REVIEW QUESTIONS

1. What is a source document? Describe briefly.

2. What are business transactions? Why is there a need to keep a written record of all
business transactions?
3. What is a chart of account?
4. What is meant by the term account?
5. Explain what is the first step in in the accounting cycle.
6. Explain what is the second step in the accounting cycle.
7. What is debit? What is credit?
8. Applying the rules, when do we debit? When do we credit?
9. What is a T-account? Describe its format.
10. Identify the source documents supporting the following transactions:
a. Cash collected from customers.
b. Cash paid for salaries.
c. Receive service from Meralco.
d. Rendered service on account.
e. Cash paid for supplies.
11. What is double entry bookkeeping system?
12. What is a journal?
13. Explain what are the two types of journal entries.
14. Why is the journal called the book of original entry?
15. Why are the credit account titles indented in the general journal?

MULTIPLE CHOICES
1. It is the initial input to the accounting process and serves as objective evidence of the
transaction, serving as part of the audit trail should the firm need to prove that a
transaction occurred.
a. Journal
b. Ledger
c. Source Document
d. T-account

2. Is a negotiable instrument drawn against deposited funds, to pay a specified amount of

money to a specific person upon demand?
a. Official Receipt
b. Invoice
c. Voucher
d. Check

3. Is a commercial document that itemizes a transaction between a buyer and a seller?

a. Official Receipt
b. Invoice
c. Voucher
d. Check
4. It is a written acknowledgment. It is a specified note that shows money which has been
received as an exchange for products or services.
a. Official Receipt
b. Invoice
c. Voucher
d. Check

5. It is a series of steps which are repeated every reporting period. This involves a series of
steps that the firm takes every accounting time period in order to take account of its
financial transactions.
a. Accounting Cycle
b. Venetian Model
c. Double Ruling
d. Journalization

6. Another term by which a journal is also known.

a. General Journal
b. Special Journal
c. Book of Original Entry
d. Book of Final Entry

7. A device in skeleton form representing an account form divided in the middle by a line to
provide for a left side or debit side and a right side or credit side.
a. Trial Balance
b. T-account
c. Venetian Model
d. Double Ruling

8. The debit side of an account.

a. Right side
b. Left side
c. Center
d. Right and Left side

9. Defined as the left side of an account.

a. Debit
b. Credit
c. Either debit or credit
d. Neither debit nor credit
10. An account's assigned ________ is on the side where increases go because the increases
in any account are usually greater than the decreases.
a. Debit
b. Credit
c. Normal Balance
d. Account Balance

11. The list of accounts to be used in recording a company’s transactions which guides the
bookkeeper in the recording of the transactions.
a. Accounting Equation
b. Account Balance
c. Transaction
d. Chart of Accounts

12. A journal entry with more than one debit or more than one credit.
a. Simple Journal Entry
b. Compound Journal Entry
c. Double Entry Bookkeeping
d. Footing

13. This is a specific location for recording transactions of a like kind. These are the basic
type of records that are kept for the individual asset, liability, equity, revenue and
expense components.
a. Journal
b. Ledger
c. Work Sheet
d. Account

14. This is where transactions and events are reliably processed and summarized into relevant
and useful financial statements and reports.
a. Work Sheet
b. Source Documents
c. Journal
d. Accounting System

15. The system where the full value of each transaction is recorded on the debit side of one or
more accounts and also on the credit side of one or more accounts. Therefore, the
combined debit balance of all accounts always equals the combined credit balance of all
accounts.
a. Venetian Model
b. Accounting System
c. Double Ruling
d. Journalization
 16. It is a permanent chronological record of the business’ transactions, including the
amounts, accounts affected, in which direction the account are affected, may it be an
increase or a decrease, and explanation of the transactions occurred.
a. Journal
b. Ledger
c. Work Sheet
d. Source Documents

17. It is the process of recording transactions in the journal.

a. Footing
b. Journalization
c. Posting
d. Double Ruling

18. The Franciscan monk who introduces the Double Entry Bookkeeping system.
a. Luca Pasiola
b. Augustus Morris
c. Fra Luca Pacioli
d. Simone Pierre

19. A type of journal entry with a single entry for the debit and a single entry for the credit.
a. Simple Journal Entry
b. Compound Journal Entry
c. Double Entry Bookkeeping
d. Footing

