General Instructions: Choose the best answer.

1. The accounting equation can be stated as:

a. A + L - OE = 0
b. A - L + OE = 0
c. -A + L- OE = 0
d. A - L - OE = 0

2. Which of the following accounts has a debit balance?

a. Accounts Payable
b. Accrued Taxes
c. Accumulated Depreciation
d. Uncollectible Accounts Expense

3. They encompass the conventions, rules, and procedures necessary to define what is accepted
accounting practice.
a. Accounting Assumptions
b. Accounting Concepts
c. Conceptual Frameworks
d. Generally Accepted Accounting Principles or GAAP

4. First statement: In general, debits refer to increases in account balances, and credits refer to
decreases.

Second statement: All liability and equity accounts are increased on the credit side and
decreased on the debit side.
a. True, True
b. True, False
c. False, True
d. False, False

5. Factors that shape an accounting information system include the

a. nature of the business
b. size of the firm
c. volume of data to be processed.
d. all of these

6. Which of the following items has no effect on owner’s equity?

a. Expense
b. Owner’s Withdrawal
c. Purchase of land
d. Revenue

7. Debit always means

a. right side of an account.
b. increase
c. decrease
d. none of these.

8. If assets total P700,000 and liabilities total P400,000, how much are the net assets?
a. P300,000
b. P400,000
c. P700,000
d. P1,100,000
9. Which of the following combinations of trial balance totals suggest the presence of either a
transposition error or number slide?
a. P65,470 debit and P68,170 credit
b. P33,220 debit and P35,420 credit
c. P25,670 debit and P26,670 credit
d. P28,570 debit and P28,570 credit

10. Which financial statement reports the revenues and expenses for a period of time such as a
year or a month?
a. Balance Sheet
b. Income Statement
c. Statement of Cash Flows
d. None of these

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11. Revenues minus expenses equals _____________.
a. Gross Sales
b. Net Expenses
c. Net Income
d. Net Sales

12. Which of the following accounts is increased by a credit?

a. Accounts Receivable
b. Sales
c. Withdrawals
d. Advertising Expense

13. Assets minus liabilities equals __________.

a. Net Income
b. Current Assets
c. Current Liabilities
d. Equity

14. Which of the following is true?

a. A debit will increase a liability account.
b. A credit will increase an asset account
c. A credit will increase a revenue account
d. A debit will decrease an expense account

15. In applying the rules of debits and credits, which of the following statements is correct?
a. The word "debit" means to increase, and the word "credit" means to decrease
b. Asset, expense and capital accounts are debited for increases
c. Liability, revenue and capital accounts are debited for increases
d. Asset, expense and withdrawals are debited for increases

16. What are increases in resources that a firm earns by providing goods or services to its
customers?
a. Assets
b. Income
c. Expenses
d. Liabilities

17. On Apr. 1, 2023,Wenn sets up a firm and brings in office equipment of P50,000 and inventory
of P30,000 to the business. Wenn puts P80,000 into the firm's cash box and P100,000 into the
firm's bank account. Meanwhile, the firm lends P50,000 cash to RD and Associates and
borrows P200,000 from the bank to acquire a piece of premises.

What is the amount of the firm's capital on Apr. 1, 2023?

510,000
a. 206,000
b. 260,000
c. 216,000

18. Under the double-entry system, what is the value of X assets, current liabilities, non-current
liabilities and capital are X, P40,000, P60,000 and P350,000 respectively?
a. 250,000
b. 350,000
c. 370,000
d. 450,000

19. A business has the following items in it:

- Land P 100,000
- Machinery 20,000
- Cash 10,000
- Debt 30,000
- Owner’s equity ______?
What is the value of the owner’s equity?
a. 100,000
b. 160,000
c. 60,000
d. 130,000

20. If assets increase by P100,000 and liabilities decrease by P30,000, owner's equity must
a. remain unchanged.
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 b. b. increase by P130,000.
c. C decrease by P70,000.
d. d. decrease by P130,000.

21. A T-account consists of how many parts?

a. One
b. Two
c. Three
d. Four

22. The debit and credit analysis of a transaction normally takes place
a. before an entry is recorded in a journal.
b. when the entry is posted to the ledger.
c. when the trial balance is prepared
d. at some other point in the accounting cycle

23. A debtor repays his debt of P50,000 by transferring the money into bank account of the
business The effect of the transaction on the accounting equation would be:
a. Both assets and liabilities increase by P50,000
b. Both assets and liabilities decrease by P50,000
c. Only assets decrease by P50,000
d. Assets and liabilities remain unchanged.

24. A sale on account would be recorded by

a. debiting revenue
b. crediting assets
c. crediting liabilities.
d. debiting assets.

25. Capital = Assets – Liabilities

a. True
b. False
c. Maybe
d. I don’t know

26. Incurring an expense for advertising on account would be recorded by

a. debiting liabilities
b. crediting assets
c. debiting an expense
d. debiting assets

27. A trial balance

a. proves that debits and credits are equal in the ledger
b. supplies a listing of open accounts and their balances that are used in preparing
financial statements.
c. is normally prepared three times in the accounting cycle.
d. all of these.

28. The first step in recording a transaction in a journal is to

a. record the debit
b. record the date.
c. record the credit.
d. write an explanation

29. Which of the following accounts is classified differently from the others listed
a. Notes Payable
b. Unearned Revenue
c. Mortgage Payable
d. Art Revenues

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30. Which of the following accounting steps is accomplished after the others listed?
a. Post the entry
b. Prepare the trial balance.
c. Apply the rules of double entry
d. Record the entry.

Think Different!