CHAPTER 4

Question 1

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

Answer 1

False

Question 2

Debit means the lest side of an account, whole credit means the right.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

An account has total debits of Php80 and total credits of Php20. This account has a balance of Php60.

Answer 4

True

Question 5

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

Answer 5

False

Question 6

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

Answer 6

True

Question 7

There are five major types of accounts used in accounting.

Answer 7

True

Question 8

Income and expenses are the balance sheet accounts.

Answer 8

False

Question 9

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

Answer 9

True

Question 10

The “used up” portion of supplies bought during the period is called “Prepaid supplies.”

Answer 10

False

Question 11

The right side of an account is called credit.

Answer 11

True

Question 12

Accounts payable and accounts receivable are opposites, meaning if I have an account payable to you, you, in turn, have an account receivable from me.

Answer 12

True

Question 13

You are selling banana cue. If I buy your banana cue and informally promise to pay for it tomorrow, your ‘accounts payable’ will increase.

Answer 13

False

Question 14

In conjuction with #13 above, my ‘accounts receivable’ will increase.

Answer 14

False

Question 15

If after sometime, I haven’t paid yet my dues to you in #13 above, and you don’t expect that I can pay you, you will recognize an expense called bad debt expense.

Answer 15

True

Question 16

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

Answer 16

False

Question 17

The terms “receivable” and “prepaid” connote an asset, while the terms “payable” and “unearned” connote a liability.

Answer 17

True

Question 18

Collectively, land, building and equipment are referred to as “Property, plant and equipment.

Answer 18

True

Question 19

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

Answer 19

False

Question 20

Mr. Monkey’s main business activity involves selling bananas. One time, Mr. Monkey sold an iPhone with carrying amount of PHp17 for Php20. Mr. Monkey recognizes a gain of Php3 on this transaction rather than revenue.

Answer 20

True