20. The correct number of spaces of a money column in the general journal.
a. 6
b. 7
c. 8
d. 9

TRUE OR FALSE
Write the letter “T” if the statement is true, the letter “F” if the statement is false on the space
provided for.
1. In the T-account form, addition by position is done by placing the amount to be
added on the same side of the balance side.
2. Double entry bookkeeping means recording the transaction twice.
3. Assets are normally debits while liabilities and owner’s equity are normally
credits.
4. Assets are debited if they are to be increased and credited if they are to be
decreased.
5. Debit to increase withdrawal of capital.
6. Credit to increase expense account.
 7. Each side of the T-account form is conveniently provided with three columns.
8. The specific titles used in the chart of accounts should be uniform for all
businesses.
9. The journal is referred to as the book of final entry.
10. A compound entry contains one debit and one credit.
11. Revenues earned for lending money is called rent income.
12. A month is generally written only once on a page of the general journal.
13. A blank line is left between each entry to clearly separate all entries in the
General Journal.
14. If an error is committed either in figure or word, cross out the error with one
horizontal line and write the correct figure or word above it.
15. The simplest form of the journal is the two-column journal called the General
Journal.

EXERCISES AND PROBLEMS

1. State whether the following have debit normal balances or credit normal balances:
a. Cash i. Land
b. Bad debts j. Accrued salaries and wages
c. Ramos, Capital k. Ramos, Drawings
d. Prepaid Rent l. Unearned Interest Income
e. Utilities Expense m. Accumulated Depreciation
f. Notes Payable n. Office Supplies
g. Furniture & Fixtures o. Depreciation
h. Service Income p. Bonds Payable

2. Maricel A. Diaz started a travel and tour business called MAD Travel and Tours. Analyze
the transactions given below as to what values are affected, whether the effect is an
increase or decrease and whether the account should be debited or credited. For example:
Jan 1 asset increase, debit cash P100,000 and owner’s equity increase credit Diaz, Capital
P100,000. Mention the debit side first.
Jan 1 Ms. Diaz made a cash investment of P100,000.
3 Acquired from Acer office equipment on account, P20,000.
5 Acquired furniture and fixtures for cash, 15,000.
10 Paid for rent, P5,000 cash.
14 Obtain a loan from BDO and signed a 90-day note for P250,000.
15 Paid the account due to Acer.
18 Paid for gas and oil P1,000.
21 P10,000 was received from a tourist for a tour in Ilocos.
22 Mr. Chua hired the services of the agency for his package tour to Hong
Kong and promised to pay P30,000 on Jan 30.
25 Paid Meralco for electricity, P3,000.
30 Collected P15,000 from the customer, Mr. Chua.
3. Wally Enaje opened his construction business called WE Built with a cash investment of
P50,000 and office building worth P100,000 on May 1, 2012. Additional transactions for
the month are as follows:
May 2 Furniture and fixtures were constructed at a total cost of P25,000.
6 Purchased supplies for cash, P3,500.
9 Paid for telephone, light and water, P2,750.
11 Received P75,000 from a client for construction services.
15 Paid salaries of workers and clerks, P56,320.
16 Obtain a loan from Metrobank and signed a 90-day note for P300,000.
18 Billed OZ Corp. P120,000 for construction of their building.
19 Billboards used to advertise the business were paid in cash, P75,000.
21 Purchase construction equipment on account, P110,000.
24 Supplies used, P1,500.
25 Collected P40,000 from the client, OZ Corp.
27 Paid the account from purchase of construction equipment.
30 Paid salaries of workers and clerks, P50,000.

a) Analyze the transactions given above and record using the T-accounts below:
b) Extract the balances of each accounts.

Cash Furniture & Fixtures Building

Supplies Accounts Receivable Equipment

Accounts Payable Notes Payable Enaje, Capital

 Service Income Salaries & Wages Advertising Expense

Supplies Expense Utilities Expense

4. Assume the following selected transactions of Abad Realty for the month of June:
June 1 Mr. Abad opened a real estate broker’s office by investing P50,000 cash.
3 Paid the office rent for three months in advance, P4,500.
4 Purchased miscellaneous office supplies from Mutual Book Store on
credit, P1,500.
5 Purchased tables and chairs from Furnett Company worth P18,000 terms
n/60.
6 Received cash P15,000 as commission from the sale of a property.
8 Received a statement of account from Goodwill Printers for advertising
materials used, P3,000.
9 Paid salary of office clerks, P4,800.
10 Sent a bill to Home Developers for services rendered, P25,000.
13 Received a check from Home Developers as partial payment of their
account, P15,000.
15 Home Developers issued a 30-day note in full settlement of their account,
P10,000.
16 Paid the telephone bill, P850.
18 Issued a 120-day, 20% promissory note to RCBC Bank for funds
borrowed, P25,000.
22 Mr. Abad, the owner, withdrew cash from the business for personal use,
P8,000.
25 Issued a 30-day, 20% note to Mutual Book Store in settlement of our
account with them, P1,500.
30 Mr. Abad made an additional cash investment, P15,000.

