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2. This group of journal entries is prepared to update certain accounts at the end of the accounting period before
preparing the periodic financial reports.
a. Closing entries c. Adjusting entries
b. Correcting entries d. Reversing entries
4. This is a reason why certain expense accounts require adjustments at the end of the accounting year.
a. Some paid expenses are to be recognized in the next accounting period.
b. Some incurred expenses are payable in the next accounting period.
c. Some incurred expenses (like supplies used) are not recorded as they are incurred.
d. All of the above
6. These accounts represent the decrease in invoice price for damaged but unreturned merchandise.
a. Purchase returns and allowances, Sales returns and allowances
b. Sales returns and allowances, Sales discounts
c. Purchase returns and allowances, Purchase discounts
d. Sales discounts, Purchase discounts
8. This account represents the net income or net loss of the accounting year.
a. Owner, capital c. Owner, drawing
b. Income and expense summary d. None of the above
9. . This method of recording inventories does not require an adjusting entry for unsold merchandise at year-end.
a. Gross method c. Net method
b. Perpetual method d. Periodic method
10. These sections in the statement of comprehensive income is presented when the functional format is used.
a. Operating expenses, Cost of goods sold, Other income & Other expenses
b. Operating expenses & Cost of goods sold
c. Cost of goods sold, Other income & Other expenses
d. Operating expenses, Other income & Other expenses
11. This type of adjusting entry may be reversed at the start of the next accounting period.
a. Ending inventory
b. Prepaid expense (using asset method)
c. Unearned income (using liability method)
d. None of the above
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12. This kind of commercial organization is also known as retailing business.
a. Sole proprietorship c. Merchandising
b. Manufacturing d. Service
13. This type of accounts does not require periodic adjustment at the end of the accounting period.
a. Accrued expenses c. Uncollectible accounts
b. Ending inventories d. Cash
16 This document may or may not be prepared during the accounting cycle.
a. Worksheet d. All of the above
b. Adjusted trial balance
c. Journal for reversing entries
17. This party shoulders the cost of delivery of the merchandise with terms ‘FOB shipping point’ from shipping
point to destination point.
a. Seller
b. Buyer
c. Both seller and buyer
d. Either seller or buyer as may be agreed upon
19. These items comprise the total factory cost of a manufacturing business.
a. Factory overhead
b. Direct labor& factory overhead
c. Raw materials used & direct labor
d. Factory overhead, direct labor & raw materials used
20. This statement is true when the total debit balance and the total credit balance of the preliminary trial balance
are equal.
a. The debit amounts are equal to the credit amounts in both the journal and ledger.
b. The debit entries and credit entries are correct in both the journal and ledger.
c. The debit amounts are equal to the credit amounts in the ledger.
d. The debit entries and credit entries are correct in the ledger.
21. These components of production process total to the cost of goods available for sale.
a. Ending & beginning inventories of finished goods
b. Beginning & ending inventories of finished goods & cost of goods manufactured
c. Cost of goods manufactured & beginning inventory of finished goods
d. Ending inventory of finished goods & cost of goods manufactured
22. This ‘Merchandise inventory’ account appears in both the balance sheet and income statement.
a. Merchandise inventory beginning & Merchandise inventory ending
b. Merchandise inventory beginning
c. Merchandise inventory ending
d. Neither Merchandise inventory ending nor Merchandise inventory beginning
24. This trial balance is prepared for the same purpose as the post-closing trial balance.
a. Both preliminary trial balance and adjusted trial balance
b. Neither adjusted trial balance nor preliminary trial balance
c. Preliminary trial balance
d. Adjusted trial balance
26. This group of adjusting entries are prepared for expenses that are incurred but unrecorded.
a. Prepaid expense
b. Accrued expense
c. Unpaid expense
d. Either accrued expense or prepaid expense
27. This information is determined by physical inventory count at the end of the accounting period under the
periodic inventory system.
a. Both ‘Beginning inventory’ and ‘Ending inventory’
b. ‘Cost of goods sold’
c. ‘Ending inventory’
d. Both ‘Cost of goods sold’ and ‘Ending inventory’
28. This business entity produces or purchases goods for its primary source of income.
a. Merchandising & partnership
b. Manufacturing & merchandising
c. Corporation & manufacturing
d. Corporation
30. This special journal may contain transactions on credit purchases of inventories.
a. Purchases journal
b. Cash disbursements journal
c. Either purchases journal or cash disbursements journal
d. Both cash disbursements journal and purchases journal
(For numbers 33 - 35) : ABC Merchandising sells goods on credit. Data relevant to its inventories are as follows: List
price - P 40,000,000; Trade discount terms - 3%, 2%; Down payment - 20%; Cash discount terms - 3/5,2/7,n/10.
34. Determine the cash discount if payment is received on the 6th day from date of sale.
a. P 608,384 c. 760,480
b. 760,000 d. 608,000
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(For numbers 36 - 39) : DEF Trading has the following account balances in its adjusted trial balance : Depreciation
- P 3,400; Merchandise inventory, Jan. 1 - 58,300; Accumulated depreciation - 10,500; Accounts payable - 2,500;
Accounts receivable - 5,100; DEF, capital - 78,500; Sales - 273,500; Allowance for uncollectible accounts - 300;
Purchases - 61,700; Salaries and wages - 70,400; Supplies on hand - 3,300; Rent expense - 60,300; Equipment &
furniture - 31,800; Utilities expense - 34,100; DEF, drawing - 7,900; Uncollectible accounts - 100; Cash - 20,800;
Supplies; 8,100. Moreover, its unsold inventory was counted to be P 61,400.
35. The following accounts may have both general and subsidiary ledgers.
a. Accounts receivable & accounts payable
b. Cash in bank & plant assets
c. Accounts payable, accounts receivable & cash in bank
d. Cash in bank, accounts receivable, plant assets & accounts payable
36. Compute the total debit in the compound closing entry for all income and expense accounts (including the
ending inventory).
a. P 273,500 c. 393,200
b. 331,800 d. 334,900
37. How much is the total credit in the compound closing entry for all income and expense accounts (excluding the
“Income summary” account) ?
a. P 238,100 c. 296,400
b. 233,300 d. 291,600
38. Assuming that the “Income summary” account has a debit balance of P 300,000, determine the balance of
“DEF, capital” after preparing all the closing entries.
a. (P 229,400) c. 386,400
b. 370,600 d. 378,500
39. The “Unexpired insurance” account of P 31,680 which is equivalent to twelve months will expire on May 31 of
the following year. In the adjusting entry for the current year, how much is the adjustment to the prepaid
expense account ?
a. P 31,680 decrease c. 18,480 decrease
b. 13,200 increase d. No adjustment.
