CHAPTER 4

Question 1

Account is the basic storage of information in accounting. An account may be depicted through a ‘T-account.’ Which of the following is not one of the parts of a T-account?
1. Account title
2. Left side or debit side
3. Right side or credit side
4. Upside down or bottoms up

Answer 1

4
Upside down or bottoms up

Question 2

Which of the following is not one of the five major accounts?
1. Assets
2. Income
3. Equity
4. Losses

Answer 2

4
Losses

Question 3

Which of the following is not one of the balance sheet (statement of financial position accounts?
1. Assets
2. Liabilities
3. Equity
4. Income

Answer 3

4
Income

Question 4

It is a list of all the accounts used by a business.
1. Trial balance
2. Contact list
3. Chart of accounts
4. Organizational chart

Answer 4

3
Chart of accounts

Question 5

An account with the following numbering ‘2100’ is most likely to be a(an)
1. asset account.
2. liability account.
3. equity account.
4. expense account.

Answer 5

2
liability account.

Question 6

The money held by a business, including the increases or decreases thereto, is recorded in this account.
1. Cash
2. Accounts receivable
3. Owner’s equity
4. Sales

Answer 6

1
Cash

Question 7

Receivables that are supported only by oral or informal promise to pay.
1. Cash
2. Accounts receivable
3. Accounts payable
4. Notes receivable

Answer 7

2
Accounts receivable

Question 8

Contributions by the business owner to the business and profits or losses of the business are recorded in this account.
1. Owner’s equity
2. Owner’s drawings
3. Sales
4. Salaries expense

Answer 8

1
Owner’s equity

Question 9

Revenues earned from the sale of goods are recorded in this account.
1. Inventory income
2. Goods income
3. Sales
4. Service fees

Answer 9

3
Sales

Question 10

This represents the value of inventories that have been sold, and consequently charged as expense, during the accounting period.
1. Inventory
2. Cost of sales(Cost of goods sold)
3. Supplies expense
4. Freight-out

Answer 10

2
Cost of sales (Cost of goods sold)

Question 11

Receivables that are supported by written or formal promises to pay in the form of promissory notes.
1. Inventory
2. Accounts receivable
3. Notes payable
4. Notes receivable

Answer 11

4
Notes receivable

Question 12

Goods that are held for sale by a business.
1. Cash
2. Accounts receivable
3. Accounts payable
4. Inventory

Answer 12

4
Inventory

Question 13

The unused portion of rent paid in advance.
1. Prepaid rent
2. Rent expense
3. Cash
4. Inventory

Answer 13

1
Prepaid rent

Question 14

Salaries earned by employees but not yet paid.
1. Salaries expense
2. Salaries payable
3. Employee points
4. Employee credits

Answer 14

2
Salaries payable

Question 15

Salaries earned by employees, whether paid or not.
1. Salaries expense
2. Salaries payable
3. Employee points
4. Employee credits

Answer 15

1
Salaries expense

Question 16

Temporary withdrawals of the owner from the business during the period are recorded in this account.
1. Owner’s expense
2. Owner’s drawings
3. Withdrawal expense
4. Salaries expense

Answer 16

2
Owner’s drawings

Question 17

Income collected in advance but not yet earned.
1. Unearned income
2. Early income
3. Sales
4. Service fees

Answer 17

1
Unearned income

Question 18

Obligations supported by oral or informal promises to pay by the debtor.
1. Cash
2. Accounts receivable
3. Accounts payable
4. Notes payable

Answer 18

3
Accounts payable

Question 19

The cost of inventories that have been sold during the period.
1. Cost of sales
2. Cost of inventories
3. Inventory
4. Selling expense

Answer 19

1
Cost of sales

Question 20

The amount of estimated losses from uncollectible accounts receivable during the period.
1. Good expense
2. Bad expense
3. Ugly expense
4. Bad debts expense

Answer 20

4
Bad debt expense

Question 21

A merchandising or manufacturing business uses this account to record revenues earned from primary business activities.
1. Sales
2. Services
3. Gains
4. Seals

Answer 21

1
Sales

Question 22

Obligations supported by written or formal promises to pay by the debtor in the form of promissory notes.
1. Notes receivable
2. Accounts receivable
3. Accounts payable
4. Notes payable

Answer 22

4
Notes payable

Question 23

The structure owned and being used by a business in its operations.
1. Building
2. Base
3. Castle
4. Kingdom

Answer 23

1
Building

Question 24

The portion of the cost of a building that is already recognized as expenses since the building was acquired and made available for use.
1. Accumulated depreciation - building
2. Upkeep
3. Accumulated upkeep
4. Repairs and maintenance expense

Answer 24

1
Accoumulated depreciation - building

Question 25

The cost of unused office and other supplies.
1. Prepaid rent
2. Prepaid supplies
3. Cash
4. Accounts receivable

Answer 25

2
Prepaid supplies

Question 26

Interest incurred by a borrower but not yet paid.
1. Interest payable
2. Interest expense
3. Notes payable
4. Notes receivable

