14.
Companies can prepare the income
SHS – ACCTG. 1 FUNDAMENTALS OF
ACCOUNTANCY
REVIEWER
_____________________________________________
__
“Try not to become a man of success. Rather become a
man of value.”
-Albert Einstein
TRUE OR FALSE
1. A ledger is where the company initially
records transactions and selected other
events. FALSE
2. Under International Financial Reporting
Standards (IFRS) the "book of original
entry" is also known as the journal. TRUE
3. On the income statement, debits are used
to increase account balances, whereas on
the statement of financial position, credits
are used to increase account
balances.FALSE
4. The rules for debit and credit and the
normal balance of owner’s equity are the
same as for liabilities.TRUE
5. Both a corporation and a proprietorship
commonly use the share capital
account.FALSE
6. All liability and equity accounts are
increased on the credit side and
decreased on the debit side.TRUE
7. The first step in the accounting cycle is
the journalizing of transactions and
selected other events.FALSE
8. The trial balance uncovers any errors in
journalizing and posting prior to
preparation of the statement of financial
position.FALSE
9. The trial balance will not balance when a
company debits two statements of
financial position accounts and no income
statement accounts.TRUE
10. Posting is done for income statement
activity; activity related to statement of
financial position does not require
posting.FALSE
11. The trial balance is a listing of all the
accounts and their balances in the order
the accounts appear on the statement of
financial position.TRUE
12. An adjustment for salaries and wages
expense, incurred but unpaid at year end,
is an example of an accrued
expense.TRUE
13. A company must make adjusting entries
each time it prepares an income
statement and a statement of financial
position.TRUE
statement and the statement of financial
position directly from the adjusted trial
balance.TRUE
15. The accrual basis recognizes revenue
when earned and expenses in the period
when cash is paid.FALSE
16. Accounting provides quantitative
information. TRUE
17. The GAAP stands for Generally Accepted
Accounting Principles. TRUE
18. Classifying is writing down the business
transactions chronologically.FALSE
19. An increase in income is on the credit side
hence a decrease in expense is also on
the credit side.TRUE
20. If the revenues are equal to or more than
the expenses for a given period, there is a
net income.TRUE
RULES OF DEBIT AND CREDIT
21. Asset accounts normally have DEBIT
balances.
22. An increase in asset is recorded as a
DEBIT.
23. A decrease in asset is recorded as a
CREDIT.
24. Liability accounts normally have a
CREDIT balances.
25. An increase in liability is recorded as a
CREDIT.
26. A decrease in liability is recorded as a
DEBIT.
27. The owner’s equity accounts normally
have a CREDIT balances.
28. An increase in owner’s equity is recorded
as a CREDIT.
29. A decrease in owner’s equity is recorded
as a DEBIT.
30. Income accounts normally have a
CREDIT balances.
31. An increase in income account is recorded
as CREDIT.
32. A decrease in income account is recorded
as DEBIT.
33. Expense accounts normally have DEBIT
balances.
34. An increase in expense account is
recorded as DEBIT
35. A decrease in expense account is recorded
as CREDIT.
 ELEMENTS OF FINANCIAL STATEMENTS G. CASH 19,300
Direction: Fill in the missing amount in each SERVICE REVENUE 19,300
accounting equation.
H. ACCOUNTS PAYABLE 4,000
Accounting equation: A=L+OE CASH 4,000

OWNER’S I. DIAZ, CAPITAL 9,000

ASSETS LIABILITIES EQUITY CASH 9,000
36. P257,000 P72,000 P185,000
37. P565,000 210,000 355,000 LEDGER ACCOUNTS:
38. P125,000 200,000 (75,000)
CASH STORE SUPPLIES
39. 430,000 (156,000) P586,000
40. 85,000 P190,000 (105,000)

RECORDING BUSINESS TRANSACTIONS

INSTRUCTION: Identify the normal balance of
the following account titles. STORE EQUIPMENT ACCOUNTS PAYABLE

41. Dividend Income CREDIT

42. Merchandise Inventory DEBIT
43. Office Supplies DEBIT DIAZ, CAPITAL SERVICE REVENUE
44. Diaz, Capital CREDIT
45. Purchases DEBIT
46. Sales CREDIT
47. Interest Expense DEBIT
48. Interest Income CREDIT
49. Professional Fees CREDIT SALARIES EXPENSE RENT EXPENSE
50. Equipment DEBIT
51. Cost of Sales DEBIT
52. Accounts Receivable DEBIT
53. Rent Expense DEBIT
54. Notes Payable CREDIT
What are the balances of the following accounts:
55. Land DEBIT

A B C D
POSTING TO THE LEDGER
8,000 7,000 5,000 6,000
INSTRUCTIONS: Analyze the following Journal
21,250 22,300 27,550 6,250
Entries. Post the following journal entries in the 12,000 10,520 11,000 1,250
ledger accounts and answer the following 45,300 40,300 42,500 41,150
questions.
56. Cash A. 45,300
JOURNAL ENTRIES: 57. Store Supplies D. 6,000
A. CASH 20,000 58. Store Equipment A. 12,000
DIAZ, CAPITAL 20,000 59. Accounts Payable A. 8,000
60. Diaz, Capital C. 11,000
B. STORE SUPPLIES 6,000
61. Service Revenue C. 27,550
CASH 6,000
62. Salaries Expense D. 1,250
63. Rent Expense C. 5,000
C. RENT EXPENSE 5,000
CASH 5,000 64. Total Assets is equal to B. 40,300
65. Total expense amounts to D. 6,250
D. STORE EQUIPMENT 12,000
ACCOUNTS PAYABLE 12,000

E. CASH 8,250
SERVICE REVENUE 8,250

F. SALARIES EXPENSE 1,250

CASH 1,250