Accounting Principles Quiz

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Questions and Answers

Which of the following transactions only affects assets?

Purchase of equipment for ₱5,000 (correct)

Loan of ₱10,000 to purchase equipment

Owner's investment of ₱20,000 in the business

All of the above

Taking out a loan increases both assets and liabilities.

True

In the accounting equation, what is the relationship between assets, liabilities, and equity?

Assets = Liabilities + Equity

The owner's investment increases both assets and __________.

equity Signup and view all the answers

Match the following transactions with their effects on accounts:

Purchase equipment for ₱5,000 = Affects only assets Loan of ₱10,000 = Affects both assets and liabilities Owner's investment of ₱20,000 = Affects both assets and equity Cash payment for equipment = Increases expenses Signup and view all the answers

What is recorded in a journal in accounting?

Every financial transaction Signup and view all the answers

In double-entry accounting, a debit increases liabilities.

False Signup and view all the answers

What do you call the accounts that include revenues, expenses, and dividends?

temporary accounts Signup and view all the answers

What effect does a debit have on assets?

Increases Signup and view all the answers

The accounting equation states that Assets = Liabilities + ______.

Equity Signup and view all the answers

Match the following types of accounts with their characteristics:

Assets = Resources owned by the company Liabilities = Obligations owed to outsiders Equity = The owner's residual interest in the assets Revenues = Increases in equity from operations Signup and view all the answers

A credit entry increases the liabilities of a business.

True Signup and view all the answers

What is the purpose of the dual aspect concept in accounting?

To ensure that every transaction affects at least two accounts. Signup and view all the answers

In accounting, liabilities ______ with a credit entry.

increase Signup and view all the answers

Match the following account types with their debit and credit effects:

Assets = Increases (Debit) Liabilities = Increases (Credit) Equity = Decreases (Debit) Expenses = Increases (Debit) Signup and view all the answers

Which of the following accounts is considered a current liability?

Accounts Payable Signup and view all the answers

Expenses decrease equity accounts when recorded.

True Signup and view all the answers

Name one type of non-current asset.

Property, Plant, and Equipment Signup and view all the answers

Study Notes

Dual Aspect Concept

Every transaction affects at least two accounts, maintaining the accounting equation: Assets = Liabilities + Equity.

Account Types and Effects

Assets: Increase when debited, decrease when credited.
Liabilities: Decrease when debited, increase when credited.
Equity: Decrease when debited, increase when credited.
Expenses: Increase when debited, decrease when credited.
Revenues: Decrease when debited, increase when credited.

Types of Assets

Current Assets: Cash, petty cash, accounts receivable, inventory, prepaid expenses, supplies, short-term investments.
Non-Current Assets: Property, plant, and equipment (PP&E), accumulated depreciation, long-term investments, intangible assets (e.g., patents, trademarks).

Types of Liabilities

Current Liabilities: Accounts payable, accrued expenses, short-term loans payable, wages payable, taxes payable.

Examples of Transactions

Purchase of Equipment: Equipment increases by ₱5,000 (debit), cash decreases by ₱5,000 (credit).
Loan for Equipment: Equipment increases by ₱10,000 (debit), loan payable increases by ₱10,000 (credit).
Owner's Investment: Cash increases by ₱20,000 (debit), owner's capital increases by ₱20,000 (credit).

Summary Impact of Transactions

Transaction 1 affects only assets.
Transaction 2 affects both assets and liabilities.
Transaction 3 affects both assets and equity.

Closing Entries

Made at the end of the accounting period to transfer balances from temporary accounts (revenues, expenses, dividends) to permanent accounts (retained earnings).

Post-Closing Trial Balance

Prepared after closing entries to confirm that debits equal credits and only permanent accounts remain.

Reversing Entries

Optional entries made at the start of the new accounting period to simplify future transaction recording.

Journal in Accounting

First formal record of business transactions, referred to as the "book of original entry."
Captures chronological transaction details before they are posted to the ledger.

Double-Entry Accounting System

Debit: Increases in assets or expenses; decreases in liabilities or equity.
Credit: Increases in liabilities, equity, or revenue; decreases in assets or expenses.
Total debits must equal total credits for every transaction.

Parts of a Journal Entry

Date: When the transaction occurred.
Account Titles: Affected accounts from the Chart of Accounts.
Debit & Credit: The monetary amounts for each account.
Explanation: Brief description of the transaction.

Importance of Accounting Equation

The accounting equation must balance consistently due to the dual effect of every financial transaction.

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Description

Test your knowledge of fundamental accounting principles, including the dual aspect concept and the impact of transactions on various account types. This quiz covers assets, liabilities, equity, and examples of common transactions. Perfect for students looking to solidify their understanding of accounting basics.