Check the effect of the transactions below Paid cash to creditors

to the element of the FS.

 DECREASE ASSETS
 DECREASE LIABILITIES

Purchase equipment on account for use in Owner invested money to the business.
the business.
 INCREASE ASSETS
 INCREASE ASSETS  INCREASE OWNER'S EQUITY
 INCREASE LIABILITIES
Owner withdraws cash from the business.
Paid cash for salaries
 DECREASE ASSETS
 DECREASE ASSETS  DECREASE OWNER'S EQUITY
 DECREASE OWNER'S EQUITY
Performed services for cash
Collected cash from services rendered.
 INCREASE ASSETS
 INCREASE ASSETS  INCREASE OWNER'S EQUITY
 INCREASE OWNER'S EQUITY

Collected cash from services rendered on

account.

 INCREASE ASSETS
 DECREASE ASSETS

Perform services on account.

 INCREASE ASSETS
 INCREASE OWNER'S EQUITY

Paid for expenses incurred

 DECREASE ASSETS
 DECREASE OWNER'S EQUITY

Incurred expenses to be paid next period

 INCREASE LIABILITIES
 DECREASE OWNER'S EQUITY

Bought machinery for use in the business,

Paid half and issued a note for the remaining
balance.

 INCREASE ASSETS
 DECREASE ASSETS
Which business activities involve the use of What is the accounting equation?
resources to design, produce, distribute
- Assets = Liability + Owner's Equity
and market goods and services?

- Operating
Which of these is a fundamental quality
of a financial report?
What form of business has a single owner?
- Relevance
- Sole proprietorship
Who provide capital for the business?
Which size of the business has P3M to
- Owners or Investors
P15M net assets?

- Small
Which of the following is correct about
the definition of accounting?
What is owned by two or more persons
- Accounting is a service activity. Its
who bind themselves to contribute money,
function is to provide quantitative
property or industry to a common fund,
information primarily financial in
with the intention of dividing the profits
nature, about economic entities that
among themselves? is intended to be useful in making
economic decisions.
- Partnership

Which of the following the increases at the - Accounting is an information system

that measures, processes and
credit side?
communicates financial information
about an identifiable economic entity
- Consulting Revenue
- Accounting is the process of
Which of the following the decreases at the identifying, measuring, and
communicating economic information
credit side?
to permit informed judgments
- Accounts Receivable - Accounting is art of recording,
classifying and summarizing in a
Which element of the financial statements significant manner and in terms of
represents the owner's right over the asset money, transactions and events
of the business after all the liabilities have which are in part at least, of a
been paid? financial character and interpreting
the results thereof
- Owner's Equity
It is an accounting support function that
Which of the following the decreases at the involves the systematic recording of
debit side? business transaction in financial terms.

- Fees Earned - Bookkeeping

What do you call the owner of a business Which type of business is a retailer?
that has a single owner?
- Trader
- Proprietor
Which of the following is a principle in These accounts classification have normal
relation to an effective accounting side on the credit side
information system?
- Income, Liability, Capital
- Cost-benefit principle
- Control principle Which is an ingredient of faithful
- Comparability principle representation?

Which size of the business has 200 or - Completeness

more employees? - Neutrality
- Free from error
- Large

What is the most common form of capital? Which is part of the stages of data
processing?
- Cash - Input
- Processing
Which type of business is hiring skilled
- Output
staff and sells their time?

- Service Which of these is NOT an enhancing

quality of a financial report?
Which form of business does not hold the - Neutrality
owners personally liable for the debt of the
business? Which type of accounting information
system uses paper-based journals and
- Corporation ledgers?
- Manual systems
Which of the following the increases at the
debit side?
Which of the following is not an element of
- Accounts Receivable the Statement of Financial Position?
- Income
If revenue is greater than expenses, the
result of the operations of the business is
The owner's withdrawal account is listed
- Profit with the other expenses of a business
Which of the following is an element of the
- False
Statement of Financial Performance?

- Expense The basic summary device of accounting is

the account.
Which type of business is pooling - True
premiums of many to meet the claims of a
few? Manufacturing companies buy raw
materials, convert them into products and
- Insurance then sell the products to other companies
or to final consumers
 - True
Accounts receivable is a liability account.
- False
An owner can only invest cash in the
business.
- False Every transaction is recorded in terms of
increases and/or decreases in two or more
One characteristic of a corporation is that accounts
its owners are personally liable for any - True
losses incurred by the business
- False Liabilities represent amounts owed to
creditors.
A partnership is always owned by two - True
individuals
- False The liability created when supplies are
bought on account is called an accounts
The personal liability of a partner is limited payable
to the amount of his investment - True
- False
Both sides of the accounting equation must
Asset is a present economic resource be equal at all times.
controlled by the entity as a result of past - True
events.
- True For accounting purposes, a business and
its owner are considered one and the
Capital represents the owner's investment, same.
or equity, in a business. - False
- True
The purchase of equipment is automatically
Debit means increase and credit means considered as an expense to the business.
decrease. - False
- False
Equipment is listed as an asset because it
The purchase of supplies on account is used up in a relatively long period of time
increases the assets and equity accounts. - True
- False
The terms bookkeeping and accounting are
A corporation is a business owned by its synonymous.
stockholders - False
- True
The first step in analyzing a transaction is
Assets are things of value owned by a to determine what accounts are involved.
business entity - True
- True
In the fundamental accounting equation, If the business earns P988,000 and the
assets are added to liabilities. result of operations is a net loss of
- False P23,000, how much was incurred as
expenses?
A withdrawal by the owner is recorded as a - 1,011,000
deduction from assets and an increase in
expenses At the beginning of the year liabilities are
- False P90,000 and owner’s equity are P54,000.
During the year the assets increased by
At the beginning of the year, liabilities are
P100,000 and liabilities decreased by
P90,000 and owner’s equity is twice as
P60,000. What is the owner’s equity at the
much as liabilities. During the year the
end of the year?
owner’s equity increased by P20,000 while
liabilities decreased by P10,000. What is - 214,000
total assets at the end of the year? If the business earns P345,900 and
- 280,000 incurred expenses of P354,700, what is
the result of operations?
If the business earns P290,000 and - (8,800) loss
incurred expenses of P187,000, what is the
result of operations? If assets are P800,000 and capital is
- 103,000 profit P320,000, How much is the amount of
liabilities?
At the beginning of the year, Assets are - 480,000
P90,000 and owner’s equity are P54,000.
During the year the assets increased to Which of the following is correct if the
P100,000 and liabilities also increased to sole proprietor of an entity borrows
P60,000. What is the owner’s equity at the P30,000 in the name of the entity and
end of the year? deposits it into the entity's bank
- 40,000 account?
- The assets of the entity increase by
Liabilities are two times higher than P30,000
owner’s equity. If assets are P900,000,
what is the owner’s equity? The business purchased a service
vehicle for P2,000,000 for the owner's
- 300,000 personal use. Which of the following will
be affected: 1. Capital 2. Assets 3.
If assets are P200,000 and liabilities
Liabilities
totaled P120,000, How much is capital?
- 1 and 2 only
- 80,000
At the beginning of the year the assets
At the beginning of the year, Assets are
total P90,000 and liabilities total
P900,000 and liabilities are P540,000.
P40,000. During the year the net assets
During the year the assets increased by
increased by 50%. How much is net
P100,000 and liabilities also increased by
assets at the end of the year?
P90,000. What is the owner’s equity at the
end of the year? - P75,000
- 370,000 Suppose a debtor pays his debt of
P50,000 by transferring the money into
 the bank account of the business. The
effect of the transaction on the
accounting equation would be:
- Both assets and liabilities are
decreased by P50,000

