Analyze the transactions of a business organized as a proprietorship described below and indicate their

effect on the basic accounting equation, use plus sign (+) to indicate an increase, a minus sign (-) to
indicate a decrease and (NE) to indicate if there is no effect.

Transactions Assets = Liabilities + Equity

Received cash for services rendered

Purchased office equipment on credit

Paid employees’ salaries

Received cash from customers in payment on account

Paid telephone bill for the month

Paid for office equipment purchased in transaction 2

Purchased office supplies on credit

Owner withdrew cash for personal expenses

Obtained a loan from the bank

Billed customers for services rendered

Match column A with column B.

Column A Column B

1. The amount by which revenues exceeds a. Net loss

expenses b. Liabilities
2. Cost of assets consumed or services used c. Creditors
in the process of earning revenue d. Owner’s equity
3. Resources a business owns e. Statement of comprehensive income
4. A business owned by a single person f. Net income
5. Economic events of a business that are g. Ethics
recorded by accountants h. Corporation
6. Withdrawal of cash or other assets from i. Revenues
an unincorporated business for the j. Statement of changes in equity
personal use of the owner(s) k. Investors
7. Creditors claims against total assets l. Assets
8. Ownership claims on total assets m. Proprietorship
9. The amount by which expenses exceed n. Statement of financial position
revenues o. Transactions
10. The gross increase in owner’s equity p. Expenses
resulting from business activities entered q. Drawings
into to earn income r. Corporations
11. A financial statement that reports assets, s. Users
 liabilities, and owner’s equity at a specific t. Loans
date
12. The use of accounting information to
decide whether to buy, hold or sell
ownership shares of a company
13. Standards of conduct by which one’s
actions are judged as right or wrong,
honest or dishonest, fair or not fair
14. They use accounting information to
evaluate the risks of granting credit or
lending money
15. A financial statement that presents the
revenues, expenses and resulting net
income or net loss of a company for a
specific period of time

Circle the correct answer.