40. A promissory received last June 30, 2012 will mature after one year. Its face amount and interest rate are P
5,700 and 12%, respectively. Compute the adjustment to the accrued income account on December 31, 2012.
a. No adjustment. c. 684
b. P 570 d. 342
41. The weekly salary of employees (from Monday to Saturday) for P 27,780 is paid on Tuesday of the following
week. December 31 was a Monday. Calculate the year-end adjustment to the accrued expense account.
a. P 23,150 c. 9,260
b. 4,630 d. No adjustment.
42. Consider the following account balances as of December 31: Accounts receivable, P 22,700; Allowance for
uncollectible accounts, P 1,350; Sales, P 258,600. It is estimated that 5% of accounts receivable may be
uncollectible. In the December 31 adjusting entry, what is the appropriate debit in the adjusting entry?
a. P 1,135 : Uncollectible accounts
b. P 1,350 :Allowance for uncollectible accounts
c. 2,485 :Uncollectible accounts
d. 215 :Allowance for uncollectible accounts
43. The “Machinery” account totals to P 234,000. Of this amount, P 52,000 was acquired on August 31, 2012. The
estimated residual value is 10% of cost, while the predetermined economic life is 8 years. For the 2012
adjusting entry, what is the correct amount of depreciation?
a. P 22,425 :
b. 26,325 :
c. 20,475 :
d. 24,375 :
44. An advance collection of P 9,400 from a preferred customer was recorded as part of the total sales amounting
to P 762,400. What is the appropriate account to be credited in the adjusting entry ?
a. Sales c. Advances from customers
b. Accounts receivable d. Unearned sales
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45. After the year-end physical inventory count, the cost of unsold merchandise was determined to be 20% larger
than last year’s ending inventory of P 132,800. How much is the current year’s debit to the Merchandise
inventory account in the adjusting entry ?
a. P 166,000 c. 33,200
b. 159,360 d. 26,560
46. The rental for five months amounting to P 17,450 was collected and recorded last October 1 using a revenue
account. At the end of the calendar year, what should be debited in the relevant adjusting entry
a. P 3,490 : Unearned rent income c. 10,470 : Unearned rent income
b. 13,960 : Rent income d. 6,980 : Rent income
47. In the “Supplies expense” account totalling P 21,770, the amount of P 19,380 was consumed during the year.
How much is the “Unused supplies” account to be reported in the income statement ?
a. P 19,380 c. 21,770
b. 2,390 d. 0
48. The “Accumulated depreciation - fixtures” account balance of P 23,850 relates to the “Furniture and fixtures”
of P 63,600 which was 5.5 years old as of trial balance date. In the annual statement of comprehensive income,
what is the amount of depreciation expense ?
a. P 3,975 c. 5,300
b. 4,770 d. 4,336
49. For the January 6 transactions, how much is the net increase in the “subscribed share capital” ?
Jan 6 The certificate of incorporation was received which authorizes the corporation to issue 20,000 units of
par-value shares for a total authorized capital of P 4,000,000.
6 The treasurer’s affidavit showed that the incorporators subscribed to 25% of the authorized capital and
paid 25% of the subscriptions. The 5 incorporators subscribed to equal number of shares at par value.
6 Total incorporation costs of P 37,800 were incurred prior to the receipt of the certificate of incorporation.
Of this amount, 50 shares were issued as payment for the services of an accountant at an agreed price of
P 12,500.
A. P 250,000 C. 1,000,000
B. 750,000 D. 1,010,000
50. For the February 4 transactions, how much is the net increase in the “share capital” ?
Feb 4 The certificate of incorporation was received which authorizes the corporation to issue 20,000 units of
par-value shares for a total authorized capital of P 4,000,000.
4 The treasurer’s affidavit showed that the incorporators subscribed to 25% of the authorized capital and
paid 25% of the subscriptions. The 5 incorporators subscribed to equal number of shares at par value.
4 Total incorporation costs of P 37,800 were incurred prior to the receipt of the certificate of incorporation.
Of this amount, 50 shares were issued as payment for the services of an accountant at an agreed price of
P 12,500.
A. P 10,000 C. 250,000
B. 12,500 D. 260,000
51. For the March 27 transactions, how much is the net increase in “additional paid-in capital” ?
Mar 27 Various subscriptions contracts were signed. Stock certificates were issued for fully-paid 1,240 shares (P
200 par) at P 210. For partially-paid 1,180 shares which were subscribed at P 220, a 50% initial payment
was collected.
A. P 12,400 C. 23,600
B. 36,000 D. 0
52. For the April 10 transactions, how much is the net increase in “share capital” ?
Apr 10 Various subscriptions contracts were signed. Stock certificates were issued for fully-paid 1,240 shares (P
200 par) at P 210. For partially-paid 1,180 shares which were subscribed at P 220, a 50% initial payment
was collected.
A. P 248,000 C. 236,000
B. 390,200 D. 484,000
53. For the April 11, transactions, how much is the net increase in “additional paid-in capital” ?
Apr 11 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
A. P 0 B. 300
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C. 480 D. 180
54. For the May 17, transactions, how much is the net decrease in “shareholders’ equity” ?
May 17 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
A. P 38,080 C. 38,000
B. 26,260 D. 11,820
55. For the July 4 transaction, how much is the net decrease in “treasury shares” ?
May 22 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
Jul 4 A total of 40 treasury shares were retired.
A. P 8,200 C. 8,080
B. 8,000 D. 8,120
56. For the September 7 transaction, how much is the net decrease in “additional paid-in capital” ?
Jul 22 Shares of stock (par value of P 200, previous issue price of P 205) were reacquired for a total amount of
P 38,080. The stock certificates for 60 shares were canceled. But the other 130 shares reacquired for P
26,260 were held in treasury.