a) Analyze the transactions given above and record using the T-accounts:
b) Extract the balances of each account.
5. The following transactions were completed by a business engaged in trucking for March,
its first month of operation.
March 1 Owner, Mr. Gascon invested P400,000 cash in the trucking business.
2 Purchased a truck for cash, P150,000.
8 Paid rent for the garage and office space, P18,000.
10 Purchased office equipment worth P10,200 from Eastern Marketing on
account. Terms: 30 days.
11 Paid P1,250 for business license and mayor’s permit.
13 Received P25,000 cash for trucking services.
15 Paid the drivers’ and employees’ salary, P18,500.
20 Sent a check to Eastern Marketing P5,000 to apply on account.
21 Paid water and electricity bill, P2,600.
23 Paid gasoline and oils used for the truck, P12,350.
25 Purchased another truck from Megatrade Trading valued at P250,000.
Terms: 50% down, balance 60 days.
26 Sent a bill to South Star Drug Co. for trucking services for their provincial
outlets, P58,000.
28 Received a check from South Star Drug Co. P38,000 as partial payment of
their account.
30 The owner, Mr. Gascon withdrew P13,000 cash from the business for
personal use.
31 Paid a mechanic, P950 for minor repairs made on one of the trucks.
Required: Journalize the above transactions using a two-column general journal.

6. Dr. Guevara opened a dental clinic near St. Paul University, and completed the following
transaction for the month of April:
April 1 Invested cash P40,000 and dental equipment worth P100,000.
3 Paid the rent of the dental office, P1,200.
5 Purchased miscellaneous dental supplies, P850 for cash.
6 Paid the corresponding business license and mayor’s permit, P450.
8 Paid the printing of calling cards and posters, P250.
10 Purchased a dental equipment worth P15,000 from Dental Supply Co. on
account.
15 Paid the salary of receptionist for the month, P2,000.
16 Sent a bill to St. Paul University for services rendered, P3,500.
18 Sent a check to Dental Supply Co. P3,000 to apply to account.
19 Dr. Guevara withdrew P2,000 cash for personal use.
20 Paid light and water bill, P750.
24 Sold an old dental equipment at cost, P1,000.
27 Purchased an office table and a chair for the receptionist P1,750 for cash.
30 A minor repair work was done on the dental equipment and paid P500.
Note: None of the dental supplies purchased in April were still on hand on April 30.
Required: Journalize the above transactions using a two-column general journal.
7. The following are the transactions of Austria Law Office owned by Atty. Leon Austria
for January for its first month of operation:
Jan 1 Deposited in a current account P50,000 as initial investment.
2 Paid the rent for the office space, P1,500.
5 Purchased office furniture and equipment from Custom Works worth
P15,000. Terms: on account.
6 Purchased various law books from Rex Book Store P17,250, issuing a
check for P7,250 and the balance payable in 30 days.
8 Paid for the newspaper advertisement, P250.
14 Secured the necessary business license and mayor’s permit, P400 cash.
17 Received P10,000 cash as retainer’s fee from various clients.
18 Sent a bill to Memorata Manufacturing Co. for legal services rendered,
P7,500.
20 Issued a check to Custom Works, P7,500 to apply on account.
21 Paid for miscellaneous office supplies used during the month, P500.
24 Paid the bill for light and water, P750.
26 Withdrew P5,000 cash for personal use.
27 Paid the telephone, telegram services, P530.
30 Paid the salary of secretary for the month, P3,000.
31 Transferred to the law office law books worth P18,000 from his personal
library as additional investment.
Required:
a) Analyze the transactions given above and record using the T-accounts.
b) Extract the balances of each account.
c) Journalize the above transactions using a two-column general journal.

