1.

Owned resources of a business are referred to as

a. assets
b. liabilities
c. equities
d. revenues

2. Assets are
a. always greater than liabilities.
b. either cash or accounts receivables
c. the same as expenses because they are acquired with cash
d. financed by the company and/or creditors

3. Debts owed by a business are referred to as

a. accounts receivables
b. equities
c. stockholders’ equity
d. liabilities

4. The accounting equation may be expressed as

a. Assets = Equities - Liabilities
 b. Assets + Liabilities = Stockholders’ Equity
c. Assets = Revenues less Liabilities
d. Assets - Liabilities = Stockholders’ Equity

5. Which of the following is not an asset?

a. Investments
b. Cash
c. Inventory
d. Owner’s Equity

6. The assets and liabilities of the company are P155,000 and P60,000 respectfully. Stockholders’ equity should equal
a. P215,000
b. P155,000
c. P 60,000
d. P 95,000

7. If total liabilities decreased by P25,000 during a period of time and stockholders' equity increased by P30,000 during the same
period, the amount and direction (increase or decrease) of the period's change in total assets is
a. P65,000 increase
b. P5,000 decrease
c. P5,000 increase
d. P65,000 decrease

8. Which of the following is not a true statement about the accounting equation and its elements?
a. The accounting equation is Assets = Liabilities - Stockholders’ Equity.
b. Assets are the resources a business possesses.
c. Liabilities represent debts of a business.
d. Examples of assets are cash, land, buildings, and equipment.
e. Stockholders’ equity are the rights of the stockholders.

9. Which of the following is not a business transaction?

a. make a sales offer
b. sell goods for cash
c. receive cash for services to be rendered later
d. pay for supplies
10. A business paid P9,000 to a creditor in payment of an amount owed. The effect of the transaction on the accounting equation
was to
a. increase one asset, decrease another asset
b. increase an asset, increase a liability
c. decrease an asset, decrease a liability
d. increase an asset, increase stockholders' equity

11. On November 1 of the current year, the assets and liabilities of Jim Chu, M.D., are as follows: Cash, P10,000; Accounts
Receivable, P8,200; Supplies, P1,050; Land, P25,000; Accounts Payable, P6,530. What is the amount of stockholders' equity
as of November 1 of the current year?
a. P37,720
b. P44,430
c. P21,500
d. P50,780

12. Which of the following sequences of action describes the proper sequence in the accounting cycle?
a. Post, close, prepare, adjust, analyze, journalize.
b. Journalize, post, close, prepare, adjust, analyze.
c. Prepare, journalize, post, adjust, analyze, close.
d. Analyze, journalize, post, adjust, prepare, close.

13. If no adjustments are needed for a particular company

a. Its trial balance will be identical to its adjusted trial balance.
b. Its trial balance, adjusted trial balance, and post-closing trial balance will be identical.
c. Its post-closing trial balance will be identical to its trial balance.
d. Its adjusted trial balance will be identical to its post-closing trial balance.

14. In the accounting cycle, which of the following steps is considered the output document or record?
a. The journal.
b. The worksheet.
c. Financial statements.
d. The ledger.

15. An important purpose of the worksheet is to

a. Accompany the financial statements in the company’s annual report.
b. Aid the accountant in the daily preparation of journal entries.
c. Replace the journal when making adjusting and closing entries.
d. Check the accuracy of adjusting entries before they are formally entered into the accounting record.

16. Which of the following accountant will have an amount in the Adjustments column of the worksheet, but probably not in the
Trial Balance column?
a. Revenue from Services.
b. Depreciation Expense, Machinery.
c. Utilities Expense.
d. Juan dela Cruz, Capital.

17. Which of the following accounts would not be found in the closing entries?
a. Reyes, Capital.
b. Reyes, Withdrawals.
c. Accumulated Depreciation, Equipment.
d. Income Summary.

18. The normal account balances for Villa, Capital, and Villa, Withdrawals, are
a. Credit and debit, respectively.
b. Debits.
c. Credits.
d. Debit and credit, respectively.

19. Which of the following types of entries is made primarily to help conform to the matching principle?
a. Reversing entries.
b. Adjusting entries.
c. Closing entries.
d. Correcting entries.

20. Reversing entries occur at the beginning of the accounting period. The primary objective of reversing entries is to
a. Place the expenses for the current period in the proper accounts.
b. Transfer the balance of the expense account to the capital account and set the accounts equal to zero.
c. Simplify the bookkeeping associated with accruals from the prior period.
d. Correct errors.

