BOOKKEEPING NC III

UNIT 3 – MODULE 3:
PREPARATION OF
FINANCIAL STATEMENTS

JAPEATH D. VILLEGAS, CPA, LPT

Trainer
Email: japeathv@gmail.com Cell #: 0977-349-3016

Page 1 of 33
ACTIVITY NO. 1

NAME: YR.&SEC.
COURSE: DATE

MULTIPLE CHOICE
1. The normal balance of an account is on the
a. Plus side
b. Left side
c. Debit side
d. Credit side
2. When a T-account has several items on both sides, the balance of the
account is written
a. On the side with the greatest number of items.
b. On the side with the least number of items.
c. On the side with the larger total.
d. On the side with the similar total.
3. A debit may signify a decrease in
a. A liability account
b. A revenue account
c. A liability and a revenue account
d. An asset and a revenue account
4. A debit may result in
a. An increase in an expense account
b. An increase in an asset account
c. A decrease in a liability account
d. A decrease in a revenue account
5. A purchase is recognized in the accounting records when
a. Payment is made for the item purchased
b. The purchase requisition is sent to the purchasing department
c. The buyer receives the seller’s bill
d. Title transfer from the seller to the buyer
6. Which of the following accounts will not affect owner’s equity?
a. Owner’s withdrawals
b. Land
c. Advertising Expense
d. Revenues
7. Which of the following errors will not cause the debit and credit
columns of a trial balance to be unequal?
a. Only part of a journal entry was posted
b. A debit was posted to an account as a credit
c. A journal entry was accidentally posted twice
d. The trial balance was incorrectly summed.
8. Which of the following errors will cause a trial balance to be out of
balance?
a. The bookkeeper forgot to journalize a transaction
b. The bookkeeper forgot to post a journal entry to the ledger.
c. A journal entry was accidentally posted twice.
d. A credit was posted to an account as a debit.

12
9. The general journal does not have a column titled
a. Description
b. Posting reference
c. Account balance
d. Date
10. To find explanation for a transaction, one should look at the
a. Journal
b. Ledger
c. Chart of accounts
d. Trial balance
11. An entry with more than one debit or credit is called a
a. Double entry
b. Compound entry
c. Dual entry
d. Multiple entry
12. The term footing refers to the
a. Addition of a column of figures
b. Process of obtaining the top number in an account
c. Process of obtaining the bottom number in an account
d. Process of posting
13. Balance sheet accounts are
a. Temporary accounts
b. Accounts with debit balances only
c. Adjusting accounts
d. Permanent accounts
14. Posting is the process of transferring information from the
a. Journal to the trial balance
b. Ledger to the financial statements
c. Ledger to the trial balance
d. Journal to the ledger
15. Typically, the chart of accounts begins with
a. Asset accounts
b. Liability accounts
c. Revenue accounts
d. Expense accounts
16. All of the following are examples of source documents except
a. Check
b. Sales invoice
c. Statement of account
d. General journal
17. The equality of debits and credits in the ledger should be verified at
the end of each accounting period by preparing
a. An accounting statement
b. An account verification report
c. A trial balance
18. A balance report Of the following errors, the one that will cause an
inequality in the trial balance totals is
a. Incorrectly computing an account balance
b. Failure to record a transaction

13
 c. Recording the same transaction more than once
d. Posting a transaction to the wrong account with the same normal
balance.
19. An entity’s trial balance
a. Shows a financial position
b. Establishes whether its accounting records are correct
c. List of all of the entries in its double-entry accounting records
d. Is a list of all of the accounts with their respective debit or
credit balances
20. If a P4,700 cash purchase of supplies is recorded as a P5,700 debit to
supplies expense and a P5,700 credit to cash, the result will be that
a. The trial balance will be out of balance
b. The supplies expense account will be understated
c. The cash account will be overstated
d. Supplies expense will be overstated and cash will be understated
21. If Accounts receivable has debit postings of P580,000, credit postings
of P440,000, and a normal ending balance of P480,000, which of the
following was its beginning.
a. P620,000 cr
b. P620,000 dr
c. P340,000 cr
d. P340,000 dr
22. If account payable has debit postings of P170,000, credit postings of
P140,000, and a normal balance ending balance of P60,000, which of the
following was its beginning balance?
a. P30,000 dr
b. P90,000 cr
c. P90,000 dr
d. P30,000 cr
23. A P800 credit item is accidentally posted as a debit. The trial
balance column totals will therefore differ by
a. P0
b. P400
c. P800
d. P1,600
24. If Accounts Payable has debit postings of P85,000, credit postings of
P70,000, and a normal ending balance of P30,000. What was its
beginning balance?
a. P45,000 cr
b. P15,000 dr
c. P45,000 dr
d. P15,000 cr
25. If accounts receivable has debit postings of P290,000, creditpostings
of P220,000 and a normal ending balance of P240,000, whichof the
following was its beginning?
a. P170,000 dr
b. P310,000 cr
c. P170,000 cr
d. P310,000 dr

