Conceptual Framework and Accounting
Principles
Table 1:
1. The statement of financial position of
Baby’s Play Center included play
equipment purchased from Japan for
350,000 in Japan Yens. It was reported
as 350,000 in the statement of
financial position while the other
assets were reported in Philippine
Peso. (Unit Measure)
2. Albert operates a canteen beside his
shoe store. The assets of the canteen
are included in the statement of
financial position of the shoe store.
(Business Entity)
3. Food company ordered a machine
needed in the assembly line of its
production department. Upon order,
the machine was immediately listed as
one of its assets. (Accrual)
4. No financial statements were prepared
by Miguel Gan for his business. He
explains that he will prepare the
statements when he closes the
business which he predicts to take
place after 20 years. (Periodicity)
5. On January 20, the owner bought a
computer and paid cash P50,000. He
got it for P40,000 but no receipt was
given to him. The accountant recorded
it as P40,000. (Objectivity)
6. The owner-manager bought a
computer for personal use. The invoice
Professional
was given to the accountant who
Accountants
recorded it as asset of the business.
(Business Entity)
Table 2:
1. The reports gave the profitability,
solvency, and liquidity ratios of the
firm. These were confirmed by the
user’s by computing ratios using the
standard formulas. (verifiability)
2. The accountant prepared only general-
purpose financial statements for all
users. (neutrality)
3. The financial reports were presented
to the shareholders of Cebu Hospital.
Several issues were raised by the
medical practitioners such as why the
cash was down by 2,500,000. The
chief finance officer had a hard time
explaining why profit improved by
P10,00,000 although cash went by
P2,500,000. (Understandability)
4. Presented as one of the assets in the
company’s 2019 statement was a
parcel of land bought at P300,000
although its current market value was
P500,000. It was deliberately
overstated to enhance the financial
position of the firm. (Faithful Rep)
5. The shareholders had a hard time
evaluating the 2019 reports submitted
to them by AJA Company which
showed assets, liabilities and profit for
2019 only. “We can’t determine trend
of performance nor the improvement
of its financial structure.
(Comparability)
6. A firm bought P40,000 tools and
recorded as assets. The owner brought
this home. (Faithful Rep)
7. Mr. Bo, the bookkeeper of Nature Spa,
prepared a statement of financial
position by presenting only three
items: Cash P50,000; other assets
P4,500,000 for all listings of assets
and total claims of creditors and owner
P3,250,000 for the claims of both
creditor and owner.
(Understandability)
8. Miss Sanchez, a fresh graduate, was
hired as bookkeeper of Skin Care, a
manufacturer of beauty products. She
prepared a statement where total
assets amounted to 2,500,000
including waste basket P100, broom
P150, dustpan P60. (Materiality)
9. The December 31, 2019 financial
reports were submitted to the owner
on April 13, 2020, Friday. the deadline
for submission to the BIR is April 15,
Sunday. (Timeliness)
Environment of
1. The commission that regulates the
practice of professionals and is
mandated to grant licenses to
candidates who have successfully
passed the government licensure
examination. Professional Regulations
Commission
2. International Education Standards for
(Initial Professional Development) are
used by IFAC member bodies when
setting education requirement for
aspiring professional accountants.
3. Develops international standards for
auditing, assurance and quality
management that strengthen public
confidence in the global performance.
(IAASB)
4. Accredited professional organization of
CPAs in the Philippines. (PICPA)
5. Undertakes the administration and
implementation of the CPD Law and its
IRR to professional accountants with
the assistance of the PH Institute of
Certified Public Accountants (CPA).
(PRBOA)
 6. IASB develops the globally accepted 1. Field of Professional Practice of Atty.
accounting standards i.e. the IFRS Clariza Anne Muralla in the
wherein FASB establishes financial accompanying video to this lesson.
accounting reporting standards follows (government)
generally accepted accounting 2. Mr. Jared Majaba Field of professional
principles practice as explained in the
7. Global organization for the accompanying video. (public)
accountancy profession comprising 3. An employee of a company designated
more than 175 members, and either as controller, internal auditor, or
associate organization in 130 process owner of an outsourced
countries and jurisdictions payroll system. (commerce & industry)
representing nearly 3 million 4. Position of either the dean or the
professional accountants. (IFAC) department chairman or its equivalent
8. There are 8 International Education that supervises the BSA program of an
Standards; the 7th pertains to educational institution. (academe)
continuing professional development 5. An independent professional who
9. The IAESB established standards for renders judgement on the fair
professional accountancy education presentation of the company’s
that prescribe technical competence financial statements after reviewing its
and professional skills, values, ethics accounting records. (public)
and attitudes. 6. The field of professional practice of
10.Sets the minimum requirement for Ms. Sarah Javalera-Mora with the Asian
professional accounting education Development Bank (commerce &
program in the Philippines. (CHED) industry)
7. Chief Accountant at PAGCOR.
Table 1:
(government)
1. I will keep myself informed of the 8. Field of professional practice of Ms.
relevant policies, rules and Belinda Narvaez, one of your teachers
regulations, will comply with it and in ACTG111. (academe)
avoid committing acts that may
Understanding the Significance of
discredit my academic department,
Accounting in Business (13 question)
college and university. (professional
behaviour) Table 1: Identify the use of accounting
2. I will properly observe and evaluate information
the data and information given on
Is the business Government
problem sets; I will apply critical
paying the right
thinking skills in solving the problems,
taxes
and make well-reasoned conclusions
Will the business be Creditor
about my answers. (intellectual)
able to pay its debt
3. In the course of completing the
when it falls due?
program, I will oppose every instance
Are the plans being Manager
of academic dishonesty. (integrity)
implemented
4. I will not compromise my judgements
beneficial to the
because of bias, conflicts of interest,
business?
or undue influence of others. If offered on credit, Supplier
(neutrality) will the business
5. I will be cooperative, I will collaborate, who is buying
and encourage healthy discussions merchandise in bulk
with my group-mates when working on be able to pay its
our assigned group tasks. account on date it
(interpersonal and communication) becomes due?
6. I will get into the habit of double- Has the business Investor
checking or reviewing my own and accumulated
group-mates’ (in case of group works) sufficient wealth to
work, ensuring that it complies with remain stable?
the requirements of the task.
(Organizational)
7. I will develop the discipline in 1. A service activity that records
managing my time and resources, and transactions of the businesses and
staying focused on the tasks at hand. prepares a progress report about its
(personal skills) financial position and result of operation.
(Accounting)
Table 2:
2. The reports prepared about the financial furniture and Increase in Equity
position and result of operation of a fixtures in the
business. (Financial Statements) business.
3. Assets owned less liabilities owed. (Net
Worth)
Classification of Normal Balances in
4. An economic unit which buys and sells
Account
goods or services. (Business)
5. Primary motive why an economic unit Account Title Classificatio Normal
engages into buying and selling of goods n Balance
or services. (Profit) Accounts CL Cr
6. The regular routine work in an accounting Payable
which includes gathering, measuring, Accounts CA Dr
recording and classifying transactions. Receivables
(Bookkeeping) Allowance CA Cr
7. Gardenia Company baking breads and for Doubtful
pastries, is an example of this type of Accounts
operations. (Manufacturing) Cash CA Dr
Equipment NCA Dr
8. The user reviews the financial statements
Accumulated NCA Cr
of an applicant as a means of evaluating
Depreciation
liquidity or ability to pay lender. (Lender)
- Equipment
9. This user considers not only the price and
Loan’s NCL Cr
quality of the product but also the
Payable
company’s reputation and ability to
(payable
deliver product on time. (Customers)
after 2
Analysis of Business Transactions years)
Note’s CL Cr
1. Identify what is being referred to in each Payable
of the statements given in Column 1. (payable due
Refer to the combination of choices below in 6 months)
and drag them on the spaces provided Owner’s EQUITY Cr
across Column 1. Capital
Owner’s EQUITY Dr
Received PLDT and Increase in Liability;
Drawings
Meralco bill. Decrease in Equity Prepaid Rent CA Dr
Rent EXPENSE Dr
Rendered services Increase in Assets; Expense
on credit to Increase in Equity Service REVENUE Cr
customer Income
Collected the Increase in one Unearned CL Cr
account from asset; Decrease in Revenue
customer. another Asset Accrued CL Cr
Expenses
Paid salaries of Decrease in Assets;
employees. Decrease in Equity
Identify if the following accounts should be
Issued a promissory Decrease in debited or credited.
note in settlement Liability; Increase in Decrease in Debit
of an accounts another Liability Accounts Payable
payable. Decrease in Debit
Purchased supplies Increase in one Unearned Revenue
for cash. asset; Decrease in Increase in Accrued Credit
another Asset Expenses
Purchased supplies Increase in Assets; Increase in Capital Credit
on account. Increase in Liability Increase in Service Credit
Income
Returned defective Decrease in Assets; Increase in Cash Debit
supplies purchased Decrease in Increase in Note’s Credit
on account. Liabilities Payable
Increase in Salaries Debit
Returned defective Increase in one Expense
supplies purchased asset; Decrease in Increase in Debit
that was paid in another Asset Drawings
cash Decrease in Credit
The owner invested Increase in Assets; Accounts Receivable
Acounting for Transaction of Service-
Oriented Business
True or False
1. Equity increases with expenses and
revenues (F)
2. Equity decreases when revenues are
earned (F)
3. An accounting firm collected cash on
account. As a result of this transaction,
total assets, liabilities, and equity are
all unchanged. (T)
4. The total amount of assets a business
possesses may or may not be equal to
the total of liabilities and owner’s
equity of the business. (F)
5. An owner’s withdrawal could represent
a cash disbursement from the
business. (T)
6. Equity increases when revenues are
earned. (F)
7. A law firm provides legal services for
clients who do not pay immediately.
There is no effect on the accounting
equation until the clients pay for the
services. (F)
8. The total amount of assets a business
possesses will always be equal to the
total liabilities and owner’s equity of
the business. (T)
9. A chart of accounts is a list of all of a
company’s accounts with their
account numbers. (T)
10.For the accounting equation to
balance, a transaction must affect
both sides of the equation. (F)
11.The accounting analysis system is
used to record the dual effects of each
transaction. (F)
12.A law firm provides legal services for
clients who do not pay immediately. As
a result of this transaction, assets and
revenues will increase. (T)
13.Assets are economic resources that
have future benefits for the business.
(T)
14.The process of transferring data from
the ledger to journal is called posting.
(F)
15.The T-account is a summary device
that is shaped like a capital T with
debits posted on the left side of the
vertical line and credits posted on the
right side of the vertical line. (T)
16.Account names in the chart of
accounts are standardized and thus
are the same for all businesses. (F)
17.An owner’s withdrawal represents a
distribution of earnings to the owner.
(F)
18.Debit refers to the right side of the T-
account, and credit refers to the left
side. (F)
19.An owner’s withdrawals affect the
business’s net income or net loss and
are recorded as an expense. (F)
20.A chart of accounts is a detailed
record of the changes in a particular
asset, liability or equity account during
a specified period. (F)
21.Compound journal entry has more
than two accounts, but the total peso
value of the debits still must equal the
total peso value of the credits. (T)
22.Liabilities are economic resources that
are expected to benefit the business in
the future. (F)
23.Assets are something of value that the
proprietor personally owns or has
control of. (F)
24.Left side of the accounting equation
measures the total amount of assets
of a business. (T)
25.Companies use a ledger to show all of
the increases and decreases in each
account along with their balances. (T)
26.A payable may or may not be a
liability. (F)
27.The left side of the accounting
equation always equals the right side
of the accounting equation. (T)
28.A debit always means a decrease, and
a credit always means an increase. (F)
29.In a computerized environment, the
posting process is completed
automatically when the user enters
the journal entry. (T)
30.A transaction is any event that affects
the financial position of the business
and can be measured with faithful
representation. (T)
31.John contributed P60,000 cash to a
sole proprietorship by opening a bank
account in the name of the business,
United Marketing. John received
capital in the business exchange. This
transaction results in an increase in
the assets of the business. (T)
32.Source documents provide the
evidence and data for accounting
transactions. (T)
33.Liabilities represent creditors’ claim on
the business assets. (T)
34.An owner’s withdrawal could represent
a cash disbursement from the
business. (T)
35.Both the chart of accounts and the
ledger provide the balance of each
account at a specific point in time. (F)
36.Bhelyn invested 50,000 cash to BZ
company, a sole proprietorship. As a
result of this transaction, assets and
revenues will increase. (F)
37.A creditor who has loaned money to a
business has a claim to some of the
 assets of the business until the debt is
paid. (T) business for
38.For an accounting equation to balance, personal use.
a transaction may or may not affect
Paid cash on Decrease asset,
both sides of the equation. (T)
accounts payable decrease liability
39.Liabilities represent full claim to assets
of the business. (F) Purchased office Increase asset,
40.A chart of account is a detailed record supplies on account increase liability
of the charges in a particular asset,
liability or equity account during a Mary johnson, the Increase asset,
specific period. (F) sole proprietor, increase equity
41.As long as an increase and decrease of contributed cash in
the same amount are recorded on one exchange for capital
side of the accounting equation, the
Received electricity Increase liability,
accounting equation remains in
bill for the previous decrease equity.
balance. (T)
month’s
42.Many but not all liabilities have the
consumption.
word payable in their titles. (T)
Table 2: Choose whether the event increases
43.When using a four-column account,
(INC) or decreases (DEC) owner’s capital. NE
the post reference column allows the
if no effect.
user of the financial data to trace the
amounts in the journal back to ledger. Withdrawal of cash Dec
(F) by owner of sole
44.Office supplies is an expense because proprietorship for
supplies will be used up in the future. personal use.
(F) Creditor loaned Ne
45.An owner’s withdrawal represents an money to the
expense of the business. (F) business.
46.Because of technology, use of double- Costs of selling Dec
entry system of accounting is optional. goods or services.
(F) Owner contributions Inc
47.All assets and equity accounts of cash to a sole
increase with a debit. (F) proprietorship
Amounts earned Inc
48.Danny’s equipment rental company
from delivering
received P1,000 cash from a customer,
goods or services to
the amount was owed from previous
customers
month. Transaction will increase cash
Cash paid to acquire Ne
and increase service revenue. (F)
land for use in the
49.An owner’s capital balance changes
business.
with an owner’s withdrawal, revenues
Concepts of Payroll
and expenses. (F)
1. From among the choices below, drag the
Table 1: Identify effects on the accounting
correct term across the Statements in
equation of the ff business transactions
column 1.