If assets total P70,000 and liabilities

total P40,000, how much is net assets?
- P30,000

Under the double entry system, what is

the value of assets if liabilities are
P120,000 and equity are P360,000
- P480,000

At the beginning of the year the assets total

P200,000 and owner's equity total
P110,000. During the year the liabilities
increased to P100,000 and assets
increased by P50,000. How much is net
assets at the end of the year?
- P150,000

On April 1, 2019 Jerome Marquez sets up

a firm and brings in office equipment of
P50,000 and inventory of P30,000 to the
business. He puts P80,000 into the firm's
cash box and P100,000 into the firm's bank
account. Meanwhile, the firm lends
P50,000 cash to SJ & Associates and
borrows P200,000 from the bank to acquire
a piece of premises. What is the amount of
the firm's capital on April 1, 2019?
- P260,000

Suppose a debtor pays his debt of P50,000

by transferring the money into the bank
account of the business. The effect of the
transaction on the accounting equation
would be:
- Both assets and liabilities remain
unchanged

If asset increase by P60,000 and liabilities

decrease by P10,000, owner's equity must
- increase by P70,000
QUIZ 2 - False

A trial balance with equal debit and credit

totals proves that all transactions have The process of adding the amount
been correctly journalized and posted to vertically is called cross-footing.
the proper ledger accounts. - False
- False
The normal balance of any account refers
A recording error caused by the erroneous to the side of the account - debit or credit -
rearrangement of digits, such as writing where decreases are recorded.
627 as 672 is called a slide error. - False
- False
The accounting cycle begins with the
Ledger is also known as the book of the recording of the transactions and ends with
final entry. the preparation of the financial statements.
- True - False
The sequence of the account titles in a trial The process of recording a transaction in a
balance depends upon the size of the journal is called journalizing.
account balances. - True
- False
Debit means decrease and credit means
Double posting of a transaction causes the increase.
debits and credits not to balance - False
- False
A transposition error means a posting of
The double entry system means that journal entry to the wrong ledger account.
transactions are recorded both in the - False
journal and in the ledger.
- False The entry in the book of the original entry is
called a journal entry.
A trial balance may balance but may not be - True
correct.
- True Journalizing is part of the summarizing
phase of accounting.
If the difference between the Debit and - False
Credit column totals is 10, 100, or 1,000,
an error in addition may have occurred.
A credit entry to an expense account will
- True increase it.
- False
The process of transferring the debits and
credits from the journal entries to the
The T-account is sometimes called the
accounts is called posting.
book of original entry.
- True - False
A group of accounts in a ledger is called a
chart of accounts.
If the difference between the Debit and
Credit column totals can be evenly divisible Which of the following transactions
by 2, the error may be due to slide error. correctly maintains the equality in the
- False accounting equation?
- To record the purchase of computer
Journalizing is a collective process of equipment, computer equipment is
identifying, analyzing, and recording the increased and cash is decreased by
accounting events of a company. P46,000
- False
Chart of accounts is a
A journal entry may include debits to more
than one account and credits to more than - list names of all account titles
one account, but the total of the debits
must always equal the total of the credits.
- True
The purpose of the ledger is to
Transactions are analyzed on the basis of - maintain a separate account for each
source documents balance sheet and income statement
accounts
- True
Transactions are recorded chronologically
Transposition occurs when the order of the in the
digits is copied incorrectly, such as writing
542 as 452 or 524.
- journal
- True The term footing refers to the
In some transactions, the accounting
- Addition of a column of figures
equation may not be maintained.
The posting reference column in the journal
- False shows that an item has been posted when
which of the following is placed in it?
The journal is used to classify and
summarize transactions and to prepare
- The account number
data for basic financial statements.
Which of the following items will not be
- False included in a trial balance?
The equality of debits and credits in the
- dates of transactions
ledger should be proven at the end of each
When a customer buys services on credit,
accounting period by posting to the ledger.
the contract is regarded as complete when
- False
- the cash payment is received
An expense may be recognized and
What function do general ledgers serve in
recorded although no cash outlay has been
the accounting process?
made.
- True - Classifying

If furniture is overvalued by P1,000 in the

Every business transaction affects a
trial balance,
minimum of two accounts.
- True
 - the total debit balance is greater than The posting reference column in the ledger
the total credit balance in the trial shows that an item has been posted when
balance which of the following is placed in it?
- The journal page number
Which of the following accounting steps is
accomplished after the others listed? Refers to the process of transferring the
- Prepare the trial balance debit and credit amounts from journal to
ledger accounts
A ledger is defined as a collection of - Posting
- Account titles - asset, liability, equity,
income and expense accounts A simple journal entry
- Consists of one debit and one credit
Payment of insurance premiums in
advance gives rise to Which of the following is a business event
- prepaid expense that is not considered a recordable
transaction?
A journal entry that contains more than two - A customer inquiries about the
accounts is called availability of a service
- compound journal entry
Which of the following combinations of trial
Which of the following situations will cause balance totals suggest the presence of
the total debit to be greater than the total either a transposition error or a number
credit balances? slide?
- The sales of goods are regarded as - P65,470 debit and P68,170 credit
purchases of goods Which of the following is classified
differently?
Which of the following is business event - Owner's capital
that is also considered a recordable
transaction? Without the use of a trial balance
- A customer purchases merchandise - inequality between debit and credit
balances cannot be easily found
Which of the following does not directly o
indirectly affect the owner's capital The primary function of an account in the
account? accounting system is to
- paying an accounts payable - Accumulate accounting information
Which of the following statements is true Which of the following event would not be
about a proper journal entry? considered an accounting transaction?
- All debits are listed before any - Tabulation of the results of a
credits customer satisfaction survey

An error of the original entry occurs when Office supplies are expensed
- either the debit entry or the credit - when they are consumed (used up)
entry for a particular transaction is
recorded in the wrong class of Which of the following situations will cause
account total debit balance to be smaller than the
total credit balance?
 - The amount extracted from the - liability increases
account of the debtor is posted as
P1,000 instead to P1,100 in the trial
balance Suppose Mr. Chan lends P500,000 cash to
the entity. At the same time, the entity uses
The accounting cycle is part of the money to repay the amount
- the sequence of procedures used by owed to a creditor and holds the remaining
a business to process economic amount of P400,000 in the bank account.
information and to produce financial The journal entry should be:
statements - Debit Accounts Payable P100,000 &
Bank P400,000 / Credit Loan payable
The first step in recording transaction in a from Mr. Chan P500,000
journal is to
- record the date A sole proprietor withdraws P50,000
supplies from the firm. The journal entry
Refers to the process of entering should be:
transactions into the books of original entry - Debit - Drawings / Credit – Supplies
- recording
Suppose Mr. Chan lends P500,000 cash to
The normal balance of an account is on the the entity. At the same time, the entity uses
- side represented by increase in the part of the money to repay the amount
account balance owed to a creditor and holds the remaining
amount of P400,000 in the bank account.
Which of the following statements is false Which of the following effects on the
about a proper journal entry? accounting equation is correct?
- Accounts that are increased are - Assets increase by P400,000 and
always listed first liabilities increase by P400,000

What function do accounting journals serve A sole proprietor borrows P50,000 cash
in the accounting process? from the bank for the purchase of computer
- Recording equipment of P40,000 in the office. The
remaining cash is held in hand. The journal
When cash is debited, a typical credit is to entry should be:
- accounts receivable - Debit Equipment P40,000 & Cash
P10,000 / Credit Bank Loan P50,000
Which of the following items will not be
included in a trial balance? A sole proprietorship settles the rental
expenses of the entity amounting to
- Trade discounts P10,000 through his personal bank
account. The journal entry should be:
Of the following errors, the one that will
cause an inequality in the trial balance - Debit - Rental Expense / Credit –
totals is Capital
- Incorrectly computing an account Which of the following errors would cause a
balance trial balance to have unequal totals?
When the owner's equity decreases, one of - A payment to a creditor was recorded
the following must occur: as a debit to Accounts Payable for
 P12,900 and as a credit to Cash for
P10,200.

