Chovter.s CATION {he Accounting Provess of a service. Cone END OF CHAPTER TEST bers which A list of accounts and the account identify their location inthe ledger ‘The recording of business transaction A system that records the dul ef ction in appropri acount. rat nts maintained by 9 inthe jourval ot of euch ‘company, dividual accounting record of it 5 in specific asset, lability, owner's revenue and expense items The basic form of an necount used in illustrat problem solving and in analyzing transactions. Prepared to test the equality of debits and credits A list of accounts and their balances at a given time. The most basic form of journal An accounting record in which transtetions initially recorded in chronological onder. The right side of an account The left side of an account. The entering of data from the journal to the ledg« A journal entry with two or more accounts debited and or credited, ‘An entry that involves only two accounts, ‘An error committed when the order of numbers axe reversed like writing P 250 as P $20 oF vice versa ‘An error committed when one or more are cither move to the left or right like writing P 1,000 a P 100 or vice versa. The book of original entry ‘The book of final entry, ‘The process of adding the debit and credit column and finding the balance of an account. 106The Accounting Process ofa Service Concern MULTIPLE CHOICE: Encircle the letter of the best answer, 1 Each ofthe following statement about an account is true except ‘There are separate accounts for specifi assets and libil Cony one account for owner's equity items. b. The let side of an account isthe creditor decrease side. © Am account is an individual accounting record of increases and decreases in specific aset, lability, and owner's equity items 4. In the simplest form, an account consists of two parts. ies but Debits and credits: 44. Increase assets and decrease liabilities. b. Decrease both assets and liabilities, © Decrease assets and increase liabilities. 4, Increase both assets and liabilities. A revenue account: 4. Is decreased by eredits, b. Is increased by credits. ©. Has a normal balance of debit. 4. Is increased by debits. ‘Which of the following accounts have normal d Assets, expenses, and revenues, b. Assets, owner’s drawings, and expenses. ©. Assets, expenses, and owner's capital d._ Assets, liabilities and owner's drawings. balances? Each of the following statements is true about a joumnal except It provides a chronological record of transactions. b. Ithelps to locate errors because the debit and credit amounts for each entry can be readily compared. . It discloses in one place the complete effect of a translation. 4. Itis nota book of original entry. 107‘Which of the following peruis toa ledger? Contains oily asset and liability accounts Is a book of original entry Should show accounts in alphabetical order. {s 8 collection of the entre group of accounts maintained by 4 company. b 4 ‘Which ofthe following eras toa til balance? b a Proves that ll transactions have been recorded. Will not balance if a corect journal entry is posted twice. Proves the mathematical accuracy of journalized transactions, {sa list of accounts with their balances ata given time “The Trial Balance will be out of balance if b, 4 1,000 cash drawing by the owner is debited to Owner's Drawing {0F P 10,000 and credited to Cash for P 1,000. qs Purchase of supplies on accounts debited to Supplies and ‘credited to Casi, 59500 Payment on acount i debited to Accounts Payable for P 450 and credited to Cash for P 450, ‘A correct journal entry is posted twice, Posting is the process of: ‘Transferring entries from the ledger othe journal, Riunsferring entries from the joumal tothe ledger, Racateiling entries from the joural tothe ledger Reconciling entries from the ledger othe joureal aeee b 4. footing error \ransposition slide<5. Classify the following items as (a) defered expense or prepaid expense, (b) deferred revenue or uneamed revenve,(c) scerued expense o accrued liability, (6) accrued revenue or accrued asset. —— 1. A three-year premium paid on a fire insurance policy 2. Utilities owed but not yet paid 3. Supplies on haad 4. Salary owed but not yet paid —— 5: Interest owed but payable inthe following period —— 6. Subscriptions received in advance by a newspaper publisher 7. Professional fees received bu: not yet eared 5. Professional fees eared but not yet received —— 9. Interest paid in advance from 2 bank loan 10. Rent collected in advance 11. Services rendered but uncollected 12. Advertising paid in advance for 3 months 13. Income collected but not yet eamed 14. Rent paid in advance 15. Interest collected in advance by the creditor +6. ‘The Supplies and Supplies Expense accounts at December 31, after adjusting entries have been posted at the end ofthe firs year of operations, are shown in the T- accounts below Required: Determine the amount of supplies purchased during the year asChapter - The Aadnsting Process END OF CHAPTER TEST IDENTIFICATION 18. 