FAR Reviewer 2

Which of the following accounting equations are correct? 1. Non-current assets + Current assets = Non-current liabilities – Current liabilities + Capital 2. Assets Liabilities = Capital + Revenue – Expenses 3. Capital + Non-current liabilities = Non-current assets + Working capital a. (1) and (2) only b. (1) and (3) only c. (2) and (3) only d. (1), (2) and (3)

. Which of the following is not an example of additional capital? a. A sole proprietor purchases a car through the bank account of the entity. b. A sole proprietor brings a second-hand computer from his home to the office. c. A sole proprietor transfers P 1,000 from his own bank account to the entity’s account. D. A sole proprietor uses his own building as an office without receiving any rent.

Which of the following is not an example of non-current assets? a. a second-hand computer used in the office b. a van that is purchased through installments the total amount of which is not fully settled c. c. P40,000 cash d. a building bought by the entity

Which of the following statements are correct? 1. The total amount of liabilities can be greater than the total amount of capital. 2. Assets = Capital + Liabilities 3. The total amount of assets can be greater than the sum of liabilities and capital. a. (1) and (2) only b. (1) and (3) only c. (2) and (3) only d. (1), (2) and (3)

The entity purchases P10,000 fixtures for entity use on credit. Which of the following will be affected? 1. assets 2. liabilities 3. capital a. (1) and (2) only b. (1) and (3) only c. (2) and (3) only d. (1), (2) and (3)

Suppose a debtor repays his debt of P50,000 by transferring the money into the bank account of the business. The effect of the transaction on the accounting equation would be: a. Both assets and liabilities increase by P50,000. b. Both assets and liabilities decrease by P50,000. c. Only assets decrease by P50,000. d. Assets and liabilities remain unchanged.

Under the double-entry system, what is the value of X if assets, current liabilities, non-current liabilities and capital are X, P40,000, P60,000 and P350,000 respectively? A. P250,000 b. P350,000 c. P370,000 d. P450,000

Which of the following is correct under the double-entry system? a. Asset amount must be equal to liability amount. b. The change in asset must be compensated by a change in liability. c. The change in a debit-side entry must be compensated by a change in credit-side entry. d. An increase in asset must be compensated by a decrease in asset.

Which of the following statements regarding the double-entry system is incorrect? a. An increase in asset means a credit entry in assets account. b. A decrease in liability means a debit entry in liabilities account. c. An increase in drawings means a debit entry in capital account. d. A decrease in non-current asset means a credit entry in assets account.

Which of the following transactions affects the total value of liabilities of a firm? a. goods purchased from suppliers by cash b. interest received from bank c. office equipment bought on credit d. goods sold to customers on credit