Suppose an entity pays P50,000 to its

creditors by check. The journal entry
should be:
- Debit - Accounts payable / Credit –
Cash
QUIZ 3 The adjusting entry to allocate part of the
cost of a one-year fire insurance policy to
Classify the following account titles expense will cause total asset to increase.
whether asset, liability, owner's equity, - False
revenue, expense or a contra account
If all transactions were originally recorded
Prepaid expense in conformity with Generally Accepted
- Asset Accounting Principles, there would be no
need for adjusting entries at the end of the
Depreciation Expense period.
- Expense - False
Bad Debts Expense The adjusting entry to recognize earned
- Expense revenues which was received in advance
will cause total liabilities to decrease.
Accrued Expense - True
- Liability
The adjusting entry to recognize an
Accrued Interest Revenue expense which is unrecorded and unpaid
- Asset will cause total assets to increase.
- False
Pre collected Rent Revenue
- Liability When the reduction in prepaid expenses is
not properly recorded, this causes the
Accumulated Depreciation asset accounts and expense accounts to
- Contra-Account be understated
- False
Supplies on Hand
- Asset Matching principle is applied when we
recognize revenue on the period earned
Unearned Interest Income regardless of when cash is collected.
- Liability - False
Allowance for uncollectible accounts The adjusting entry to recognize earned
- Contra-Account commission revenues not previously
recorded or billed will cause total assets to
Book value is the original cost of the increase.
building less depreciation for the year. - True
- False
Acquiring a computer for cash is just
Every adjusting entry must change both an exchanging one asset for another and will
income statement account and a balance not result in an expense even in future
sheet account. periods.
- True - False

Rent collected in advance but not yet

earned.
 - unearned rent
- unearned rent revenue Unpaid workers wages.
- unearned rent income - wages payable
- precollected rent - accrued wages expense
- accrued wages payable
- accrued wages
Income earned by the lessor but not yet Expenses provided for accounts which may
collected. not be collected.
- accrued rent income - bad debts expense
- accrued rent revenue - doubtful accounts expense
- accrued rent receivable - uncollectible accounts expense
- rent receivable
- accrued lease income Expense account debited as a portion of
- accrued lease revenue the insurance expired for the period.
- accrued lease receivable - insurance expense
- lease receivable
On September 21, 2020, Sayona Uy
Expenses paid in advance but are not yet bought a brand new computer costing
incurred. P25,000. it has an estimated useful life of
- prepaid expense five years and a scrap value of 5,000 at the
- prepaid expenses end of its useful life. The accounting period
ends on December 31, 2020. How much is
Expenses incurred by the debtor as cost of the annual depreciation?
borrowing money but is not yet paid. - 4,000
- interest payable
- accrued interest expense On July 15, 2020, Caya Co collected in
- accrued interest payable advance cash of P48,000 from a tenant of
her building. This represents rental which
A contra asset account for property, plant covers from period August 1,2020 to
and equipment. August 1, 2022 . Assume the use of
- accumulated depreciation income method, what is the adjusting entry
for December 31, 2020?
A contra asset account for accounts - dr-rent revenue-38,000/cr-unearned
receivable. It provides for possible losses rent revenue-38,000
from uncollected accounts
- allowance for bad debts Carrie Coto has insured its building and a
- allowance for uncollectible accounts truck . The building insurance premium was
- allowance for doubtful accounts acquired and paid at June 1, 2020 for
P12,000 while the truck insurance was
Account used for supplies on hand at the acquired and paid on October 3, 2020 for
end of the period. P6,000. Assume the use of expense
- supplies method. What is the adjusting entry for
- unused supplies December 31, 2020?
 - dr-prepaid insurance-9,500/cr- - 1,000
insurance expense-9,500

The company has opened its business last

On July 15, 2020, Caya Co collected in July 1, 2020. A total of P1,000,000
advance cash of P48,000 from a tenant of Accounts Receivable and P10,000,000
her building. This represents rental which Sales were recorded as of the end of
covers from period August 1,2020 to December 31, 2020. It is the company's
August 1, 2022 . Assume the use of liability policy to make provision for uncollectible
method, what is the adjusting entry for accounts annually at the rate of 0.5% of
December 31, 2021? sales. How much is the balance of the
- dr-unearned rent revenue-24,000/cr- accounts receivable in the ledger after
rent revenue-24,000 adjustments to uncollectible accounts is
made?
On October 3, 2020, Creditor Co. lends - 1,000,000
P800,000 to Debtor Co for 12% interest per
annum. The principal and interest are Cory Pot borrowed P600,000 from the bank
collectible after one year. What amount of on September 1, 2020. The note was
interest is earned for 2021? carried at 12% interest per annum. Interest
- 72,000 is paid monthly while the principal is
payable after six months. What is the
The company has opened its business last adjusting entry on December 31, 2020?
July 1, 2020. A total of P1,000,000 - None
Accounts Receivable and P10,000,000
Sales were recorded as of the end of On October 3, 2020, Creditor Co. lends
December 31, 2020. It is the company's P800,000 to Debtor Co for 12% interest per
policy to make provision for uncollectible annum. The principal and interest are
accounts annually at the rate of 0.5% of collectible after one year. What is the
sales. What is the adjusting entry on adjusting entry for December 31, 2020?
December 31, 2020? - dr-accrued interest income-
- dr-bad debts-50,000/cr-allowance for 24,000/cr-interest income-24,000
bad debts-50,000
On July 15, 2020, Caya Co collected in
On September 21, 2020, Sayona Uy advance cash of P48,000 from a tenant of
bought a brand new computer costing her building. This represents rental which
P25,000. it has an estimated useful life of covers from period August 1,2020 to
five years and a scrap value of 5,000 at the August 1, 2022 . How much is the earned
end of its useful life. The accounting period portion of the rental as of December 31,
ends on December 31, 2020. How much 2020?
depreciation expense that should be - 10,000
recorded at the end of the current
accounting period?
 Cory Pot borrowed P600,000 from the bank
Cory Pot borrowed P600,000 from the bank on September 1, 2020. The note was
on September 1, 2020. The note was carried at 12% interest per annum. Interest
carried at 12% interest per annum. Interest is paid monthly while the principal is
is paid monthly while the principal is payable after six months. What is the
payable after six months. What is the amount of interest expense paid in 2021?
amount of increase in liability in 2020? - 12,000
- 600,000
Carrie Coto has insured its building and a
On January 1, 2020, the Accounts Payable truck . The building insurance premium was
account showed a balance of P50,000 and acquired and paid at June 1, 2020 for
the Supplies Inventory was P10,000. P12,000 while the truck insurance was
During the year, the company made a total acquired and paid on October 3, 2020 for
purchases of P160,000 all on account, of P6,000. What is the expired portion as of
which P30,000 was chargeable to Supplies December 31, 2020?
Inventory. At the end of the year, the - 8,500
Supplies Inventory balance was P8,000
and the Accounts Payable showed a On January 1, 2020, the Accounts Payable
balance of P80,000. What is the amount of account showed a balance of P50,000 and
payment of Accounts Payable during the the Supplies Inventory was P10,000.
year? During the year, the company made a total
- 130,000 purchases of P160,000 all on account, of
which P30,000 was chargeable to Supplies
On July 15, 2020, Caya Co collected in Inventory. At the end of the year, the
advance cash of P48,000 from a tenant of Supplies Inventory balance was P8,000
her building. This represents rental which and the Accounts Payable showed a
covers from period August 1,2020 to balance of P80,000. What is the amount of
August 1, 2022 . How much is the Supplies Expense at the end of the year?
unearned portion of the rental as of - 32,000
December 31, 2021?
- 14,000 On September 21, 2020, Sayona Uy
bought a brand new computer costing
On September 21, 2020, Sayona Uy P25,000. it has an estimated useful life of
bought a brand new computer costing five years and a scrap value of 5,000 at the
P25,000. it has an estimated useful life of end of its useful life. The accounting period
five years and a scrap value of 5,000 at the ends on December 31, 2020. How much is
end of its useful life. The accounting period the net book value of the computer as of
ends on December 31, 2020. What is the December 31, 2021?
ledger balance of office equipment as of - 20,000
December 31, 2022?
- 25,000
 Carrie Coto has insured its building and a
On October 3, 2020, Creditor Co. lends truck . The building insurance premium was
P800,000 to Debtor Co for 12% interest per acquired and paid at June 1, 2020 for
annum. The principal and interest are P12,000 while the truck insurance was
collectible after one year. What amount of acquired and paid on October 3, 2020 for
cash is collectible in 2021? P6,000. Assume the use of asset method.
- 896,000 What is the adjusting entry for December
31, 2020?
The company has opened its business last - dr-insurance expense-8,500/cr-
July 1, 2020. A total of P1,000,000 prepaid insurance-8,500
Accounts Receivable and P10,000,000
Sales were recorded as of the end of On October 3, 2020, Creditor Co. lends
December 31, 2020. It is the company's P800,000 to Debtor Co for 12% interest per
policy to make provision for uncollectible annum. The principal and interest are
accounts annually at the rate of 0.5% of collectible after one year. What amount of
sales. How much is the provision for bad interest is accrued as of December 31,
debts? 2020?
- 50,000 - 24,000