Compensation Cash Advance

Signed a note Increase asset,
withdrawn by a
payable for the increase liability
worker or employee
purchase of
before payroll date
equipment
The net earnings an Take home pay
Performed services Increase asset, employee or worker
for a customer on increase equity will actually receive
account. Compensation paid Wages
to workers based on
Paid office rent at Decrease asset, a piece rate or
the end of the first decrease equity hourly rate.
month. A listing of Payroll Sheet
employees beside (Registry)
Received cash from Increase asset, which special
a customer on decrease asset columns are
accounts provided for gross
receivables earnings,
The owner withdrew Decrease asset, deductions and net
cash from the decrease liability earnings
In line with the Withholding tax Summative Assessment #1:
policy "pay as you
1. Transactions are first recorded in:
earn", this is a
GENERAL JOURNAL
deduction paid to
the BIR. 2. Licensed accountants who chose to serve
Pag-ibig HDMF as CoA Auditors, BSP bank examiners,
contributions are municipal accountants, BIR Legal Officers are
remitted to this considered to be in this field of practice:
agency CPAs IN GOVERNMENT SERVICE
As members of this PhilHealth
agency, a worker or 3. Final step in journalizing and posting
employee enjoys process: DETERMINING WHETHER THE
sickness and ACCOUNTING EQUATION IS IN BALANCE
hospitalization 5. A posting reference column is used: WHEN
benefits THE INFORMATION IS TRANSFERRED FROM
THE JOURNAL TO THE LEDGER.
2. Spell out the acronym Pag-IBIG: _____
6. Marcus has decided to open an auto-
_____ _____ _____ _____ _____ _____ _____
detailing business. He will pick up an
Response: Pagtutulungan automobile from the client, take it to his
parents’ garage, detail it, and return it to the
Sa Kinabukasan Ikaw, Bangko, Industriya, at client. If he does all the work himself and
Gobyerno takes no legal steps to form a special
3. What is the difference between gross pay organization, which type of business
and net pay? organization effect, has he chosen: SOLE
PROPRIETORSHIP
Response: Gross pay refers to the
compensation, either salary or wage, without 7. A liability created when a business
the deductions of the required employee's receives cash from customers in advance of
contributions yet. On the other hand, net pay providing services or delivering goods:
is the actual amount that an employee or UNEARNED REVENUE
worker can receive and bring home after the 8. An asset account: PREPAID EXPENSE
mandatory deductions and contributions are
applied. 9. A business makes a payment of P1400 on
a note payable. Which of the following
journal entries would be recorded: NOTES
Computation of Net Pay PAYABLE IS DEBITED, CASH IS CREDITED FOR
1400
Short Problem:
Lorna Chavez is a line manager of Sunday 11. Jackson Electric Services Company
Machine Works and is receiving a monthly incurred P800 as a repair expense and paid
salary of P30,000. Answer the succeeding for it in cash. The company is a sole
questions. proprietorship. This transaction will:
DECREASE OWNER’S EQUITY
1. Lorna's tax liability using the monthly
withholding tax table is _____. 12. Which of the following is a decision made
by an internal user: HOW MUCH MONEY
Response: 1563.40 SHOULD THE BUSINESS BUDGET FOR
2. Lorna's monthly net taxable income is PRODUCTION
_____. 14. The following transactions have been
Response: 28650 journalized and posted to the proper
accounts. March is the first month of
3. Lorna's take home pay on March 31 is business operations for the sole
_____. proprietorship
Response: 27086.60 March 1: The business received 7000
cash from the owner in exchange for capital
4. Sunday Machine Works' total remittance
to PhilHealth for the March payroll is March 2: Paid the first month’s rent of
_____. 800
Response: 900.00 March 3: Purchased equipment by
paying 3000 cash and executing a note
5. Sunday Machine Works' total remittance
payable for 4000
to SSS for March payroll is _____.