14
Use of the following information to answer the questions below. The
following is the trial balance for Manabat Company.
Manabat Company
Trial Balance
Jan. 31, 2014

Cash P30,000
Accounts Receivable 20,000
Art Supplies 30,000
Office Supplies 50,000
Prepaid rent 70,000
Prepaid insurance 50,000
Art Equipment 50,000
Office Equipment 30,000
Accounts Payable P 50,000
V. Manabat, Capital 150,000
V. Manabat, withdrawals ?
Advertising revenues ?
Wages Expense ?
Utilities Expense 50,000
Telephone Expense 30,000
Total P A P B

26. If the balance of the Manabat, 28. In the trial balance, total
withdrawals account were assets equal
P120,000 and the balance of a. P330,000
the Wages Expense account were b. P230,000
P50,000, what would be the c. P430,000
amount of B? d. P410,000
a. P180,000 29. If the total debits equals to
b. P580,000 490,000, what would be the
c. P370,000 balance of Advertisingrevenue?
d. P380,000 a. P290,000
27. If the trial balance showed a b. P330,000
balance of 70,000 in the c. P190,000
Manabat, withdrawals accountand d. P690,000
a balance of P50,000 inthe 30. If the trial balance showed a
Wages Expense account, what balance of P80,000 in the wages
would be the amount of expense and a balance of
Advertising revenues for the P350,000 in the Advertising
period? Revenue, what would be the
a. P330,000 amount of A?
b. P480,000 a. P500,000
c. P180,000 b. P550,000
d. P430,000 c. P450,000
d. P600,000

15
ACTIVITY NO. 2

NAME: YR.&SEC.
COURSE: DATE

PROBLEM #1

The following accounts were taken from the General Ledger of Kapit Tuko Law
Office at the end of its 1st year of operation, December 31, 2014.

Cash P 85,000
Accounts Receivable 60,000
Office Supplies 5,000
Office Equipment 100,000
Office Furniture 40,000
Service Vehicle 400,000
Accounts Payable 25,000
WHT Payable 8,000
SSS Payable 10,000
Philhealth Payable 2,000
K. Tuko, Capital 500,000
K. Tuko, withdrawals 20,000
Professional fees earned 959,000
Salaries and Wages 350,000
Rent Expense 240,000
Advertising Expense 12,000
Supplies Expense 10,000
Light and Water Expense 24,000
Gas and Oil Expense 75,000
Repairs and Maintenance 6,000
Telephone Expense 36,000
Representation Expense 30,000
Insurance Expense 6,000
Taxes and Licenses 5,000

Required:
Prepare a Trial Balance.

16
ACTIVITY NO. 3

NAME: YR.&SEC.
COURSE: DATE

PROBLEM #1

El Granado established the EG Data Encoders on May 15, 2014. The following
transactions occurred during the month.

a. El Granado invested P157,000 cash to establish the business

b. Bought office desks and filing cabinet for cash, P15,150.
c. El Granado invested in the business her personal computer with a fair
value of P57,500.
d. Bought computer software for use in the business from Dela Torre
Computer Center for P39,000 paying P15,000 down; the balance is due in
thirty days.
e. Paid rent for the month, P5,300.
f. Received cash for services rendered, P5,160.
g. Ordered a panaflex sign for P9,000 from Royal Bright Enterprises, with
P5,000 as down payment and the balance due when installed.
h. Received bill for advertising from Buy and Sell newspaper, P3,320.
i. Bought print paper and stationary on account, P2,290.
j. Received and paid electric bill, P1,240.
k. Paid bill for advertising recorded previously in transaction (h).
l. Received cash for services rendered, P10,900.
m. Paid salaries to employees, P8,400.
n. El Granado withdrew cash for personal use, P4,500.