On January 1, 2020, the Accounts Payable The company has opened its business last
account showed a balance of P50,000 and July 1, 2020. A total of P1,000,000
the Supplies Inventory was P10,000. Accounts Receivable and P10,000,000
During the year, the company made a total Sales were recorded as of the end of
purchases of P160,000 all on account, of December 31, 2020. It is the company's
which P30,000 was chargeable to Supplies policy to make provision for uncollectible
Inventory. At the end of the year, the accounts annually at the rate of 0.5% of
Supplies Inventory balance was P8,000 sales. How much is the net realizable
and the Accounts Payable showed a value?
balance of P80,000. What is the adjusting - 950,000
entry?
- dr-supplies expense-32,000/cr- Carrie Coto has insured its building and a
supplies inventory-32,000 truck . The building insurance premium was
acquired and paid at June 1, 2020 for
Cory Pot borrowed P600,000 from the bank P12,000 while the truck insurance was
on September 1, 2020. The note was acquired and paid on October 3, 2020 for
carried at 12% interest per annum. Interest P6,000. What is the unexpired portion as of
is paid monthly while the principal is December 31, 2020?
payable after six months. What is the - 9,500
amount of interest expense recognized in
2021?
- 12,000
On October 3, 2020, Creditor Co. lends A business received cash of P30,000 in
P800,000 to Debtor Co for 12% interest per advance for revenue that will be earned
annum. The principal and interest are later. The cash receipt entry debited cash
collectible after one year. What amount is and credited unearned revenues for
increase in asset for 2020? P30,000. At the end of the period, P11,000
- 24,000 is still unearned. The adjusting entry for
this situation will
Cory Pot borrowed P600,000 from the bank - debit unearned revenues and credit
on September 1, 2020. The note was revenues for P19,000
carried at 12% interest per annum. Interest
is paid monthly while the principal is An entity's weekly payroll of P5,000 is paid
payable after six months. What is the on Fridays. Assume that the last day of the
amount of interest expense paid in cash in month falls on Wednesday. Which of the
2020? following is the required adjusting entry?
- 24,000 - debit salaries expense P3,000 and
credit salaries payable P3,000
Cory Pot borrowed P600,000 from the bank
on September 1, 2020. The note was Suppose the opening balance of machinery
carried at 12% interest per annum. Interest account is a debit balance of P100,000.
is paid monthly while the principal is Within this month, there is an acquisition of
payable after six months. What is the machinery by an equivalent settlement of
amount of interest expense recognized in P400,000 debt amount. Also, there is a
2020? sale of machinery to the sole proprietor at
- 24,000 the cost price of P20,000. What is the
opening balance of the machinery account
Accrual concept states that revenues and the next month?
expenses of the firm should be recorded on - debit balance of P480,000
___________ instead of _____________.
- accrual basis; cash basis Suppose an entity recorded an expense
when it was paid, but the expense was
The financial year of Divina ends on Dec. incurred one year before the payment date.
31 each year. On May 30, 2019, Divina Which of the following accounting
received an annual service fee of P600,000 principles has been violated?
from a customer for a service commencing - accrual concept
on June 1. On Dec. 31, 2019
- P250,000 should be treated as At the beginning of 2021, an entity
unearned revenues purchased a fire insurance policy covering
a property for a period of two years. The
At the beginning of the financial year, Edzel P5,600 cost of the policy was paid in cash.
paid a 3-year insurance premium of At the end of 2021, the company will
P720,000. At the end of the financial year, reduce Prepaid insurance for this policy by
- P240,000 should be treated as - 2,800
expenses
A law firm began November with office An entity has P1,500 of supplies on hand
supplies of P16,000. During the month, the at the end of 2020. During 2021, P2,750 of
firm purchased supplies of P29,000. On supplies were purchased . A count of
November 30, supplies on hand totaled supplies on hand at the end of 2021 found
P21,000. Supplies expense for the period an inventory of P875. What was the
is amount of supplies expense for 2021?
- 24,000 - 3,375

Daisy will rent a warehouse from 3J Realty Based on 2021 sales of music recorded by
from May 1, 2018 to April 30, 2020. On an artist under a contract with Music Co.,
April 1, 2018, Daisy paid P360,000. It the artist earned P200,000 after an
included a cleaning fee of P10,000, two adjustment of P16,000 for anticipated
months' rent, and a rental deposit returns. In addition, the company paid the
amounting to three months' rent. What artist P150,000 in 2021 as a reasonable
should be the related rental expense for the estimate of the amount recoverable from
year ended Mar. 31, 2019? the future royalties to be earned by the
- P770,000 artists. What about should be royalty
expense?
RO Realty pays commissions to its sales - 200,000
staff at the rate of 3% of net sales. Sales
staff are not paid salaries but are given The supplies account had a P2,800 debit
monthly advances of P15,000. Advances balance at the end of the accounting period
are charged to commission expense, and before adjustment for supplies used, and
reconciliations against commissions are an inventory of P600 worth of unused
prepared quarterly. Net sales for the year supplies was on hand. Which of the
ended Mar. 31, 2021 were P15,000,000. following is the required adjusting entry?
The unadjusted balance in the - debit supplies expense P2,200 and
commissions expense account on March credit supplies P2,200
31, 2021 was P400,000. March advances
were paid on April 3, 2021. What amount
should be commission expense at the end
of March?
- 450,000

