BSA 1101- FUNDAMENTALS OF BASIC ACCOUNTING
PRELIMINARY EXAM REVIEWER
TOPIC COVERAGE:
 Introduction to Accounting
 Analysis of Transactions
THEORIES (TRUE OR FALSE)
1.
2.
3.
4.
Accounts are records of increases and decreases in individual financial statement items.
Prepaid expenses are an example of an expense.
A chart of accounts is a listing of accounts that make up the journal.
Unless the transaction is compound, the dollar amount of the debits for each transaction is
equal to the dollar amount of the credits for that transaction, and thus the term double-entry
bookkeeping
5. A capital stock account represents the amount of investments less dividends made by the
owner.
6. The chart of accounts should be the same for each business.
7. Consuming goods and services in the process of generating revenues results in expenses.
8. Accounts payable are accounts that you expect will be paid to you.
9. Accounts in the ledger are usually maintained in alphabetical order.
10. Depending on the account title, the right side of the account is referred to as the credit side.
11. Transactions are listed in the journal chronologically.
12. Expense accounts are increased by credits.
13. For a month's transactions for a typical medium-sized business, the salary expense account
is likely to have only credit entries.
14. For a month's transactions for a typical medium-sized business, the accounts payable account
is likely to have only credit entries.
15. When a business receives a bill from the utility company, no entry should be made until the
invoice is paid.
16. An account has three parts to it; a title, an increase side, and a decrease side.
17. The recording of cash receipts to the cash account will be done by debiting the account.
18. The balance of the account can be determined by adding all of the debits, adding all of the
credits, and adding the amounts together.
19. When an accounts payable account is paid in cash, the stockholders' equity in the business
decreases.
20. The order of the flow of accounting data is (1) record in the ledger, (2) record in the journal,
(3) prepare the financial statements.
THEORIES (MULTIPLE CHOICE)
21. Supplies purchased on account were incorrectly recorded as Office Equipment. The
correcting entry would be
a. Supplies, debit; Office Equipment, credit.
b. Accounts Receivable, debit; Supplies, credit.
c. Office Equipment, debit; Supplies Expense, credit.
d. Supplies, debit; Accounts Payable, credit.
22. Which of the following errors will cause the trial balance totals to be unequal?
a. amount incorrectly entered on the trial balance
b. failure to record a transaction or to post a transaction
c. recording the same transaction more than once
d. recording the same erroneous amount for both the debit and the credit parts of a
transaction
e. posting a part of a transaction correctly as a debit or credit but to the wrong account
23. Which of the following is not a short-cut in finding errors on the trial balance?
a. Determine the difference between debits and credits and look for the amount.
b. Determine the amount and change any account to make the trial balance correct.
c. Determine the difference between debits and credits, divide the amount by 2, look for the
amount.
d. Determine the difference between debits and credits, divide the amount by 9, if it divides
evenly, look for a transposition or slide error.
24. A trial balance is prepared to
a. prove that there were no errors made in recording transactions into the journal
b. prove that no errors were made in posting to the ledger
c. prove that each account balance is correct
d. summarize the account balances to help prepare financial statements
25. Which of the following group of accounts increase with a credit?
a. Capital stock, revenues, expenses
c. Liabilities, capital stock, revenues
b. Assets, capital stock, revenues
d. none are true
26. A patient has a physical examination and asks the bookkeeper to mail the bill. The bookkeeper
should
a. make no entry until the cash is received
b. Cash, debit; Accounts Receivable, credit
c. Cash, debit; Fees Earned, credit
d. Accounts Receivable, debit; Fees Earned, credit
27. Which of the following entries records the payment of rent for the current month?
a. Cash, debit; Rent Expense, credit
b. Rent Expense, debit; Cash, credit
c. Rent Expense, debit; Accounts Receivable, credit
d. Accounts Payable, debit; Rent Expense, credit
28. Office supplies purchased by J's Appliance Repair on account were returned. Which of the
following entries for J's Appliance Repair records this transaction?