Response: 2430.00
 March 4: Purchased office supplies for
750 cash
March 5: Billed a client for 12000 of
design services completed
March 6: Received 6000 on account for
the service previously recorded
What is the ending balance in the
Service Revenue: 6000
15. A business renders services to a client
and issues a sales invoice. The amount will
be collected from the customer at a later
time. Which of the following is true at the
time invoice is issued: NET INCOME WILL
INCREASE
17. Saturn Company paid the rent for the
current month in cash. Which of the following
accounts will be used to record the
transaction: Rent Expense
19. Which of the following statements is true
of a sole proprietorship: THE SOLE
PROPRIETORSHIP IS PERSONALLY LIABLE FOR
THE LIABILITES OF THE BUSINESS.
20. A business purchases 3500 of office
supplies for cash. Which of the following sets
of ledger accounts reflects the posting of
transaction:
OFFICE SUPPLIES CASH
3500 | | 3500
21. A business makes a cash payment to a
supplier for office supplies that were
purchased earlier on account. Which of the
following accounts is debited: ACCOUNTS
PAYABLE
22. Adams Company recorded the following
journal entry on March 2, 2018
Cash 8500
Unearned Revenue 8500
What is the transaction on March 2,
2018: ADAMS RECEIVED 8500 FOR SERVICES
TO BE PERFORMED IN A LATER PERIOD.
24. Which of the following represents the
correct flow of accounting data:
TRANSACTIONS OCCUR SOURCE
DOCUMENTS ARE PREPARED
TRANSACTIONS ARE ANALYZED 
TRANSACTIONS ARE JOURNALIZED AND
POSTED
25. A business purchases 500 of the office
supplies on account. What is the effect on
the accounting equation: OFFICE SUPPLIES
INCREASE AND ACCOUNTS PAYABLE
INCREASE
26. Owner’s capital account decreases with:
OWNER’S WITHDRAWALS
27. A sole proprietorship reported the
following transactions for the month of
March. The transactions have been
journalized and posted to proper accounts
Mar 1 The business received 8000
cash from the owner in exchange for capital
Mar 2 Paid the first months rent of 600
Mar 3 Purchased equipment by paying
1000 cash and executing a note payable for
3000
Mar 4 Purchased office supplies for
600 cash.
Mar 5 Billed a client for 11000 of
design services completed
Mar 6 Received 9000 on account for
the services previously recorded
What is the balance in Accounts
Receivable: 2000
28. Local firms like SGV & Co, PwC- Isla
Lipana & Co., and Punongbayan & Araullo are
primarily engaged in this field of practice:
CPAs IN PUBLIC PRACTICE
30. A business purchases equipment by
paying 7517 in cash and issuing a note
payable of 19410. Which of the following
occurs: CASH IS CREDITED FOR 7517,
EQUIPMENT IS DEBITED FOR 26917, AND
NOTES PAYABLE IS CREDITED FOR 19410
31. Which of the following is a control risk
related to payroll: A DISHONEST EMPLOYEE
CASHING A PAYCHECK THAT WAS WRITTEN
FICTITIOUS PERSON
32. Which of the following is true of good
internal controls over payroll: ACCOUNTING
FOR PAYROLL SHOULD BE SEPARATE FROM
HIRING AND FIRING OF EMPLOYEES
33. Watson Foods Company, a sole
proprietorship, reported the following
transactions for September 2019:
a. Business received 23000 cash from
the owner in exchange for capital
b. Business purchased office
equipment for 11500 for which 4000 cash
was paid and the balance was put on a note
payable
c. Paid insurance expense of 1200
cash
d. Paid the September utility for 800
cash
e. Paid 1800 cash for September rent
f. The business had sales of 11000 in
September. Of these sales, 60% were cash
sales, and the balance was credit sales,
 g. the business paid 8000 cash for 50. For expenses, the category of account
office furniture and its normal balance is: EQUITY AND A
DEBIT BALANCE
What are the total liabilities at the end
of September 2019: 7500 51. On October 31, a business pays 1500
cash for television ads that appeared during
34. This skill is being enhanced when,
October. Which of the following accounts is
instead of comparing my performance with
debited: ADVERTISING EXPENSE
that of my classmates, I rather monitor the
progress of my own learning in the course:
PERSONAL SKILLS
QUIZ #1: Trial Balance and FS Preparation
36. A business borrows cash by signing a
1. From the transactions listed for Flying Ace
note payable. Which of the following
Helicopter Rental Services, identify the cash
accounts is debited: CASH
flow activity.
37. According to the _____, acquired assets
Cash investment Financing Inflow
should be recorded at the amount actually
by Ace, the
paid rather than at the estimated market
owner
value: COST PRINCIPLE
Purchase of 2 Investing Outflow
38. Regarding the ledger, which of the helicopters
following statements is incorrect: BOTH THE Direct cash Operating Inflow
CHART OF ACCOUNTS AND THE LEDGER payment from
PROVIDE THE BALANCE OF EACH ACCOUNT customers for
AT A SPECIFIC POINT IN TIME Helicopter rental
Collection from Operating Inflow
40. An accounting entry that is characterized customers with
by having multiple debits and/or multiple credit line
credits is called a ___ entry: COMPOUND Payment of Operating Outflow
JOURNAL utilities
Payment of pilot Operating Outflow
41. Which of the following is the source
salaries
document that provides the evidence and Sale of piece of Investing Inflow
data for accounting transactions: SALES lot owned by the
INVOICE business
42: Owner’s claim to the assets of the Release of cash Financing Inflow
business is called: EQUITY loaned from BPI
Cash withdrawal Financing Outflow
43. An economic resource of a business such by Ace
as furniture, building and land are its: Investments in Investing Outflow
ASSETS securities traded
by BPI
44. This skill is being enhanced when I 2. S1: In a trial balance, total debits must
choose to be cooperative with teammates, always equal total credits: TRUE
and when we encourage healthy discussions,
process of working on our assigned group S2: The trial balance is an internal document
tasks: INTERPERSONAL AND used only by the employees of the company:
COMMUNICATION SKILLS TRUE

45. Which of the following is a control 3. From the accounts listed below for Flying
procedure to prevent a dishonest employee Ace Helicopter Rental Services, identify the
from cashing a paycheck that was written to financial statement section where these
a fictitious person: REQUIRING PHOTO IDs accounts should appear.
FOR EMPLOYEES PICKING UP THEIR
Advances SFP Current
PAYCHECKS
from Liabilities
46. Spring Company has assets and equity customer
that amount to 260000 and 70000 Unused SFP Current
respectively. Liabilities total: 190000 supplies Assets
Ace, drawing Capital
47. Which of the following is not recorded by Statement
accountants: EFFECTS OF ECONOMIC BOOM (Equity)
Current SFP Current
49. Regarding liabilities, which of the
portion of 5- Liabilities
following statements is incorrect: LIABILITIES
year
ARE ECONOMIC RESOURCES THAT ARE
mortgage
EXPECTED TO BENEFIT THE BUSINESS IN THE
payable
FUTURE
Depreciation Income Expense 11. S1: A trial balance summarizes the
Expense Statement ledger by listing all the accounts with their
Helicopter Income Revenue balances at a point in time: TRUE
Rental Statement
S2: Balancing errors can be detected by
Revenues
Helicopters SFP Non-Current computing the difference between total
Assets debits and total credits on the trial balance:
Prepaid rent- SFP Current TRUE
hanger Assets 12. S1: The firm’s ability to generate cash
Net loss Capital
and its equivalent is contained in the Capital
Statement
Statement: FALSE
(Equity)
Mortgage SFP Non-Current S2: Information about the business
Payable 5 Liabilities performance for a certain period of time is
years primarily derived from the SFP: FALSE
4. S1: The trial balance verifies the equality
of debits and credits on a specific date: TRUE Drill #2: Cost of Goods Sold

S2: The trial balance is one of the basic 1. Compute for the missing amounts. DO
financial statements that is issued to NOT include comma and decimal places in
external users of the business: FALSE your answer.