21. Which of the following accounts could appear in an adjusting entry, closing entry, and reversing entry?
a. Accumulated Depreciation, Buildings.
b. Salaries Payable.
c. Depreciation Expense, Buildings.
d. Advertising Fees Earned.

22. Which of the following could not possibly be a closing entry?

a. Debit J. Rizal, Capital and credit Income Summary.
b. Debit Income Summary and credit J. Rizal, Capital.
c. Debit J. Rizal, Capital and credit J. Rizal, Withdrawals.
d. Debit Income Summary and credit J. Rizal, Withdrawals.
23. When a company suffered a net loss, the net loss amount is entered into the worksheet in the
a. Credit side of both the Income Statement column and the Balance Sheet column.
b. Debit side of both the Income Statement column and the Balance Sheet column.
c. Credit side of the Income Statement column and the debit side of the Balance Sheet column.
d. Debit side of the Income Statement column and the credit side of the Balance Sheet column.

24. After all closing entries have been posted, which of the following accounts is most likely to have a nonzero balance?
a. Wages Payable.
b. Income Summary.
c. Service Revenue.
d. Interest Expense.

25. The post-closing trial balance would not include which of the following accounts?
a. Accumulated Depreciation, Office Equipment.
b. A. Bonifacio, Capital.
c. A. Bonifacio, Withdrawals.
d. Unearned Legal Fees.

26. Which of the following is the most useful aid in the accountant in preparing closing entries?
a. Work Sheet.
b. Financial Statements.
c. Ledger.
d. Journal.

27. Which work sheet column should contain “key letters?”

a. Trial Balance.
b. Adjustments.
c. Balance Sheet.
d. Adjusted Trial balance.

28. In the work sheet, under what circumstances will the 1st two columns be in balance after the initial footing?
a. When no adjustments have been entered into the work sheet.
b. Under no circumstances.
c. Under all circumstances, assuming no arithmetical errors has been made.
d. When net income equals exactly P0.

29. The preparation of formal adjusting entries

a. Is difficult, and therefore must first be entered into the general journal in pencil.
b. Typically precedes the preparation of the financial statements.
c. Typically precedes the preparation of the work sheet.
d. Is easy because they are simply copied from the work sheet.

30. In the work sheet, account balances are “extended” from

a. The Income Statement and Balance Sheet columns to the Financial Statements.
b. The Trial Balance columns and the Adjusted Trial Balance columns.
c. The Adjusted Trial Balance columns to the Income Statement and Balance Sheet columns.
d. The Trial Balance and Adjustments columns to the Adjusted Trial Balance columns.

31. In the completed work sheet, which set of columns should usually be out of balance after the initial footing?
a. The Balance Sheet column.
b. The Adjusted Trial Balance columns.
c. The Income Statements columns.
d. Both “a” and “c” are correct.

32. Which of the following accounts would probably have a smaller balance in the Adjusted Trial Balance columns of a work
sheet than in the Trial Balance columns?
a. Prepaid Advertising.
b. Wages Payable.
c. Wages Expense.
d. Accumulated Depreciation, Equipment.

33. Which of the following sequences of documents or records describes the proper sequence in the accounting cycle?
a. Source documents, work sheet, journal, ledger, financial statements.
b. Source documents, journal, ledger, work sheet, financial statements.
c. Source documents, ledger, journal, work sheet, financial statements.
d. Work sheet, source documents, journal, ledger, financial statements.

34. The process of posting is most closely associated with the

a. Ledger.
b. Source documents.
c. Work sheet.
d. Financial statements.

35. On which financial statements will Income Summary appear?

a. Balance Sheet.
b. Statements of owners’ equity.
c. On no financial statement.
d. Income statement.

36. In preparing closing entries, which of the following columns of the work sheet are the most helpful?
a. The Income Statement columns.
b. The Balance Sheet columns.
c. The Adjustments columns.
d. The Adjusted Trial Balance columns.

37. Which of the following financial statements cannot be prepared by referring solely to the completed work sheet?
a. Statement of Cash Flows.
b. Statement of owners’ equity.
c. Balance Sheet.
d. Income Statement.

38. When accompany has earned a net income, the net income amount is entered into the work sheet in the
a. Credit side of both the Income Statement column and the Balance Sheet column.
b. Debit side of both the Income Statement column and the Balance Sheet column.
c. Credit side of the Income Statement column and the debit side of the Balance Sheet column.
d. Debit side of the Income Statement column and the credit side of the Balance Sheet column.

39. An amount would not appear opposite the owners’ withdrawals account in which work sheet column?
a. Adjusted Trial Balance.
b. Balance Sheet.
c. Trial Balance.
d. Income Statement.