Lorelei Corpuz entered into a one-year

tenancy contract from Mar. 1, 2018 to Feb.
28, 2019. The monthly rental was P90,000.
For the year ended Dec. 31, 2018, Lorelei
Corpuz paid P1,080,000 for the contract
and recorded it as rental expenses. The
profit for the year ended Dec. 31, 2018 was
- Underestimated by P180,000
QUIZ 4 Financial statements cannot be prepared
correctly until all the accounts have been
In the worksheet, there is said to be a net adjusted.
loss when the debit column of the Balance - True
sheet is greater than the credit column.
- False The purchase of land is an example of an
investing activity.
On a worksheet, the balance of the - True
owner's capital account is its ending
amount for the period. The balance sheet may be prepared by
- False referring solely to the balance sheet
columns of the worksheet.
The statement of cash flows discloses - False
significant events related to the operating,
investing and financing activities of a Total assets, total liabilities and owner's
business. equity on the balance sheet are the same
- True as the totals of the Balance sheet columns
on the worksheet
Buying and producing goods and services - False
are examples of operating activities.
- True If all transactions were originally recorded
in conformity with the generally accepted
The statement of changes in equity relates accounting principles (GAAP), there would
the income statement to the balance sheet be no need for adjusting entries at the end
by showing how the owner's capital of the period.
account changed during the accounting - False
period.
- True The worksheet is a necessary device for
completing the accounting cycle.
Paying taxes to the government is an - False
example of a financing activity.
- False The focal point of the accounting cycle is
the financial statements
Financial statements are confidential - True
documents which are available only to the
owner of the business. When adjusting entries are entered onto a
- False worksheet, it is not necessary to record
The heading for an income statement might them in the general journal.
include the line "as of December 31, 2020." - False
- False
The statement of changes in equity Consider the steps in the accounting cycle.
discloses the withdrawals during the Which part of the accounting cycle
period. provides information to help a business
- True decide whether to expand its operations?
- Financial Statements
In preparing the worksheet, nominal
accounts are moved to the balance sheet In which columns of a worksheet would the
columns. adjusted balance of accumulated
- False depreciation appear?
- trial balance, adjustments credit,
The purchase of equipment is an example adjusted trial balance credit, balance
of a financing activity. sheet credit
- True
In the adjusted trial balance, the owner's
The profit figure appears in all the following equity account reflects
financial statements except the - the beginning-of-the-period
- statement of cash flows
The amount of profit will appear on the
Which of the following is a cash inflow from debit side of the income statement columns
financing activities? on a worksheet
- Receipts from issuance of note - if total revenue exceeds total
payable expenses for the period

Worksheets are prepared because Which of the following steps comes first in
- they aid in the preparation of the worksheet preparation?
financial statements, adjusting - Enter the account balances in the
entries and closing entries unadjusted trial balance columns and
total the amounts
If total credits exceed total debits in the
balance sheet columns of a worksheet, Accounting data flow from the
- a loss has occurred - Income statement to the statement of
owner's equity
Which of the following types of information - Statement of owner's equity to the
is not found in financial statements? balance sheet
- Selling Prices
The trial balance debit or credit amount of
Which columns of the worksheet show each account is combined with the amount
profit? of any debit or credit adjustment to that
- Income statement account to determine the new balance of
the account. This process is known as
- cross-footing
If the income statement debit and credit
columns are not equal after adding the
respective columns in the worksheet,
- the entity either generated a profit or
incurred a loss

Which columns of the accounting

worksheet show unadjusted amounts?
- Trial Balance

Supplies has a P60,000 unadjusted

balance on your trial balance. At year-end
you count supplies of P20,000. What
adjustment will appear on your work sheet?
- Debit-Supplies Expense / Credit-
Supplies; 40,000

The income statement debit column of the

worksheet contains
- expense account balances

Which of the following is an example of an

operating activity?
- selling goods and services

Which situation indicates a loss on the

income statement?
- Total debits exceed total credits

The statement of cash flows would

disclose the withdrawal of cash by the
owner
- in the financing activities section
QUIZ 5 - True
Gross margin from sales is the income that
the business would have made if all goods
The periodic inventory system relies on a available for sale had been sold during the
physical count of merchandise for its period.
balance sheet amount. - False
- True
When preparing the worksheet of a
Purchase discounts would be recorded as merchandising entity that uses the periodic
a credit inventory system, the merchandise
- True inventory amount shown in the trial balance
will be carried over to the balance sheet
debit column.
The difference between revenues from - False
sales and cost of sales is operating  Perpetual
income.
- False
Sales Returns and Allowances is described
The purchase of equipment not for resale
as a contra-revenue account.
should be debited to the purchases
account. - True
- False

There is no need for a physical inventory A credit term of 2/10, n/30 means that the
count in the perpetual inventory system. buyer may deduct 2% from the invoice if
- False payment is made within 10 days from the
end of the month.
The cost of merchandise purchased during
the period is determined by substracting
- False
 10 days from date of acquisition
from the net purchases the amount of
transportation costs incurred during the
The function of expense method reports
period.
gross margin and income from operations.
- False
- True
 adding NOT subtracting

Net Sales is not an account name.

Discounts offered to the buyer to
encourage early payment are trade - True
discounts.
- False

Merchandise inventory could include goods

that are in transit.
The ending inventory amount appears in An advantage of using the periodic
both income statement columns on the
inventory system is that it requires less
worksheet on a merchandising entity that
recordkeeping than the perpetual inventory
uses periodic inventory system.
- False system
 credit column of the Income - True
Statement and debit column of the
balance sheet The balance in the merchandise inventory
account at the beginning of the period
Purchase returns and allowances is a
represents the cost of the merchandise on
deduction from purchases.
- True hand at that time.
- False
A physical inventory is usually taken at the  end NOT beginning
end of the accounting period.
- True
A business can shorten its operating cycle

The debit balance of the inventory account by increasing its percentage of cash sales
in the trial balance under the periodic and reducing its percentage of credit sales.
inventory system is the amount of the - True
inventory at the end of the current year.
- False Cost of goods sold is major expense of a
merchandising business.
The term freight prepaid or collect will
dictate who shoulders the transportation - True
costs.
- False When using the perpetual inventory
 pays NOT shoulders system, the merchandise inventory account
will not appear in closing entries.
Cost of goods sold is the primary difference
between a merchandising and a service - True
business income statement.
- True Summing ending merchandise inventory
and cost of goods sold gives the cost of
goods available for sale.
The worksheet of a merchandising entity
- True
that uses the perpetual inventory system
will not have a transportation in account
- True Sales discounts is a contra-revenue
account with a normal credit balance
- False
The periodic inventory system provides an -
up to date amount of inventory on hand. In the income statement, operating
- False expenses are classified as selling
expenses, administrative expenses and
Sales returns and allowances account has other operating expenses.
a normal debit balance - True
- True
The traditional balance sheet arrangement
Both transportation in and out accounts are of assets on the left-hand side with the
closed by crediting the accounts. liabilities and owner's equity on the right-
- True hand side is called the report form.
- False
The sales discounts is a contra-income
account and will have a debit balance.
When preparing the worksheet of a
- True
merchandising entity that uses the
perpetual inventory system, the cost of
The determination of net cost of purchases
goods sold can be derived from the
would include addition of transportation
balances of several accounts in the income
out.
statement columns
- False
- False
 transportation in NOT out
 Periodic

