REVIEW #1 (THEORIES)

1. When total debits exceed total credits in the income statement, this shows NET LOSS.
2. Debit always means increase. Credit always means decrease. Both statements are
incorrect.
3. American Institute of Certified Public Accountants defined accounting as the art of
recording, classifying, and summarizing in a significant manner and in terms of money,
transactions and events which are, in part at least, of financial character, and interpreting
results thereof.
4. FINANCIAL ACCOUNTING is the process of preparing accounting reports known as
financial statements that show the company’s financial performance and position to people
outside the company like creditors and customers.
5. Asset = Liability + Owner’s Equity / Asset = Liability + Owner’s Equity + Income –
Expenses – Withdrawal / Equity = Asset – Liability
6. BUSINESS ENTITY CONCEPT indicates that the personal assets and liabilities of the
owner is separate from the assets and of the business.
7. ACCRUED EXPENSE is not an expense account.
8. VERIFIABILITY is not a qualitative characteristic of financial statements.
9. Increase in Asset = Increase in Owner’s Equity / Increase in one Liability = Decrease
in another Liability
10. ERROR OF TRANSPOSITION is a data entry snafu that occurs when two digits are
accidentally reversed.
11. SALARIES EXPENSE is not included in the Post-Closing Trial Balance.
12. Payment for purchasing office equipment is a cash outflow from investing activities.
13. The entity generated a net income if the balance sheet’s total debits exceed total credits
after adding the respective amounts.
14. Prepaid expense under asset method & Deferred revenue under liability method
cannot be reversed.
15. Beginning Inventory + Net Purchases – Ending Inventory shows how to compute the
cost of sales.
16. FOB Shipping point, freight prepaid = Buyer should pay the freight, Seller pays the
freight.
17. Purchase returns and allowances, Sales Discount, and Allowance for bad debts are all
contra accounts except for FREIGHT IN.
18. Schedule of accounts receivable is prepared to ensure that the total balance in the
subsidiary ledger agrees with the control account.
19. According to ARTICLE 1767, by the contract of partnership, two or more persons bind
themselves to contribute money, property, or industry to a common fund, with the intention
of dividing the profits among themselves.
20. GENERAL PARTNER is a kind of partner whose liability to third persons extends to his
separate property.
21. TRANSFER OF OWNERSHIP is not an advantage of partnership. Unlimited liability,
better management, and larger resources, however, are advantages.
22. In ACCRUAL BASIS, revenues are recognized and recorded when earned regardless of
when the cash is received. Expenses incurred are recorded whether or not the cash is
paid.
23. ADJUSTING ENTRIES bring the accounts up to date prior to preparing the financial
statements.
24. TRADING PARTNERSHIP is a type of partnership whose main activity is the manufacture
of sale or the purchase and sale of goods.
25. ALLOWANCE FOR BAD DEBTS is a contra account that is carried forward when sole
proprietor forms a partnership.
26. In computing CAPITAL, Cash should be in BOOK VALUE and Equipment, Furniture
and Fixture should be in AGREED VALUE.

REVIEW #2 (THEORIES)

1. According to Revised Corporation Code (2019), a corporation is an artificial being created

by operation of law, having the right of succession and the powers, attributes, and
properties expressly authorized by law or incidental to its existence. The Revised
Corporation Code as of 2019 is also known as R.A. No. 11232.

2. SHARE SPLIT is a transaction whereby the original shares are called in for cancellation
and replaced by a larger number accompanied by a reduction in the par/stated value.
3. DEFERRED CASH DIVIDENDS are NOT called script dividends.

4. LEGAL CAPITAL, NO PAR, BUT WITH STATED VALUE = Issued Share Capital +
Subscribed Share Capital

5. RETAINED EARNINGS are part of the equity account. DONATED CAPITAL is NOT part
of Share Capital.

6. When shares without par value but with stated value are sold, the excess proceeds over
stated value shall be credited to SHARE PREMIUM.

7. A SHARE OPTION is a financial instrument that gives a shareholder the right to buy or
sell a certain number of shares in the company by a specific date and at a stipulated price.

