Chapter 5: Double Entry Bookkeeping for a Service Provider

Question 1

First Step of the Accounting Cycle

Answer 1

Collecting data based on various documents or business reports.

Question 2

Second Step of the Accounting Cycle

Answer 2

Analyzing and RECORDING the documents in a book called the JOURNAL.

Question 3

Third Step of the Accounting Cycle

Answer 3

Classifying and POSTING from the journal to another book called LEDGER.

Question 4

Fourth Step of the Accounting Cycle

Answer 4

Extracting the balances of each of the accounts found in the ledger and PREPARING a TRIAL BALANCE.

Question 5

Source documents evidencing transactions of a business.

Answer 5

Business Papers

Question 6

Issued when service or merchandise is given to a customer or client.

Answer 6

Invoice

Question 7

Issued when cash is received by the entity.

Answer 7

Official Receipt

Question 8

A document used when cash is paid or a check is issued.

Answer 8

Check Voucher

Question 9

Negotiable instrument used as a substitute for cash, the payment for which is drawn against the entity’s or individual’s current account.

Answer 9

Check

Question 10

Written promise to pay a certain sum of money at a future date.

Answer 10

Promissory Note

Question 11

A bill presented to a customer for service rendered or merchandise given for which payment is demandable.

Answer 11

Statement of Account

Question 12

This is a device used to record the increases and decreases affecting each of the different assets, liabilities and owner’s equity.

Answer 12

Account

Question 13

A listing of account titles that guides the bookkeeper in the recording of the transactions.

Answer 13

Chart of Accounts

Question 14

The number and the nature of accounts depend on the type of ———.

Answer 14

Business Operation

Question 15

The accounts in chart of accounts are properly arranged with the —— listed first, followed by the —— and lastly by the ——.

Answer 15

1. Assets
2. Liabilities
3. Owner’s Equity

Question 16

Assigned for each account for easy reference.

Answer 16

Account numbers

Question 17

This is the simplest tool used to analyze the effects of the transactions on each account.

Answer 17

T Account

Question 18

The left part of the T Account is called

Answer 18

Debit Side

Question 19

The right part of the T Account is called

Answer 19

Credit Side

Question 20

It is placed on the top of T Account.

Answer 20

Title of Account

Question 21

Increases in Assets are recorded on the —— of the account, while Decreases in Assets are recorded on the —— of the account.

Answer 21

1. Debit Side (Left of T Account)
2. Credit Side (Right of T Account)

Question 22

Increase in Liabilities are recorded on the —— of the account, while Decreases in Liabilities are recorded on the —— of the account.

Answer 22

1. Credit Side (Right of T Account)
2. Debit Side (Left of T Account)

Question 23

Increases in Owner’s Equity are recorded on the —— of the account, while Decreases in Owner’s Equity are recorded on the ——.

Answer 23

1. Credit Side (Right of T Account)
2. Debit Side (Left of T Account)

Question 24

ENTRY: March 1, May Gomez opened a tour and travel service business by investing cash of P50,000 and two cars worth P750,000.

Answer 24

Debit: Cash P50,000
Debit: Car P750,000

Credit: Gomez, Capital P800,000

Question 25

ENTRY: March 3, Borrowed P100,000 from Citibank for business use.

Answer 25

Debit: Cash P100,000 Credit: Loans Payable P100,000

Question 26

ENTRY: March 7, Bought tables and chairs from Blim’s. Paid cash of P45,000.

Answer 26

Debit: Furniture & Fixtures P45,000 Credit: Cash P45,000

Question 27

ENTRY: March 10, Purchased from National Winner two aircon units for P50,000 and an electric fan for P5,000, all on account.

Answer 27

Debit: Equipment P55,000 Credit: Accounts Payable P55,000

Question 28

ENTRY: March 18, Gomez made a cash withdrawal of P5,000 for personal use.

Answer 28

Debit: Gomez, Drawing P5,000 Credit: Cash P5,000

Question 29

ENTRY: March 20, Paid the account due to National Winner.

Answer 29

Debit: Accounts Payable P55,000 Credit: Cash P55,000

Question 30

ENTRY: March 21, P15,000 was received from a tourist for a tour package for three persons in Baguio.

Answer 30

Debit: Cash P15,000 Credit: Service Income P15,000

Question 31

ENTRY: March 22, Paid for gas and oil P500 and repair of car P1,000.

Answer 31

Debit: Gas & Oil Expense P500 Debit: Repair Expense P1,000 Credit: Cash P1,500

Question 32

ENTRY: March 22, Paid for gas and oil P500 and repair of car P1,000.

Answer 32

Debit: Gas & Oil Expense P500 Debit: Repair Expense P1,000 Credit: Cash P1,500

Question 33

ENTRY: March 24, Mr. Gray hired the services of the agency for his visitors and promised to pay P16,000 on March 31.

Answer 33

Debit: Accounts Receivable P16,000 Credit: Service Income P16,000

Question 34

ENTRY: March 25, Paid PLDT for telephone service, P500.

Answer 34

Debit: Utilities Expense P500 Credit: Cash P500

Question 35

ENTRY: March 27, Billed Angelicum Faculty Club P20,000 for a tour of Metro Manila.

Answer 35

Debit: Accounts Receivable P20,000 Credit: Service Income P20,000

Question 36

ENTRY: March 30, Collected P8,000 from the customer, Mr. Gray.

Answer 36

Debit: Cash P8,000 Credit: Accounts Receivable P8,000

Question 37

ENTRY: March 31, Paid for office rent P10,000 and salaries of workers P9,000.

Answer 37

Debit: Rent Expense P10,000 Debit: Salaries Expense P9,000 Credit: Cash P19,000

Question 38

Every transaction entry must have a debit equal to a credit no matter how many accounts are affected. This is called

Answer 38

Double Entry Bookkeeping System or Venetian Model by Luca Pacioli

Question 39

The transactions must always affect two —— (Ex. Cash and Capital) and at least one or two —— (Ex. Assets only or assets and Owner’s Equity)

Answer 39

1. Accounts 2. Accounting Elements

Question 40

The difference between the debit total and the credit total is called an

Answer 40

Account Balance

Question 41

If the debit total is higher than the credit total the account balance is called a

Answer 41

Debit Balance

Question 42

If the credit total is higher than the debit total the account balance is called a

Answer 42

Credit Balance

Question 43

Used by accountants to analyze transactions and immediately determine balances of accounts.

Answer 43

T Account