UNIVERSITY OF CEBU

PRELIM EXAMINATION ACCOUNTING 2

OCTOBER 11, 2020

NAME: ____________________________________________ DATE &

TIME:_________________

I. Before each statement, write TRUE if the statement is correct or FALSE if the statement is incorrect.

1. A partnership business is registered with the Department of Trade and Industry (DTI) and the
Securities and Exchange Commission (SEC).
2. General purpose financial statements are the end product of the financial accounting process.
These statements are intended for internal users.
3. Corporate and partnership businesses in the Philippines are regulated by the Department of Trade
and Industry (DTI).
4. An item that is considered material by one business is always considered material by all other
businesses.
5. Accounting is as old as civilization and has evolved in response to economic and social needs of
men.
6. Accounting is a service activity.
7. Partnership has unlimited life.
8. If you want to increase the balance of a liability account, you will debit it.
9. The normal balance of an asset or expense account is debit, while the normal balance of a
liability, equity or income account is credit.
10. In some instances, a journal entry can be recorded only through a debit and no credit, or vice-
versa.
11. A business owner contributes cash to the business. This transaction increases only the owner’s
equity account of the business.
12. A capitalist partner is the one who contributes money or property as well as his work or industry
to the partnership.
13. A secret partner is the one who does not take active part in running the partnership affairs but he
is a general partner.
14. Only accountable events are recorded in the accounting books.
15. Fra Luca Pacioli is the mother of modern accounting.

II. Multiple Choice

1. Transferring the debit and credit amounts of a journal entry to the ledger is called
a. Recording c. Tweeting
b. Posting d. Liking

2. Which of the following accounts is presented on the credit column of the unadjusted trial
balance?
a. Cash c. Owner’s drawings
b. Accounts Receivable d. Service fees

3. Which of the following is not one of the important parts of a journal entry?
a. Date
b. Account titles and amounts debited and credited
 c. A detailed narrative of the reason why management entered into the transaction
d. Short description of the transaction

4. You have various credit customers, including Ms. Oh Tang and Mr. Pah Lista. If you want to
know how much Ms. Oh Tang owes you, you will refer to the
a. General ledger c. Special journal
b. Subsidiary ledger d. Reminder app

5. If you want to increase an asset account, what would you do?

a. Debit that account c. Double that account
b. Credit that account d. Any of these

6. One of the following is not a characteristic of contract of partnership.

a. Real, in that the partners must deliver their contributions in order for the partnership contract
to be perfected
b. Principal, because it can stand by itself
c. Preparatory, because it is a means by which other contracts will be entered into
d. Onerous, because the parties contribute money, property, or industry to the common fund

7. 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?
a. Accounts payable c. Accounts receivable
b. Notes payable d. Notes receivable

8. Income collected in advance but not yet earned.

a. Unearned Income c. Sales
b. Early income d. Service fees

9. Entity A’s beginning equity was P60M. If during the year, Entity A earned total income of P16M
and incurred total expense of P8M, how much Entity A’s ending equity?
a. P68M c. P84M
b. P76M d. I’ll ask my classmate later.

10. Every partner has the authority to act for the partnership and become binding if such act is within
his express or implied authority
a. Co-ownership c. Mutual Agency
b. Limited Life d. None of these

11. Which of the following are needed in determining the Statement of Changes in Partners Equity
a. Partners’ equity at the beginning of the period c. share in profit
b. Partners’ drawing d. all of these

12. This is the phase of accounting which involves the routine and mechanical process of writing
down the business transactions and events in a chronological manner
a. Classifying c. Summarizing
b. Recording d. Interpreting
 13. Net working capital is defined as:
a. total liabilities minus shareholders' equity.
b. current liabilities minus shareholders' equity.
c. fixed assets minus long-term liabilities.
d. current assets minus current liabilities.
14. In case the partnership makes profit, how will an industrial partner be given a share?
a. Depending on the court’s decision c. Equally
b. Equally d. What is just equitable

15. A kind of partnership that all partners are personally liable for the partnership debts to the extent
of their personal assets in case partnership assets are not sufficient to pay the said obligation
a. General partnership c. Limited Partnership
b. Trading partnership d. None of these

III. Problem Solving

Entity A’s accounts have the following beginning balances:

Cash 300,000
Office Equipment 500,000
Accumulated Depreciation 100,000
Accounts Payable 300,000
Owner’s Equity 400,000

The following transactions during the year:

1. Owner contributed P70,000 cash to the business.

2. Purchased office supplies for P20,000 cash.
3. Paid salaries expense worth P10,000.
4. Rendered services worth P350,000, on account.
5. Owner withdrew P15,000 cash from the business.
6. Collected P100,000 accounts receivable.
7. Paid utilities expense worth P7,000 cash.
8. Rendered services worth P40,000, on cash basis.
9. Owner withdrew P10,000 cash from the business.
10. The business recognized depreciation P20,000 during the year.

Provide the following:

1. Prepare journal entries.

2. Determine the balances of each account after reflecting the transactions during the year.