Answer 26

1
Interest payable

Question 27

Interest incurred by a borrower, whether paid or not.
1. Interest payable
2. Interest expense
3. Notes payable
4. Notes receivable

Answer 27

2
Interest expense

Question 28

The seller’s cost of delivering goods to customers.
1. Freight-out
2. Freight-in
3. Freight-good
4. Freight-bad

Answer 28

1
Freight-out

Question 29

The cost of promotional or marketing activities during the period.
1. Market expense
2. Advertising expense
3. Groceries
4. Insurance expense

Answer 29

2
Advertising expense

Question 30

The cost of gasoline, hotel accommodation, taxi fare, and similar expenditures.
1. Transportation and travel expense
2. Interest expense
3. Taxi expense
4. Gas expense

Answer 30

1
Transporation and travel expense

Question 31

The cost of the lot on which the building of a business has been constructed is recorded in an account described as
1. Realm.
2. Ground.
3. Land.
4. Earth.

Answer 31

3
Land.

Question 32

Entity A sells an asset that is not an inventory for Php100. The carrying amount of the asset is Php180. The Php80 difference represents a
1. gain.
2. loss.
3. revenue.
4. interest income.

Answer 32

2
loss.

Question 33

Interest earned by a lender but not yet collected.
1. Interest receivable
2. Interest income
3. Notes payable
4. Notes receivable

Answer 33

1
Interest receivable

Question 34

Interest earned by a lender, whether collected or not.
1. Interest receivable
2. Interest income
3. Notes payable
4. Notes receivable

Answer 34

2
Interest income

Question 35

Revenues earned from rendering services.
1. Unearned income
2. Rendering income
3. Sales
4. Service fees

Answer 35

4
Service fees

Question 36

The cost of supplies used in an accounting period.
1. Prepaid supplies
2. Supplies cost
3. Supplies expense
4. Surprise expense

Answer 36

3
Supplies expense

Question 37

The portion of the cost of a building or equipment that has been charged as expense in the current accounting period.
1. Accumulated deduction
2. Deduction expense
3. Accumulated depreciation
4. Depreciation expense

Answer 37

3
Accumulated depreciation

Question 38

You opened up a business. Your initial investment to the business will be recorded in which of the following accounts?
1. Owner’s payable
2. Owner’s equity
3. Notes payable
4. Accounts payable

Answer 38

2
Owner’s equity

Question 39

In conjunction with #38 above, which of the following would most likely be your first expense?
1. Equipment
2. Inventory
3. Taxes and licenses
4. Utilities expense

Answer 39

3
Taxes and licenses

Question 40

You purchase goods that will be held for sale in the ordinary course of your business activities. You will record the goods as
1. Expense.
2. Income.
3. Accounts receivable.
4. Inventory.

Answer 40

4
Inventory

Question 41

You are a business owner. Your business needed additional capital so you obtained a loan from a bank. The bank made you sign a contract promising to repay the loan after a year. Which of the following accounts is increased by this transaction?
1. Accounts payable
2. Notes payable
3. Accounts receivable
4. Notes receivable

Answer 41

2
Notes payable

Question 42

From the point of view of the bank who lent you the loan in #41 above, which of the following accounts is increased?
1. Accounts payable
2. Notes payable
3. Accounts receivable
4. Notes receivable

Answer 42

4
Notes receivable

Question 43

A customer bought goods from your business, on credit. The customer orally promised to pay the sale price next week. Which of the following accounts is increased by this transaction?
1. Accounts payable
2. Notes payable
3. Accounts receivable
4. Notes receivable

Answer 43

3
Accounts payable

Question 44

From the point of view of the customer who bought goods from your business in #43 above, which of the following accounts is increased?
1. Accounts payable
2. Notes payable
3. Accounts receivable
4. Notes receivable

Answer 44

1
Accounts payable

Question 45

When you collected the dues of the customer in #43 above, which of the following accounts is increased?
1. Accounts payable
2. Cash
3. Accounts receivable
4. Notes receivable

Answer 45

2
Cash

Question 46

From the point of view of the customer who paid you in #45 above, which of the following accounts is decreased?
1. Inventory
2. Cash
3. Accounts receivable
4. Notes receivable

Answer 46

2
Cash

Question 47

You purchased a computer for Php100,000. Which of the following accounts is increased by this transaction?
1. Cash
2. Owner’s capital
3. Computer equipment
4. Inventory

Answer 47

3
Computer equipment

Question 48

You expect to use the computer in #47 above over the next 5 years. How much is the depreciation expense per yer?
1. 10,000
2. 20,000
3. 7,143
4. 100,000

Answer 48

2
20,000

Question 49

After using the computer #’s 47 and 48 above for 3 years, how much is the balance of the “Accumulated depreciation - Computer equipment” account?
1. 60,000
2. 30,000
3. 20,000
4. 90,000

Answer 49

1
60,000

Question 50

At the end of Year 2, how much is the carrying amount of the computer equipment in #’s 47 and 48 above?
1. 50,000
2. 40,000
3. 60,000
4. 0

Answer 50

3
60,000