Sep 7 A total of 40 treasury shares were retired.
A. P 200 C. 120
B. 80 D. 0
61. This is an artificial being created by operation of law formed by five to 15 persons.
A. corporation C. incorporated
B. incorporation D. organization
62. These are the persons who originally formed the corporation.
A. partners C. managers
B. incorporators D. shareholders
63. These are the costs incurred in connection with the incorporation. These include cost of printing stock
certificates and filing fees.
A. processing fees C. pre-operating expenses
B. notary fees D. one-time fees
64.. This is the class of share capital which entitles the holder to an equal or pro-rata division of profits without any
preference or advantage over any class of stock.
A. common stock C. outstanding stock
B. preferred stock D. subscribed capital
66. This is the minimum amount upon which no-par, no-stated value share capital are to be subscribed or issued.
A.10 pesos C. 1 peso
B. 15 pesos D. 5 pesos
68. This statement is true for the par value of a share capital.
A. usually different from its market value
B. often higher for preference share than for ordinary share
C. an arbitrary amount assigned to a share of stock
D. all of these
69. This body is regarded as the supreme authority in matters of management of the regular business affairs of a
corporation.
A. board of directors C. majority stockholders
B. minority stockholders D. none of the above
71. This is the right of the corporation to continue as a juridical entity for the period stated in the Articles of
Incorporation despite death of any stockholder.
A. right of succession C. right of existence
B. right of pre-emption D. none of the above
72.. This document regulates the various internal matters regarding the calling and conducting of meeting of
stockholders and directors.
A. by-laws C. voting trust agreement
B. articles of incorporation D. none of the above
73. . This is the basis of recording the non-cash asset received as payment for share capital.
A. its book value
B. its fair market value
C. the lower of its book value or fair market value
D. the higher of its book value or fair market value
74. This is the entry to record the issuance of share capital for fully paid stock subscription.
A. Memorandum entry C. Debit: Share Capital Subscribed;
B. Debit: Share Capital Subscribed; Credit: Additional Paid-in capital
Credit: Share Capital D. Debit: Share capital subscribed;
Credit: Subscription receivable
75.. This is not a correct statement which describes the advantage of a corporation from a partnership.
A. The death of a stockholder will not dissolve the corporation because of its power of succession.
B. Its management is centralized under the Board of Directors.
C. Shareholders have limited liability and shareholders are not general agents of the business.
D. all of the above
76. This is an incorrect statement concerning the similarities between a partnership and a corporation.
A. Both are created by law and must file a copy of its certificate with the proper government authorities.
B. All corporate stockholders and all limited partners in a limited partnership have limited liability.
C. Both are recognized for national income tax purposes as taxable entities.
D. Both may engage in income generating business activities.
(For numbers 78 - 85) Partners A, B and C (dividing profits and losses equally) decided to liquidate ABC
Merchandising on May 17, 2013.Consider the following relevant data.
Settlement to partners was made once cash became available. On October 21, however, cash amounting to P 10,000
was withheld for possible liquidation expenses.
78. How much is the total financial interest of A immediately after the October 21 realization
A. P 160,000 C. 120,000
B. 210,000 D. 110,000
79. What is the total amount of liabilities to partners immediately before the December sale of noncash assets ?
A. P 10,000 C. 25,000
B. 15,000 D. 5,000
80. In the first schedule of cash payment to partners, how much is total remaining assets to be deducted from the
partners’ financial interest ?
A. P 180,000 C. 170,000
B. 310,000 D. 480,000
81. Compute the total cash available for payment to partners after the December realization of assets.
A. P 380,000 C. 300,000
B. 360,000 D. 210,000
82. Who did not receive any cash from the first cash distribution to partners ?
A. A C. C
B. B D. None
84. If a cash priority program is prepared on May 17, how much is the loss absorption capacity of C ?
A. P 585,000 C. 195,000
B. 510,000 D. 165,000
85. Based on a cash priority program, what is the total cash to be distributed to partners in the first priority of payment
?
A. P 230,000 C. 30,000
B. 115,000 D. 25,000
(For numbers 86 - 90)Partners P and Q had been dividing profits and losses equally. On July 1, 2012, PQ Partnership
admitted R as a new partner. After closing and adjusting the old partnership books, the capital balances of P and Q
were P 48,000 and P 37,000, respectively. Based on their agreement, R invested P 10,000 and purchased 1/2 of P’s
interest for P 35,000. Moreover, R was credited a capital of P 40,000. The new partnership shall continue to divide
net income equally.
C. 6,000
.89. Compute the capital of the new partner at the start of business operations for the new partnership.
A. P 40,000 C. 40,000
B. 45,000 D. 34,000
90.Which of the following journal entries pertinent to the admission of R is (are) correct ?
(For numbers 91 - 95)From January 1 - March 31, 2012, AB partnership earned a net income of P 90,000. On April 1, C
was admitted as a new partner after purchasing 25% ownership interest from A and B for P 50,000 each. On this
date, the partnership assets and liabilities were determined to be fairly valued. The capital balances of A and B
before net income were P 120,000 and P 170,000, respectively. Profit-loss ratio between A and B was 1:2, while
between A, B and C was 1:2:1, respectively.
91. .How much is the total partnership capital immediately before admitting C as a new partner ?
A. P 290,000 C. 285,000
B. 300,000 D. 380,000
93. What is the “B, capital” balance after admitting the new partner ?
A. P 180,000 C. 127,500
B. 172,500 D. 120,000
(For numbers 96 - 103) After some years of unprofitable operations, partners X and Y agreed to liquidate their
partnership business, XY Merchandising, on June 30, 2013. The following data were available on this date.
a. After recording the year-end adjusting and closing entries, the assets and liabilities were reported as follows.
Cash P ?
Non-cash assets 360,000
Liabilities, outside creditors 70,000
Liabilities, Y 10,000
X, capital 230,000
Y, capital 90,000
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b. Cash proceeds from the realization of noncash assets are presented below.
Date Cost Proceeds Gain (loss) on sale
July 27 P 100,000 P 120,000 ?