a. Cash, debit; Office Supplies, credit
b. Office Supplies, debit; Accounts Receivable, credit
c. Accounts Payable, debit; Office Supplies, credit
d. Office Supplies, debit; Accounts Payable, credit
29. Randomly listed below are the steps in the accounting cycle:
(1)
prepare the financial statements
(2)
post the journal entries to the ledger
(3)
record journal entries
(4)
prepare a trial balance
What is the proper order of these steps?
a. (3), (2), (4), (1)
b. (2), (3), (4), (1)
c. (3), (2), (1), (4)
d. (4), (3), (2), (1)
30. The classification and normal balance of the dividends account is
a. an expense with a credit balance
c. a liability with a credit balance
b. an expense with a debit balance
d. stockholders' equity with a debit balance
31. Which of the following applications of the rules of debit and credit is true?
a. decrease Prepaid Insurance with a credit and the normal balance is a credit
b. increase Accounts Payable with a credit and the normal balance is a debit
c. increase Supplies Expense with a debit and the normal balance is a debit
d. decrease Cash with a debit and the normal balance is a credit
32. A debit may signify a(n)
a. decrease in asset accounts
b. decrease in liability accounts
c. increase in the capital stock account
d. decrease in the dividend account
33. A chart of accounts is
a. the same as a balance sheet
b. usually a listing of accounts in alphabetical order
c. usually a listing of accounts in financial statement order
d. used in place of a ledger
34. Accounts are classified in the ledger
a. chronologically
b. alphabetically
c. in accordance with their appearance in the financial statements
d. so that accounts used most often are listed first
35. A group of related accounts that comprise a complete unit is called a
a. journal
c. ledger
b. liability
d. transaction
36. XYZ Hospital purchased X-ray equipment for 3,000, paid 750 down, with the remainder to be
paid later. The correct entry would be
a. Equipment
750
c. Equipment Expense 3,000
Cash
750
Accounts Payable
750
b. Cash
750
Cash
2,250
Accounts Payable
2,250
d. Equipment
3,000
Equipment
3,000
Accounts Payable
2,250
Cash
750
37. The Unadjusted Trial Balance columns of a work sheet total 84,000.
The Adjustments columns contain entries for the following:
1. Office supplies used during the period, 1,200.
2. Expiration of prepaid rent, 700.
3. Accrued salaries expense, 500.
4. Depreciation expense, 800.
5. Accrued service fees receivable, 400.
The Adjusted Trial Balance columns total is:
a. 80,400.
c. 85,700.
b. 84,000.
d. 85,900.
38. A business pays weekly salaries of 20,000 on Friday for a five-day week ending on that day.
The adjusting entry necessary at the end of the fiscal period ending on Thursday is
a. debit Salaries Payable, 16,000; credit Cash, 16,000
b. debit Salary Expense, 16,000; credit Dividends, 16,000
c. debit Salary Expense, 16,000; credit Salaries Payable, 16,000
d. debit Drawing, 16,000; credit Cash, 16,000
Use the following information for questions 39-41.
Atlantis Car Repair Shop started the year with total assets of 270,000 and total liabilities
of 180,000. During the year, the business recorded 450,000 in car repair revenues, 255,000 in
expenses, and Jimmy withdrew 45,000.
39. Atlantis Capital balance at the end of the year was
a. 240,000.
c. 285,000.
b. 225,000.
d. 195,000.
40. The net income reported by Atlantis Car Repair Shop for the year was
a. 150,000.
c. 90,000.
b. 195,000.
d. 405,000.
41. Atlantis Capital balance changed by what amount from the beginning of the year to the end
of the year?
a. 45,000
c. 90,000
b. 195,000
d. 150,000
42. The supplies account has a balance of 1,000 at the beginning of the year and was debited
during the year for 2,800, representing the total of supplies purchased during the year. If 750
of supplies are on hand at the end of the year, the supplies expense to be reported on the
income statement for the year is
a.