5. S1: The trial balance is also known as the Purchase Returns &
1,750.00
balance sheet: FALSE Allowances
S2: Data from a trial balance is used to Sales Returns &
2,250.00
prepare the income statement of owner’s Allowances
equity and the balance sheet: TRUE
Goods Available for
90,000.00
6. S1: The trial balance reports the balances Sale
of assets, liabilities and equity: TRUE
Merchandise Inventory,
_____ 47000
S2: If the total debits equal total credits on End
the trial balance, the individual account
Freight Out 5,000.00
balances will be error free: FALSE
Merchandise Inventory,
7. S1: A trial balance is the list of only a 17,500.00
Beg.
company’s asset and liability accounts, along
with their account numbers at a point in Freight-in _____ 2250
time: FALSE
Purchases 72,000.00
S2: A trial balance is a list of all the ledger
Sales Discount 5,500.00
accounts of a company with their balances at
a point in time: TRUE Purchase Discount 0
8. S1: The objective of financial statements is Cost of Goods Sold 43,000.00
to provide all the information that users may
need in making business decisions: FALSE
2. Compute for the missing amounts. DO
S2: Financing activities refers to the NOT include comma and decimal places in
financing and borrowing posture of the firm: your answer.
TRUE

9. S1: The income statement measures the Purchase Returns &

2,480.00
revenues and expenses for a period of time: Allowances
TRUE
Sales Returns &
6,200.00
S2: A business entity that generates Net Allowances
income (instead of Net loss) for a certain
period of time would also show a net Goods Available for Sale 77,500.00
increase in Cash as may be revealed in the Freight In 5,000.00
Statement of Cash Flows: FALSE
Freight Out 12,000.00
10. S1: Liabilities are debts owing to
creditors for assets and services received in Merchandise Inventory,
19,000.00
the past with promise to pay at some future Beg.
date: TRUE
Merchandise Inventory,
S2: Two forms of SFP are Report Form and _____ 23500
End
Account Form: TRUE
Purchases _____ 58155 Cost of Goods Sold _____
Sales Discount 4,600.00 5. Compute for the missing amounts. DO
NOT include comma and decimal places in
Purchase Discount 2,175.00 your answer.

Cost of Goods Sold 54,000.00

Purchase Returns & 2,200.0
Allowances 0
3. Compute for the missing amounts. DO
5,500.0
NOT include comma and decimal places in Sales Returns & Allowances
0
your answer.
85,500.
Purchase Returns & 14,000.0 Goods Available for Sale
00
Allowances 0
1,110.0
35,000.0 Freight In
Sales Returns & Allowances 0
0
1,500.0
Goods Available for Sale _____ Freight Out
0
Freight In 1,250.00 Merchandise Inventory,
_____
Freight Out 3,800.00 End.

13,000.0 Merchandise Inventory,

Merchandise Inventory, Beg. _____
0 Beg.

18,500.0 73,000.
Merchandise Inventory, End Purchases
0 00

85,000.0 2,000.0
Purchases Sales Discount
0 0

Sales Discount 1,950.00 1,500.0

Purchase Discount
0
Purchase Discount _____
68,000.
60,000.0 Cost of Goods Sold
Cost of Goods Sold 00
0

QUIZ #1: Concepts on Merchandising

4. Compute for the missing amounts. DO Operations
NOT include comma and decimal places in
your answer. 1. An invoice is also known as a bill. (TRUE)

2. Under the perpetual inventory system,

Purchase Returns & when a purchaser makes payment within the
_____
Allowances discount period, the amount of discount will
be credited to the Merchandise Inventory
Sales Returns & Allowances 4,500.00
account. (TRUE)
69,000.0
Goods Available for Sale 3. Cost of Goods Sold is based on the
0
company’s cost, not the retail price. (TRUE)
Freight In 2,000.00 4. Gross profit is the excess of COGS over net
Freight Out 3,000.00 sales revenue. (FALSE)

Merchandise Inventory, 35,000.0 5. An invoice is a request for payment from

the purchaser (FALSE) – (TRUE)
Beg. 0
6. Knowing the net cost of inventory allows a
19,000.0
Merchandise Inventory, End business to determine the actual cost of the
0
merchandise purchased. (TRUE)
47,500.0 7. Merchandise inventory is included in a
Purchases
0 merchandising company’s current assets.
Sales Discount 3,200.00 (TRUE)

8.
Purchase Discount 2,750.00
Income statement Function of expense
form showing costs method the seller is referred to as purchase
and expenses allowances by the purchaser. (FALSE)
according to its
20. A retailer can buy merchandise either
function.
from a manufacturer or a wholesaler. (TRUE)
Stock of goods left Merchandise
unsold from the inventory, beginning 1. Credit terms of a merchandising company
previous accounting are 1/15, net 40. This means the buyer can
period. receive a discount of 1% if the invoice is paid
Discount granted to Trade Discount within 40 days of the invoice date. (FALSE)
the customer on
the date of 2. A merchandiser sold goods on account to
purchase based on Customer A for 8000 with terms of 2/10,
the catalogue price. n/30. If the payment is received after the
Account title used Furniture & discount period., Accounts Receivable is
when buying table Fixtures decreased by 8000 (TRUE)
and chairs for use
3. On the balance sheet, Merchandise
by the company.
inventory is listed above Accounts
Operating expenses Selling &
Receivable. (FALSE)--- should be below.
incurred in storing Distribution
and marketing the Expenses 4. Sales are recorded at the amount of the
goods. sales less any trade discounts. (TRUE)
Account title used Sales
for revenue earned 5. On the income statement, a
when goods are merchandising company reports the cost of
delivered to merchandise inventory that has been sold to
customers. customers. (TRUE).
Discount granted to Cash Discount 6. The net invoice price is list price reduced
a customer for by any trade discount. (TRUE)
paying his account
promptly 7.

