FUNDAMENTALS OF ACCOUNTING

REVIEWER FOR THE FINAL EXAM

I. Complete the tables

Account Title Normal Balance Increase Decrease

1 Salaries Expense Debit Debit Credit
2 X, Drawing Debit Debit Credit
3 Unearned Fees Income Credit Credit Debit
4 Dividend Income Credit Credit Debit
5 Equipment Debit Debit Credit
6 Interest Receivable Debit Debit Credit
7 Insurance Payable Credit Credit Debit
8 Prepaid Rent Debit Debit Credit
9 Insurance Expense Debit Debit Credit
10 Service Income Credit Credit Debit
11 X, Capital Credit Credit Debit
12 Mortgage Payable Credit Credit Debit
13 Accounts Payable Credit Credit Debit
14 Accounts Receivable Debit Debit Credit
15 Cash Debit Debit Credit

A B C D E
100
Assets 200,000 81,000 140,000 % 150,000
Liabilities 55,000 33,000 105,000 35% 45,000
Owner's
Equity 145,000 48,000 35,000 65% 105,000

A B C D
Revenue 200,000 83,000 160,000 57,000
Expenses 37,000 40,000 93,000 80,000
Net Income
(Loss) 163,000 43,000 67,000 - 23,000

II. Identification

1. These accounts are presented in the financial statements as addition to their related accounts.
Answer: Adjunct accounts
2. This type of journal entry contains only a single debit and a single credit. Answer: Simple journal
entry
3. This type of ledger contains all the accounts appearing in the trial balance. Answer: General
ledger
 4. It is the accounting record where business transactions are first recorded. Answer: General
Journal
5. It is also called “book of final entries”. Answer: General ledger
If you pay your tuition fee in school, the school will issue you this document. Answer: Official
receipt
6. A business is assumed to have an indefinite existence. Answer: Going concern
7. The commission that regulates the practice of all professions and is mandated to grant licenses
to candidates who have successfully passed the government licensure examination. Answer:
Professional Regulation Commission (PRC)
8. Is engaged in the production of items to be sold. Answer: Manufacturing business
9. It shows the result of operations for a given period. It consists of the revenue, cost and
expenses. Answer: Income Statement
10. It includes debts, obligations to pay and claims of the creditors on the assets of the business.
Answer: Liability
11. It summarizes the cash receipts and cash disbursements for the accounting period. Answer:
Statement of Cash Flows
12. An account representing the amounts owed by charge customers. Answer: Accounts receivable
13. A twelve-month period that starts on January 1 and ends on December 31. Answer: Calendar
period/year
14. It means that approaches used in reporting must be uniformly employed from period to period
to allow comparison of results between time periods. Answer: Consistency
15. States that income should be recognized at the time it is earned such as when goods are
delivered or when services have been rendered. Likewise, expenses should be recognized at the
time they are incurred, such as when goods and services are actually used and not at the time
when the entity pays for those goods and services. Answer: Accrual principle
16. Expired portion of premium paid on insurance coverage. Answer: Insurance expense
17. A small amount of cash kept on hand to pay for minor expenses, such as office supplies or
reimbursements. Answer: Petty cash fund
18. A system of policies and procedures used by companies to safeguard assets and ensure that
transactions are recorded properly and in a timely manner. Answer: Internal control
19. The amount of money charged to the borrower for the use of borrowed funds. Answer: Interest

III. Multiple choice

1. Which of the following adjustments cannot be reversed in the next accounting period?
a. Accruals for income or expense
b. Prepayments initially recorded using the expense method
c. Advanced collections initially recorded using the income method
Answer: a
2. If P3,000,000 cash is paid to buy land, the land is reported in the buyer’s balance sheet as
P3,000,000. What principle is being applied?
a. Business entity concept
b. Periodicity
c. Cost principle
 d. Neutrality
Answer: c
3. What is another term for equity?
a. Net assets
b. Liability
c. Retained earnings
d. Net income
Answer: a
4. Withdrawal by the owner has all of the following effects except
a. Decrease in assets
b. Decrease in equity
c. Decrease in cash balance
d. Decrease in profit
Answer: d
5. In a worksheet, which of the following is prepared after the unadjusted trial balance?
a. Income statement columns
b. Adjusted trial balance columns
c. Adjusting entries columns
d. Balance sheet columns
Answer: c
6. Which of the following is not a correct expanded accounting equation?
a. Assets + Expenses = Liabilities + Equity + Income
b. Assets – Liabilities = Equity + Income – Expenses
c. Assets = Liabilities + Equity + Income + Expenses
d. Assets = Liabilities + Equity + Income – Expenses
Answer: c
7. The income statement showed utilities expense of P24,000 and the statement of financial
position showed utilities payable of P4,000. How much was the utilities expense paid?
a. P28,000
b. P24,000
c. P20,000
d. P4,000
Answer: c
8. The owner’s capital is P400,000. The total liability is P160,000 of which P120,000 is current
liability. The non-current asset is P200,000. What is the amount of working capital?
a. P360,000
b. P200,000
c. P240,000
d. P80,000
Answer: c
9. At the start of the period, a business has total assets of P500,000 and total liabilities of
P300,000. During the period, the business earned total income of P1,000,000 and total expenses
of P640,000. No additional investments or withdrawals were made by the owner. Total assets at
the end of the period were P830,000. How much is the total liabilities at the end of the period?
 a. P280,000
b. P270,000
c. P260,000
d. P240,000
Answer: b
10. Entity A has a beginning inventory of P280,000. During the period, Entity A purchased inventory
costing P890,000. Freight paid on the purchase totaled P30,000. If the ending inventory is
P220,000, how much is the cost of goods sold?
a. P1,360,000
b. P980,000
c. P950,000
d. P920,000
Answer: b