Sept. 23 260,000 ? (80,000)
c. Partners X and Y, with profit-loss ratio of 60:40, respectively, agreed to accept cash distribution after selling all the
noncash assets.
97. .In the July 27 realization of assets, determine the share Y in the gain or loss on sale.
A. P 20,000 loss on sale C. 10,000 loss on sale
B. 12,000 gain on sale D. 8,000 gain on sale
98. .What is the total gain or loss on realization after the July and September sale of noncash assets ?
A. P 100,000 loss on realization C. 20,000 gain on realization
B. 60,000 loss on realization D. 80,000 gain on realization
99. .How much is the total proceeds from the cash sale of assets ?
A. P 300,000 C. 360,000
B. 340,000 D. 400,000
100. In the distribution of partnership cash, who is the first to receive payment ?
A. X (for capital) C. Non-partners (for liabilities)
B. Y (for capital) D. Y (for liabilities)
101. .After selling the noncash assets in September, determine the amount of total cash available for distribution to
partners.
A. P 340,000 C. 300,000
B. 270,000 D. 260,000
102. .How much is the total financial interest of X and Y, respectively, immediately before payment to partners ?
A. P 194,000 and 76,000 C. 242,000 and 98,000
B. 194,000 and 66,000 D. 242,000 and 108,000
103. .Based on the order of cash payment, who is the last to receive cash ?
A. Y (for liabilities) C. X (for capital)
B. Y (for capital) D. X and Y (for capital)
(For numbers 104 - 108)On September 1, 2012, partners X and Y consented to admit Z into the partnership by
investing P 60,000. After dividing the net loss of P 12,000, the capital balances of X and Y were P 88,000 and P
63,000, respectively. Immediately before admitting Z, it was agreed that the recorded amount of “Merchandise
inventory” of P 76,000 should be adjusted to P 58,000. The profit-and-loss sharing agreement was 2:1 (for X and Y,
respectively) and equally (for X, Y and Z).
105. .How much is the net increase (net decrease) in the financial interest of Y after the investment of Z ?
A. P 0 C. (6,000)
B. 2,000 D. 10,000
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A. Debit : Cash, P 60,000 Credit : Z, capital, P 60,000
B. Debit : X, capital, P 40,000 Credit : Z, capital, 60,000
Y, capital, 20,000
C. Debit : X, capital, P 30,000 Credit : Z, capital, P 60,000
Y, capital, 30,000
D. Debit : X, capital, P 20,000 Credit : Z, capital, P 60,000
Y, capital, 40,000
109. .This is not one of the causes of partnership dissolution.
A. Incapacity of an existing partner
B. Admitting a new partner
C. Incorporating a partnership
D. Sale of more than 50% of a partner’s financial interest to another existing partner
110. This transfer of capital results when the agreed capital credited to the new partner is less than the amount of
capital purchased from any, some or all of the old partners.
A. Bonus to new partner
B. Bonus to old partners
C. Bonus to new and old partners
D. Bonus to any partner
111. This situation may arise when the agreed capital of all the partners is different from their contributed capital.
A. overstatement or understatement of recorded amount of certain asset(s) or liability(ies)
B. bonus to partner(s)
C. (A) and (B), if (A) is insufficient
D. (A) and (B), if (B) is insufficient
113. This statement is true regarding partnership dissolution when a new partner joins the partnership through purchase
of capital.
A. The new partnership takes over the operations of the dissolved partnership.
B. The new partnership contract is not essential.
C. The new partner is admitted with the approval by majority or all of the partners.
D. The new partner is an industrial partner.
114. This sale of capital by a partner does not result to any gain or loss to the partnership.
A. Selling price is equal to recorded amount of capital sold
B. Selling price is less than the recorded amount of capital sold
C. Selling price is more than the recorded amount of capital sold
D. (A), (B) and (C)
115. This mode of admitting a new partner may give rise to bonus to a new partner.
A. Admission by purchase of interest C. (A) or (B)
B. Investment D. Neither (A) nor (B)
117. This kind of partner is admitted as a new partner when the admission is through purchase or sale of interest.
A. Capitalist partner C. Capitalist-industrial partner
B. Industrial partner D. (A) or (B)
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119. This event pertains to the winding up of partnership operations.
A. Liquidation C. Operations
B. Dissolution D. Formation
120. This party receives the cash proceeds from the sale of capital or interest to the new partner.
A. Partnership
B. Selling partner
C. Selling partner and non-selling partners
D. Partnership, selling partner and non-selling partners
121. This account is debited in the partnership journal to record the sale of a partner’s capital to a new partner.
A. Cash or receivable account
B. Capital account of selling partner
C. Capital account of selling and non-selling partners
D. Capital of new partner
122. .This account(s) is(are) either debited or credited in the journal entry to record any adjustment of partnership asset
or liability in connection with the admission of a new partner through sale of interest.
A. Capital accounts of selling and non-selling partners
B. Capital accounts of new and old partners
C. Capital accounts of non-selling partners
D. Capital account of selling partner
123. This stage in the life of a partnership pertains to the termination of its life but not of its operations.
A. Liquidation C. Dissolution
B. Acquisition D. Consolidation
124. These partners’ capital accounts are credited in dividing the net income earned by the partnership as of the date of
admission of new partner by purchase of interest.
A. Selling partners C. Selling and new partners
B. New partners D. Selling and non-selling partners
125. .This transfer of capital from one or some partners to one or some partners arises when the capital credited to the
new partner as agreed upon is greater than his investment or contribution.
A. Bonus to any partner
B. Bonus to old and new partners
C. Bonus to old partners
D. Bonus to new partner
126. This is the journal entry to eliminate the negative capital balance of partner X.
A. Debit : X, capital P xxx Credit : Cash xxx
C. Debit : X, capital P xxx
Credit : Payable to X xxx Credit : Y, capital xxx
B. Debit : Capital P xxx
Credit : Z, capital xxx
D. Neither (A), (B) nor (C)
129. This account shall be deducted against the partners’ capital to determine the adjusted capital balances immediately
before liquidation.