19. 20. ‘An accounting period that extends from January 1 to December is . ‘counting basi in whic ransctions hat care company's financial statements are recorded in the periods in which the events occur, rather than in the periods in which the company receives or pays cash. Entries prepared to update the balances of accounts. . Accounting basis in which revenue is recorded only when cash is received and an expense is recorded only when eash is paid An account that is offset agninst an asset account on the balance sheet The difference between the cost of «depreciable asset and its related ‘accumulated depreciation Entries made at the end ofan accounting period to ensure that the reverie recognition and matching principles are followed. Revenues earned but not yet received in cash. Expenses incurred but not yet pad in cash or ccosded. The length of service of a productive facili Expenses paid in eash and recorded as asets before they are used or ‘consumed. ‘The process of allocating the cost of an asset to expense over its useful life in a rational and systematic manner. th received and recorded as liabilities before revenuc is earned The principle that requires revenue to be recognized in the accounting period in which itis earned, ‘An accounting period that i one year in length, ‘An assumption tha divides the economic life ofa business into artifical time periods The principle that requires efforts (expenses) be matched with Monthly or quarterly accounting time periods, ‘An secounting period that ends on December 31 These are expenses paid in advanceChater 4 The Adisting Process MATCHING TYPE. From the list of possible answers below, select the best ‘answer that will fit to the given statement. — ! Anaccount which contains both nominal and real accounts — ? Anentry that splits the nominal and real accounts from a mixed account. 3° An expense that is already incurred but not yet paid. 4 Refers to income received in advance The expired cost of fixed asset that is charged to expense, © The process of allocating the depreciable cost of fixed assets, 7 An expense paid in advance. 8 An income that is already eared but not yet received or collected 9 Entries prepared to update the balances of accounts. 10 Income is recognized when eared regardless of when received, and. ‘expense is recognized when incurred regardless of when paid. 11 Revenue eared during the period should be properly matched with the related expense. —— 12. Income is recognized when received while expense is recognized ‘when paid, — 15. Fixed asset that is mot subject to depreciation. 14 The postponement of the recognition of an expense or revenue that ‘has been paid or collected in advance. 15 The estimated smount of fixed asset at the end of its useful life. PELE Tddd | List of possible answers 2 Accrved Expense J Matching Principle b Acerued Revenue K Cash Basis of Accounting ¢ Prepaid Expense | Accruals Basis of Accounting 4 Unearned Revente Residual Value © Depreciation Expense = n_Building {Depreciation Accounting 0 Equipment 2 Adjusting Emery Deferrals Correcting Entry 9 Accruals Mined Account © Land usClnaoter 4 The Adiusting Process TRUE OR FALSE, Write true ifthe statement is correct and false if i is incorrect. ‘The trial balance shows the ledger accounts before adjustment, The adjusting entries are prepared after a trial balance is prepared, ‘All accounts inthe trial balance need adjusting entries. ‘Adjusting entries are required in order to update the balance of some ledger accounts. ; Adjusting entries are prepared to correct errors made inthe Fecording phase of the accounting process. — 6 Thevourdagofeaact ret rae } {0 « revenue account \ 7 Matching principle requires that expenses be recorded during the ‘same period revenues are recorded. it — 8 Acquisition of prepaid expenses requires an adjusting entry at the \ end of the perio. { — 9 The recording of an accrued expense will always result in an increase to Eli I ‘an asset account with a corresponding increase