1. Which of the following is not a step in the accounting process?
a. Identification
b. Verification
c. Recording
d. Communication
2. Which of the following statements about users of accounting information is incorrect?
a. Management is an internal user
b. Taxing authorities are external users
c. Present creditors are external users
d. Regulatory authorities are internal users
3. The cost principle states that:
a. Assets should be initially carried at cost and adjusted when fair value changes
b. Activities of an entity are to be kept separate and distinct from its owner
c. Assets should be recorded at their cost
d. Only transaction data capable of being expressed in terms of money should be included in the
accounting records
4. Which of the following basic assumptions is correct?
a. Basic assumptions are the same as accounting principles
b. The economic assumption states that there should be a particular unit of accountability
c. The monetary unit assumption enables accounting to measure employee morale
d. Partnerships are not economic entities
5. The three forms of business are:
a. Proprietorship, small business and partnership
b. Proprietorship, partnership and corporation
c. Proprietorship, partnership and legal business
d. Financial, manufacturing and service companies
6. Net income will result during time period when
a. Assets exceed liabilities
 b. Assets exceed revenues
c. Expenses exceed revenues
d. Revenues exceed expenses
7. Performing services on account will have the following effects on the components of the basic
accounting equation:
a. Increase asset and decrease owner’s equity
b. Increase asset and increase in owner’s equity
c. Increase in asset and increase liabilities
d. Increase liabilities and increase in owner’s equity
8. Which of the following event is not recorded in the accounting records?
a. Equipment is purchased on account
b. An employee is terminated
c. A cash investment is made into the business
d. The owner withdraws cash for personal use
9. On the last day of the period, the company buys P 500 machine on credit. This transaction will affect
the:
a. Statement of comprehensive income only
b. Statement of financial position only
c. Statement of comprehensive income and statement of financial position only
d. Statement of comprehensive income, statement of financial position, statement of changes in
owner’s equity
10. The financial statement that reports asset, liabilities and owner’s equity is the:
a. Statement of comprehensive income
b. Statement of changes in owner’s equity
c. Statement of financial position
d. Statement of cash flows
11. Debits:
a. Increase both assets and liabilities
b. Decrease both assets and liabilities
c. Increase assets and decrease liabilities
d. Decrease assets and increase liabilities
12. Revenue account:
a. Is increased by debits
b. Is decreased by credits
c. Has a normal balance of a debit
d. Is increased by credits
13. Accounts that normally have debit balances are:
a. Assets, expenses and revenues
b. Assets, expenses and owner’s capital
c. Assets, liabilities and owner’s drawings
d. Assets, owner’s drawings and expenses
14. The expanded accounting equation is:
a. Assets + liabilities = owner’s capital + owner’s drawings + revenue + expenses
b. Assets = liabilities + owner’s capital +owner’s drawings + revenue - expenses
 c. Assets = liabilities - owner’s capital - owner’s drawings - revenue - expenses
d. Assets = liabilities + owner’s capital - owner’s drawings + revenue - expenses
15. Which of the following is not part of the recording process?
a. Analyzing transactions
b. Preparing a trial balance
c. Entering transactions in a journal
d. Posting transactions
16. Which of the following statements about journal is false?
a. It is not a book of original entry
b. It provides chronological order of transactions
c. It helps to locate errors because the debit and credit amounts for each entry can be readily
compared
d. It discloses in one place the complete effect of a transaction
17. The order of accounts on the ledger:
a. Assets, revenues, expenses, liabilities, owner’s capital, owner’s drawings
b. Assets, liabilities, owner’s capital, owner’s drawings, revenues, expenses
c. Owner’s capital, assets, revenues, expenses, liabilities, owner’s drawings
d. Revenues, assets, expenses, liabilities, owner’s capital, owner’s drawings
18. A ledger is
a. Contains only asset and liability account
b. Should show accounts in alphabetical order
c. A collection of the entire group of accounts maintained by a company
d. A book of original entry
19. Posting:
a. Normally occurs before journalizing
b. Transfers ledger transaction date to journal
c. Is an optional step in the recording process
d. Transfers journal entries to ledger account
20. A trial balance:
a. Is a list of accounts with their balances at a given time
b. Proves the mathematical accuracy of journalized transactions
c. Will not balance if a correct journal entry is posted twice
d. Proved that all transactions have been recorded

Fill in the missing amounts.

Company A Company B Company C Company D

January 1, 2024

Assets P 95,000 P 110,000 P 170,000

Liabilities 50,000 75,000

Owner’s equity 60,000 45,000 90,000

 December 31, 2024

Assets P 141,000 200,000

Liabilities 55,000 75,000 80,000

Owner’s equity 63,000 130,000 162,000

Owner’s equity changes in year 2024

Additional 15,000 10,000 15,000

investment

Drawing 25,000 14,000 20,000

Total revenues 350,000 420,000 520,000

Total expenses 320,000 385,000 342,000

An inexperienced bookkeeper prepared the following trial balance. Prepare a correct trial balance
assuming all account balances are normal. Write the correct balance.

Ardent Tigers Company

Trial Balance
December 31, 2024

Debit Credit

Cash P 12,900

Prepaid insurance P 650

Accounts payable 3,960

Unearned service revenue 2,200

Owner’s capital 9,000

Owner’s drawings 4,550

Service revenue 25,600

Salaries and wages expense 19,200

Rent expense 3,460

TOTAL P 34,300 P 47,220

 Ardent Tigers Company
Trial Balance
December 31, 2024

Debit Credit

Cash

Prepaid insurance

Accounts payable

Unearned service revenue

Owner’s capital

Owner’s drawings

Service revenue

Salaries and wages expense

Rent expense

TOTAL

Circle the correct answer. If the answer is not found, write E beside the item number.