Required:
1. Journalize each transactions
2. Establish the following T-accounts:
 Cash  El Granado, withdrawals
 Accounts Receivable  Service Revenues
 Supplies  Salaries Expense
 Office Equipment  Advertising Expense
 Compute Software  Rent Expense
 Signage  Utilities Expense
 Accounts Payable  Miscellaneous Expense
 El Granado, Capital
3. Prepare Trial Balance
4. Prepare Financial Statements
 Income Statements
 Statement of Changes in Capital
 Balance Sheet

17
ACTIVITY NO. 4

NAME: YR.&SEC.
COURSE: DATE

PROBLEM #1

Marichu Fornolles Guardians completed the following transactions during

October 2014.

Oct. 1 Fornolles transferred cash from a personal account to an account

to be used for the business, P243,000.
3 Fornolles invested in the business personal weapons having a fair
market value of P34,000.
4 Bought communication equipment on account from Pesa Electronics,
P13,740.
5 Paid rent for the month, P7,650.
6 Bought a used service vehicle car for P93,000, paying P45,000
down, with the balance due in thirty days.
9 Received invoice and paid insurance premium to Cacawa Fidelity
company for bonding employees, P7,710.
12 Performed security services for Loreta Galleries. Billed Loreta
for services rendered, P8,250.
16 Received bill from Marcos Printers for office stationary, P1,757.
17 Billed Pascua Construction for services rendered, P14,790.
22 Paid Regal Shell Service for gasoline for service vehicle, P720.
24 Performed security services at a fashion jewelry fair, Billed
organizers for services rendered, P17,500.
27 Paid Pesa Electronics P4,500 to apply on account.
29 Received P8,250 from Loreta Galleries in full payment of account.
30 Billed Merchant Bank for services rendered, P21,600.
31 Receive and paid telephone bill, P1,030.
31 Paid salaries to employees, P31,500.
31 Fornolles withdrew cash for personal use, P18,000.

Required:
1. Prepare the journal entries for the October Transactions.
2. Set up the following ledger accounts using T-account and post all the
journal entries: Cash; Accounts Receivabe; Prepaid Insurance; Arms and
Communications Equipment; Service Vehicle; Accounts Payable; Fornolles,
Capital; Fornolles, Withdrawals; Service Revenue; Salaries Expense;
Rent Expense; Supplies Expense; gasoline Expense; and Utilities Expense.
3. Prepare a trial balance
4. Prepare the income statement, statement of changes in capital and balance
sheet.

18
ACTIVITY NO. 6

NAME: YR.&SEC.
COURSE: DATE

PROBLEM #1
After several years with a large accounting firm. Virgie Dal decided to
establish her own accounting practice. The following transactions were
completed during May 2014.

May 2 Transferred P92,500 from a personal savings account to a checking

account. Virgie Dal, CPA.
3 Acquired office equipment on account from Gican Furniture, P36,800.
4 Acquired office supplies on account from Lorenzo office supply
Company, P17,100.
6 Performed accounting services for Cayao Computer Company and submitted
a bill of P29,200 for those services.
7 Paid for accounting and tax books for use in the practice, P19,500.
8 Paid Lorenzo Office Supply Company, P4,100 on account.
10 Acquired a condominium unit for the accounting practice, P265,000. A
down payment of 38,000 was made and issued a note payable for the
remaining P227,000.
12 Paid salaries, P14,200.
13 Received P9,750 from Cayaco Computer Company, billed on May 6.
16 Paid telephone expense, P650.
19 Received cash in the amount of P14,600 from Ponferada Book Company for
accounting services rendered for the month.
22 Acquired office supplies on account from Lorenzo Office Supply
Company, P4,650.
23 Withdrew P8,150 for personal use.
25 Paid salaries, P10,300.
26 Billed Bosante Exporters P31,600 for accounting services rendered.
27 Paid PICPA-Tacloban P5,500 for professional dues.
28 Paid P3,250 rent on an office-copying machine.

Required:
 Prepare the journal entries for the May transactions
 Post the entries to the ledger accounts using T-account. The
following accounts will be needed:
 Cash  Notes Payable  Rent Expense
 Accounts  Accounts Payable  Telephone Expense
Receivable  Dal, Capital  Professional dues
 Office Supplies  Dal, Withdrawals Expense
 Office Condominium  Accounting
 Office Equipment Revenues
 Accounting Library  Salaries Expense

 Prepare a trial balance, income statement, statement of changes in

capital and balance sheet.