750
c. 3,800
b. 3,550
d. 3,050
43. In the first month of operations for Widget Industries, the total of the debit entries to the cash
account amounted to 8,000 (4,000 investments by the owner and revenues of 4,000). The
total of the credit entries to the cash account amounted to 5,000 (purchase of equipment 2,000
and payment of expenses 3,000). At the end of the month, the cash account has a(n)
a. 2,000 credit balance.
c. 3,000 debit balance.
b. 2,000 debit balance.
d. 3,000 credit balance.
44. Rusthe Company showed the following balances at the end of its first year:
Cash
Prepaid insurance
Accounts receivable
Accounts payable
Notes payable
Denton, Capital
Denton, Drawing
Revenues
Expenses
7,000
700
3,500
2,800
4,200
1,400
700
21,000
17,500
What did Rusthe Company show as total credits on its trial balance?
a. 30,100
c. 28,700
b. 29,400
d. 30,800
45. Ayala Company showed the following balances at the end of its first year:
Cash
5,000
Prepaid insurance
500
Accounts receivable
2,500
Accounts payable
2,000
Notes payable
3,000
Cerner, Capital
1,000
Cerner, Drawing
500
Revenues
15,000
Expenses
12,500
What did Ayala Company show as total credits on its trial balance?
a. 21,500
c. 20,500
b. 21,000
d. 22,000
46. During February 2020, its first month of operations, the owner of Alona Enterprises invested
cash of 25,000. Alona had cash revenues of 4,000 and paid expenses of 7,000. Assuming no
other transactions impacted the cash account, what is the balance in Cash at February 28?
a. 3,000 credit
c. 29,000 debit
b. 22,000 debit
d. 18,000 credit
47. On August 13, 2020, Merrill Enterprises purchased office equipment for 1,000 and office
supplies of 200 on account. Which of the following journal entries is recorded correctly and in
the standard format?
a. Office Equipment ............................................... 1,000
Account Payable........................................................... 1,200
Office Supplies.......................................................200
b. Office Equipment. .............................................. 1,000
Office Supplies....................................................... 200
Accounts Payable ......................................................... 1,200
c. Accounts Payable............................................... .1,200
Office Equipment........................................................... 1,000
Office Supplies.............................................................. 200
d. Office Equipment ................................................ 1,000
Office Supplies........................................................ 200
Accounts Payable. ........................................................1,200
48. The accounts in the ledger of Mickeys Park Co. are listed in alphabetical order. All accounts
have normal balances.
Accounts Payable
Accounts Receivable
Investment
Cash
Dividends
The total of all the assets is:
a. 4,400
b. 5,300
500
800
1,000
1,600
200
Fees Earned
Insurance Expense
Land
Wages Expense
Capital Stock
2,000
300
2,000
400
1,800
c. 5,200
d. 4,700
Use the following information for answering question 49-50.
At the beginning of the year, Yates Company had total assets of 550,000 and total liabilities of
200,000. Answer the following questions viewing each situation as being independent of the
others.
49. If total assets increased 200,000 during the year, and total liabilities decreased 75,000, what
is the amount of owner's equity at the end of the year?
a. 725,000.
c. 625,000.
b. 700,000.
d. 650,000
50. During the year, total liabilities increased 230,000 and owner's equity decreased 90,000. What
is the amount of total assets at the end of the year?
a. 690,000.
c. 260,000.
b. 430,000.
d. 440,000
51. Pappy Corporation received cash of 13,500 on September 1, 2020 for one year’s rent in
advance and recorded the transaction with a credit to Unearned Rent. The December 31,
2020 adjusting entry is
a. debit Rent Revenue and credit Unearned Rent, 4,500.
b. debit Rent Revenue and credit Unearned Rent, 9,000.
c. debit Unearned Rent and credit Rent Revenue, 4,500.
d. debit Cash and credit Unearned Rent, 9,000.
Use the following information for answering questions 52-56:
EI Greco Corporation began operations on January 1, 2019. Presented below is selected
information related to EI Greco at December 31, 2019.
