ST.

VINCENT COLLEGE OF CABUYAO

Mamatid, City of Cabuyao, Laguna

I. Write the word TRUE if the statement is correct, otherwise, write FALSE.
________ 1. Expenses represent the cash paid for the goods sold or services rendered in the process of
generating revenue.
________ 2. Payment of a liability will not affect total assets but will cause total liabilities to decrease.
________ 3. Owner’s equity is the excess of an entity’s capital over liabilities.
________ 4. Accounts that appear on the left side of the accounting equation usually have credit balances.
________ 5. According to the balance sheet equation, the assets of a business entity must always equal
the liabilities and owner’s equity.
________ 6. Asset is a resource controlled by the enterprise as a result of past events and from which
future economic benefits are expected to flow to the enterprise.
________ 7. Expenses cause decreases in owner’s equity and are recorded by credits.
________ 8. A debit entry always decreases the balance of an account.
________ 9. Liabilities represent amount owed to the creditors.
________ 10. In the fundamental accounting equation, assets are added to liabilities.

II. Fill in the blanks. Determine whether the word debit or credit is appropriate for each statement.
1. Asset accounts normally have ________ balance. An increase in asset is recorded as a
________ while a decrease is recorded as a ________.
2. The owner’s capital account normally has a ________ balance. This account increases on the
________ side and decreases on the ________ side.
3. Income accounts normally have ________ balances. These accounts increases on the ________
side and decreases on the _______ side.
4. Expense accounts normally have ________ balances. These accounts increases on the
________ side and decreases on the _______ side.
5. Liability accounts normally have ________ balance. An increase in liability is recorded as a
________ while a decrease is recorded as a ________.

III. Indicate each account’s classification and normal balance by placing CHECK mark.
The following ledger accounts are used by Rafaelito RamosTutorials:
a. Cash o. Office Equipment
b. Salaries Expense p. Rent Payable
c. Accounts Receivable q.Notes Receivable
d. Torres, Capital r. Interest Expense
e. Service Revenue s. Notes Payable
f. Prepaid Rent t. Supplies
g. Accounts Payable u. Interest Receivable
h. Land v. Rent Expense
i. Supplies Expense
j. Prepaid Insurance
k. Utilities Expense
l. Torres, Withdrawals
m. Salaries Payable
n. Unearned Revenue

Asset Liability Ramos, Ramos, Revenue Expense Debit Credit

Capital Withdrawals
a.
b.
c.
d.
e.
f.
g.
h.
i.
J.
k.
l.
m.
n.
o.
P.
q.
r.
s.
t.
u.
v.

IV. Box the letter of the correct answer.

1. Which one of the following accounting equation can be rewritten as?

a. Assets plus profit less drawings less liabilities equal closing capital
b. Assets less liabilities less drawings equal opening capital plus profit
c. Assets less liabilities less opening capital plus drawings equal profit

2. Which of the following is a liability of a firm?

a. An office building owned by the firm.

b. Inventories for sale stored in the warehouse.
c. Money which the firm has borrowed and has not yet been repaid.
d. Money owned to the firm by its customers.
3. An example of an asset is:

a. Machinery owned by the firm

b. Money owed by the firm to one of its suppliers for goods purchased
c. An overdrawn bank balance
d. The capital of the firm
4. Identify the incorrect statement.
a. Assets-Liabilities = Equity
b. Equity-Liabilities=Assets
c. Assets= Equity + Liabilities
d. Assets-Equity = Liabilities
5. Swatch is famous for fashion wristwatches. At the end of a recent year, Swatch’s total assets added up
to P381 million, and owner’s equity was P264 million. How much were Swatch’s liabilities?
a. Cannot be determine from the given data
b. P381 million
c. P117 million
 d. P264 million
6. The left side of an account is used to record:
a. Debit or credit, depending on the type of account
b. Credit
c. Debit
d. Increases
7. Suppose your business has cash of P50,000, receivable of P60,000, and furniture totaling P200,000.
The Store owes P80,000 on account and has a P100,000 note payable. How much is your equity?
a. P20,000
b. P130,000
c. P180,000
d. P310,000
8. Which is false concerning the rules of debit and credit?
a. The left side of an account is always the debit side and the right side is always the credit side.
b. The word “debit” means to increase the word “credit” means to decrease.
c. Increase in assets and expenses are debit entries and increase the liabilities, equity and revenue
are credit entries.
d. The normal balance of any account appears on the side for recording increases.
9. A credit entry decreases the balance of
a. Assets
b. Income
c. Liabilities
d. Owner’s equity
10. Debits
a. Decrease assets and expenses and increase liabilities, revenue, and owner’s equity.
b. Increase assets and decreases expenses, liabilities, revenue, and owner’s equity.
c. Increase in assets and expenses and decrease liabilities, revenue and owner’s equity.
d. Increase in assets and owner’s equity and decrease liabilities, expenses, and revenue.
11. Over a period of time, if total assets increase by P270,000 and total liabilities increase by P70,000,
then owner’s equity will be increased by
a. P70,000
b. P340,000
c. P270,000
d. P200,000
12. In the accounting equation, an increase in asset can be associated with
a. A decrease in a liability
b. A decrease in owner’s equity
c. An increase in a liability
d. An increase in another asset
13. Which of the following accounts has a normal debit balance?
a. Owner’s capital
b. Owner’s withdrawals
c. Unearned revenue
d. Salaries payable
14. Which of the following describes the classification and normal balance of Torres, Capital?
a. Asset, Debit
b. Revenue, Credit
c. Owner’s equity, Debit
d. Expense, Debit
e. None of these
15. A credit may result in
 a. An increase in asset account
b. A decrease in the capital account
c. An increase in liability account
d. A decrease in liability account
V. Essay

What is Accounting?

Why is there a need for the Double-Entry System?

VI. Provide the answer for the following.

1. SEC- _______________________________________________________________________
2. COA-_______________________________________________________________
3. BIR-________________________________________________________________________
4. BSP-_______________________________________________________________________
5. DOF-____________________________________________________________________

Problem Solving:

Rafaelito Ramos recently established a business that will operate as Ramos Cleaning Service. The
transactions for February 2019 are presented below.

Feb. 1 Deposited Php 62,500 cash in a bank account in the name of the new company.
3 Acquired cleaning supplies on account, Php 21,400
5 Acquired cleaning equipment on account, Php 15,600
6 Acquired an old service vehicle costing Php 47,000 for the business, paying Php 10,000 cash,
and financing the remaining Php 37,000 by issuing a note payable.
7 Paid rent on office space for the month, Php 7,300
9 Received Php 31,800 cash for cleaning services rendered.
10 Paid for a newspaper advertisement, Php 1,700
12 Paid for insurance for the next six months by recording prepaid insurance, Php 4,800
13 Paid Php 9,000 on account
14 Paid miscellaneous expenses, Php 2,200
15 Billed costumers Php 18,600 for cleaning services rendered.
16 Paid salaries, Php 8, 400
20 Received Php 9,800 from customers billed of Feb. 15
22. Paid amount due on the note payable, Php 2,400.
25 Paid telephone expense, Php 900.
28 Paid salaries, Php 7,900
28 Billed customers for cleaning services rendered, Php 22500
 28 Withdrew Php 10,000 from the business.

Required:

Prepare the journal entries for the February transactions.