8. RETAINED EARNINGS arises from the retention of assets generated from profit-directed
activities of the corporation.

9. DIVIDENDS IN ARREARS on preference shares are NOT reported in the financial

statement as a liability.

10. For a company, retained earnings represent: Profits obtained by the company after
payment and provision for dividends, and after any transfer to and from reserves.

11. Retained Earnings DO NOT require setting aside a reserve of cash for the
appropriations.

12. The account Retained Earnings Appropriated for Dividends is NOT debited at the date of
declaration.

13. When a subscriber fails to pay his obligations after the corporation has sent several notices
to him, his subscribed shares is called DELINQUENT SHARES.

14. In the concept of shares split, it will INCREASE THE NUMBER OF SHARES
OUTSTANDING.

15. DIVIDENDS DECLARED ON PREFERRED STOCK would not be reported in the

stockholder’s equity section of the balance sheet.

16. Under the journal entry method, UNISSUED SHARE CAPITAL credited upon issuance of
the share capital thereby reducing the balance of this account.

17. TREASURY SHARES are the shares reacquired by the corporation but not retired and
are subject to reissuance.

18. Convertible Preference Shares are NOT converted at the options of the board of directors.
Convertible Ordinary Shares CAN be converted into Preference Shares.
19. SHARE DIVIDEND is a pro-rata distribution of the corporation’s own capital to its
shareholders.

20. PROPERTY DIVIDEND is a non-cash asset such as inventories and securities held by
the corporation such as investment to be distributed to the shareholders.

REVIEW #3 (THEORIES)

1. In the cash priority program, the partner who receives the final cash distribution is the one
who has the highest LOSS ABSORPTION POTENTIAL.

2. SCHEDULE OF SAFE PAYMENTS supports the installment liquidation statement which

summarizes the changes in real account balances as the liquidation progresses.

3. In doing schedule of safe payments, it is assumed that ALL NON-CASH ASSETS ARE
WORTHLESS.

4. The deficiency in a partner’s capital account in liquidation must absorb by the remaining
partners because of MUTUAL AGENCY AND UNLIMITED LIABILITY.

5. CASH PRIORITY PROGRAM is prepared before determining how much the asset or
portion of asset is sold, to determine to whom the available cash is first given to.

6. Cash withheld for possible liquidation expenses and unrecognized liability is treated in the
preparation of schedule of safe as POSSIBLE LOSS.

7. If a partner with a negative capital balance is personally INSOLVENT, the negative capital
balance MAY BE ABSORBED by those partners having a positive capital balance
according to the residual profit and loss sharing ratios that apply to those partners having
positive balances.

8. Gains and losses incurred at liquidation are distributed to the partners using the residual
profit and loss sharing ratios because these amounts represent profits and losses from
prior periods that would have been shared using the residual profit and loss ratios.

9. The order of partnership liquidation process is SELL ASSETS, PAY LIABILITIES, AND
DISBURSE CASH TO PARTNERS.

10. In the final liquidation transaction, the remaining cash is distributed to the partners. The
partners share in the cash according to their CAPITAL BALANCES.

11. In a partnership liquidation, a loss from sale of non-cash assets is allocated to the
PARTNERS BASED ON THE PROFIT AND LOSS RATIO.
12. A capital deficiency in a partner’s capital that is uncollectible is A LOSS TO THE OTHER
PARTNERS.

13. Interest on capital, Salary Allowances, and bonuses are NOT treated as expenses.

14. R.A 9298 is the law regulating the practice of accountancy in the Philippines.

15. A corporation MAY be a stockholder of another corporation.

16. A corporation DO NOT commence to exist upon the execution of the articles of
incorporation by the incorporators.

17. ORDINARY SHARE CAPITAL is the capital that represents a residual ownership equity.

18. Death of a partner, retirement of a partner, and admission of a new partner will result to
PARTNERSHIP LIQUIDATION.

19. The residual interest in a corporation belongs to ORDINARY SHAREHOLDERS.