipment rental expense Telephone expense Electricity expense AMOUNT: P 678,232 1,781,400 229,200 875,300 1,655,228 1,300,000 2,433,000 2,510,000 1,500,000 900,000 450,000 368,778 265,918 Transactions during December 2015: Dec. 5 Issued check in the amount of P 100,000 in payment of an account payable. 11 Issued check in the amount of P 23,689 for the purchase of office supplies. 13 Recorded the week’s cash receipts from customers on account, P 151,500. 20 Issued check in the amount of P 170,000 to Julia Oliveros to pay personal expenses. 22 Provided civil legal services in the amount of P 17,500 issuing billing slip #1333. 25 Recorded the week’s cash receipts from clients on account, P 99,000 27 Issued check in the amount of P 42,500 in payment of an account payable. 29 Provided criminal legal services to a client in the amount of P 312,000. The billing slip was #952. 30 Received the electric and telephone bill for the month of December in the amount of P 18,954 and P 35,712, respectively. Determine the following: 16. Total Assets as of December 31, 2015. 17. Total Revenues earned during 2015. 18. Oliveros, Capital as of December 31, 2015. 19. Trial balance debit column total. Problem 5: Selected information for Storm Spirit Company for the year 2013 follows: December 31, 2013 December 31, 2012 Cash 11,200 P51,250 Accounts Receivable –trade P302,450 287,600 Collections from customers on credit P595,500 20. How much was the cash payments during 2013? 21. How much revenue on credit was earned during 2013? Page 7 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV Problem 6: Selected information for Necrolyte Company for the year 2013 follows: December 31, 2012 December 31, 2013 Cash P45,550 P32,400 Cash payments during the year P234,700 22. How much was collected from customers during 2013? Problem 7: Some information that was taken from the books of Earth Spirit Corporation are as follows: Beginning P131,250 93,000 Cash Accounts receivable Service income for the year (all are on credit) Kaolin, Capital Liabilities ? 42,520 End 204,340 234,500 P312,000 312,500 ? Assuming there were no additional investments nor withdrawal during the year. 23. How much was collected from customers during the year? 24. What is the total amount of cash disbursements during the year? 25. Assuming total assets, beginning and end is P451,200 and P502,300 respectively, How much is the net income (loss) during the year? 26. Based on #25, How much is the net increase / decrease in liabilities during the year? Problem 8: Below is a trial balance of Butcher, Inc. as of December 31. It was full of errors: Butcher Inc. Trial Balance December 31, 2013 Cash Accounts Receivables Prepaid insurance Equipment Accounts payable Unearned rent Pudge, capital Pudge, drawing Service revenue Salaries expense Advertising expense Miscellaneous expense 75,350 23,600 3,300 86,000 9,450 2,570 91,615 10,000 64,940 33,400 5,200 291,765 1,380 115,040 When the ledger and other records are reviewed, you discover the following: (a) the debits and credits in the cash account total P75,350 and P53,975, respectively. (b) a billing of P1,000 to a customer on account was not posted to the accounts receivable account. (c) a payment of P1,500 made to a creditor on account was not posted to the accounts payable account. (d) the balance of the unearned rent account is Page 8 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV P2,750. (e) the correct balance of the equipment account is P68,000. (f) some accounts were placed in the wrong side of the trial balance. 27. How much is adjusted total assets as of December 31, 2013? 28. How much is the net income (loss) for the year ended December 31, 2013? 29. What is the adjusted trial balance debit column total? Problem 9: Given is a trial balance of Mortred Corporation as of October 31, 2013: Cash Accounts receivable Prepaid insurance Equipment Accounts payable Salaries payable Mortred, capital Drawing Service revenue Salaries expense Advertising expense Miscellaneous expense Mortred Corporation Trial balance October 31, 2013 8,010 16,400 2,400 52,000 1,850 750 39,600 5,000 78,700 28,400 7,200 1,490 94,150 94,150 30. What is the adjusted trial balance total? Problem 10: Enigma Co. has the following trial balance as of March 31: Cash Accounts Receivable Supplies Prepaid insurance Equipment Bank loan Accounts payable Capital Drawing Fees earned Salaries expense Rent expense Advertising expense Miscellaneous expense 7,315 5,545 1,010 250 25,000 20,000 4,960 18,800 5,500 54,790 31,100 7,455 320 1,505 85,000 98,550 The debit and credit totals are not equal as a result of the following errors: Page 9 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV a. b. c. d. e. f. g. h. i. j. The balance of cash was understated by P900 A cash receipt of P1,750 was posted as a debit to cash of P7,150 A debit of P2,500 for a withdrawal by the owner was posted as a credit to capital The balance of P3,200 in advertising expense was entered as P320 in the trial balance A debit of P580 to accounts receivable was not posted. A return of P125 of defective supplies was erroneously posted as a P215 credit to supplies The balance of bank loan was overstated by P5,000 An insurance policy acquired at a cost of P150 was posted as a credit to prepaid insurance. Utilities expense, with a balance of P3,150. Was omitted from the trial balance A debit of P1,050 in accounts payable was overlooked when determining the balance of the account. 