General Instructions: Chose the best answer.

Theories and Short Problems

1. An account has two sides two sides called the

a . Debit and credit c. Revenue and expense
b. Asset and liability d. Journal and ledger

2. Increases in liabilities are recorded by

a. Debits b. Credits

3. Why do accountants record transactions in the journal?

a. To ensure that all transactions are posted to the ledger
b. To ensure that total debits equal to total credits
c. To have a chronological record of all transactions
d. To help prepare the financial statements.

4. Posting is the process of transferring information from the

a . Journal to the trial balance
a. Ledger to the trial balance
b. Ledger to the financial statements
c. Journal to the ledger

5.. The purchase of land for cash is recorded by a

a. Debit to cash and credit to land.
b. Debit to cash and debit to land
c. Debit to land and credit to cash.
d. Credit to cash and a credit to land

6. The purpose of the trial balance is to

a. List all the accounts with their balances
b. Ensure that all transactions have been recorded
c. Speed the collection of cash receipts from the customers.
d. Increase assets and owner's equity.

7. What is the normal balance of the Accounts Receivable, Office Supplies and Rent Expense
accounts?
a. Debit b. Credit
 8. A business has Cash of P3,000, Notes payable of P2,500, Accounts payable of P4,300,
Service Revenue of P7,000, and Rent expense of P1,800. On the basis of this data, how
much are its total liabilities?
a. P5,500 c. P9,800
B. P6,800 d. P13,800

9. Wenn Company earned revenue on account. The journal entry to record this transaction is
a
a. Debit to revenue and a credit to accounts receivable
b. Debit to cash and a credit to revenue.
c. Debit to accounts receivable and a credit to revenue
d. Debit to accounts payable and a credit to revenue

10.If the amount of profit for the current period is less than the amount of the owner's
withdrawals, there will be a(n)
a . decrease in the Cash account.
b. decrease in the owner's Capital account.
c. increase in liabilities on the balance sheet.
d. increase in the Cash account.
e. increase in the owner's Capital account.

10. Profit for Jeffrey Franco's Treasures is P250,000 for the current year. The owner withdrew
P30,000 per month for personal living expenses. The owner's Capital account will show a net
a . decrease of P110,000 c. increase of P610,000.
b. decrease of P360,000. d. increase of P110,000.
e. increase of P360,000

11. Which of the following is a cash outflow from operating activities?

a. Payment for interest expense
b. Payment to acquire property and equipment
c. Payment to settle notes payable
d. Payment to owners in the form of withdrawals

12. The trial balance debit or credit amount of each account is combined with the amount of any
debit or credit adjustment to that account to determine the new balance of the account. This
process is known as
a. Balancing c.footing
b. cross-footing d. totaling
13.Which of the following comes first in the accounting process?
a. journalizing external transactions
b. preparation of an adjusted trial balance
c . preparation of an unadjusted trial balance
d. worksheet preparation

14. Which two steps in the accounting cycle are aided by the preparation of a worksheet?
a. adjusting the accounts and preparing financial statements
b . analyze source documents and preparing financial statements
c. posting journal entries and adjusting the accounts
d. journalizing transactions and closing the accounts

15. Posting a P3,000 debit as a credit causes an error

a. in the journal known c. that is divisible by 9
b. as transposition. d. that is divisible by 2

Use the following information to answer questions 16 to 20 below. Villanueva Realty had
the following balance sheet accounts and balances:

Accounts Payable P60,000 Equipment P70,000

Accounts Receivable 10,000 Villanueva, Capital ?
Building ? Land 70,000
Cash 30,000

16. If the balance of the Villanueva, Capital account was P210,000, what would be the balance
of the Building account?
a. P250,000 c. P90,000
b. P40,000 d. P210,000

17. If the balance of the Building account was P170,000, what would be the total of liabilities
and owner's equity?
a. P170,000 c. P320,000
b. P270,000 d. P350,000

18. If the balance of the Building account was P150,000 and the equipment was sold for
P70,000, what would be the total of owner's equity?
a. P150,000 c. P270,000
b. P160,000 d. P330,000
19. If the balance of the Bullding account was P140,000 and P30,000 of Accounts
Payable were paid in cash, what would be the balance of the Villanueva, Capital account?
a. P210,000 c. P320,000
b. P260,000 d. P340,000

20. If the balance of the Building account was P80,000 and P30,000 of Accounts Payable were
paid in cash, what would be the total liabilities and owner's equity?
a. P140,000 c. P190,000
b. P180,000 d. P230,000