Test 1.

Write the following on the space provided after each sentence to identify
what branch of accounting renders this service:
1. Preparation of general-purpose financial statements
2. Evaluation of the performance of a sales department
3. Develop standards to address a new business set up
4. Review tax compliance of the business
5. Evaluate whether a branch of the business complies with the collection and
deposit policy of the company
6. Review whether the financial statements are presented fairly and in
compliance with accounting standards
7. Report on the spending of government funds
8. Report on the total cost of materials and labor used in the production
9. Conducting lectures on accounting topics
Test 2. Enumeration
1-3. Give at least 3 internal users of accounting information.
4-6. Give at least 3 external users of accounting information.
Test 3. Identify if it is a service, merchandising, manufacturing business or hybrid
1. Provides services to customers
2. Sells goods to customers
3. Raw materials are available
4. Goods to be sold are purchased from a supplier
5. Goods to be sold are produced by the company itself
6. Supplies are used, no goods to be sold
7. Bakery
8. Barber shop
9. Cellphone store
10.Abenson appliances
Test 4-A. Concept check. Use the following multiple-choice questions for practice.
Ask the students to answer the following multiple-choice questions:
1. The accounting guideline that requires financial statement information to be
supported by independent, unbiased evidence other than
someone's belief or opinion is the:
a. Business entity principle
b. Monetary unit principle
c. Going-concern principle
d. Cost principle
e. Objectivity principle
2. The principle that requires every business to be accounted for separately and
distinctly from its owner or owners is known as the:
a. Objectivity principle
b. Business entity principle
c. Going-concern principle
d. Revenue recognition principle
e. Cost principle
3. The rule that requires financial statements to reflect the assumption that the
business will continue operating instead of being closed or sold,
unless evidence shows that it will not continue, is the:
a. Going-concern principle
b. Business entity principle
c. Objectivity principle
d. Cost Principle
e. Monetary unit principle
4. To include the personal assets and transactions of a business's owner in the
records and reports of the business would be in conflict with the:
a. Objectivity principle
b. Realization principle
c. Business entity principle
d. Going-concern principle
e. Revenue recognition principle
5. The objectivity principle:
a. means that information is supported by independent, unbiased evidence
b. means that information can be based on what the preparer thinks is true
c. means that financial statements should contain information that is optimistic
d. means that a business may not re-organize revenue until cash is received
6. Marian Mosely is the owner of Mosely Accounting Services. Which accounting
principle requires Marian to keep her personal financial
information separates from the financial information of Mosely Accounting Services?
a. Monetary unit principle
b. Going-concern principle
c. Cost principle
d. Business entity principle
7. Which of the following accounting principles would require that all goods and
services purchased be recorded at cost?
a. Going-concern principle
b. Continuing-concern principle
c. Cost principle
d. Business entity principle
Test 4-B. Matching. Match the following words with their definition:
a. Going concern principle e. Time period principle h. Monetary
unit principle
b. Objectivity principle f. Cost principle i. Accrual
accounting principle
c. Matching principle g. Disclosure principle j.
Conservatism principle
d. Materiality principle
___________________ 1. All relevant information should be included in the financial
reports
___________________ 2. In case of doubt, assets and income should not be overstated.
___________________ 3. Assume that the company will continue indefinitely.
___________________ 4. All transactions should be supported by unbiased evidence.
___________________ 5. Expenses should be recorded in the period when the revenue
is generated.
___________________ 6. Minimal costs incurred should be recorded as an expense.
___________________ 7. A Philippine company should report financial statements in
pesos.
___________________ 8. A barber who performs services for a client should record
revenue.
___________________ 9. Statement of Financial position should be recorded as of
December 31, 2015.
___________________ 10. A company that purchases furniture should record it at its
acquisition price.
Test 5. For each transaction, tell whether the assets, liabilities and equity will
increase (I), decrease (D) or is not affected (NE).