1. The matching principle states that:

a. Revenue should be recognized in the accounting period in which it is earned.
b. Expenses should be matched with revenues.
c. The economic life of a business can be divided into artificial time periods.
d. The fiscal year should correspond with the calendar year.
2. The principle or assumption dictating that the economic life of a business can be divided into
artificial time period is:
a. Expense recognition principle
b. Cost assumption
c. Time period assumption
d. Revenue recognition principle
3. Adjusting entries are made to ensure that:
a. Expenses are recognized in the period in which they are not incurred
b. Revenues are not recorded in the period in which they are earned
c. Statement of Comprehensive Income and Statement of Financial Position accounts don't have
correct balances at the end of the accounting period.
d. All of the above.
4. Each of the following is not a major type (or category) of adjusting entries except:
a. Unearned revenues
b. Accrued prepayment
c. Unearned expenses
d. Earned revenues
5. The trial balance shows Supplies P 1,350 and Supplies Expense P 0. If P 600 of supplies are on
hand at the end of the period, the adjusting entry is:
a. Supplies 600
Supplies Expense 600
b. Supplies 750
Supplies Expense 750
c. Supplies Expense 750
Supplies 750
d. Supplies Expense 600
Supplies 600
6. Accumulated Depreciation is a/an:
a. Contra asset account
b. Expense account
c. Owner's equity account
d. Liability account
7. OLX PH computes depreciation on store equipment at P 1,000 for the month of August. The
adjusting entry to record this depreciation is as follows:
a. Depreciation Expense 1,000
Accumulated Depreciation - OLXPH 1,000
b. Depreciation Expense 1,000
Equipment 1,000
c. Depreciation Expense 1,000
Accumulated Depreciation - Equipment 1,000
d. Equipment Expense 1,000
Accumulated Depreciation - Equipment 1,000
8. Adjustments of unearned revenues:
a. Decrease liabilities and increase revenues
b. Has an asset and revenue account relationship
c. Increases assets and increases revenues
d. Decrease revenues and decrease assets
9. Adjustments for accrued revenues:
a. Have a liability and revenue account relationship
b. Have an asset and revenue account relationship
c. Decrease assets and revenues
d. Decrease liabilities and increase revenues
10.Failing to adjust an Unearned Revenue that has been partially earned and was originally recorded
as a credit to Unearned Revenue will usually result in an:
 a. Overstatement of Revenues and an Overstatement of Liabilities
b. Overstatement of Revenues and an Understatement of Liabilities
c. Understatement of Revenues and an Understatement of Liabilities
d. Understatement of Revenues and an Overstatement of Liabilities
11. Which of the following statement is incorrect concerning the worksheet
a. The worksheet is essentially a working tool of the accountant
b. The worksheet is distributed to management and other interested parties
c. The worksheet cannot be used as a basis for posting to ledger accounts
d. Financial statements can be prepared directly from the worksheet before journalizing and
posting the adjusting entries
12. in a worksheet, net income is entered in the following columns:
a. Income statement (Dr) and balance sheet (Dr)
b. Income statement (Cr) and balance sheet (Dr)
c. Income statement (Dr) and balance sheet (Cr)
d. Income statement (Cr) and balance sheet (Cr)
13. In the unadjusted trial balance of its worksheet for the year ended December 31, 2024, Tigers
Company reported Equipment of P 120,000. The year ended, adjusting entries required an adjustment
of P 15,000 for depreciation expense for the equipment. After adjustment, the following adjusted
amount should be reported:
a. A debit of P 105,000 for Equipment in the balance sheet column
b. A credit of P 15,000 for Depreciation Expense-Equipment in the income statement column
c. A debit of P 120,000 for Equipment in the balance sheet column
d. A debit P 15,000 for Accumulated Depreciation in the balance sheet column
14. An account that will have zero balance after closing entries have been journalized and posted is:
a. Service revenue
b. Supplies
c. Prepaid insurance
d. Accumulated Depreciation-Equipment
15. When a net loss has occurred, Income Summary is:
a. Debited and Owner's Capital is credited
b. Credited and Owner's Capital is debited
c. Debited and Owner's Drawings is credited
d. Credited and Owner's Drawings is debited
16. Which type of accounts will appear in the post-closing trial balance?
a. Permanent (real) accounts
b. Temporary (nominal) accounts
c. Accounts shown in the income statement columns of a worksheet
d. None of the above
17. When Tigers Company purchased supplies worth P 500, it incorrectly recorded a credit to
Supplies for P 500 and a debit to Cash for P 500. Before correcting this error:
a. Cash is overstated and Supplies is overstated
b. Cash is understated and Supplies is understated
 c. Cash is understated and Supplies is overstated
d. Cash is overstated and Supplies is understated
18. Cash of P 100 received at the time the service was provided was journalized and posted as a debit
to Cash P 100 and a credit to Accounts Receivable P 100. Assuming the incorrect entry is not
reversed, the correcting entry is:
a. Debit Service Revenue P 100 and credit Accounts Receivable P 100
b. Debit Accounts Receivable P 100 and credit Service Revenue P 100
c. Debit Cash P 100 and credit Service Revenue P 100
d. Debit Accounts Receivable P 100 and credit Cash P 100
19. The correct order of presentation in a classified balance sheet for the following current assets is:
a. Accounts Receivable, cash prepaid insurance, inventory
b. Cash, inventory, accounts receivable, prepaid insurance
c. Cash, accounts receivable, inventory, prepaid insurance
d. Inventory, cash, accounts receivable, prepaid insurance
20. On December 31, Ardent Tigers Company correctly made an adjusting entry to recognize P 2,000
of accrued salaries payable. On January 8 of the next year, total salaries of P 3,400 were paid.
Assuming the correct reversing entry was made on January 1; the entry on January 8 will result in a
credit to Cash P 3,400 and the following debit(s):
a. Salaries and Wages Payable P 1,400 and Salaries and Wages Expense P 2,000
b. Salaries and Wages Payable P 2,000 and Salaries and Wages Expense P 1,400
c. Salaries and Wages Expense P 3,400
d. Salaries and Wages Payable P 3,400