8. Mr. Luigi Castillo, proprietor of Terrific Dry Cleaning furnished the data for their month
of August operations.
Aug 1 Invested cash P60,000 and dry cleaning equipment worth P240,000.
3 Paid rent of plant and office for the month, P9,500.
5 Paid for printing of cards and circulars announcing the opening of the
business, P250.
7 Paid business license and mayor’s permit, P500.
9 Received P36,750 cash for services rendered.
10 Paid salaries and wages of employees, P17,300.
12 Purchased solvents and dyes from Proctor & Gamble Co. P15,000 on
account.
15 Mr. Castillo, the proprietor, withdrew P2,500 cash for personal use.
18 Sent a check to Proctor & Gamble Co. P3,000 to apply on account.
20 Sent a bill to Sunrock Hotel for services rendered, P7,500.
22 Paid light and water bill for the month, P11,850.
23 Sent a bill to Villa Luisa Resort P20,000 for services rendered.
25 Sold an old dry cleaning equipment at cost for cash P6,000.
 28 Purchased various office furniture worth P20,000 from Space Encounters
on account.
31 Transportation expense paid P3,700.
Required:
a) Record each transaction in the proper debit and credit position in the T-
accounts. Always start with the debit entry.
b) Indicate account balance by footings.
c) Journalize the above transactions using a two-column general journal.

9. Mrs. Laura Florante rented a space at the Serendra to start a flower shop business. During
the month of May, she had the following transactions:
May 1 Deposited P10,000 cash in a checking account as initial investment.
3 Paid P4,500 rent for the month.
5 Purchased flowers and ferns on account from Oasis Greenhouse, P6,200.
7 Purchased potted plants from Binondo Florist, P2,900 cash.
9 Purchased fresh flowers on account from Oasis Greenhouse, P5,900.
11 Cash sales to date amounted to P28,250.
13 Withdrew cash for personal use, P3,000.
15 Expenses incurred in delivery of flowers, P1,830 and paid cash.
17 Sent a check to Oasis Greenhouse P6,000, to apply on account.
19 Sold flowers and plants to Serendra Hotel, P8,250. Terms: on account.
21 Paid salaries and commission for May P13,300.
23 Paid cash for corsage, ribbons, pins, wire, paper, etc. P450.
25 Paid business license and mayor’s permit, P650.
27 Received a check from Serendra Hotel, P4,000.
31 Purchased a new glass counter for P7,700, cash.
All flowers and plants purchased during the month were sold by the end of the month.
Required:
a) Record each transaction in the proper debit and credit position in the T-
accounts. Always start with the debit entry.
b) Indicate account balance by footings
c) Journalize the above transactions using a two-column general journal.
d) Determine the balances of the following:
1. Cash
2. Accounts Receivable
3. Furniture & fixtures
4. Accounts Payable
5. Sales
6. Purchases
7. Florante, Capital
8. Florante, Drawing
10. As of November 1, the books of L. Ferriol had the following balances:
Cash ………………………………………………….. P 26,300
Transportation Equipment …………………………… P 250,000
Office Equipment ……………………………………. P 8,800
Office Furniture & Fixtures ………………………….. P 15,600
Ferriol, Capital ……………………………………….. P 341,200

For the month of November the following transactions of L. Ferriol Consultancy Office
transpired:
2 Paid P2,000 for rent of the office for November.
4 Paid P150 for parking space for the car (use rent expense).
6 Paid the city government for business registration fees and mayor’s
permit, P500.
7 Bought office supplies from Office Warehouse for cash, P5,000.
8 Bought a new office table from Custom Works costing P1,250 on account
payable in 30 days.
10 Sold an old office computer for P3,500 cash.
12 Sent a bill to Elias & Clark Publishing amounting to P40,000 for audit
work rendered.
16 Process Oriented Day Care Center was billed for accounting services
rendered P15,000.
18 Received a bill from PLDT for P3,720 for telephone services, to be paid
later.
22 Paid P1,000 to nearby Caltex Service Station for repairs on transportation
vehicle.
23 Received P6,400 cash for accounting services rendered to various clients.
24 Paid P4,010 for electricity and water bill.
26 Process Oriented Day Care Center paid P5,000.
28 Withdrew P4,300 cash for personal use of Ms. Ferriol.
29 Paid salary of employees, P15,500.
30 P4,500 supplies were used up.
Required:
a) Record each transaction in the proper debit and credit position in the T-
accounts. Always start with the debit entry.
b) Indicate account balance by footings
c) Journalize the above transactions using a two-column general journal.
d) Determine the balances of the following:
1. Cash
2. Accounts Receivable
3. Office Supplies
4. Office Equpment
5. Office Furniture & Fixtures
6. Transportation Equipment
7. Accounts Payable
8. Income from Fees