Ownership of goods FOB-Destination

9. A wholesaler is a merchandiser who buys is transferred only
goods from a manufacturer and then sells upon delivery to
the goods to retailers. (TRUE) buyer’s place of
business.
10. Even in a perpetual inventory system,
An account used to Freight-Out
the business must count its inventory at
record transportation
least once in a year. (TRUE)
cost incurred by the
11. The perpetual inventory system keeps a seller.
running computerized record of inventory A method of Periodic Inventory
and COGS. (TRUE) accounting wherein Method
the cost of the
12. The net invoice price is list price reduced merchandise sold is
by any trade discount. (TRUE) determined only
14. Under the perpetual inventory system, after making a
purchase returns or allowances are debited physical inventory
to the Merchandise Inventory account by the count.
The sum of net Goods Available for
purchaser (FALSE)--- should be credit
purchases and Sale
15. A merchandiser sold goods on account to beginning
Customer A for P8,000 with terms of 2/10, merchandise
n/30. If the payment is received within the inventory.
discount period, Accounts Receivable is A reduction in the Purchase returns
decreased by P7840. (TRUE) cost of the goods and allowances.
purchased for resale
17. Freight in is a delivery expense to the when the goods are
seller. (FALSE) returned to the
18. A retailer purchases goods from supplier for being
manufacturer and sells them to wholesalers. defective or spoiled.
(FALSE) Method which keeps Perpetual Inventory
a detailed recording Method
19. Defective, damaged, otherwise of inventory for each
unsuitable merchandise that is returned to item stocked.
Represents Freight-In
transportation cost
which is added to the
cost of goods bought
for resale.
A freight payment Freight Collect
agreement when
freight is payable
only upon arrival of
the goods bought.
8. The buyer records Purchase Discounts for
early payment on purchases with 2/10, n/30
credit terms. (TRUE)
10. Credit terms of 2/10, n/30 indicate that a
discount of 2% will be given if payment is
made within 10 days of the invoice date.
Otherwise, the total invoice amount is due
within 30 days of the invoice date. (TRUE)
11. There is a discount on freight in, thus
purchase discounts are computed on
transportation costs. (FALSE)
12. The purchase discount amount in
calculated on the amount of the invoice
minus the returns and allowances. (TRUE)
13. Merchandise inventory account is an
asset account that is used only for goods
purchased that the business owns and
intends to resell to customers. (TRUE)
14. Under the perpetual inventory system,
two journal entries are used to record the
sale of merchandise. One entry records the
Sales Revenue and another entry records
COGS. (TRUE)
15. A wholesaler is a merchandiser who buys
goods from a manufacturer and then sells
the goods to retailers. (TRUE)
16. Centennial, Inc. sold goods on credit
terms n/20 to Harper, Inc. This means no
discounts are offered, and the amount of the
invoice is due 20 days after the invoice date.
(TRUE)
17. When a company uses a perpetual
inventory system, all merchandise
transactions are updated as they occur.
However, the inventory account may not
show the correct balance at all times. (TRUE)
18. The seller records freight out on
merchandise sold for the amount of freight
paid on shipment of good to customer on
agreed term, fob shipping point. (FALSE)
19. On the income statement, a service
company reports the cost of merchandise
inventory that has been sold to customers.
(FALSE)
20. A purchase discount is the amount
offered to the purchaser for delaying the
payment to the seller. (FALSE)
21. FOB Destination represents a situation in
which the buyer takes title to the goods after
the goods leave the seller’s place of
business. (FALSE)
22. The operating cycle of a merchandiser
begins when the company purchases
inventory from a vendor and ends when the
company then sells the inventory to a
customer. (FALSE)
2. A reduction in the amount of revenue
earned on sales for early payment is known
as a sales discount. (TRUE)
3. The net cost of inventory purchased
equals the purchase cost less purchase
returns and allowances less purchase
discounts. (FALSE)
4. Both wholesalers and retailers are
merchandisers (TRUE)
5. The net invoice price is list price reduced
by any trade discount. (TRUE)
6. A retailer can buy merchandise either from
a manufacturer or a wholesaler. (TRUE)
7. When a company uses a perpetual
inventory system, all merchandise
transactions are updated as they occur.
However, an inventory account may not
show correct balance at all times. (TRUE)
8. Gros profit is the extra amount the
company receives from the customer for
merchandise sold over what the company
paid to the vendor. (TRUE)
11. Under perpetual inventory system,
purchase returns and allowances are debited
to the Merchandise Inventory account by the
purchaser. (FALSE)
12. An invoice is a request for payment from
the purchaser. (FALSE)
13. With the terms FOB shipping point, the
freight cost becomes part of the cost of
merchandise inventory for the purchaser.
(Assume a perpetual inventory system)
(TRUE)
14. A merchandiser sold goods on account to
Customer A for 8000 with the terms of 2/10,
n/30. If the payment is received within the
discount period, Accounts Receivable is
decreased 7840. (TRUE)
15.. Gross profit is the excess of COGS over
net sales revenue. (FALSE)
16. Under the terms FOB destination, title to
the merchandise will pass to the purchaser
when the goods are received by the
purchaser. (TRUE)
17. There is a discount on freight in, thus paid by:
purchase discounts are computed on
transportation costs. (FALSE)
3.
18. COGS is based on the company’s cost,
Purchase Date May 1
not the retail price. (TRUE)
List Price 50000
19. Knowing the net cost of inventory allows Shipping Terms FOB Destination,
a business to determine the actual cost of Freight Prepaid
the merchandise purchased. (TRUE) 2000
Payment Terms Cash, less 5%, 10%
20. When a sale is made on account, discount
Accounts Receivable is debited. (TRUE) Return of 1000 on May 3
Merchandise
21. Freight In is recorded in the Merchandise
Cash Discount 0
Inventory account if the purchaser uses the
availed if any:
perpetual inventory system. (TRUE) Amount paid on May 41750
QUIZ #2: Freight and Payment Terms 1
Transportation cost Seller
1. recognized as
expense by:
Purchase Date November 1
Transportation cost Seller
List Price 6000
Shipping Terms FOB Destination, paid by:
P500 freight collect
Payment Terms Less 5%; 2000 4.
down payment,
2/eom, n/60 Purchase Date October 1
Return of 800 on November 3 List Price 8000
Merchandise Shipping Terms FOB Destination,
Actual Payments 50% on November 600 freight prepaid
15, Balance on Payment Terms 2/10, 1/15, n/30,
December 5 discount is granted
Amount paid on Nov. 1200 on partial payment.
15, upon making Partial Payment 60% of Accounts
50% partial payment Payable Balance on
of account balance. October 14
Amount paid on 1200 Cash Discount 48
December 5, upon availed if any
Amount paid on 3200
full settlement of
October 17, upon full
account
Transportation cost Seller settlement of
recognized as account
Transportation cost Seller
expense by:
Transportation cost Buyer recognized as
paid by: expense by:
Transportation cost Seller
paid by:
2.

Purchase Date September 8 5.