to the revenue account. — 10 All adjusting entries involve one entry to real account and i ‘one entry to a nominal account. i — 11. Frifure to record an adjusting enry would affect the company's — __ |? Preparing adjusting entries atthe end ofthe accounting period is i income statement only. | Supported by the matching principle as wel s the acereal — 19 Prepaid expenses are expec accounts appearing onthe i income statementChapter 4- The Adjusting Process 16 26 2 28 29 30 ‘The difference between accrued revenues and uneamed revenues is that ‘accrued revenues are earned before cash is received while unearned revenues are camed after cash is received. Revenue is accrued upon receipt of cash from customers. Expenses are accrued when incurred regardless of when payment is to be made. Depreciable cost of any fixed asset is equal to asset cost minus accumulated depreciation to date. ‘The statement of financial position should reflec the net realizable value of the company’s receivable account. Recording depreciation of the company on its fixed asset results in the reduction of a credit entry to the asset being depreciated, All fixed assets, without exemption, are subject to depreciation. Prepaid expenses are commodities acquired by the company but hhave been neither paid nor recorded. ‘The payment of an expense in advance requires a prepaid expense adjusting entry at the end of the accounting period. Recording the expired portion of a prepaid expense results in an increase to the expense account and a decrease in the related prepaid expense account. ‘The accrual basis of accounting dictates that revenues and expenses be recorded in the period they are eamed and incurred regardless of when ‘cash is received o paid. ‘Under the asset method of recording prepaid expense, the amount of adjustment would represent the unused portion of the prepaid expense. ‘Under the expense method of recording prepayment, the initial entry is a debit toa prepaid expense account. ‘The amount of adjustment for deferred revenue would depend on, ‘what method was used to record the intial transaction. ‘The similarity between allowance for doubtful account and accumulated depreciation is that both are contra asset accounts treated as deduction fom the asset to which they relate. asChapter 4 a 32 33 34 The Adiusting Process ‘The amount of adjustment for a prepaid expenses recorded using the ‘Asset method represents the expired or used portion of the prepaymeny. ‘The amount of adjustment for a deferred revenue recorded using | the revenue method represents the eared portion of the advance payment received. Failure to record the accrual of liabilities will overstate the net ‘income and understate liabilities ofthe company. Failure to record the accrual of liabilities will overstate the net income and company’s expenses but the company’s total assets ‘ill not be affected Adjusting entries are one and the same as correcting entries, where erroneous entries made are rechecked and corrected, Office supplies, Cash, Accounts Receivable and Allowance for doubtful accounts are some ofthe accounts affected by adjusting entries atthe end ofthe period. ‘The accrual, basis of accounting presents a more complete and correct financial information reported in the company’s financial statements, |i no adjusting entries or incomect adjusting entries are prepared, then the accounting process would generate incorrect financial statements. All adjusting entries, just like al journal entries, to record the ‘company’s transactions must be prepared atthe end of each ‘eccounting period. ‘The amount of adjustment for a deferral varies on the method used to record the original transaction, 182Chapter_4- The Adiusting Process MULTIPLE CHOICE. Select the letter that best described each statement 1. The special feature of accrual basis of accounting is 8. recording expenses only when cash is paid recording revenues only when cash is received © recording adjustments only if thas a favorable effect on the ‘company's income recording revenues and expenses when they are eamed and incurred regardless of when cash is received or pai 4 ‘Compiling adjusting data is the process of 1 transactions as they oceue during the period recording entries to bring the balances of nominal accounts to 2210 balances ‘recording entries to correct erroneous entries made inthe previous period 4. gathering and putting together data necessary to update the balances of some ledger accounts, ‘The matching principle states ‘that revenue is recorded only when cash is received . that revenue is recorded only after you have earned it ‘that revenue and expenses are recorded only if they have favorable effect to the business 4. expenses be recorded in te period they are incurred and match them against the revenues earned during the same time period 4. Which of the following adjustments would affect the net realizable value of accounts receivable? ‘4 adjustment for uncollectible accounts adjustment for deprecation of plant assets, .c. adjustment for prepaid expense using the asset method 4. adjustment for deferred revenue using the revenue method 5. Which ofthe following ctor is ot considered in determining the depreciation of rope, plant nd exsipmen? ft asetoomt 6. aes estate wel ie 8. mode of seqisition 4 seemed esl vale 153‘Chater 4- The Adjusting Process © Cash received from customers prior to delivery of services is an example of 4% prepaid expense «. an accrued revenic b. an accrued expense 4. anuneamed revenue ‘Adiusting cotries are necessary in ode 10 ‘bring asset accounts o correct balances ©. bring tablty accounts to correct balances - teasure properly the company's income forthe period 4. allof these 8. Adjusting entry for scorned revenue is required when ‘cash i received for services rendered ©. cash is received after the revenue is eared ‘cash is received before the revenue is eamed 4d. none of these ‘An cotry that results ina debit to an expense account and a credit to a related Jiabitity account is an example of which category of adjusting entries? ‘a. accrued expense . acerued revenue . prepaid expense 4. uncollectble accounts 10. An entry that results in a debit to an expense account and a credit to @ ‘related asset account isa n example of which category of adjusting entries? accrued expense ©. acerved revenue . prepaid expense 4. depreciation expense 11. Al adjusting entries involve ‘am asset account anda liability ccount an asset account and an equity account (can asset and a contra asset account 4. a balance sheet account and an income statement account 12. Adjusting entries are necessary to 2 record revenve forthe period ensue the equality ofthe debits and credits balance the books tthe endo the accountng prod 44 update the balance of ome ledger accounts tthe endo the accountng period 154Chapier 4- The Adisting Process 13. The amount of accrued but unpaid expenses atthe end ofthe period is both an expense and a. an asset © liability . arevenue 4. a deferral |. An item that represents the advance payment received by the firm for services to be rendered in the future is 4. unearned revenue 6. acorved revenue ». accrued revenue 4. prepaid expense Accrued expenses lites ©. increase assets b. increase liabilities 4, decrease assets 16, Accrued revenues a. increase assets © increase liabilities i. decrease assets 4, decrease liabilities 17, The decrease in the usefulness of property, plant and equipment as time passes is called a depletion ©. depreciation ». deterioration 44. consumption 18, The adjusting entry for accrued salaries ‘8 debits salaries expense and credits cash '. debits salaries payable and credits cash cc. debits salaries expense and credits salaries payable 4, debits salaries payable and credits salaries expense 19, Which of the following is an example of an adjusting entry? recording depreciation expense on a tuck recording the purchase of supplies on account recording the payment of salaries to employees recording the receipt of eash from customers for services rendered“hovlee 4. The Adiusing Process 70. The book value of plant assets determined by * doc openness em int a f e ‘asset account 'h. deducting the balance ofthe accumolated deprecation from the asset cost © ding accumulated deprecation balance to the asset cost ‘4 by deducting residual value fom the asst cost 21. The journal entry to record accrued revenue results in which of the following types of accounts being debited and credited”? 