If the seller is to shoulder the cost of

delivery, the term is stated as FOB
In the worksheet, the ending inventory
destination.
amount will appear in the income statement
- True
credit column and the balance sheet debit
column
Under the periodic inventory system,
- True
purchases of merchandise are not
recorded in the Merchandise Inventory
The excess of gross profit over operating
account.
expenses is called operating profit.
- True
- True

The perpetual inventory system requires

Under the periodic inventory system, cost
recording the cost of each sale as it occurs
of goods sold is treated as an account
- True
- False
The two main systems for accounting for Olive Traders purchased merchandise from
merchandise are periodic and perpetual. Jose for P3,600 list price, subject to a trade
- True discount of 25%. The goods were
purchased on terms of 2/10, n/30 FOB
The ending inventory of one period is the destination. Olive paid P100 transportation
beginning inventory of the next period cost. Olive returned P400 (list price) of the
- True merchandise to Jose and later paid the
amount due within the discount period. The
An entity would be more likely to know the amount paid is
amount of inventory on hand if it used the - 2,252
periodic inventory system rather than the
perpetual inventory system. Olive Traders purchased merchandise from
- False Jose for P3,600 list price, subject to a trade
discount of 25%. The goods were
purchased on terms of 2/10, n/30 FOB
The operating cycle involves the purchase shipping point, freight prepaid. Jose paid
and sale of inventory as well as the P100 transportation cost. Olive returned
subsequent payment for purchases and P400 (list price) of the merchandise to Jose
collection of cash and later paid the amount due within the
- True discount period. The amount paid is
- 2,452
The purchases account is closed to the
merchandise inventory account Olive Traders purchased merchandise from
- False Jose for P3,600 list price, subject to a trade
discount of 25%. The goods were
Taking a physical inventory refers to purchased on terms of 2/10, n/30 FOB
making a count of all merchandise on hand shipping point. Olive paid P100
at a particular time. transportation cost. Olive returned P400
- True
(list price) of the merchandise to Jose and
later paid the amount due within the
discount period. The amount paid is
- 2,352
On March 1, Vicente purchased Winston started business on Jan. 1. During
merchandise with an invoice price of the year, the company purchased
P270,000 and 2/10, n/30 terms. On March merchandise with an invoice price of
3, paid P10,000 transportation cost on the P5,000,000. Winston paid P200,000 freight
purchased goods. On March 10 paid for the on the merchandise. During the year,
merchandise. What was the total cost of Winston returned P800,000 of the
the purchased merchandise? merchandise to its suppliers. All purchases
- 274,600 were paid for in a timely manner, and a
P100,000 cash discount was taken.
Suppose UCU store received the P4,180,000 of the merchandise was sold
for P6,270,000. What was the Dec. 31
settlement of debt from Lindberg Soriano
balance in the inventory account?
by cash. Lindberg purchased goods with a - 120,000
list price of P100,000 on Jan. 1 with a trade
discount of 5%. Suppose the cash discount Goods totaling P50,000 were purchased
period is 15 days with a cash discount of February 2 with terms of 2/10, n/30.
Returns of P10,000 were made on
4% and Lindberg settled the payment in
February 10. What discounts, if any, can be
Jan. 10 in full. What is the amount of sales availed of if the invoice was paid on
discounts given? February 12?
- 3,800 - 800

Luis began the period with P200,000 in

A buyer received an invoice for P6,000 inventory. The entity purchased an
dated June 10. If the terms are 2/10, n/30 additional P200,000 of inventory and
returned P20,000 for a full credit. A
and the buyer paid the invoice within the
physical count of the inventory at year-end
discount period, what amount will the seller revealed an inventory on hand of
receive? P160,000. What was Luis' cost of goods
- 5,880 sold for the period?
- 220,000

Cormack purchased merchandise with a

list price of P60,000 from the Murray. with
terms of 2/10, n/30. What amount should
Cormack pay if the cash discount is taken?
- 58,800
ABC Co. sold 10 units of goods with a unit
list price of P2,000 on Jan. 1, 2019. Given
that the trade discount is 5% and the cash
discount is 10% and that the cash discount
period is 10 days and the credit period is
30 days, if the customer settles the debt on
Jan. 28, 2019, what is the actual amount
has needs to pay?
- 19,000

Carl purchased P50,000 merchandise from

the Sartire with terms of 3/10, n/30. How
much discount is Carl entitled to take if it
paid within the allowed discount period of
10 days?
- 1,500

Assuming that net purchases was

P900,000 during the year and that ending
merchandise inventory was P20,000 less
than the beginning merchandise inventory
of P250,000, how much was cost of goods
sold?
- 920,000
QUIZ 6 - supplies purchased on account.
A firm that uses special journals acquired
When merchandise is returned or a price
merchandise for P5,000, giving a P5,000-
adjustment is granted, an entry is made in note payable. In which journal would the
the transaction be recorded?
- General Journal - Purchases Journal

A special journal contained columns for

The receipt of cash arising from a sales Cash, Purchase Discounts, and Accounts
transaction would be recorded in the Payable. This journal is
- cash receipts journal. - Cash Disbursements Journal

Each time an entry is recorded in the Each amount in the other accounts column
purchases journal, the credit would be of the cash receipts journal must be posted
entered in the individually to the appropriate general
- accounts payable column. ledger account.
- True
The individual amounts in the Accounts
Payable column of the purchases journal Special journals are modified in practice to
are posted to the appropriate account in adapt to the specific needs of an entity.
the - True
- Accounts Payable ledger.
The voucher register is a substitute for a
If a firm uses special journals, in which cash payments journal
journal would the sale of merchandise for - False
cash be recorded?
- Cash Receipts Journal When there are numerous accounts with a
common characteristic, it is common to
The type of transaction that would appear place them in a separate ledger called a
in the sales journal would be a sale of detail ledger.
- merchandise on account. - False
 subsidiary ledger
Infrequent sales returns would be recorded
in which journal? The primary ledger that contains all of the
- General balance sheet and income statement
accounts is called the general ledger.
Which of the following items would be - True
recorded in the Purchases Journal?
- equipment purchased on account.
- merchandise purchased on account.
At the end of each month, the total of the - True
amount column of the sales journal is
Sales on account of office equipment used
posted as a debit to accounts receivable
in the business would be recorded in the
and a credit to sales.
- True sales journal.
- False
Other accounts columns allow the  general journal
recording of transactions that do not fit into
any of the special columns.
The sale of merchandise for cash is
- True
recorded in the sales journal
When customers are allowed to return - False
merchandise for credit to their accounts,
these transactions are recorded in the Transactions involving the payment of cash
general journal.
for any purpose are usually recorded in a
- True
cash journal.
- False
A check register is used to record all
 cash payments journal
expenditures.
- False
The total of the other accounts column of a
 cash payments
cash receipts journal is not posted to the
general ledger.
For each transaction recorded in the
- True
purchases journal, the credit is entered in
the accounts payable column.
When special journals, control accounts
- True
and subsidiary ledgers are used, no
posting to any ledger is performed until the
After postings have been completed for the
end of the month.
month, if the sum of the balances in the
accounts receivable subsidiary ledger does
- True

not agree with the balance of the accounts

The voucher register is a substitute for a
receivable account in the general ledger,
sales journal
the errors must be located and corrected.
- True
- False
 purchases journal

Combination journal provides the

cornerstone for a simple yet effective
accounting system in many small entities
Acquisitions on account which are not
provided for in special debit columns are Payment of interest on a mortgage
- Cash Payments Journal
recorded in the other accounts column in
the purchases journal. Receipt of a note in settlement of a
- True customer's account
- General Journal
Debits to creditors' accounts for invoices
paid are recorded in the accounts payable
debit column of the cash payments journal.
- True

Indicate which of the five journals each

transaction must be recorded.