List Price 10000
Shipping Terms FOB Shipping Point, Purchase Date August 10
500 freight Collect List Price 40000
Payment Terms Less 10%, 2/10, Shipping Terms FOB Shipping
n/30 Point, 1000 freight
Return of 500 on September prepared
Merchandise 10 Payment Terms 5000 down
Cash discount 170 payment, balance
availed if any 2/10, n/30
Amount paid on 8330 Cash Discount availed 700
September 18, upon if any
full settlement of Amount paid on 35300
account. August 15, upon full
Transportation cost Buyer settlement of account
recognized as Transportation cost Buyer
expense by: recognized as
Transportation cost Buyer expense by:
Transportation cost Seller
paid by:
 Total debits and credit must always equal
 Trial balance is for internal document
 Trial balances summarizes the ledger by
listing all accounts and balances at point
intime
 Balancing errors can be detected by
computing the difference of credit and
debit
 Trial balance reports balance of assets,
liabilities and equity
 Trial balance still have an error even if
balance, they might be posting error or
transferring from journal to ledger
 Liabilities are debt with promise to pay
 Two forms of f/s are report form and
account form
 The firm’s ability to generate cash is
contained primarily in cash flow
 Business performance is in Income
Statement
 Objective of financial statement is to
provide information but not all such as
the non-financial details. (isa sa mga used
in making decisions only)
 Income statement measure revenues and
expenses
 Ang net income does not primarily mean
a cash increase in cash flow because
there is still a financing and investing.
 If list price only said: it is VAT exclusive
and needs Trade Discount
o Discount is the subject for VAT if so.
But, if not stated automatically or default
of VAT inclusive
 If may discount pa yung payables,
lalagyan pa ng VAT. If wala ng discount,
literal na payment and/or collection na
lang, wala ng VAT since sa purchase and
sales pa lang naglagay na ng VAT
 Input VAT for discounts para
mabawasan yung debited VAT
correspondingly
 Credit Card sales can be a cash
transaction because it is the buyer who
will have a payable to the bank or credit
financer
 If no freight collect or freight prepaid
included, it should be understood who
ever recognizes expense will be the
actual buyer
 Freight in and out are both INPUT VAT
since they are cost or expense
 Freight-out is INPUT VAT since
operating expense are subject to VAT
 Sales discount and r&a- the only time
output vat can be reversed
 Only sales can have output vat
 Banking is a service, hence subject to
VAT.
o If the bill is given, that is inclusive of
VAT
o If not (derived) it is not inclusive of
VAT
 Non-cash expense: depreciation
expense, bad debts expense
 Discount is based on price WITHOUT
vat (hence needed to be divided by 1.12)
 BALANCE SHEET: Place dollar signs on
the first number in each column, for each
section, and final totals.
 INCOME STATEMENT: Place dollar signs
on TOP of every column and the final
TOTAL.
 CAPITAL (EQUITY) STATEMENT: TOP
and TOTALS
 CASHFLOW STATEMENT:
Summative Assessment #2
1. Freight costs paid by a seller on
merchandise sold to customers will cause an
increase: IN OPERATING EXPENSES FOR THE
SELLER.
2. Statement 1: The income statement
measures revenues and expenses for a
period of time.
Statement 2: Liquidity refers to the
availability of cash to meet obligations in the
near future (BOTH STATEMENTS ARE
CORRECT)
3. A business purchases equipment with
8,000 cash. Which of the following accounts
is credited? (CASH)
4. On Sept 1 Buyer co. purchased supplies of
8000 on account with 10% TD and credit
terms 3/10,n/30… Shipping point, freight
prepaid and freight costs is 400. Buyer co.
paid in full on sept…. what is the entry not
recorded by the buyer co. on sept 1: (DEBIT
PURCHASES OF 7200)
5. For expenses, the category of account and
its normal balance is: (EQUITY AND DEBIT
BALANCE)
6. Macky continued on with the engagement
and didn’t say any word to Kate (cousin):
(OBJECTIVITY)
7. Manuel plumbing services earned 500 by
completing a job for Samuel company. 500
earned by manuel: (REVENUE)
8. An entity that buys goods and sells them
to consumers are at a markup is a
(RETAILER)
11. Which of the following sequence is the
normal sequence flow of accounting:
SOURCE DOCUMENT  JOURNAL LEDGER
12. Metropolitan: Calculate the amount of
increase or decrease in the capital for the
year: (20,000 INCREASE)
13. the respective normal account balances
of purchase, purchase discounts and freight
in: DEBIT, CREDIT, DEBIT
14. Boss company, a VAT registered business
purchased on account inventory from Well
company. The shipping costs were 560-VAT
included and the terms of the shipment were
FOB shipping point, prepaid. Boss would
have the following entry regarding Freight
Charges: DEBIT FREIGHT IN, 500 AND INPUT
VAT, 60; CREDIT A/P, 560
15. Under the perpetual inventory system,
the entry record return of defective
merchandise includes a credit to:
(MERCHANDISE INVENTORY)
16. Company A sells 300,000 of merchandise
on account to Company B with credit terms
of 2/10, n/30. If Company B is taking
advantage of the discount offered, what is
the amount of Company B’s check?
(294,000)
17. COGS Delivered amount to: (121,000)
18. Macky earn trust of her clients by
keeping client information to herself and
maintaining professionalism
(CONFIDENTIALITY)
19. Gross profit on Sales amount to: 48400
21. The company purchased goods for
205,000, under the terms less 5%, 2/10…
days after the purchase, the buyer returned
2,000 worth of goods which was… issuing a
credit memorandum. The buyer paid the
account within the discount…. (assume that
there is no VAT): (3855)
22. Regarding the inventory system used by
small retailers, which of the ff is incorrect: TO
BE COMPETITIVE, SMALL RETAILERS MUST
USE A PERSONAL INVENTORY SYSTEM.
23. Which of the following is provided in a
typical chart of accounts: ACCOUNT NUMBER
24. Fred Jones, the sole owner of a business,
withdraws cash for his personal use….
Equation: (ASSETS DECREASE AND EQUITY
DECREASES)
25. The seller did not record the freight
transaction. What is the term of shipment
between buyer and seller: FOB SHIPPING
POINT, FREIGHT COLLECT
26. The cost of goods available for sale
amount to: (139,200)
28. Gross profit represent the mark-up on:
(MERCHANDISE INVENTORY)
29. if a purchaser using a periodic system
agrees to freight terms of FOB Shipping
point, then the: (MERCHANDISE INVENTORY
WILL NOT BE AFFECTED)
30. Which of the ff line items would appear
on the income statement of a company that
uses the periodic inventory system, but not
on that of a company that uses the perpetual
inventory system: (COST OF GOODS
AVAILABLE FOR SALE)
31. Which of the following is an important
aspect of control over payroll: CONTROLS
EFFICIENCY IN PAYROLL PROCEDURES
32. Some popular designations of a
professional accountant engaged in this field
of practice are Chief Accountant, Controller,
Chief Financial Officier: CPAS IN COMMERCE
AND INDUSTRY
33. Which is an example of cashflow from an
operating cycle: RECEIPT OF CASH FROM THE
SALE OF GOODS AND SERVICES
34. Which is considered as a contra-revenue
account: (SALES RETURN AND ALOWANCES)
35. On aug 5. Buyer co purchased
merchandise of 360,000 on account with
10% TD and credit terms of 2/10, n/30 from
seller co. FOB Shipping point, Freight
prepaid. Freight costs if 4,000 buyer co. paid
in full on sep 11. The buyer is using the
Perpetual method of inventory system. What
is the entry that will not be recorded by the
Seller: (DEBIT TO PURCHASES OF 324,000)
36. HKing Company, a non-VAT company,
made a purchase of merchandise on credit
from Claude Company, a VAT-Registered
company on August 3, for 44,800, including
VAT, terms 2/10, n/45. On august 10, HKing
makes the appropriate payment to Claude.
The entry on August 10 for Claude Company
includes: (DEBIT CASH OF 43904)
37. September 1, 2020. The buyer and seller
agreed on term FOB Shipping point, Freight
collect for the freight costs of 15,000 on the
sales transaction of 800,000 with Trade
Discount of 5%, 10%. The seller provided a
credit terms of 3/10, n/30. The buyer paid on
September 9, 2020. How much is the invoice
price: (684,000)
38. The statement of cash flows should not
be used to evaluate an entity’s ability to:
(EARN NET INCOME)
39. The buyer and seller agreed on the term,
FOB-Shipping point, freight collect for the
freight cost of 15,000 on sales transactions
of 500,000 on September 1, 2020. The buyer
is using the perpetual method of inventory
system. Which entry will not be recorded by
the Buyer: (DEBIT TO FREIGHT IN OF 15,000)
40. the CFO of a “green university”
recommends some healthful measures on
proper disposal of the university’s chemical
laboratory wastes, so as not… The CFO is
observing the value of: (SOCIAL
RESPONSIBILITY)
41. How much is the Net Income: 4,190
42. If a purchaser using a perpetual system
agrees to freight terms of FOB Shipping
point, then the: MERCHANDISE INVENTORY
ACCOUNT WILL BE INCREASED
43. Which of the following is the correct
accounting equation: (ASSETS = LIABILITIES
+ OWNER’S EQUITY)
44. In a perpetual inventory system, the
physical count of inventory: (ALL
STATEMENTS ARE CORRECT)
45. Bryan Company, a VAT- registered
business, purchased merchandise on account
from Cates Company, a non-VAT business
with freight terms of FOB Shipping point,
collect. Bryan will record: DEBIT ENTRY TO
FREIGHT BUT NO ENTRY TO INPUT VAT
47. The buyer and seller agreed on the term
FOB-Destination, Freight Collect for the
freight costs of 15,000 for the purchase
transactions of 500,000 on September 1,
2020. Which entry will be recorded by the
Seller: DEBIT ACCOUNTS RECEIVABLE OF
485,000
48. A perpetual inventory system: ACHIEVES
BETTER CONTROL OVER INVENTORY
49. The buyer did not record the transaction
for the freight. What is the term of shipment
between the buyer and the seller: FOB-
DESTINATION; Freight Prepaid
50. Hala company sells merchandise on
account for 13440 including VAT to Long
company with credit terms of 2/10, n/30.
Long Company was credited 224 for
merchandise that was damaged sent back,
along with a check to settle the account
within the discount period. What is the
amount of the check: 12951.68
51. When customers pay their account within
the discount period, the amount that is
indicated as Debit to Cash: LESSER THAN
THE AMOUNT IN ACCOUNTS RECEIVABLE
CREDIT.
52. Regarding periodic inventory system,
which of the following statements is
incorrect: THE PERIODIC INVENTORY SYSTEM
IS NORMALLY USED FOR RELATIVELY
EXPENSIVE GOODS
53. The seller recorded freight-out and
credited the Accounts Receivable from Buyer.
What is the term of shipment for this
transaction: FOB-DESTINATION, FREIGHT
COLLECT
55. Business borrowed cash from BDO. This
transaction will be reflected as cash inflows
in: (FINANCING ACTIVITY)
56. A posting reference column is used:
WHEN THE INFORMATION IS TRANSFERRED
FROM THE JOURNAL TO THE LEDGER.
57. Which is a type of discount which is a
percentage reduction from a published list
price granted to merchandisers for buying
large quantities of for regularly patronizing
the business: TRADE DISCOUNT
58. BananaQ company purchased goods for
205,000, under the terms less 5%, 2%, 2/10,
n/30, FOB Destination, freight prepaid, 3,000.
Three days after the purchase, BananaQ
company returned 2,000 worth of goods
which was acknowledged by the seller upon
acceptance by issuing a credit
memorandum. The buyer paid the account
within the discount period. Assuming VAT is
not included in the amounts, the amount of
Purchase Returns and Allowance recorded
was: 2000
59. On September 1, buyer co purchased
merchandise of 90,000 on account with 5%
TD, with credit term 3/10, n/30 from seller
co., FOB shipping point, Freight Prepaid and
freight costs is 4,000. Buyer co paid in full on
September 11. The buyer is using the
Periodic Inventory System. What is the entry
that will not be recorded in the Buyer Co.
Books: CREDIT TO CASH 4,000
60. The statement of income contains the
following items, except: ACCUMULATED
DEPRECIATION
61. The trial is out of balance. This may be
due to: SALES POSTED AS 400 SHOULD BE
450
62. If a company is given credit terms of
2/10, n/30 it should: PAY WITHIN THE
DISCOUNT AND RECOGNIZE A SAVINGS
63. Which is an example of cash flow from
financing activity: CASH INVENTORY BY
OWNER
65. October 31, a business pays 1500 cash
for television ads that appeared during the
October. Which of the following account is
debited: ADVERTISING EXPENSE
67. The owner’s claim to the assets of the
business is called: EQUITY
68. How much is the total current assets:
10490.
69. on oct 1, Elma co. purchased 6720 worth
of goods on terms 2/15, n/30. Freight of 336
was prepaid by the seller under the term FOB
shipping point. The account was paid on
October 10. Assuming all amounts are VAT
inclusive, discount recorded was: 120,000
70. Regarding T-accounts, which of the ff
statements is correct: A T-ACCOUNT IS A
SUMMARY DEVICE WITH CREDITS POSTED ON
THE RIGHT SIDE OF THE VERTICAL LINE
71. This document is issued by the buyer
informing seller that returns are made
because the goods may be defective or not
as ordered: DEBIT MEMO
72. Macky authorized misappropriation of
funds to pursue expenditures that didn’t pass
through kate’s approvals: INTEGRITY
73. Macky refuses to attend trainings and
webinars …: PROFESSIONAL COMPETENCE
AND DUE CARE
74. A transaction was credited and posted to
membership fees revenue 2,000 instead of
to accounts receivable
Statement 1: the overstated both the
revenue and accounts receivable
Statement 2: Total debits is higher than total
credits: ONLY FIRST STATEMENT IS TRUE
75. Statement 1: when a company sells
merchandise with a term , 2/10, n.30, FOB
Destination, freight collect, the discount
given to the customer is computed as 2% of
the sum of the sales and freight out.
Statement 2: When a company sells
merchandise with a term, 2/10, n/30 , FOB
shipping point, freight prepaid, the discount
given to customer is computed as 2% of the
Sales: ONLY STATEMENT 2 IS TRUE
1. A payment of 25000 was correctly
journalized but posted as a credit to cash of
52000
S1: This understated cash by 27,000
S2: This error is called a transplacement
error.: ONLY FIRST STATEMENT IS TRUE
2. The buyer and seller agreed on the term
of FOB-Destination, Freight collect for the
freight cost of 15,000 for the purchase
transactions of 500,000 on September 1,
2020. Which entry will be recorded by the
seller: DEBIT ACCOUNTS RECEIVABLE OF
485,000
3. Regarding net pay, which of the following
statements is incorrect: THE NET PAY
AMOUNT IS IMPORTANT FOR ACCOUNTING
PURPOSES.
4. How much is the total non-current assets:
5,000
5. The journal entry to record a return of
merchandise purchased under a
perpetual inventory system would credit:
MERCHANDISE INVENTORY
6. Macky hides this practice by showing only
the net cash flows from investing and
financing activities, and concealing the
detailed activities from the statement of
cash flows. What professional ethics is
violated: INTEGRITY
7. Regarding the monetary unit assumption,
which of the following statements is
correct: ACCOUNTANTS ASSUME THAT
THE PESO’S PURCHASEING POWER IS
STABLE
8. The net cost of purchases amount to:
116,900
9.
10.As per the--- the entity will remain in
operation for the foreseeable future:
GOING CONCERN ASSUMPTION
11.A busines prepays four months’ office
rent. Which of the ff accounts is debited:
PREPAID RENT
12.The buyer purchased inventory on
October 28, 2020 for 1,000,000 is a FOB-
Destination, Freight Collect with freight
cost of 75,000. The seller gave a trade
discount of 15%, 5% with a credit term of
3/10, 1/15, n/30. The seller collected on
November 10, 2020. The buyer is using
the Periodic method of inventory system.
What is the Journal Entry that will not be
recorded by the Buyer on October 28:
DEBIT TO FREIGHT IN OF 75,000
13.Which of the following journal entries
would be recorded if a business
purchased office supplies on account in a
previous accounting period and now
makes a cash payment of 750 to the
supplier to settle the account: ACCOUNTS
PAYABLE 750, CASH 750
14.Merchandise inventory and COGS appear:
ON THE BALANCE SHEET AND INCOME
STATEMENT, RESPECTIVELY.
15.A debit entry for 6750 was posted as 675.
This error is called a : TRANSPLACEMENT
16.The seller recorded the freight
transactions as additional Accounts
Receivable from Buyer. What is the term
of shipment between the Buyer and
 Seller: FOB-SHIPPING POINT, FREIGHT
PREPAID
17.A business buys 300 of the office supplies
on account. Which of the following
accounts is debited: OFFICE SUPPLIES
18.The main expense of merchandiser is
usually: COGS
19.The buyer purchased equipment on
October 28, 2020 for 1,000,000 with
shipping terms of FOB-Destination,
Freight Collect of 75,000. The seller gave
a trade discount of 15%, 5% with a credit
term of 3/10 , 1/15 , n/30. The seller
collected on November 10, 2020. What is
the journal entry to record the cash
discount on the Buyer’s Book: CREDIT TO
OTHER INCOME 8,075
20.The four-column account: ADDS TWO
ADDITIONAL COLUMNS THAT ARE USED
TO DETERMINE A RUNNING BALANCE.
21.The main expense of a merchandiser is
usually: COGS
22.On the balance sheet of a retailer, the
merchandise inventory account: IS
INCLUDED IN THE CURRENT ASSETS
SECTION
23.Value electronics inc, started its
operations on January 1, 2019. Value
engages in buying and selling different
types of electronic gadget. The first step
in operating cycle would be: PURCHASE
INVENTORY FROM VENDORS
24.on oct 1, Elma co. purchased 6720 worth
of goods on terms 2/15, n/30. Freight of
336 was prepaid by the seller under the
term FOB shipping point. The account was
paid on October 17. Assuming all
amounts are VAT inclusive, discount
recorded was: 0
25.The buyer purchased inventory on
October 28, 2020 for 1,000,000 is a FOB-
Destination, Freight Collect with freight
cost of 75,000. The seller gave a trade
discount of 15%, 5% with a credit term of
3/10, 1/15, n/30. The seller collected on
November 10, 2020. The buyer is using
the Periodic method of inventory system.
What is the Journal Entry that will not be
recorded by the Buyer on October 28:
DEBIT TO FREIGHT IN OF 75,000
31. A business perform services for a
customer for 26,000 on account. Which of
the following is debited: Accounts Receivable
32. Net Sales amount to: 152 200
33. The company purchased goods for
350,000 under the terms less: 5%, 2%, 2/10,
1/12, n/30. FOB Shipping point, freight
prepaid, 3,000. Three days after the
purchase, buyer returned 2,000 worth of
goods which was acknowledged by the seller
upon acceptance by issuing a credit
memorandum. The buyer paid the account
11 days after the date of purchase. Which
statement is true relative to the journal entry
prepared on the date of purchase:
PURCHASES SHOULD BE DEBITED FOR
325,850
34. Which of the following is an example of a
cash flow from an investing activity: RECEIPT
OF CASH FROM THE SALE OF EQUIPMENT
35. FRC a bookstore, returned books with
missing pages. It should: CREDIT
FURNITURES AND FIXTURE
35. FRC a bookstore, returned books with
missing pages. It should: CREDIT PURCHASE
RETURNS AND ALLOWANCES
36. On may 11, buyer co, purchased
merchandise on account from seller co,
440,000 with 10%, 5%, 2% TD, FOB
Destination, Freight Prepaid and the freight
costs is 14,000. Which entry is correct in
recording the transactions in the buyer co,
books: DEBIT PURCHASES OF 368,676 AND
CREDIT ACCOUNTS PAYABLE OF 368, 676.
37. Gross profit is calculated as the
difference between net sales revenue and:
COGS
37. Gross profit is calculated as: NET SALES
LESS COST OF GOODS SOLD.
38. A 1,500 debit to utilities expense was not
posted.
S1: This understated the trial balance debit
total
S2: Net income is overstated: ONLY THE
FIRST STATEMENT IS TRUE
39. HKing Company, a non-VAT company,
made a purchase of merchandise on credit
from Claude Company, a VAT-Registered
company on August 3, for 44,800, including
VAT, terms 2/10, n/45. On august 10, HKing
makes the appropriate payment to Claude.
The entry on August 3 for Claude Company
includes: (DEBIT TO A/R 44800 AND CREDIT
SALES 40,000, OUTPUT VAT 4800)
40. When a seller grants credit for returned
goods, the account that is credited is:
ACCOUNTS RECEIVABLE
41. On oct 1, Elma Co sold goods to Seth Co.
for 2,800 on terms 2/10, 1/20, n/30. Freight
of 224 was paid under FOB Destination.
Goods were returned to Elma worth 784,
Seth paid on Oct 11. Assuming all amounts
are VAT inclusive. Discount recorded by Seth
was: 36
42. A business collects cash from a customer
for services that were performed one month
earlier. Which of the following accounts is
credited: ACCOUNTS RECEIVABLE
43. A business purchases equipment with
8,000 cash. Which of the following accounts
is credited: CASH
44. In a perpetual Inventory: ALL
STATEMENTS ARE CORRECT
45. A business renders services to a client
and issues a sales invoice. The amount will
be collected from the customer at a later
time. Which of the FF is true at the time
invoice is issued: NET INCOME WILL
INCREASE
46. Business purchased furniture and
equipment on account. Identify which major
activity does this transaction will be reflected
in the company’s cash flow statement: NOT
APPLICABLE OR NOT AFFECTED
47. On sept 1: buyer co purchased office
supplies of 5,000 on account with 10% TD
and credit erm 3/10, n/30 from seller co. FOB
Shipping Point , Freight Prepaid, and freight
costs400. Buyer co paid in full on September
11. Which among entries will not be recorded
by seller co on sept 11: CREDIT ACCOUNTS
RECEIVABLE 5,400
48. A buyer would record a payment within
discount period under perpetual inventory
system by crediting: MERCHANDISE
INVENTORY
26.on oct 1, Elma co. purchased 6720 worth
of goods on terms 2/15, n/30. Freight of
336 was prepaid by the seller under the
term FOB shipping point. The account was
paid on October 11. Assuming all
amounts are VAT inclusive, discount
recorded by Seth was: 36
39. HKing Company, a non-VAT company,
made a purchase of merchandise on credit
from Claude Company, a VAT-Registered
company on August 3, for 44,800, including
VAT, terms 2/10, n/45. On august 10, HKing
makes the appropriate payment to Claude.
The entry on August 10 for Claude Company
includes: (ALL OF THE ABOVE)
40. The respective normal balances of Sales,
Sales Retun and Sales discount: CREDIT,
DEBIT, DEBIT
41. Which of the following is not recorded in
a perpetual inventory system: TIMELINESS
OF VENDOR DELIVERIES
42. A 500 debit entry to furniture was posted
twice:
S1: Understated the trial balance credit total
S2: total assets is overstated: BOTH
STATEMENTS ARE TRUE
43. When a seller grants credit for returned
goods, the account that is credited is: SALES
RETURN AND ALLOWANCES-.> ACCOUNTS
RECEIVABLE
44. HOW MUCH IS THE TOTAL CURRENT
LIABILITIES: 3100  3300
46. Eaton company sells merchandise on
account for 22, 400 inclusive of VAT. Tang
company with credit terms of 2/10, n/30.
Tang returns 1120 of merchandise that was
damaged along with a check to settle the
account within discount period. What entry
does Eaton company make upon receipt of
check: DR. CASH, 20 854, SR&A, 1000, SD,
380; OUPUT VAT 165.60, CR: A/R 22400
47. The company purchased goods for
205,000, under the terms 2/10, n/30, FOB
Destination, freight prepaid, 3,000. Days
after the purchase, the buyer returned 2,000
worth of goods which was acknowledged by
the seller upon acceptance by issuing a
credit memorandum. The buyer paid the
account within the discount. The Purchase
Discount recorded is (assume that there is
VAT and the amounts are VAT-inclusive):
(3625)
48. The buyer purchased equipment on
October 28, 2020 for 1,000,000 with shipping
terms of FOB-Destination, Freight Collect of
75,000. The seller gave a trade discount of
15%, 5% with a credit term of 3/10 , 1/15 ,
n/30. The seller collected on November 10,
2020. What is the journal entry that will not
be recorded by the Seller if compound entry
is made: DEBIT A/R 807500. (corrected
answer)
49. on oct 1, Elma co. purchased 6720 worth
of goods on terms 2/15, n/30. Freight of 336
was prepaid by the seller under the term FOB
shipping point. The account was paid on
October 15. Assuming all amounts are VAT
inclusive, discount recorded by Seth was: 36
50. The company purchased goods for
350,000 under the terms, 2/10, 1/15, n/30,
FOB Shipping Point, Freight Prepaid, 3,000.
Three days after the purchase, the buyer
returned 11,200 worth of goods which was
acknowledged by the seller upon acceptance
by issuing a credit memorandum. The buyer
paid the account 11 days after the date of
purchase. Which statement is true relative to
the journal entry prepared on the date of
payment? (Assume the amounts are VAT
inclusive): PURCHASE DISCOUNT IS RECORDS FOR ACCOUNTS RECEIVABLE AND
CREDITED FOR 3025 SALES REVENUE.