8. esset and revenue . expense and asset asset and lability 4. expense and liability 22, Entries required at the end of the accountng period to bring the accounts upto date are called 8. journal entries . correcting entries >. adjusting entries <4. compound entries 23. An adjustment for acerued revenue is required because . cash is received before the revenue is earned cash is received after the revenue is eared revenue is recorded as cash is eocived none of these 24. Under the asset method of recording prepayment, the amount of adjustment atthe end ‘of the period represents the ‘used portion of the prepaid expense ‘unused portion of the prepaid expense ‘camned portion ofthe prepaid expense ‘the unearned portion of the prepeid expense apse 25. Under the expense method of recording prepayment, the amount of adjustment atthe ‘nd of the accounting period represents the ‘used portion ofthe prepaid expense unused portion of the prepaid expense ©. eamed portion ofthe prepaid expense 44. uncamed portion ofthe prepaid expense‘Chapter 4- The Adtusting Process 26, 27 28, 29, 30, 31 ‘The amount recoverable known as a. depreciable cost ». asset's book value ‘upon retirement of any property, plant, and equipment is ©. residual value 4. asset cost Failure to record adjusting entries atthe end ofthe accounting period would affect the ‘company's 2 income statement ». statement of financial postion © statement of changes in owner's equity 4. allof these ‘Under the revenue method of recording deferred revenve, the adjustment at the end of the period represents the ‘8 eamed portion ofthe advance payment received ‘unearned portion ofthe advance payment received expired portion of the advance payment received ‘unexpired portion of the advance payment received ‘Where would you find Uneamed Service Revenue? 4. in the owner's equity section ofthe balance sheet inthe revenue section ofthe income statement in the liability ection of the balance sheet in the asset section ofthe balance sheet b 4 Recording the expiration ofa prepaid expense would require a. a debit tothe appropriate prepaid expense account ', a debit to the appropriate expense account «©. a edit to aceounts payable 4. accredit to cash “The time period assumption states tha: 14. Revenue should be recognized in the accounting period in which it is eamed b, Expenses should be matched with revenues cc. The economic life ofa business canbe divided into artificial time periods <4. The fiscal year should correspond withthe calendar year 157eo RE es et i a | hare Phe Adsting Process shed with 32. The principle whic dictates that efforts (expenses) be mal secomplshmeatrevenis isthe: Matching rie Cost principle «Petey principle 4. Revenue recognition principle 33. Adjusting entries are made to ensure that: «Exper emp nt pein wh hye nce, 'b. Revenues are recorded in the period in which they are eared, € Balae set fone one ohare cores anes ate endo esting pd 4. Allie shore. 34. Esch ofthe following is a major type (or category) of adjusting entries xcept Prepaid expenses . Accrued revenues ‘Accrued expenses 4. Eamed revenues 35. The trial balance shows Supplies P 2,700 and Supplies Expense P 0.1 1,200 of supplies are on hand at the end ofthe period the adjusting Supplies as ‘Supplies Expense 1,200 >. Supplies 1st ‘Supplies Expense 150 Supplies Expense 1,500 Supplies 1,500 4. Supplies Expense cy ‘Supplies on 36, Adjustments for uneamed revenues: ‘Decrease liabilities and increavereven b. 4ter dst 4. Decrease liabilities and increase revenves 38, Julius Casey earned a salary of P 4,000 forthe last week of June. He will be paid on July 1. The adjusting entry of Casey's employer at June 30 is: 1. Noentry is required . ‘Salaries Expense 4,000 Salaries Payable 4,000 Salaries Expense 4,000 Cash 4,000 4. Salaries Payable 4,000 Cash 4,000 39. Which ofthe following statements is incorrect concerning the adjusted tral balance? ‘An adjusted trial balance proves the equality ofthe total debit balances and the total credit belances inthe ledger after sll adjustments are made . The adjusted wal balance provides the primary bass forthe preparation of financial statements ‘s. The adjusted tial balance lists the secount belances segregated by assets and liabilities 44. The adjusted wil balance is prepared afte the adjusting entries hhave been jouralized and posted 40. The unadjusted trial balance shows Supplies Expense of P3,000. If P 1,600 of supplies are on hand a the end of the perio, the adjusting entry is: a. Supplies 1,600 ‘Supplies Expense 1,600 ». Supplies Expense 1,600 ‘Supplies 1,600 Supplies 1400 ‘Supplies Expense 1,400 4, Supplies Expense 1,400 Supplies 1,400 159r 2, B u, chanter S= Completion ofthe Accounting Cycle END OF CHAPTER TEST IDENTIFICATION, consists of cash and other assets that are expected to be converted to cash or used by the business within one year or within the company's normal operating cycle. Entries prepared atthe end of an accounting cycle to bring the balances of tnominal accounts to zero, Steps performed during an