____ 1. The purchase of an asset on account will A) Increase total liabilities and decrease total assets. B) Have no effect on total assets or total liabilities. C) Increase total assets and increase owners equity. D) Increase total assets and decrease owners equity. ____ 2. Amounts owed by a business are referred to as A) Assets B) Equities C) Liabilities D) Capital E) Expenses ____ 3. When an owner deposits cash in an account in the name of the business, it is an increase to A) Cash and Accounts Receivable B) Cash and Withdrawals C) Cash and Capital D) Cash and Accounts Payable E) Cash and Rent Expense ____ 4. Which of the following equations is the fundamental accounting equation? A) Assets Liabilities = Owners Equity B) Assets = Liabilities + Owners Equity C) Assets + Liabilities = Owners Equity D) Assets Owners Equity = Liabilities E) Assets + Owners Equity = Liabilities ____ 5. If an owner invests her computer and printer in the business, there is an increase to A) Cash and Capital B) Computer Equipment and Withdrawals C) Cash and Withdrawals D) Computer Equipment and Capital E) Computer Equipment and Cash ____ 6. A collection of an account receivable will result in which of the following? A) No increase in total assets, total liabilities, or total owners' equity B) An increase in cash, only C) A decrease in accounts receivable, only D) Net income will increase E) None of the above ____ 7. Which pair of accounts follows the rules of debit and credit in the opposite manner? A) Owners Withdrawals and Medical Revenues. B) Advertising Expense and Land C) Interest Payable and Owners Capital. D) Prepaid Insurance and Owners Withdrawals. ____ 8. Which the following debit and credit rules are correct? A) Increases in owners' equity are recorded by credits. B) Revenue is recorded by credits. C) Decreases in owners' equity are recorded by debits. D) Expenses are recorded by debits. E) All of the above are correct.

____ 9. Which of the following is true about expenses? A) Expenses may result in a decrease of assets. B) Expenses may result in an increase in liabilities. C) Expenses reduce owners' equity. D) A and C E) A, B, and C ____ 10. The collection of an account receivable does which of the following? A) Increases total assets B) Increases owners' equity C) Increases revenues D) A and C E) None of the above ____ 11. The purchase of an asset for cash will A) increase total assets and decrease total liabilities B) have no effect on total assets or total liabilities C) increase total assets and increase total liabilities D) increase total assets and increase total owners equity ____ 12. A current asset which includes coins, currencies and bank deposits is called A) Cash equivalents B) Notes receivable C) Accounts receivable D) Accounts payable ____ 13. The purchase of supplies for cash will A) Increase Supplies and decrease Cash B) Increases Supplies Expense and decrease Cash C) Decrease Cash and increase Accounts Payable D) Increase Supplies Expense and increase Accounts Payable E) Decrease Cash and increase Capital ____ 14. When an entity acquires computer equipment for cash, A) Assets and owners equity are increased B) An asset is increased and a liability is decreased C) One asset is increased and another is also increased D) One asset is increased while another is decreased ____ 15. When an entity receives cash for services performed, A) An asset is decreased B) The owners equity is increased C) The owners equity is decreased D) Total assets remain unchanged E) None of the above

____ 16. Art Supplies account is classified as a(n) A) Assets

B) Liability, if the supplies have not yet been paid for C) Owner's Equity account D) Expense ____ 17. When an entity acquires computer equipment for cash, A) one asset is increase and another is also increased B) one asset is increased while the other is decreased C) asset and owners equity are increased D) one asset is increased and a liability is decreased ____ 18. The acquisition of an asset on credit A) leaves the total assets unchanged B) decreases assets and increases liabilities C) increases assets and liabilities D) increases assets and owners equity ____ 19. The account records long-term debt of the business entity for which it has pledged certain assets as security A) notes payable B) accounts payable C) mortgage payable D) bonds payable ____ 20. The accounting equation A) is used to determine the amount of liabilities owed B) is used to determine the amount of income earned during the period C) shows the claims on the owners equity by the creditors D) shows the claims on the entitys assets by both the creditors and the owner ____ 21. When the proprietor withdraws cash or other assets, the withdrawal account is A) debited B) credited C) debited and credited D) not affected ____ 22. A credit entry decreases the balance of A) owners equity B) assets C) income D) liabilities ____ 23. When an entity pays employees for their services, the effect is an increase in A) expenses B) assets C) income D) liabilities ____ 24. All of the following affect the owners equity account except A) Original investment B) Payment of liability C) additional investment D) withdrawal by the owner ____ 25. Which of the following is an asset of the firm? A) The capital of the firm B) Computer Equipment owned by the firm C) Money owed by the firm for purchases made on credit D) An overdrawn balance on the firms bank account ____ 26. A P100,000 machine is purchased by paying P25,000 cash and issuing a promissory note for the remainder. The entry should include

