Recording of Transactions

Question 1

True or False

Posting a transaction twice results in unbalanced debits and credits.

Answer 1

False

• The debits and credits will remain balanced.

Question 2

True or False

The basic summary device of accounting is the ledger.

Answer 2

False

Question 3

True or False

Double-entry bookkeeping denotes that an increase or decrease in an asset only corresponds to an increase or decrease in a liability.

Answer 3

False

Question 4

True or False

A credit entry to unearned revenue increases a liability.

Answer 4

True

Question 5

True or False

Recording 5,126 as 5,162 is an example of a transposition error.

Answer 5

True

Question 6

True or False

Income statement accounts are permanent accounts, while balance sheet accounts are temporary accounts.

Answer 6

False

Question 7

True or False

An increase in accounts receivable is recorded as a debit, thus increases the total assets.

Answer 7

True

Question 8

Multiple Choice (Theory)

A firm’s failure to recognize depreciation expense for the year would

a. overstate assets, understate expenses, overstate net income
b. overstate assets, overstate expenses, overstate net income
c. understate assets, understate expenses, understate net income
d. understate assets, overstate expenses, no effect on net income

Answer 8

a. overstate assets, understate expenses, overstate net income

Dr. Depreciation Expense
Cr. Accumulated Depreciation

Question 9

Multiple Choice (Theory)

Which of the following is correct under the double-entry bookkeeping?

a. The change in asset must be compensated by a change in liability.
b. An increase in asset must be compensated by a decrease in asset.
c. The change in a debit-side entry must be compensated by a change in the credit-side entry.

Answer 9

c. The change in a debit-side entry must be compensated by a change in the credit-side entry.

Question 10

Multiple Choice (Theory)

Which of the following does not directly or indirectly affect the owner’s Capital account?

a. Withdrawals by the owner
b. Paying an accounts payable
c. Incurring expenses
d. Earning revenues

Answer 10

b. Paying an accounts payable

Question 11

Multiple Choice (Theory)

Advance payment of insurance premiums will

a. Decrease unearned income
b. Increase accrued expenses
c. Increase prepaid expense
d. Increase accrued income

Answer 11

c. Increase prepaid expense

Question 12

Multiple Choice (Theory)

Which of the following is not an application of accrual accounting?

a. Recording advertising revenues when cash payment was received.
b. Recording advertising revenues when service was rendered.
c. Recording the amount of accrued interest
d. Recording telephone expense when the monthly bill is received

Answer 12

a. Recording advertising revenues when cash payment was received.

Question 13

Multiple Choice (Theory)

When an entity pays for goods or services before actual receipt, the payment should be recorded as a decrease of cash and increase in

a. an expense
b. an asset
c. an owner’s equity account
d. a liability

Answer 13

a. an expense

Question 14

Multiple Choice (Theory)

Which of the following transactions does not affect the balance sheet totals?

a. Withdrawal of P17,000 by the firm’s owner
b. Paying an interest payable of P1,245
c. Collecting P5,000 from customers on account
d. Purchasing P10,000 supplies on account

Answer 14

c. Collecting P5,000 from customers on account

Question 15

Multiple Choice (Problem Solving)

In July 2021, Mr. J Printing Press started its business operations. Office supplies of P35,575 and machinery costing P127,000 were purchased. In the same month, the entity bought a piece of equipment worth P123,456 and office supplies costing P7,890. Additionally, the owner withdrew 3,000 from the business to buy home supplies. On July 31, supplies on hand amounted to P30,450. How much is the month’s supplies expense?

a. 16,015
b. 5,125
c. 13,015
d. 1,085

Answer 15

c. 13,015

Office Supplies  P35,575
Add: Office Sup.     7,890
-------------------------------------
Total Office Sup.    P43,465
Less: Sup. on hand  30,450
---------------------------------------
Total supplies exp.  P13,015

Question 16

Multiple Choice (Problem Solving)

Use the following information to answer items 2-3.

David Banaag, a sole proprietor, established Banaag Delivery Service. The following transactions occurred during the month:

a. David deposited 250,000 in a bank account in the name of the business
b. Bought delivery trucks for 80,000, paying 5,000 in cash and the balance on account
c. Bought office equipment, paying cash, P1,500
d. Paid salaries expense, P2,900
e. Paid gas expense for company trucks, P750
f. Billed customers for delivery services rendered, P5,500
g. Received P2,200 as partial payment from customers who were previously billed
h. David paid her home telephone bill from the company checkbook, P700

I. Received cash for delivery services rendered, P15,000.

j. Rendered delivery service on account, P4,570

After posting these transactions, how much is the balance of the cash account?

a. 257,050
b. 262,550
c. 256,350
d. 255,350

Answer 16

c. 256,350

Cash
Dr. 250,000
          2,200
         15,000
--------------------
    P267,200

Cr. 5,000
      1,500
      2,900
         750
         700
---------------------
      P10,850

Dr. P256,350

Question 17

Multiple Choice (Problem Solving)

(Refer to the problem in the previous question.)

How much is the balance of the accounts receivables account?

a. 10,070
b. 3,300
c. 7,870
d. 0

Answer 17

Accounts Receivable
Dr. 5,500
      4,570
---------------
    P10,070

Cr. 2,200

Dr. P 7,870

Question 18

Multiple Choice (Problem Solving)

Entity A failed to record an accrued expense of P175,290 and a prepayment of P130,470. The draft income statement shows a loss of P220,000 for the year ended December 31, 2021. What should be the profit or loss following the inclusion of the accrued expense and prepayment?

a. 264,820 loss
b. 264,820 profit
c. 175,180 loss
d. 175,180 profit

Answer 18

a. 264,820 loss

Acc Exp.            175,290
Less: Prepay     130,470
------------------------------------
Total                    44,820
Add: DIS (loss)   220,000
------------------------------------
Total                   P264,820

Loss => Expense (Accrued Expense & prepayment)

Question 19

Multiple Choice (Problem Solving)

During 2021, an entity paid a total of P600,000 for rent, covering the period from October 1, 2020 to March 31, 2022. What figure should appear in the Income Statement for the year ended December 31, 2021?

a. 300,000
b. 100,000
c. 200,000
d. 400,000

Answer 19

d. 400,000

18 months

P600,000 / 18 (months) = P33,333.33 x 3 (Oct. - Dec. 2020) = P1,000 omit

33,333.33 x 12 (Jan. - Dec. 2021) = P400,000

Question 20

Multiple Choice (Problem Solving)

Based on no. 5, what figure should appear in the prepayment in the Balance Sheet as of December 31, 2021?

a. 200,000
b. 400,000
c. 300,000
d. 100,000

Answer 20

d. 100,000

Remaining P100,000 for Jan. - Mar. 2022