40. In preparing adjustments in the work sheet, which of the following accounts could be added to the accounts column?
a. Interest Receivables.
b. Notes Payable.
c. Interest Income.
d. Depreciation Expense.

41. Which of the following accounts is not closed during the closing procedure?
a. J. Luna, Withdrawals.
b. Commission Earned.
c. J. Luna, Capital.
d. Income Summary.
42. The post-closing trial balance differs from the adjusted trial balance in that
a. Does not take into account closing entries.
b. Does not include balance sheet accounts.
c. Does not include income statement accounts.
d. Does not take into account adjusting entries.

43. Which of the following entries could not be a legitimate reversing entry?
a. Debit Interest Receivable and credit Interest Income.
b. Debit Wages Payable and credit Wages Expense.
c. Debit Fees Earned and credit Accounts Receivable.
d. Debit Interest Payable and credit Interest Expense.

44. A reversing entry would be acceptable for which of the following?

a. Accrual of interest expense.
b. Correction of an error.
c. Depreciation of building.
d. Allocation of prepaid rent to the current period.

45. An important purpose of closing entries is

a. To help in preparing financial statements.
b. To set real account balances to zero in order to begin the next period.
c. To adjust the account in the ledger.
d. To set nominal account balances to zero in order to begin the next period.

46. A work sheet is useful for all but which of the following?
a. Preparing financial statements.
b. Recording closing entries.
c. Recording adjusting entries.
d. Recording transaction from source documents.

47. Typically, formal adjusting entries

a. Are prepared prior to completion of the work sheet.
b. Need not be prepared if a work sheet has been completed.
c. Are prepared at the same time as formal closing entries.
d. Are entered directly into the ledger.

48. The process of cross footing in the work sheet results in the
a. Trial Balance columns.
b. Adjustments columns.
c. Adjusted Trial Balance columns.
d. Income Statement columns.

49. Which of the following adjustments would most likely be reversed if a company used reversing entries?
a. The adjustment to determine supplies expense for the period.
b. The adjustment to accrue salaries payable.
c. The adjustment to allocate prepaid insurance to the current period.
d. The adjustment to record depreciation expense.

50. The adjustment on 12/31/x1 to accrue interest payable would most likely be reversed by which of the following entries?
a. Debit Interest Payable and credit Interest Expense on 1/1/x2.
b. Debit Interest Expense and credit Interest Payable on 12/31/x2.
c. Debit Interest Expense and credit Interest Payable on 1/1/x2.
d. Debit Interest Payable and credit Interest Expense on 12/31/x1.

51. Amar Company received P96,000 on April 1, 2002 for one year’s rent in advance and recorded the transaction with a credit to
a nominal account. The December 31, 2002 adjusting entry is
a. Debit rent revenue and credit unearned rent revenue, P24,000.
b. Debit rent revenue and credit unearned rent revenue, P72,000.
c. Debit unearned rent revenue and credit rent revenue, P24,000.
d. Debit unearned rent revenue and credit rent revenue, P72,000.

52. Andoy Company paid P72,000 on June 1, 2002 for a two-year insurance policy and recorded the entire amount as insurance
expense. The December 31, 2002 adjusting entry is
a. Debit insurance expense and credit prepaid insurance, P21,000.
b. Debit insurance expense and credit prepaid insurance, P51,000.
c. Debit prepaid insurance and credit insurance expense, P21,000.
d. Debit prepaid insurance and credit insurance expense, P51,000.

53. Antipuesto Company purchase equipment on November 1, 2002 and gave a 12-month, 9% note with a face value of P480,000.
The December 31, 2002 adjusting entry is
a. Debit interest expense and credit interest payable, P7,200.
b. Debit interest expense and credit interest payable, P10,800.
c. Debit interest expense and credit cash, P7,200.
d. Debit interest expense and credit interest payable, P43,200.

54. On December 31, 2002, Asilo Company’s bookkeeper made an adjusting entry debiting supplies expense and credit supplies
inventory for P12,600. The supplies inventory accounts had a P15,300 debit balance on December 31, 2001. The December
31, 2002 balance sheet showed supplies inventory of P11,400. Only one purchase of supplies was made during the month, on
account. The entry for that purchase was
a. Debit supplies inventory and credit cash, P8,700.
b. Debit supplies expense and credit accounts payable, P8,700.
c. Debit supplies inventory and credit accounts payable, P8,700.
d. Debit supplies inventory and credit accounts payable, P16,500.

