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Fundamentals of Accounting Theory and Practice

Provides a guide for effective accounting and financial reporting theory involves the assumptions and methodologies used in financial reporting.

problems

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business management

accounting

accountancy

strategy

agreement

advantage

entrepreneurship

growth strategy

cost principle

matching principle

materiality

conservatism

monetary unit assumption

A business transaction can have dual effect on a single accounting element or value.

  • True
  • False

All the nominal and real accounts are closed at the end of the accounting period.

  • True
  • False

It is the method of adjusting prepaid expense, the entry of which is reversed.

  • Post- closing Trial Balance
  • Expense method
  • Balance Sheet or Statement of Financial Position
  • Reversing entries

Net loss is closed to capital by debiting Income Summary and crediting capital account.

  • True
  • False

The amount corresponding to a debited account can be written on the credit money column of the journal.

  • True
  • False

Maria Clara invested the following in a Parlor: Cash P 60,000, parlor equipment originally costing P 20,000, with a fair market value of P 18,000. Maria Clara's Capital account should be credited for

  • P 60,000
  • P 80,000
  • P 62,000
  • P 78,000

Businesses have a common annual accounting period.

  • True
  • False

It is the controlling account that holds the revenues and expenses in the closing the account process.

  • Post- closing Trial Balance
  • Nominal accounts or temporary accounts
  • Balance Sheet or Statement of Financial Position
  • Revenue and Expense summary or Income Summary or Profit and Loss Summary

The general journal is also called the book of final entry.

  • True
  • False

The account Revenue and Expense Summary is a controlling account where revenues and expenses are closed.

  • True
  • False

The following information were taken from the balance sheet of Juan Repair shop as of March 31, 2017: Cash P70,000; Notes Receivable, P10,000; supplies, P5,000; Prepaid Rent,P20,000; total non-current assets, P80,000; Total Liabilities and Capital, P200,000. How much is the Accounts Receivable?

  • Answers not given.
  • P 25,000
  • P 120, 000
  • P 15,000

After the closing entries are posted in the ledger, all the permanent accounts have zero balances.

  • True
  • False

The normal balance of an account is always on its right side.

  • True
  • False

The difference, if any, between the total debits and total credits of the Cash account should always be shown on the debit side.

  • True
  • False

Accumulated Depreciation or Allowance for Depreciation is a contra account of Accounts Receivable.

  • True
  • False

Reversing accrued expense adjustment requires a debit to Accrued Expense and credit Expense.

  • True
  • False

A journal entry can have two or more debits and two or more credits.

  • True
  • False

All assets have normal debit balances.

  • True
  • False

The worksheet is a financial report that should accompany the financial statements.

  • True
  • False

In recording in the general journal, the year and month of the transaction are written once in every page of the journal.

  • True
  • False

Mr. X's Capital account has a balance of P 100,000 on March 31, 2017. Withdrawals for personal expenses during April amounted to P 15,000. At the end of April, the Capital account has a balance of P135, 000. Mr. X's net income for April is

  • P 20,000
  • P 35,000
  • P 85,000
  • P 50,000

Using the allowance method, the Accounts Receivable account is credited for the estimated uncollectible from customers.

  • True
  • False

It is a tool that aids in the accounting process, specifically, in the preparation of the financial statements.

  • Posting the journal entries to the ledger
  • Closing entries
  • Accounting cycle
  • Worksheet

The trial balance extracted from the ledger before the adjusting entries are posted in called the adjusted trial balance.

  • True
  • False

A T-account is a representation of the ledger.

  • True
  • False

The trial balance of Maria Clara Parlor has a total debit balance of P 300,000. Among the accounts listed are Accounts Payable, P 3,500; Notes Payable, P10,000;Maria Clara, Capital, P180,000. The parlor's revenue is

  • P 180,000
  • P 120,000
  • P 193,500
  • P 106,500

Profit and Loss Summary is a nominal account.

  • True
  • False

Writing the general journal page number in the F column of the ledger and the account number to the F column of the general journal during the posting process is called cross-referencing.

  • True
  • False

A chart of accounts presents a list of account titles, its definition, description of when to debit or credit and its corresponding account numbers.

  • True
  • False

The right or claim of the owner over the assets of the firm is called liabilities.

  • True
  • False

The summarizing phase of the accounting cycle ends with the preparation of the financial statements.

  • True
  • False

It involves routine performances of the different phases of accounting for a given period of time.

  • Posting the journal entries to the ledger
  • Accounting cycle
  • Worksheet
  • Closing entries

Assuming, Mr. A. paid rent of P25, 000, this would result to decrease in capital and decrease in liability.

  • True
  • False

It is the list of accounts with their balances after the closing entries are recorded and posted in the ledger.

  • Balance Sheet or Statement of Financial Position
  • Nominal accounts or temporary accounts
  • Revenue and Expense summary or Income Summary or Profit and Loss Summary
  • Post- closing Trial Balance

Certificates of deposits and checks are part of the Cash on Hand and in Banks or simply, Cash account.

  • True
  • False

Post-closing trial balance contains nominal accounts.

  • True
  • False

A credit balance in the Revenue and Expense Summary account represents net loss.

  • True
  • False

A's Laundry Shop T-accounts for A, Capital, Laundry Income, Laundry Expenses have normal balances of P 200,000, P 180,000, and P80,000, respectively. What is the new balance for A, Capital at the end of the period?

  • P 300,000
  • P 100,000
  • P 380,000
  • P 460,000

Maria Clara has the following transactions during the month of March: paid salaries of house helper, P 3,500; paid utility expenses of the parlor, P 2,500; at the end of month, hired a parlor helper with a monthly salary of P5, 000. The total expenditures that should be reported for the month of March is

  • P 11,000
  • P 2,500
  • P 7,500
  • P 6,000

It is the second step in the accounting cycle that was done during the accounting period.

  • Closing entries
  • Posting the journal entries to the ledger
  • Accounting cycle
  • Worksheet

Post-closing trial balances confirms the account balances of the ledger which will be the starting point of the next accounting period.

  • True
  • False

This is the category of accounts listed in the income statement.

  • Post- closing Trial Balance
  • Balance Sheet or Statement of Financial Position
  • Revenue and Expense summary or Income Summary or Profit and Loss Summary
  • Nominal accounts or temporary accounts

Assets, Liabilities, and Owner's Equity are permanent accounts

  • True
  • False

A non-exchange business transaction does not involve changes in quantifiable monetary values.

  • True
  • False

Post-closing Trial Balance is a tool to determine if the ledger accounts are in balance before the start of the new accounting period.

  • True
  • False

Aside from the adjusting entries, these entries are also done at the end of the accounting period to zero out nominal accounts.

  • Accounting cycle
  • Worksheet
  • Closing entries
  • Posting the journal entries to the ledger

Maria Clara rendered parlor services during the month: P 5,000 cash basis and P 3,500 on account. The amount to be credited to Service Income is

  • P 8,500
  • Answer not given
  • P 3,500
  • P 5,000

A trial balance is also a tool in checking whether the journal entries are accurately done and posted in the ledger.

  • True
  • False

Adjusting entry for Prepaid Expenses-Asset Method is also reversed at the start of the new accounting period.

  • True
  • False

The credit side of T-account is used to record increases in liability and capital.

  • True
  • False
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