51. A payment of 6,500 to an account
supplier was currently journalized but was
posted as a credit to accounts payable and a
credit to cash for the correct amount:
S1: This overstated Accounts Payable
S2: The total debit is higher than the total
credits: ONLY THE FIRST STATEMENT IS TRUE
52. Lynn Company, a VAT registered business
purchased merchandise inventory with an
invoice price of P33,600 including VAT, and
credit terms of 2/10, n/30. What is the net
cost of goods if Lynn Company pays within
the discount period? (30,000)
53. Which of the following statements is
NOT correct: IN A PERIODIC INVENTORY
SYSTEM, MERCHANDISE INVENTORY AND
PURCHASING SYSTEMS ARE INTEGRATED
WITH THE RECORDS FOR ACCOUNTS
RECEIVABLE AND SALES REVENUE.
51. Which of the following is correct about
the statement of cash flows: ALL OF THE
STATEMENTS
52. Merchandise inventory and COGS appear:
ON THE BALANCE SHEET AND INCOME
STATEMENT, RESPECTIVELY
53. The first step in journalizing and posting
process is to: IDENTIFY THE ACCOUNTS
INVOLVED AND THE ACCOUNT TYPE
54. Merchandise inventory account is used in
each of the following except the entry record
to: PAYMENT OF FREIGHT ON GOODS SOLD
55. Van Jones is the owner of a sole
proprietorship. Van took 5,000 from the
business for personal use. Which of the
following account is debited: JONES
WITHDRAWALS