A. Drawing account C. Neither (A) nor (B)
B. Noncash asset that cannot be realized D. Both (A) and (B)
132. This party’s financial interest is the last to be settled in the order of priority in partnership liquidation.
A. Partners for capital C. External creditors for liabilities
B. Partners for undistributed profits D. Internal creditors for liabilities
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133. This item has the effect of decreasing the capital of partners.
A. Liquidation expense C. Both (A) and (B)
B. Unrecorded liability D. Neither (A) nor (B)
135. This partner’s account shall be considered in computing his financial interest in a schedule of safe payment.
A. Capital of partner C. Receivable from partner
B. Withdrawal of partner D. (A), (B) and (C)
136. .These partners are liable for unpaid partnership debts up to the amount of their investments only.
A. Industrial partners C. Limited partners
B. General partners D. Industrial and limited partners
137. .These partner’s accounts are closed to the partner’s “capital” account at the start of the liquidation period.
A. ‘Receivable’ from partner, ‘Payable’ to partner & ‘Withdrawal’ of partner
B. ‘Receivable’ from partner & ‘Payable’ to partner
C. ‘Receivable’ from partner & ‘Withdrawal’ of partner
D. ‘Payable’ to partner & ‘Withdrawal’ of partner
138. This account may arise from the realization of noncash partnership assets.
A. Loss on sale of assets C. Either A or B
B. Gain on sale of assets D. Neither A nor B
139. This partner can absorb the capital deficiency of another partner.
A. Solvent partner with negative capital balance
B. Insolvent partner with positive capital balance
C. Neither (A) nor (B)
D. Both (A) and (B)
140. This is the excess of cash proceeds over the book value of the noncash assets sold.
A. Either gain or loss on realization C. Loss on realization
B. Gain on realization D. Neither gain nor loss on realization
141. This is the journal entry to record the amount of cash withheld from the total cash available for distribution to
partners A and B.
A. No journal entry B, capital xxx
B. Debit : Cash P xxx
Credit : Cash xxx
Credit : A, capital xxx D. Debit : Cash P xxx
B, capital xxx
Credit : Noncash assets xxx
C. Debit : A, capital P xxx
142. . This is the order of accounting procedures to eliminate the capital deficiency of a partner during liquidation.
A. Invest, offset, absorb C. Offset, invest, absorb
B. Absorb, invest, offset D. Invest, absorb, offset
143.This schedule of cash distribution may be prepared anytime before cash settlement is made to any partner.
A. Cash priority program C. Both (A) and (B)
B. Schedule of safe payment D. Neither (A) nor (B)
144. This journal entry shows the distribution of net loss between partners A and B.
A. Debit : Income summary P xxx Credit : A, capital P xxx
B, capital xxx
B. Debit : A, capital P xxx Credit : Income summary P xxx
B, capital
C. Debit : Expense summary P xxx Credit : A, capital P xxx
B, capital xxx
D. Debit : A, capital P xxx Credit : Expense summary P xxx
B, capital
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145. This basis shall be used in dividing net loss if the partnership contract stipulates on the division of net income but
not on the division of net loss.
A. Original investments of the partners
B. Beginning capital of the partners
C. Average capital of the partners
D. Agreement on distribution of partnership net income
146. These parties are the contracting parties in the admission of a new partner by investment.
A. Partnership, old partners and new partner
B. Old partners and new partner
C. Partnership and old partners
D. Partnership and new partner
147. This group of entries shows the net income or net loss at the end of the accounting period.
A. Adjusting entries C. Reversing entries
B. Closing entries D. Correcting entries
148. This factor in distributing partnership profits or losses is based primarily on the difference in the capital balances
of the partners.
A. Fixed or arbitrary ratio C. Salary to partner
B. Interest on capital D. Bonus to partner
172. How much is the share of partner L if all the partners are capitalist partners ?
A. P 42,000 C. 24,000
B. 36,000 D. 12,000
173. Compute the decrease in capital of partner K if only partners J and L are capitalist partners.
A. P 0 C. 24,000
B. 12,000 D. 36,000
174. What is the amount of debit to “J, capital” in recording the distribution of net loss to the partners if J and K are
the capitalist partners ?
A. P 48,000 C. 24,000
B. 36,000 D. 12,000
175. Calculate the decrease in partnership capital after closing the net loss for the year if partner K is an industrial
partner.
A. P 36,000 C. 60,000
B. 48,000 D. 72,000
176. This method of allocating partnership net income at the end of the period recognizes the difference in services
rendered by the partners in the partnership.
A. Bonus to partner C. Interest on capital
B. Salary to partner D. (A) and (B)
At the end of 2012 : (a) net income amounted to P 1,220,000 ; and (b) the capital balances of the partners were P
140,000, P 150,000 and P 190,000, for F, G and H, respectively.
178. Calculate the total share in net income of the partners on account of interest, salary and bonus.
A. P 152,000 B. 190,000
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C. 252,000 D. 290,000
179. Determine the total share of the partners in net income to be divided equally among the partners.
A. P 1,220,000 C. 1,124,000
B. 1,148,000 D. 930,000
180. What is the total credit to “F, capital” in recording the shares of the partners in net income ?
A. P 382,000 C. 410,000
B. 462,000 D. 338,000
190. What is the percentage share of S in partnership loss if the partners agreed to divide income and losses based on
capital balances at the start of the accounting period ?
A. 72.41 % C. 31.50 %
B. 75.60 % D. 42.00 %
191. How much will be the decrease in “T, capital” if the partners’ ending capital balances shall be the basis of profit-
loss distribution ?
A. P 139,200 C. 100,800
B. 117,600 D. 122,400
193. This journal entry for allocating net income to partners R and S shows the salary to partner R as a mode of
profit-and-loss distribution.
A. Debit : Income summary P xxx Credit : R, capital P xxx
Salary expense xxx S, capital xxx
B. Debit : Income summary P xxx Credit : R, capital P xxx
S, capital xxx
C. Debit : Salary expense P xxx Credit : Income summary P xxx
R, capital xxx
S, capital xxx
D. Debit : Salary expense P xxx Credit : R, capital P xxx
S, capital xxx
194. The art of recording and communicating financial information of a business entity
a. bookkeeping c. journalizing
b. accounting d. none of the above
194. The accounting concept which says that the business has a separate and distinct personality from that of the
owners.
a. Corporation c. Partnership
b. Sole Proprietorship d. none of the above
196. It is a business whereby two or more persons bind themselves together to contribute money, property or
industry to a common fund.