19
ACTIVITY NO. 5

NAME: YR.&SEC.
COURSE: DATE

PROBLEM #1 Correcting a Trial Balance

Below is the trial balance of Matilde Gascon Repair Service, which does not
balance.

Gascon Repair Service

Trial Balance
Jan. 31, 2014

Cash P 110,400
Accounts Receivable 284,600
Supplies 66,400
Prepaid Insurance 40,000
Office Equipment 526,800
Notes Payable P 130,000
Accounts Payable 195,400
Gascon, Capital 297,200
Gascon, Withdrawals 100,000
Repair Revenues 821,400
Salaries Expense 348,700
Advertising Expense 12,200
Totals P1,389,100 P1,544,000

The following information is obtained from a review of the record keeping

process.
a. An account receivable for P19,600 was incorrectly added as P 16,900
when computing the balance of the Accounts Receivable account.
b. A debit posting from the journal for P5,200 is missing from the
Advertising Expense account.
c. A credit posting of P15,000 to Notes Payable should have been made to
Accounts payable.
d. A debit posting of P34,000 to Supplies was incorrectly posted as
P3,400.
e. Credits to the ledger Accounts Payable account were under-footed by
P60,000.
f. Revenues are overstated in the ledger account by P40,000.
g. A credit posting for Repair Revenues from the journal in the amount of
P63,600 is missing.
h. Supplies acquired in the amount of P17,400 have been incorrectly posted
to the Office Equipment account.

Required: Prepare a corrected trial balance.

20
 Fundamentals
of Accounting 1
SESSION 4

ADJUSTING THE ACCOUNTS

Desired Learning Outcomes

Understand the Accounting period.
Differentiate Accrual to Cash
Accounting.
Appreciate the importance of
Adjusting entries in the
preparation of financial
statements.
Items that needed Adjustments.
The Effects of not making the
necessary adjusting entries to
financial statements.

Instructor Leemon L. Araza 2015 Edition

AC101 Session 4 1
ACTIVITY NO. 1

NAME: YR.&SEC.
COURSE: DATE

MATCHING TYPE

Below are terms pertinent to adjusting entries. Match each definition with
its related term. There are two answers for each term.

Terms Definitions

1. Accrued Expense a. Revenue not yet earned; collected in

2. Deferred Expense advance.
3. Accrued Revenue b. Office supplies on hand; used next
4. Deferred Revenue accounting period.
c. Rent revenue collected; not yet earned.
d. Rent not yet collected; already earned.
e. An expense incurred; not yet paid or
recorded.
f. Revenue earned; not yet collected.
g. An expense not yet incurred; paid in
advance.
h. Property taxes incurred; not yet paid.

Match each transaction with its related term:

Terms Definitions

1. Deferred Revenue a. At the end of the year, salaries payable

of P3,600 had not been recorded or paid.
b. Supplies for office use were purchased
during the year for P500, and P100 of
the office supplies remained on hand
(unused) at year-end.
c. Interest of P250 on a note receivable
was earned at year-end, although
collection of the interest is not due
until the following year.
d. At the end of the year, service revenues
of P2,000 was collected in cash but was
not yet earned.

AC101 Session 4 9
ACTIVITY NO. 2

NAME: YR.&SEC.
COURSE: DATE

Journal Entries

Prepare Adjusting Entries required on December 31 for each item with your
supporting computations after each entry.

a. On March 1, 2013, XYZ Company paid P54,000 for 2 year insurance premium
on property. The bookkeeper debited Prepaid Insurance account at the
time of payment.
b. On December 1, 2013, ABC Company received P120,000 as advance payment
for professional services to be rendered starting 1st quarter of 2014.
Unearned revenue account was credited at the time of deposit.
c. Miscellaneous office supplies were purchased in the last quarter of
2014 amounting to P6,500. On December 31, inventories showed that
P3,200 were on hand. The purchase was debited to Office Supplies
account.
d. The company’s office equipment costing P100,000 is expected to have 10
years economic life with no salvage value. This was purchased by the
company on Aug. 1, 2013.
e. ZTE company owes a bank a 10%, 90-day note for P 150,000 dated Nov. 1,
2013.

Use the journal provided on the other page for your answer.

AC101 Session 4 10