55. Astillo Company loaned P300,000 to another company on December 1, 2002 and received a 3-month, 15%, interest-bearing
note with a face value of P300,000. What adjusting entry should Astillo Company make on December 31, 2002?
a. Debit interest receivable and credit interest income, P7,500.
b. Debit cash and credit interest income, P3,750.
c. Debit interest receivable and credit interest income, P3,750.
d. Debit cash and credit interest receivable, P7,500.

56. The supplies inventory account balance at the beginning of the period was P66,000. Supplies totaling P128,250 were
purchased during the period and debited to supplies inventory. A physical count shows P38,250 of supplies inventory at the
end of the period. The year-end adjusting entry is
a. Debit supplies inventory and credit supplies expense, P90,000.
b. Debit supplies expense and credit supplies inventory, P128,250.
c. Debit supplies inventory and credit supplies expense, P156,000.
d. Debit supplies expense and credit supplies inventory, P156,000.

57. At the end of 2002, Avila Company made four adjusting entries for the following items: (1) depreciation expense, P35,000; (2)
expired insurance, P2,200 (originally recorded as prepaid insurance); (3) interest payable, P9,000; and (4) rental revenue
receivable, P10,000.

In the normal situation, to facilitate subsequent entries, the adjusting entry or entries that may be reversed is/are
a. Entry 1 c. Entries 3 and 4
b. Entry 4 d. Entries 2, 3, and 4

58. Bagaipo Company reported an allowance for doubtful accounts of P12,000 (credit) at December 31, 2002 before performing
an aging of accounts receivable. As a result of the aging, Bagaipo Company determined that an estimated P20,000 of the
December 31, 2002 accounts receivable would prove uncollectible. The adjusting entry at December 31, 2002 would be
a. Doubtful accounts expense 8,000
Allowance for doubtful accounts 8,000
b. Doubtful accounts expense 20,000
Accounts receivable 20,000
c. Allowance for doubtful accounts 8,000
Doubtful accounts expense 8,000
d. Doubtful accounts expense 8,000
Interest revenue 8,000

59. Assuming that the company does not reverse the adjusting entries, what should be made on April 1, 200 when the annual
interest payment is received?
a. Debit cash and credit interest revenue, P9,375.
b. Debit cash and credit interest receivable, P28,125.
c. Debit cash, P37,500; credit interest receivable, P28,125; and interest revenue, P9,375.
d. Debit cash and credit interest revenue, P37,500.

60. Using the data of No. 19, but assuming that the company does reverse its adjusting entries, what entry should be made on April
1, 2003 when the annual interest payment is received?
a. Debit cash and credit interest revenue, P9,375.
b. Debit cash and credit interest receivable, P28,125.
c. Debit cash, P37,500; credit interest receivable, P28,125; and interest revenue, P9,375.
d. Debit cash and credit interest revenue, P37,500.

The following is the post-closing trial balance of Abagon Shop dated February 1, 2006:

Debit Credit
Cash 120,000
Accounts Receivable 280,000
Allowance for doubtful accounts 2,800
Unused shop supplies 800
Shop Equipment 240,000
Accumulated depreciation - shop 48,000
equipment
Accounts payable 88,800
Notes payable 100,000
Accrued interest payable 1,200
Abagon, Capital 400,000
Total 640,800 640,800

For the month of February, the following are the transactions of Abagon Shop.

1. Abagon withdrew P100,000 cash from the business for her personal use.
2. Paid P12,000 insurance premium.
3. Paid P24,000 rent.
4. Total service rendered to various customers, P140,000, 40% of total sales are on cash basis
and the balance on open account.
5. Received promissory note from customer to replace P40,000 accounts receivable.
6. Collected in cash P164,000 of accounts receivable.
7. Paid the notes payable of P100,000 plus the P2,400 interest.
8. Purchased P2,400 shop supplies on cash basis.
9. Paid salaries, P24,000.

At the end of the month, the following information are available to effect adjustments.

a. The insurance in number 2 for P12,000 is applicable for six months starting February.
b. The rent of P24,000 paid in number 3 is for 3 months, starting February.
c. The note receivable is number 5 is earning 12% interest per year. The note is dated February
1, and is due on April 30.
d. Bad debts expense is estimated at 2% of accounts receivable balance.
e. The annual depreciation is P48,000.
f. The unused supplies balance is P1,000.

Questions
1. Cash at end of February is:
2. Net Realizable value of Accounts Receivable at end of February is
3. Unused shop supplies at end of February is
4. Net book value of Shop Equipment at end of February is
5. Accounts Payable at end of February is
6. Notes Payable at end of February is
7. Abagon Capital, net of drawing at end of February is
8. Net income of the company at end of February is
9. Total Revenue of the company at end of February is
10. Total Expenses of the Company at end of February is