Journalize the following adjusting entries (no need to indicate the explanation and post ref.)

PROBLEM A. The transactions for SMA Realty for the year 2024 have been recorded in the
accounting system. This problem requires you to prepare adjusting entries for December 2024.

Dec.31 A computer was purchased for P 1,600 on January 1, 2024. The useful life of the
computer is 4 years.

Dec.31 Furniture costing P 4,800 was purchased on January 1, 2024. The useful life of the
furniture is estimated to be 10 years and the salvage value is P 800.

Dec.31 The amount of supplies available at the end of December was P 850. The amount of
supplies at the beginning of the period was P 1,000. P 1,850 of supplies were
purchased during 2024.

Dec.31 On September 1,2024, SMA Realty had paid P 6,600 as rent for a six-month period.
This had been recorded as prepaid rent.
PROBLEM B. The transactions for MAPAPASA KO ANG SEMESTER INC. for the year 2024 have
been recorded in the accounting system. This assignment requires you to prepare adjusting entries for
December 2024.

Dec.31 Depreciation on the building owned by MAPAPASA KO ANG SEMESTER INC. is

estimated to be P 12,500 for the period.

Dec.31 MAPAPASA KO ANG SEMESTER INC. purchased furniture for P 4,200 on

January 1, 2024. The estimated useful life of the furniture is seven years. Record the
depreciation for 2024.

Dec.31 Excess space in the building was rented to another business on October 1, 2024, and
six months rent of P 7,200 was collected in advance.

Dec.31 The amount of party supplies available at the end of December was P 150. The
amount of supplies at the beginning of the period was P 200. P 550 of supplies were
purchased during 2024.
d