198. It deals with the acquisition of raw materials and the conversion of these raw materials into finished product.
a. Manufacturing c. Merchandising
b. Service d. none of the above
a. Bookkeeping c. Transactions
b. Journalizing d. None of the above
a. Asset c. Capital
b. Liability d. None of the above
202. Asset can be converted into cash or used up within a short period of time, usually one year
a. Asset c. Capital
b. Liability d. None of the above
a. asset c. capital
b. liability d. none of the above
a. assets c. liability
b. capital d. none of the above
a. asset
a. asset c. capital
b. liability d. none of the above
212. Which of the following is a qualitative characteristics of accounting information, which assures that the
accounting methods are uniformly and consistently used by business?
a. Comparability c. Understandability
b. Reliability d. Completeness
213. Which of the following accounting assumptions relates to the presumption of continuous and indefinite
operations of a business?
215. The government body which conducts the CPA licensure examination.
a. Professional Regulation Commission
b. Board of Accountancy
c. Philippine Institute of Certified Public Accountant
d. Financial Reporting Stadards Council
a. Service c. Bookkeeping
b. Merchandising d. Manufacturing
217. Atty. Ivan Carmona began the practice of law by investing P20,000 in cash and a law library of P30,000.
a. increase in assets and increase in proprietorship
b. increase in liabilities and increase in proprietorship
c. increase in assets and increase in liabilities
d. none of the above
219. Purchased office equipment, P5,000 and office supplies, P1,000 for cash.
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a. increase in assets and increase in proprietorship
b. increase in one form of asset and decrease in another form of asset
c. increase in assets and increase in liabilities
d. none of the above
220. Completed legal work for Teri Obemio and collected ₱4,000 cash.
a. increase in assets and increase in proprietorship
b. increase in assets and increase in liabilities
c. increase in one form of asset and decrease in another form of asset
d. none of the above
221. Purchased additional office equipment from Botong Trading on credit. ₱5,550
a. increase in assets and increase in proprietorship
b. increase in assets and increase in liabilities
c. decrease in assets and decrease in proprietorship
d. none of the above
I. Analyze each of the given terms/criteria/activities, and choose from the chices below the category that would
appropriately represent the term/criteria. Shade the letter of your answer.
300. The purchase accunts normally has a debit balance. There are instances wherein goods are returned for some
reasons. It is proper to credit the amount returned to.
301. To encourage early payment of account, the seller offers a discount on the invoice price. To take up the
discount.
302. If the buyer pays his account within the discount period, he is granted the cash discount. The effect is that the
cash settlement would be
303. The term of a purchase 2/10, 1/20, n/30 means that 1% discount will be allowed if the merchandise is paid
within
a. 30 days c. 10 days
b. 20 days d. none of the above
304. Refer to the numbr above. If the merchandise is paid after ten days but still within the discount period, the
buyer is entitled to a discount of
a. 2% c. 10%
b. 1% d. none of the above
305. This kind of discount is a deduction from the catalog or list price granted to purchaser of goods.
306. It is a certain percentage o deducted from fthe purchase price granted to the buyer if the latter pays within a
specified period from the date of the purchase.
307. A document sent to notify the buyer that the seller has in its records credited the former’s accounts.
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a. Purchase order c. Sales invoice
b. Credit memorandum d. none of the above
308. The purpose of granting discount is to encourage buyers to purchase in larger quantity.
309. For merchandising business, an asset that is acquired for the purpose of selling it at profit is
311. All freight charges incurred from the point of shipment to the buyer’s place shall be shouldered and recorded
by the buyer.
312. It is the seller who shall pay for all the freight charges incurred in delivering the goods to their destination.
313. It is an income account which is credited when goods or merchandise are sold either for cash or an account
basis.
314. It is an amount deducted from the regular price of goods that is granted for early payment
315. This is debited if the business shoulders the payment for the delivery of goods bought.
316. It is the accumulated cost of all merchandise bought for resale during an accounting period
a. Purchases c. Freight in
b. Sales d. none of the above
320. Goods were sold for Php 40,000 at discount term of 2/10, n/15. Some of these goods were delivered for Php
800 as FOB destination. Journal entry would be
a. Debit accounts receivable; Credit Sales
b. Debit accounts receivable and freight-out; Credit Sales and cash
c. Debit purchases; Credit sales
d. None of the above
a. Debit freight out; Credit cash c. Debit Freight in; Credit Cash
b. Debit cash; Credit freight in d. No entry
a. Debit freight out; Credit cash c. Debit Freight in; Credit Cash
b. Debit cash; Credit freight in d. No entry
a. Debit Cash; Credit Purchase returns & c. Debit Sales; Credit Purchases
allowances d. No entry
b. Debit Cash; Credit Sales
B. The merchandise with total list price of P75,000 was bought with the following discount terms: trade discount of
5%, 8%; cash discount of 1/7, n/15. Compute the following
333. Purchase price
334. Trade discount
335. Cash Payment if settlement is after 7 days but within 15 days
336. Cash payment if payment is within the discount period
73.
C. Compute the amount of payment of the following purchases:
341. This accounting principle assures that each expense shall be recognized in the same period that the income to
which such expense relates has been recognized.
A. Cash basis C. Continuity concept
B. Accounting period concept D. Matching concept
(For numbers 342 - 344) The following year-end adjusting entries of PQR Services for 2012 relate to interest.
(A) Interest expense xxx
Interest payable xxx
342. Which of the journal entries pertain to the asset method of adjusting interest not yet incurred but already paid ?
A. (A) C. (C)
B. (B) D. (D)
343. What adjusting entry represents accrued interest on a promissory note issued by the business ?
A. (A) C. (C)
B. (B) D. (D)
344. Identify the adjusting entries that may be reversed at the start of the next accounting period ?
A. (A), (B), (C) and (D) C. (B) and (C)
B. (A) and (B) D. (A) and (D)
345. This financial report may be presented using the natural format.
A. Statement of financial position C. Statement of changes in owner’s equity
B. Statement of cash flow D. Statement of comprehensive income
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346. This accounting procedure states that revenues and expenses are recorded in the specific period that the
corresponding cash is collected or disbursed.