Sale of merchandise for cash

- Cash Receipts Journal

Sale of merchandise on account

- Sales Journal

Cash refund to a customer

- Cash Payments Journal

Receipt of cash from a customer in

settlement of an account
- Cash Receipts Journal

Purchase of merchandise for cash

- Cash Payments Journal

Purchase of merchandise on account

- Purchases Journal

Payment of salaries
- Cash Payments Journal

Notes Payable sent to a creditor in

settlement of an account
- General Journal
QUIZ 7 The partner's interest in the partnership
assets is always proportionate to his share
If the account "Loans to and from a
in the partnership's profit and losses.
Partner" has a credit balance, it means that
the partner has a liability to the partnership. - False
- True
A partnership and a corporation cannot
Accounting for a partnership comes closer form a partnership.
to accounting for a sole proprietorship than
- True
to accounting for a corporation
- True
A partnership with a capital of less than
Temporary withdrawals of cash from P3,000 is valid even if it is unregistered
partnership are charged to the partner's with the Securities and Exchange
drawings account, when these are made in
Commission.
anticipation of gross profit to be earned by
- True
the partnership.
- True
In the basic accounting equation, the
partnership owner's capital is equal to the
There can never be a partnership without net asset of the partnership business.
contribution of money, property, or industry - True
to a common fund.
- True Two or more persons may form a
partnership for the exercise of a profession.
- True
The amount of capital contribution to be
made by the partners should be based on
the partners' agreement. If there is no agreed value on noncash
- True assets contributed by the partners, these
should be recorded in partnership books at
their fair market values.
One of the partners in a proposed
- True
partnership is a multi-millionaire. The
stipulation in the Articles of Partnership that A partnership cannot be established for
this partner shall be excluded from sharing religious purposes.
in the profits of the partnership is valid. - True
- False
In a limited partnership, the general
partner's liability is limited to his
investment.
- False
If the noncash asset is contributed by the A partner's drawing or partner's personal
partner, its carrying value should be the are normally considered as credit balance.
basis for recording the capital credit to the - False
partner even if it is different from its fair
value. A partnership should always be constituted
- False
in writing.
- False
Owner's capital is one of the basic
accounting elements of partnership
business. A proprietorship has a limited life whereas
- False a partnership may have an unlimited life.
- False
All partners in a general partnership are
personally liable for all debts incurred by
A limited partnership normally has one or
the partnership.
- True more general partners whose liability is
unlimited.
The balance in the partner's capital - True
accounts represent the partner's share in
the net assets of the partnership.
A public instrument needs to be executed
- True
when immovable property or real rights are
A partner's personal drawings in contributed to the partnership.
anticipation of partnership profits should be - True
debited to the partner's capital account.
- False A partnership's deficit account is normally
a credit balance.
In the closing the books of the sole - False
proprietor which is converted into a
partnership, closing entries will include the A memorandum entry to record the
closing of real accounts. industry as contribution of an industrial
- True partner is without a debit and a credit
because there is no actual value of the
A dormant partner is one who does not industrial partner's industry at the point of
take active part in the partnership business partnership formation.
and is not known as a partner. - True
- True
The manner in which profits are to be
Bankruptcy of a partner will dissolve the shared should be specified in the Articles
partnership. of Partnership.
- True - True
A partnership must always have at least Withdrawals of owner’s investment are
two owners. accounted in the partnership's books of
- True accounts, but not in the corporation's books
of accounts.
Not all of the partners in a general - False
partnership are personally liable for all
debts incurred by the partnership. In a partnership business, the partner's
capital account is a nominal account.
- False
- False

Under the partnership form of business, Work or services that may either be
large amounts of capital can be raised personal manual efforts or intellectual may
easily. also be contributed to a partnership.
- False - True

When the partnership capital is P3,000 or In the absence of partners' agreement, the
more, the public instrument must be partners must contribute the partnership's
total agreed capitalization equally.
recorded with the Securities and Exchange
- True
Commission (SEC).
- True Mutual agency means that each partner
has the right to bind the partnership to
A de jure partnership is one which has contracts.
complied with all the legal requirements for - True
its establishment.
In converting two existing single
- True
proprietorship businesses into a
partnership, any agreed adjustments on the
Partners' drawing accounts have normal value of assets or liabilities of the sole
credit balances. proprietorship should accrue to the benefit
or expense of the sole owner and not to the
- False
partnership.
- True
Ownership is easily transferred in a
partnership. A deficit balance of a partner's capital
- False account must be a result of partnership
losses.
- True
The entry to record the acceptance and the Which of the following terminates a
skill to be contributed by an industrial
partnership?
partner is through a memorandum entry.
- A new partner is accepted in the
- True partnership.
- The specific objective for which the
A partner who invests assets into a partnership was formed is achieved.
partnership retains control over those - Any of the partners becomes
incapacitated.
specific assets.
- False
What is the valuation if a partner
contributes a noncash property to the
As long as the action is within the scope of
partnership?
the partnership, any partner can bind the
- Agreed value of the property
partnership.
- True
Which of the following is not a
characteristic of a partnership business?
The limited partners are liable only to the
- unlimited life
extent of their personal contributions.
- True
At what value will cash contributions of a
partner be recorded in the partnership
A partnership involves mutual agency,
books?
unlimited liability for general partners and
- Actual amount of cash
limited life.
- True
In general, partners have unlimited liability,
but which type of partners does not have
A partnership is a legal entity separate and
unlimited liability?
apart from its owners.
- limited partners.
- True

Moran owns and operates a large hardware

All of the following are true for both general store in Cebu City that employs about forty-
and limited partnerships, five personnel. She delegates some of the
- all partners have the right to decision making to two supervisors.
participate in the profits of the Moran's business is organized as a
business. - sole proprietorship.
- all partners are liable for all the
debts of the firm.
The advantages of the partnership do not
- both are easily dissolved.
include
- unlimited liability.
Cabrera inherited a large amount of money - share in net income of the
partnership
from his parents. Cabrera wishes to start
A partnership ends it life when
his own business in Batangas. His lawyers
- a new partner is admitted.
encouraged her to make it a corporation.
What disadvantage of a sole proprietorship
Which of the following is debited directly to
were the lawyers trying to avoid?
capital?

- unlimited liability
- permanent withdrawal of capital

The business organization which is not A budding entrepreneur wants to start a

usually subject to tax is a business but is unsure of the legal form
- cooperative suited for her. Short of cash, she has to
take the form that is least expensive and
What is the basis of capital sharing if the most flexible in terms of decision-making
partners do not have an agreement as to and implementation. Which would you
the amount of their individual capital recommend?
contribution? - sole proprietorship.
- Equal share

An advantage of the partnership as a form

The drawing account is debited, except for
of a business organization is
- partnership obligations assumed or
- a partners is created by mere
paid by the partner
agreement of the partners.