Equipment
Cash
Service Revenue
145,000
42,000
324,000
Utilities Expense
18,000
Accounts Receivable
41,000
Wages Expense
121,000
Rent Expense
39,000
Notes Payable
48,000
Accounts Payable
Share Capital
22,000
84,000
Dividends
Wages Payable
45,000
8,000
Supplies
15,000
Advertising Expense
20,000
52. The statement of financial position at December 31, 2019 reports total assets of
a. 160,000
b. 202,000
c. 228,000
d. 243,000
53. The statement of financial position at December 31, 2019 reports total liabilities of
a. 30,000
b. 60,000
c. 78,000
d. 119,000
54. Net income (loss) reported on the income statement for the month of December is
a. 126,000
b. 90,000
c. 81,000
d. 48,000
55. Retained earnings reported on the statement of financial position at December 31, 2019 is
a. 165,000
b. 126,000
c. 84,000
d. 81,000
56. Equity at December 31, 2019, is
a. 148,000
b. 121,000
c. 93,000
d. 55,000
Use the following information for answering questions 57-60.
The following is the adjusted trial balance for Steely Company.
Steely Company
Adjusted Trial Balance
For the Year ended December 31, 2020
Cash
Accounts Receivable
Prepaid Expenses
Equipment
Accumulated Depreciation
Accounts Payable
Notes Payable
Capital Stock
Dividends
Fees Earned
Wages Expense
Rent Expense
Utilities Expense
Depreciation Expense
Miscellaneous Expense
Totals
6,130
2,300
750
13,400
1,200
1,700
5,000
12,000
870
6,600
1,450
900
475
150
75
26,500
57. Determine the net income (loss) for the period.
a. Net Income 26,500
b. Net Loss 870
c. Net Loss 3,550
d. Net Income 3,550
26,500
58. Determine the stockholders’ equity ending balance for the period.
a. 14,680
c. 15,550
b. 11,130
d. 2,680
59. Determine total assets.
a. 26,500
b. 15,380
c. 21,380
d. 22,580
60. Determine the current assets.
a. 22,580
b. 9,180
c. 21,380
d. 26,500
Based on this trial balance, answer questions no. 61-65.
The trial balance of Gerbo Company appears as follows:
GERBO COMPANY
Trial Balance
December 31, 2019
Cash
Accounts Receivable
Prepaid Insurance
Supplies
Office Equipment
Accumulated Depreciation
Accounts Payable
Gerbo, Capital
Service Revenue Earned
Salaries Expense
Rent Expense
TOTAL
DEBIT (PHP) CREDIT (PHP)
20,000
50,000
20,000
15,000
40,000
10,000
30,000
85,000
60,000
20,000
20,000
185,000
185,000
61. If on December 31, 2019 supplies on hand were P1,000, the adjusting entry would contain a
a. Debit to supplies expense for P1,000
b. Credit to supplies expense for P1,000
c. Debit to supplies expense for P14,000
d. Credit to supplies expense for P14,000
62. If on December 31, 2019 the trial balance showed insurance still unexpired amounting to
P8,000, the adjusting entry would contain
a. Debit to prepaid insurance for P12,000
b. Credit to prepaid insurance for P12,000
c. Debit to prepaid insurance for P8,000
d. Credit to prepaid insurance for P8,000
63. If the estimated depreciation for office equipment were P10,000, the adjusting entry would
contain
a. Credit to accumulated depreciation for P10,000
b. Credit to depreciation expense for P10,000
c. Debit to accumulated depreciation for P10,000
d. Credit to office equipment for P10,000
64. If as of December 31, the rent of P5,500 for December had not been recorded or paid the
adjusting entry would include
a. Credit to accumulated rent for P5,500
b. Debit to rent payable for P5,500
c. Debit to rent expense for 5,500
d. Credit to cash for P5,500
65. If services totaling P10,000 had been performed but not billed, the adjusting entry to record
this would include
a. Debit to service revenue earned for P10,000
b. Credit to unearned service revenue for P10,000
c. Credit to service revenue earned for P70,000
d. Credit to service revenue earned for P10,000
Presented below is the unadjusted trial balance of MOKUJIN, manufacturer of woodcrafts.