A. Matching concept C. Accounting period concept
B. Accrual basis concept D. Cash basis concept
348. This step in the accounting process is performed immediately before posting the closing entries.
A. Prepare the financial statements C. Prepare the post-closing trial balance
B. Close the temporary accounts D. Journalize the day-to-day transactions
349. These accounts are affected (increased or decreased) in each of the adjusting entries at the end of an accounting
period.
A. Both permanent and temporary accounts C. Nominal accounts only
B. Either permanent or nominal accounts D. Real accounts only
350. These peso columns of the worksheet show the amount of net loss incurred for the specific accounting period.
A. Income statement debit column and balance sheet credit column
B. Income statement credit column and balance sheet debit column
C. Balance sheet debit column and income statement debit column
D. Balance sheet credit column and income statement credit column
352. This accounting method requires that every income is to be reported in the appropriate period in which the
corresponding benefit has been rendered.
A. Cash basis concept C. Revenue recognition concept
B. Separate entity concept D. Going concern concept
353. This trial balance shows the updated balances of all accounts.
A. Preliminary trial balance
B. Adjusted trial balance
C. Post-closing trial balance
D. Adjusted trial balance and post-closing trial balance
354. This account is among those accounts that are closed to the “Income and expense summary” account.
A. Allowance for doubtful accounts C. Owner’s drawing
B. Depreciation D. Accrued rent income
(For numbers 354 - 355) The following accounts appear in the adjusted trial balance columns of the worksheet for STU
Services.
(A) Accumulated depreciation (F) ABC, capital
(B) Accrued salaries (G) Allowance for doubtful accounts
(C) Unearned interest (H) Accrued rent income
(D) Prepaid supplies (I) ABC, personal
(E) Utilities (J) Professional fees
355. These accounts are extended under the balance sheet credit column.
A. (A), (F), and (G) only
B. (A), (B), (F) and (G) only
C. (A), (B), (C) and (F) only
D. (A), (B), (C), (F) and (G) only
356. These accounts are extended to the income statement debit column.
A. (D), (E), (H) and (I) only C. (E) and (H) only
B. (D), (E) and (H) only D. (E) only
357. This account exists only during the closing stage of the accounting process.
A. Owner’s withdrawal C. Income summary
B. Expense D. Income
358. This optional process is undertaken to facilitate the performance of the different steps in the accounting cycle at
the end of the accounting period primarily the preparation of the financial statements.
A. Preparing the adjusted trial balance C. Preparing the worksheet
B. Posting to the ledger D. Preparing the preliminary trial balance
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359. This method of recording unearned revenues is used if the relevant income account in the adjusting entry is to be
reduced.
A. Income method C. Asset method
B. Liability method D. Expense method
361. This financial statement shows the results of operation of the business
A. Income statement C. Statement of changes in owner’s equity
B. Cash flow statement D. Balance sheet
362. This financial statement is also known as the “statement of financial position”.
A. Income statement C. Statement of changes in owner’s equity
B. Cash flow statement D. Balance sheet
363. This method of estimating uncollectible accounts always increases the unadjusted balance of the allowance
account.
A. Aging-of-receivables method
B. Income statement method
C. Balance sheet method
D. Both aging-of-receivables and balance sheet methods
364. These accounts with non-zero balances shall appear in the post-closing trial balance.
A. Income, expenses, assets, owner’s capital and withdrawal, liabilities
B. Owner’s capital, assets, liabilities
C. Liabilities, expenses, owner’s capital, assets, income
D. Assets, owner’s capital and withdrawal, liabilities
365. This group of journal entries is posted to the ledger accounts during the first part of the accounting period.
A. Regular entries C. Closing entries
B. Adjusting entries D. Reversing entries
366. This type of presentation format shows the assets, liabilities and owner’s equity in a vertical arrangement.
A. Report format C. Natural format
B. Functional format D. Account format
367. This method is used in adjusting prepaid expense if the related expense account is increased.
A. Income method C. Liability method
B. Expense method D. Asset method
368. This is an accounting assumption which provides that all business transactions are reported through the basic
financial statements for each period of equal length.
A. Accrual basis concept C. Continuity concept
B. Periodicity concept D. Business entity concept
369. This adjusting entry, among others, may not be reversed at the start of the next accounting period.
A. Accrued income C. Unearned income using the income method
B. Accrued expense D. Prepaid expense using the asset method
371. This type of adjusting entry will reduce total assets if the related expense is initially recorded as asset.
A. Prepaid expense using expense method C. Prepaid expense using asset method
B. Accrued expense D. Depreciation
(For numbers 372 - 373) In the year-end preliminary trial balance, the “Unused supplies” account was reported
at P 2,450. A review of the supplies on hand showed that P 2,100 was already consumed.
374. How much is the adjustment to the “Accrued interest expense” account ?
A. P 0 C. 2,000
B. 1,000
(For numbers 380 - 381) The balance sheet on December 31, 2012 includes the following information about its plant
assets : Delivery equipment, P 360,000 ; Accumulated depreciation, P 99,000. This delivery equipment was
acquired on April 1, 2009.
(For numbers 382 - 383) The following unadjusted data relate to the December 31, 2012 preliminary trial balance of
ABC Services.
Tools and equipment P 129,400
Accumulated depreciation 32,100
Salvage value 1,000
The plant assets were acquired 3 years ago from the trial balance date ?
(For numbers 384 - 385) Consider the following information gathered for JKL Services on December 31, 2012.
Accounts receivable P 67,000
Sales (of which P 46,000 are on account) 172,000
Allowance for uncollectible accounts 2,100
384. If 4% of accounts receivable is estimated to be uncollectible, how much is the “Uncollectible accounts expense” ?
A. 580 C. 4,780
B. 2,680
385. Compute the “Uncollectible accounts expense” for 2012 if 1% of credit sales is possibly uncollectible.
A. 1,640 C. 460
B. 1,260
386. Last year, the owner’s equity amount was 85,000 as of January 1. During the year, the total income, total
expenses and owner’s withdrawal were P 240,000, P 265,000 and P 20,000, respectively. How much is the owner’s
capital at the end of the year ?