34. A P1,500 debit entry to utilities expense

was not posted. Statement 1: This is
understated the trial balance debit total.
Statement 2: Net income is overstated. =
ONLY THE FIRST STATEMENT IS TRUE

52. Lynn Company, a VAT registered business

purchased merchandise inventory with an
invoice price of P33,600 including VAT, and
credit terms of 2/10, n/30. What is the net
cost of goods if Lynn Company pays within
the discount period, the journal entry to
record the settlement includes: A CREDIT TO
INPUT VAT OF 72

49. on oct 1, Elma co. sold goods to Seth co

for 2,800 on terms 2/10, 1/20, n/30. Freight
of 224 was paid under the term FOB
destination. Goods were returned to elma
worth 784. Seth paid on Oct 23. Assuming all
amounts are VAT inclusive, discount recorded
by Seth was: 0

42. Wilson furniture company is a sole

proprietorship. Wilson contributed P40,000 of
cash exchange for capital. Which of the ff will
be debited? = Cash

49. on oct 1, Elma co. sold goods to Seth co

for 2,800 on terms 2/10, 1/20, n/30. Freight
of 224 was paid under the term FOB
destination. Goods were returned to elma
worth 784. Seth paid on Oct 15. Assuming all
amounts are VAT inclusive, discount recorded
by Seth was: 18

50. Which of the following statements is not

correct: IN A PERIODIC INVENTORY SYSTEM,
MERCHANDISE INVENTORY AND PURCHASING
SYSTEMS ARE INTEGRATED WITH THE