PARTICULAR
Cash
Accounts Receivable
Supplies
Land
Accounts Payable
Capital
Utilities Expense
Supplies Expense
Revenue
Total
DEBIT
25,000
50,000
40,000
230,000
CREDIT
100,000
175,000
20,000
20,000
385,000
100,000
375,000
Upon checking the accountant noted some errors:
 A credit to cash of Php10,000 was posted twice
 A journal entry to record payment by customers worth Php15,000 was not recorded
 Php10,000 worth of the utilities expense were recorded as a supplies expense
 Sales of Php10,000 worth of key chain was posted in the debit side
 Cash investment by the owner worth Php25,000 was credited to accounts payable
 Purchase of a parcel of land worth Php20,000 was debited to supplies
66. The corrected total debit/credits in the trial balance would be
a. Php380,000
c. Php395,000
b. Php375,000
d. None of the above
67. Net income for the period would be
a. Php80,000
b. Php70,000
c. Php60,000
d. None of the above
68. Total ending owner’s equity would be
a. Php280,000
b. Php255,000
c. Php260,000
d. None of the above
69. Total asset would be
a. Php380,000
b. Php355,000
c. Php360,000
d. None of the above
70. Total liabilities would be
a. Php100,000
b. Php125,000
c. Php75,000
d. None of the above
ANSWER KEY:
THEORIES (TRUE OR FALSE)
1. True
2. False
3. False
4. False
5. False
6. False
7. True
8. False
9. False
10. False
11. True
12. False
13. False
14. False
15. False
16. True
17. True
18. False
19. False
20. False
THEORIES (MULTIPLE CHOICE)
21. A. Supplies, debit; Office Equipment, credit.
22. A. amount incorrectly entered on the trial balance
23. B. Determine the amount and change any account to make the trial balance correct.
24. D. summarize the account balances to help prepare financial statements
25. C. Liabilities, capital stock, revenues
26. D. Accounts Receivable, debit; Fees Earned, credit
27. B. Rent Expense, debit; Cash, credit
28. C. Accounts Payable, debit; Office Supplies, credit
29. A. (3), (2), (4), (1)
30. D. stockholders' equity with a debit balance
31. C. increase Supplies Expense with a debit and the normal balance is a debit
32. B. decrease in liability accounts
33. C. usually a listing of accounts in financial statement order
34. C. in accordance with their appearance in the financial statements
35. C. ledger
PROBLEMS
36. D Equipment
3,000
Accounts Payable
2,250
Cash
750
37. C. 85,700.
38. C. debit Salary Expense, 16,000; credit Salaries Payable, 16,000
39. A. 240,000.
40. B. 195,000.
41. D. 150,000
42. D. 3,050
43. C. 3,000 debit balance.
44. B. 29,400
45. B. 21,000
46. B. 22,000 debit
47. D.
Office Equipment ................................................ 1,000
Office Supplies......................................................200
Accounts Payable. ................................................1,200
48. A. 4400
49. C. 625,000
Total Assets Total Liabilities =
Owner's Equity
Beginning
550,000
200,000
Change
200,000
(75,000)
Ending
750,000
–
125,000
=
625,000
50. A. 690,000
Beginning
Change
Ending
51. C.
52. D.
53. C.
54. A.
55. D.
56. D.
57. D.
58. A.
59. C.
60. B.
61. C.
62. B.
63. A.
64. C.
65. D.
66. C.
67. A.
68. A.
69. B.
70. C.
Total Assets
550,000
690,000
=
=
Total Liabilities +
200,000
230,000
430,000
+
debit Unearned Rent and credit Rent Revenue, 4,500.
13,500 x 4/12 = 4,500.
243,000
78,000
126,000
81,000
55,000
Net Income 3,550
14,680
21,380
9,180
Debit to supplies expense for P14,000
Credit to prepaid insurance for P12,000
Credit to accumulated depreciation for P10,000
Debit to rent expense for 5,500
Credit to service revenue earned for P10,000
Php395,000
Php80,000
Php280,000
Php355,000
Php75,000
Owner's Equity
350,000
(90,000)
260,000