A. P 120,000 C. 80,000
B. 40,000
387. During 2012, the total liabilities increased to P 60,000 while total assets decreased by P 25,000. At the start of the
year, the assets and liabilities were P 270,000 and P 45,000, respectively. How much is the owner’s equity at
the end of the year ?
A. P 140,000 C. 235,000
B. 185,000
(For numbers 388 -) GHI Services reported the following data in its financial statements.
Additional investments P 55,000
Withdrawals for owner’s personal use 20,000
Revenues 235,000
Expenses 80,000
Assets : Jan. 1, P 265,000 ; Dec. 31, P 390,000
Liabilities : Jan. 1, P 90,000 ; Dec. 31, P ?
398. How much is the net increase in capital during the year ?
A. 290,000 C. 190,000
B. 210,000
(For numbers 402 - 20) The December 1, 2012 assets and liabilities for ABC Services are as follows.
Cash P 72,400
Accounts receivable 6,800
Supplies on hand 16,200
Fixtures and equipment 84,700
Accumulated depreciation 24,100
Accounts payable 15,900
During December, cash collections were P 31,500 for services and P 4,100 for accounts receivables, while cash
payments were P 2,200 for rental, P 5,200 for salaries, P 2,700 for utilities and P 7,900 for accounts payable. In
addition, cost of supplies used was P 7,400 and estimated depreciation was P 900.
406. i. In a Statement of Liquidation, there are only classes of assets – cash and other assets (non-cash assets)
ii. After the distribution of cash in partnership liquidation, the business will have zero assets, liabilities and
owner’s equity
407. i. The liquidation ratios will always be equal to the profit and loss ratio of the partners
ii. If the deficient partner is insolvent, his deficiency will be absorbed by the other partners distributed
according to their profit and loss ratio
408. i. The right of offset is exercised when a partner has a capital deficiency and he has at the same time a loan to
the partnership
ii. Personal creditors of individual partners have priority over partnership creditors in the order of claims
against the personal assets of a partner
409. i. All incorporators are shareholders but not all shareholders are incorporators
ii. A corporation, like a partnership, may be formed by the mere agreement of five or more persons
410. i. The authorized shares represent the maximum number of shares that a corporation may issue
ii. Unissued shares represent the number of that may still be subscribed
412. i. Stocks with par value cannot be issued at less than the par value.
ii. Share capital that has been sold and issued to a shareholder is called an outstanding share capital
414. i. When a partnership is incorporated, a new set of books should always be opened for the corporation
ii. When the memorandum entry method is used, the account Capital Stock is credited upon issuance of stocks
419. . In the final liquidation transaction, the remaining cash is distributed to the partners. The partners share in
cash according to their
a. profit and loss ratio b. withdrawals
c. capital balances d. cash balance
425. . Class of share capital which entitles the holder to an equal or pro-rata division of profits without any
preference or advantage over any class of stock
a. common stock b. preferred stock
c. outstanding stock d. subscribed capital
432. . This is the right of the corporation to continue as a juridical entity for the period stated in the Articles of
Incorporation despite death of any stockholder
a. right of succession c. right of existence
b. right of pre-emption d. none of the above
433. They regulate the various internal matters regarding the calling and conducting of meeting of stockholders
and directors
a. by-laws c. voting trust agreement
b. articles of incorporation d. . none of the above
436. . The entry to record the issuance of share capital for fully paid stock subscription is
a. Memorandum entry
b. Debit: Share Capital Subscribed;
Credit: Share Capital
c. Debit: Share Capital Subscribed;
Credit: Additional Paid-in capital
d. Debit: Share capital subscribed;
Credit: Subscription receivable
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Additional information is as follows:
a. Profit and loss ratio is 60% and 40% to B and C, respectively
b. The partnership’s non-cash asset consist of Inventory amounting to P500,000
c. Personal assets of B and C amount to P100,000 and P50,000, respectively.
443. . Before the additional investment of C, how much is the remaining cash available for distribution?
a. P11,100 b. P 10,100
c. P 9,100 d. P 12,100
445. Candy Corporation was organized on January 1, 2012 with authorized capital of P2,000,000 consisting of 100,000
ordinary shares, P20 par value. Subsequently, incorporators subscribed for 25,000 shares at P24. How much must be
paid upon subscription to comply with the requirement of the Securities and Exchange Commission (SEC)?
a. P600,000 b. P500,000
c. P125,000 d. P150,000
446. The Royal Note Corporation recorded the following journal entry on August 1, 2012
Cash 42,250
Share capital 32,500
Premium on Share Capital 9,750
The explanation reads: “ Issued ordinary capital for P130 per share”
449. On April 8, 2012, Cordillera Corp. declared and issued a 25% ordinary share dividend. Prior to this date,
Cordillera had 20,000 shares of P2 par value ordinary share that were both issued and outstanding. The carrying value
of each share of stock is P20 at the time of declaration of the dividend.
493. What is the percentage share of S in partnership loss if the partners agreed to divide income and losses based on
capital balances at the start of the accounting period ?
A. 72.41 % C. 31.50 %
B. 75.60 % D. 42.00 %
494.By how much will the “T. Capital” decrease if the partners’ ending capital balances shall be the basis of profit-loss
distribution ?
A. P 139,200 C. 100,800
B. 117,600 D. 122,400
497. This journal entry shows the distribution of net loss between partners A and B.
A. Debit : Income summary P xxx Credit : A, capital P xxx
B, capital xxx
B. Debit : A, capital P xxx Credit : Income summary P xxx
B, capital
C. Debit : Expense summary P xxx Credit : A, capital P xxx
B, capital xxx
D. Debit : A, capital P xxx Credit : Expense summary P xxx
B, capital
507. This account title represents net income at the end of the accounting period
A. Income and expense summary (debit balance)
B. Partners’ capital (credit balance)
C. Income and expense summary (credit balance)
D. Partners’ capital (debit balance)
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