Test 6. Application
Jerome Garcia started a new business and completed these transactions during
August:
Aug. 1 Garcia invested PHP48,000 cash in the business.
1 Rented office space and paid PHP800 cash for the August rent.
3 Purchased exploration equipment for PHP22,000 by paying PHP12,000 cash and
agreeing to pay the balance in 3 months.
5 Purchased office supplies by paying PHP1,500 cash.
6 Completed exploration work and immediately collected PHP420 cash for the work.
8 Purchased PHP1,350 of office equipment on credit.
15 Completed exploration work on credit in the amount of PHP8,000.
18 Purchased PHP700 of office supplies on credit.
20 Paid cash for the office equipment purchased on August 8.
24 Billed a client PHP2,400 for work completed; the balance is due in 30 days.
28 Received PHP5,000 cash for the work completed on August 15.
30 Paid the assistant’s salary of PHP1,100 cash for this month.
30 Paid PHP340 cash for this month’s utility bill.
30 Garcia withdrew PHP1,050 cash from the business for personal use.
Required
1. Arrange the following asset, liability, and equity titles in a table: Cash; Accounts
Receivable; Office Supplies; Office Equipment; Exploration
Equipment; Accounts Payable; Jerome Garcia, Capital; Jerome Garcia, Withdrawals;
Revenues; and Expenses on a separate sheet.
Test 7. Matching Type
Assets Accounts Receivable Intangible Assets
Liabilities Notes Receivable Property, Plant and Equipment
Owner’s Equity Rent Expense
Cash Prepaid Expense
____________ 1. It is the obligations of the company payable in money, goods or
services.
____________ 2. These are non-current tangible assets.
____________ 3. These assets are identifiable, non-monetary assets without physical
substance.
____________ 4. It is the claim of the owner also known as the capital.
____________ 5. It is the most liquid asset and is the medium of exchange for
business transactions.
____________ 6. It is an expense for leased office space, equipment or assets rented
from others.
____________ 7. Examples of this are cash, account receivable and prepaid expenses.
____________ 8. It is a written promise from the customer to pay his receivables on a
certain future date.
Test 8. Identify what special journal that is applicable for the following transactions:
1. Collected PHP10,000 from a customer in payment of his account
2. Bought 100 pieces of mugs to be sold in the store amounting to PHP1,500 on
account.
3. Sold five pieces of mugs to X, PHP320 cash.
4. Sold two pieces of mugs to Y, PHP112 cash
5. Purchased office supplies for cash, PHP500.
6. Paid PHP20,000 monthly rental
7. Paid salary of staff, PHP15,000
8. Sold 100 pieces of mugs to Unicup, Inc., PHP5,600 on account.
9. Sold 500 pieces of mugs to Bugsmore Corp. for PHP15,300 payable one
month after delivery.
10.Purchase on account 1,000 pieces of mugs for PHP12,400
11.Official Receipt issued by the company
12.Charge Invoice issued by the company
13.Charge Invoice from a supplier
14.Official receipt from a supplier as proof of payment of account
Test 9. Application
On June 1, Maya Cruz opened the Ganda Beauty Salon. During the first month, the
following selected transactions occurred:
1. Deposited PHP5,000 cash in the City Bank in the name of the business
2. Paid PHP800 cash for beauty supplies
3. Purchased equipment at a cost of PHP12,000 paying PHP2,000 in cash and the
balance on account
4. Received PHP1,200 cash for services rendered
5. Paid PHP500 cash as a salary to a beautician
6. Withdrew PHP400 cash for personal expenses
Required Task
Using the following format, identify the effects of above transactions to the
accounting equation on a separate sheet:
ASSETS = LIABILITIES + OWNERS' EQUITY
Test 10. Application. Compute the depreciation expense for the following
independent cases. Use the straight-line method of depreciation.
1. Pedro Reyes purchased a delivery vehicle on January 1, 2016 amounting to
PHP250,000. It is estimated that the vehicle will be useful for 10
years. The vehicle can be sold for PHP10,000 at the end of its useful life. If the
accounting period being reported by Pedro is one (1) year
from January – December 2016, how much is the depreciation expense?

2. Pedro Reyes purchased a delivery vehicle on April 1, 2016 amounting to

PHP250,000. It is estimated that the vehicle will be useful for 10
years. The vehicle can be sold for PHP10,000 at the end of its useful life. If the
accounting period being reported by Pedro is one (1) year
from January-December 2016, how much is the depreciation expense?

3. Pedro Reyes purchased a delivery vehicle on January 1, 2016 amounting to

PHP250,000. It is estimated that the vehicle will be useful for 10
years. The vehicle can be sold for PHP10,000 at the end of its useful life. If the
accounting period being reported by Pedro is one (1) month
(January 2016), how much is the depreciation expense for the month?

Test 11. For each of the following items, write the journal entry first (if one is
needed) to record the transactions; and then the adjusting entry, if any is
required, for the end of the accounting year of Ron Car Rental Company on
December 31, 2016.
1. On December 1, borrowed PHP300,000 cash from Nation Bank by issuing a
promissory note with an interest of 12% per annum payable in
three months.

2. On December 1, paid rental for six months beginning December 1, 2016 to May
31, 2017, at PHP3,000 per month.

3. On December 31, 2016, received telephone bills for the month December
amounting to PHP5,600. The bill will be paid on January 2017.

Test 12. Application

Kay Travel was organized on September 1, 2016. Assume that the accounts are
closed and financial
statements are prepared each month. The company occupies rented office space
but owns office
equipment estimated to have a useful life of 10 years from date of acquisition,
September 1, 2016. The
unadjusted trial balance for Kay at November 30, 2016 is shown below:

Unadjusted Trial Balance

Debit credit
Cash P1,750
Accounts Receivable 1,210
Office Equipment 4,800
Accum. Depreciation, P80
Off Eqpt
Accounts Payable 1,640
Kay, Capital 7,490
Kay, Withdrawal 500
Service Revenue 4,220
Advertising Expense 800
Salaries Expense 3,600
Rent Expense 770
P13,430 P13,430

Additional Information:
The rent expense amounting to PHP770 covers rental for the month of November
and December 2016
Instructions:
1. Prepare the adjusting entries necessary for the above problem
2. Prepare an adjusted trial balance
3. Prepare an income statement ending November 30, 2016
4. Prepare closing entries
Do this on a separate sheet.