A partnership is
For fair and honest business formation of a
- an association of two or more
partnership, each partner's initial
persons to carry on a business for a
investment of noncash assets should be
profit, as co-owners.
recorded at their
- fair market values
The primary reason why an article of
partnership should not be kept secret
among the partners is the principle of
- transparency
The partner's capital account is credited
when there is a (an)
- initial investment in the partnership
- additional investment in the
partnership
Wendy loves to cook. She receives Nabua is trying to decide whether to accept
unqualified praise whenever she prepares a salary of P40,000 or a salary of P25,000
a meal for someone. Encouraged by these plus a bonus of 10% of profit after bonus
compliments and eager to put her culinary as a way of dividing profits among the
talents to good use, Wendy decides to partners. What amount of profit would
open a boutique restaurant in Dumaguete make the choices equal?
City. Since she plans to maintain complete - 165,000
control of the business, she will most likely
Mara David and Clara del Valle decided to
organize it as a
become partners after a year of successful
- sole proprietorship. business operations as proprietors. Upon
formation, the partners’ equity has reached
Which of the following accounts has normal to a total amount of P4,800,000. The total
credit balance? book value before formation of their assets
equaled to P8,000,000. Their liabilities
- Partner's Capital
book and market value totaled to
P2,000,000. How much is the total assets
Which of the following items is not a of the partnership?
collectible from a partner? - 6,800,000
- Loans from Partner
Choji had a P500,000 capital balance for
eight months and a P650,000 balance for
The partner's capital account increased in
four months. Shikamaru had a P380,000
the following cases except when a capital balance for five months P500,000
partner's transaction involves his balance for seven months. How much of
- personal drawings the year’s P800,000 profit should Choji
receive if profits and losses are distributed
based on the ratio of their average capital
Unlimited liability means
balances?
- the owner is responsible for all
- 440,000
business debts.

Which of the following is an asset account?

- Prepaid Expense
On January 1, 2021, Mateo Rodriguez and Nabua is trying to decide whether to accept
Lia Ortega formed a partnership agreeing a salary of P40,000 or a salary of P25,000
to share profits and losses of 40% and 60% plus a bonus of 10% of profit after salaries
respectively. Mateo invested a parcel of and bonus as a way of dividing profits
land that cost him P300,000. It was sold for among the partners. Salaries traceable to
P350,000 three hours after formation of the the other partners is P100,000. What
partnership. Lia invested cash of P200,000 amount of profit would make the choices
and an equipment costing P100,000 but equal?
has a fair market value of P120,000. How - 290,000
much should be the capital balance of
Mateo Rodriguez? Barroga and Gonzales are partners who
- 350,000
shares profits and losses in the ratio of

N. Chik, B. Saya, and E. Longgo are 60:40 respectively. Barroga's salary is

partners. Their capital contributions are as P60,000 and P30,000 for Gonzales. The
follows: N. Chik, P600,000; B. Saya, partners are also paid interest on their
P400,000 and E. Longgo, services. The average capital balances. In 2019, Barroga
partners agreed to divide profits and losses
received P30,000 of interest and Gonzales,
in the ratio of 35:25:40 respectively. How
much of the loss of P100,000 is the share P12,000. The profit and loss allocation is
of E. Longgo? determined after deductions for the salary
-0 and interest payments. If Gonzales' share
in the residual profit (profit after deducting
Cabance, a partner in the Cabance and
salaries and interest) was P60,000 in 2019,
Mendoza Partnership, has a 30% share in
the partnership profit and loss. His capital what was the total partnership profit?
account had a net decrease of P60,000 in - 282,000
2019. In 2019, he withdrew P130,000
against his capital and invested property Ravelo and Gastaron are partners agreeing
valued at P25,000 in the partnership. The
to allow monthly salaries of P6,000 and
profit of the partnership is
- 150,000 P5,000 respectively; 6% interest on the
capital investment at the beginning of the
N. Chik, B. Saya, and E. Longgo are year P300,000 and P230,000 respectively
partners. Their capital contributions are as and the balance equally. The first year
follows: N. Chik, P600,000; B. Saya,
registered a profit of P100,000. Ravelo’s
P400,000 and E. Longgo, services. The
share should be
partners agreed to divide profits and losses
in the ratio of 35:25:40 respectively. How - 58,100
much of the loss of P100,000 is the share
of B. Saya?
- 41,667
In its first year of operations, the profit of P60,000. During the second year,
partnership of Reyes, Balino and Dimalanta the firm sustained a loss of P30,000. So,
made a profit of P20,000 before providing the total profit for the two years of
salaries of P5,000 and P3,000 per annum operations was only P30,000. In the
for Reyes and Balino respectively. The Articles of Partnership, it was agreed that
capital contributions of the partners are as Lee Bogh would get 1/3 of the profit but
follows: Reyes P30,000, Balino P20,000 would not share in losses. How much will
and Dimalanta P10,000. Assuming that no Lee Bogh get in the second year?
profit and loss ratio are provided in the - 0
partnership agreement and that there has
been no change in capital contributions On January 1, 2021, Mateo Rodriguez and
during the year, how much profit share Lia Ortega formed a partnership agreeing
would Reyes be entitled to receive? to share profits and losses of 40% and 60%
- 11,000 respectively. Mateo invested a parcel of
land that cost him P300,000. It was sold for
Lee Bogh, an industrial partner. During the P350,000 three hours after formation of the
first year of operation, the firm realized a partnership. Lia invested cash of P200,000
profit of P60,000. During the second year, and an equipment costing P100,000 but
the firm sustained a loss of P30,000. So, has a fair market value of P120,000. At
the total profit for the two years of what amount that investment of Lia Ortega
operations was only P30,000. In the be recorded?
Articles of Partnership, it was agreed that - 320,000
Lee Bogh would get 1/3 of the profit but
would not share in losses. How much will Mara David and Clara del Valle decided to
Lee Bogh get in the first year? become partners after a year of successful
- 20,000 business operations as proprietors. Upon
formation, the partners’ equity has reached
to a total amount of P4,800,000. The total
book value before formation of their assets
equaled to P8,000,000. Their liabilities
book and market value totaled to
P2,000,000. How much is the net debit
adjustments to equity?
- 1,200,000
Lee Bogh, an industrial partner. During the
If a partnership has profit of P44,000 and
first year of operation, the firm realized a
Partner Garcesa is to be allocated a bonus
of 10% of profit after the bonus, Garcesa's
bonus would be
- 4,000

N. Chik, B. Saya, and E. Longgo are

partners. Their capital contributions are as
follows: N. Chik, P600,000; B. Saya,
P400,000 and E. Longgo, services. The
partners agreed to divide profits and losses
in the ratio of 35:25:40 respectively. How
much of the loss of P100,000 is the share
of N.Chik?
- 58,333

A partner has a capital balance of

P400,000 for five months, P500,000 for
four months and P600,000 for three
months. The average capital balance is
- 483,333

Antiporda and Sy are partners who share

profits and losses after salary and interest
allowances in the ratio of 60:40
respectively. Antiporda's salary is P20,000
and Sy's is P10,000. The partners are also
paid interest on their average capital
balances. In 2019, Antiporda received
P10,000 in interest and Sy P4,000. If Sy's
share in the partnership profit was P40,000
in 2019, what was the total partnership
profit?
- 109,000