31. How much is the correct owner’s equity as of March 31? 32. How much is the adjusted prepaid insurance account? 33. What is the correct trial balance total? Problem 11: The trial balance of Armada Corporation as of November 30 is presented below: Cash Accounts receivable Prepaid insurance Office supplies Accounts payable Sarah, capital Sarah, drawing Fees earned Salaries expense Rent expense Advertising expense Miscellaneous expense 19,500 28,600 ? 625 3,250 12,625 ? 158,725 83,075 16,000 10,500 4,550 Prepaid insurance is equal to 17.5% of the drawing account balance. The trial balance columns agree on November 30. The following business transactions were completed by Armada during December: Dec. 1 2 3 8 14 23 29 31 Purchased office supplies on credit, P1,100 Paid rent on office for the month, P1,600 (An expense account was debited) Received cash from clients on credit, P24,200 Paid annual insurance premiums, P1,925 Paid advertising expense, P2,150 Paid creditors, 1,650 Paid miscellaneous expense, P1,065 Paid salaries for the month, P10,850. Recorded revenue earned and billed to clients during the month, P26,200 Page 10 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV Purchased land for a future building site for P50,000, paying P10,000 in cash and the balance is payable on January. Withdrew cash for personal use, P2,500. 34. 35. 36. 37. What is the balance of the prepaid insurance as of Nov. 30? How much is the total assets as of December 31? How much is the net increase / decrease in total liabilities? What is the December 31 trial balance credit column total? Problem 12: Selected information for Masterpiece Company for the year follows: Collections from customers 2,100,000* Increase (decrease) in cash account during the year 30,000 Owner’s Equity, Jan. 1 50 2/3% of assets Increase (decrease) in Accounts receivable account during the year 170,000 *including P340,000 cash income from customers. Additional information: • On January 1, the amount of liabilities is P 10,000 lower than owner’s equity. • Assets increased by 17 1/3 % throughout the year. • On December 31, the amount of owner’s equity is P 100,000 higher than its liabilities. • There were no additional investments or withdrawal by the owner during the year. 38. What is the Net profit for the current year? 39. What is the amount of expenses incurred for the current year? 40. What is the amount of cash disbursement for the current year? Compute the following balances on January 1. 41. Total assets 42. Total liabilities 43. Owner’s equity Compute the following balances on December 31. 44. Total assets 45. Total liabilities 46. Owner’s equity Problem 13: the following trial balance of ABC Services as of December 31 of the current year does not balance because of a number of errors: Cash Accounts receivable Supplies Prepaid insurance Equipment Notes payable Accounts payable ABC, Capital ABC, Drawing Service income P 13,000 30,840 8,700 2,140 69,400 14,000 5,650 31,200 2,000 147,500 Page 11 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV Wages expense Rent expense Advertising expense Utility expense 46,500 6,000 510 1,920 P 181,010 P 198,350 In the process of comparing the amounts in the trial balance with the ledger, re-computing the balances of the accounts, and comparing the postings with the journal entries, the errors described below were discovered: (a) The balance of cash was understated by P 5,000. (b) The cash receipt of P 1,200 was posted as debit to cash of P 2,100. (c) A credit of P 600 to accounts receivable was not posted. (d) A return of P 750 of defective supplies was erroneously posted as P 570 credit to supplies. (e) An insurance policy acquired at cost of P 1,480 was posted as a credit to prepaid insurance. (f) A debit of P 2,250 in accounts payable was overlooked when determining the balance of the account. (g) The balance of notes payable was overstated by P 1,000. (h) A debit of P 5,100 in advertising expense was entered as P 510 in the trial balance. (i) Miscellaneous expense with a balance of P 3,220 was omitted from the trial balance. Determine the following: 47. Adjustments made to total assets to bring it to its correct balance. 48. Adjusted net income (loss) for the current year. 49. Adjusted liabilities. 50. Adjusted owner’s equity. 51. Adjusted total assets. 52. Adjusted trial balance total. “Always do your best. What you plant now, you will harvest later.” ~Og Mandino Page 12 of 13 ACCT 1A&B: Fundamentals of Accounting BCSV Suggested Key CONCEPTUAL SKILLS 16. A 17. C 18. A 19. D 20. A 21. A 22. C 23. D 24. C 25. D 26. C 27. C 28. B 29. D 30. D I. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. B D A B D B B A C A A D C B C II. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. COMPUTATIONAL AND ANALYTICAL SKILLS P37,490 27. P117,275 P5,840 28. P24,960 P20,340 29. P167,255 47,400 30. P120,900 P 19,290 31. P16,680 P 199,715 32. P550 P 233,375 33. P90,000 P 15,760 34. P1,750 P 225,760 35. P97,960 596,000 36. P39,450 P 540,000 37. P240,250 P 394,000 38. P110,000 P 1,038,000 39. P2,160,000 P 874,000 40. P 2,070,000 P 1,204,000 41. 750,000 P 2,705,832 42. 370,000 P 5,272,500 43. 380,000 P 1,918,366 44. 880,000 P 7,715,194 45. 390,000 P635,550 46. 490,000 P610,350 47. P 6,280 increase P221,550 48. P 84,760 P170,500 49. P 16,400 P97,410 50. P 113,960 (P96,180) 51. P 130,360 P147,280 increase 52. P 195,100 Page 13 of 13 Name: Description: ...
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