A) Cr. to Machinery B) Dr. to Cash C) Cr. to Notes Payable D) Cr. to Notes Receivable ____ 27. A purchase is recognized in the accounting records when A) payment is made for the item purchased B) the purchase requisition is sent to the purchasing department C) the seller delivers the goods to the buyer and were received by the buyer D) the buyer receives the sellers bill ____ 28. All of the following are assets except A) equipment B) unearned revenue C) cash D) inventory ____ 29. Which of the following is an asset account? A) insurance expense B) Supplies expense C) Office Equipment D) Sales ____ 30. A debit may signify a decrease in A) a liability account B) an asset account C) an expense account D) a withdrawal account ____ 31. A purchase of supplies on account should be recorded as A) Dr. Supplies Expense and Cr. Cash B) Dr. Accounts Payable and Cr. Supplies C) Dr. Supplies Expense and Cr. Accounts Payable D) Dr. Supplies Expense and Cr. Accounts Receivable ____ 32. Which of the following accounts is increased with a debit? A) Owners Withdrawals B) Legal Revenues C) Rent Payable D) Owners Capital ____ 33. Which of the following account is increased with a credit? A) Supplies expense B) Supplies C) Revenues D) Owners Withdrawals ____ 34. A withdrawal by the owner of a business will A) increase liabilities B) decrease owners equity C) not affect total assets D) decrease profit ____ 35. An entry with more than one debit or credit is called a A) double entry B) compound entry C) dual entry D) multiple entry

PART II. FILL IN THE BLANK Instruction: Fill in the blank with the missing information. 1. Revenues minus expenses equals _______________________. 2. Resources owned by a company (such as cash, accounts receivable, vehicles) are reported on the balance sheet and are referred to as __________________. 3. Obligations (amounts owed) are reported on the balance sheet and are referred to as ________________. 4. Assets minus liabilities equals ___________________________________. 5. Liabilities often have the word ________________ in their account title. 6. ____________ term is associated with "left" or "left-side". 7. ____________ term is associated with "right" or "right-side". 8. The financial statement with a structure that is similar to the accounting equation is the _____________ _____________.

PART III. JOURNAL ENTRIES, T-ACCOUNT AND TRIAL BALANCE PROBLEM 1: Rocky Company May 1 Rocky Invested P250,000 into his Consulting business. 1 Rented office space and paid two months rent in advance for P10,000 per month. 2 Rocky issued a promissory note for a P210,000 loan from a bank. 2 Acquired service vehicle for P420,000. 4 Paid Prudential Guarantee and Assurance, Inc. P14,400 for a one-year comprehensive insurance coverage on the service vehicle. 5 Acquired office equipment for P60,000 paying P15,000 in cash and the balance next month. 8 Purchased supplies on credit for P18,000 from AB Trading. 9 Paid AB Trading P10,000 of the amount owed. 10 Performed Consulting Services and collected fees of P26,400. 13 Paid salaries, P6,600. 15 Received P10,000 advance fees from clients. 19 Billed clients for services rendered amounting to P36,000. 25 Rocky withdrew P14,000 for personal use. 27 Paid salaries, P7,200. 30 Received the telephone bill P1,400. 30 Received cash of P24,000 from two clients for services billed last may 19. 31 Settled the electricity bill of P3,000 for the month. Use the following accounts: Cash, Notes Receivable; Accounts Receivable; Office Supplies; Prepaid Rent; Prepaid Insurance; Office Equipment; Service Vehicle; Notes Payable; Accounts Payable; Unearned Consulting Revenues; Rocky, Capital; Rocky, Withdrawal; Consulting Revenues; Salaries Expense; Utilities Expense; Repairs and Maintenance. Instructions: 1. Prepare the journal entries of each transaction in a journal. 2. Post the journal entries to the T-Account. 3. From the balances of the T-Account of each account, prepare the Trial Balance as at May 31.

PROBLEM 2: (Jones Programming Service) May 2 Patrick Jones started a computer programming business, Jones Programming Service, by investing P50,000 cash. 5 Purchased a computer for P25,000 in cash. 7 Purchased supplies on credit for P3,000. 19 Received cash for programming services performed, P5,000.

22 Received cash for programming services to be performed, P6,000. 25 Paid the rent for May, P6,500. 31 Billed a customer for programming services performed, P2,500. Use the following accounts: Cash; Accounts Receivable; Supplies; Computer Equipment; Unearned Programming Revenue; Jones, Capital; Programming Revenue; Rent Expense Instructions: 1. Record the above transaction directly in the T-Account without using a journal. Indicate the date to identify the transactions. 2. Prepare the Trial balance as at May 31.