accounting period related to gathering, recording, classifying and reporting financial information, ‘Assets acquired for use rather than for sale, They are also called plant assets oF fixed assets, ‘columnar paper used by accountants in gathering and summarizing data needed for the preparation of financial statements. ‘These are debts, usually due within one year, the payment of which normally will require current assets, clearing account used only at the end of the accounting period to summarize revenues and expenses for the period. Entries prepared at the beginning of an accounting period to reverse the effects of an adjusting entry to which they relate. Activities that ereate revenue or expense in the entity's major line of business. ‘he financial statement that reports the result of business operation for a given period. These are Liabilities that will mature after a relatively long period of time, usually ‘more than one year. Financial statements prepared at the middle of the year. ‘The excess of total revenue over total expenses. The financial statement that shows the financial condition of an entity as of a Biven date. Reports the company's assets, liabilities, and owner's equity as of a specific date A trial balance prepared after the closing entries have been posted. aa™ MULTIPLE CHOICE. Eneirle the letr of your answer i 1. All of the following statements are correct except: The work sheet cannot be used as a basis for posting ig ledger accounts. ; } '. Financial statements can be prepared directly from the wor sheet before joumalizing and posting the adjusting entries, The work sheet is distibuted to management and ine, | interested parties. | 4. The work sheet is essentially a working oo! ofthe secountant |n what columns of the work sheet does net income appear? & Comprehensive Income (Dr) and Statement of Financia! Position (Cr) >. Comprehensive Income (Dr) and Statement of Financia! Position (Dr) ‘© Comprehensive Income (C1) and Statement of Financial Position (Ce) 4. Comprehensive Income (C1) and Statement of Financial Position (Dr) 3. After recording and posting the closing entries, witich of the following accounts will have a zero balance? 4 Professional fees b. Advertising Supplies ©. Prepaid Rent 4. Allowance for Doubtful accounts 4. When a net loss has occurred, Income Summary is: Credited and owner's drawing is debited Debited and owner’s drawing is credited, Credited and owner's capital is debited. Debited and owner’s capital is credited. pose azconguer = Conlin af th Accoing Ce 5, The clising process involves separate enties to close (1) expenses. (@) demwings, (3) revenues, and ($) income summary. The correst sequencing of the entries is: 2 M.A.) © 0,4.) LWAOO ¢ OOM 6, The postclosing trial balance includes wiich of the following sccounts? ‘4. Permanent (rea!) accouats, b. ‘Temporary (nominal) accounts, «Accounts shown inthe income statement 4. None ofthe above, 7. Which ofthe following is nota required step in the accounting cycle? ‘Financial statement preparation. '. Work sheet preparation «. Revonding and posting closing entries, 4. Joumalzin the transactions. 8. Cash of P 10,000 received atthe time the service was rendered was journalized and posted as a debit 10 Cash 10,000 and « credit to ‘Accounts Receivable 10,000. The correcting entry is: ‘a. Debit Service Revenue 10,000 and credit Accounts Receivable 10,000. . Debit Accounts Receivable 10,000 and credit Service Revenue 10,000. ‘e. Debit Cash 10,000 and eredit Service Revenue 10,000. 23—— ™~ ‘Chapter 5. Completion ofthe Acconntas Cisle 9. Ima classified balance shee, assets arc usually clasifed using he oo aera Jong-term assets; property, plant, ang oe Franycanpeescty Property, plant, ang oe en rn (oe equipment; and intangible ase, 10. Curren assets are arranged according to: Liquidity Longevity . Importance ‘Alphabetical order 11. A debit column total greater than the eredit-column total under the Income Statement portion ofthe work sheet would mean: © The Income Summary account will have a credit balance ‘after the nominal accounts are closed. 'b. Mistakes were made in the preparation of the adjusted trial balance. & The company had a profitable yea. 4. The company had loss this yea. 12. Why does the accountant find a work sheet useful? ‘ Ithelps the accountant to organize data and compute the net ‘income or loss for the period. '. Ithelps the accountant prepare end-of-period financial statements © Tehelps the socountant prepare adjusting and closing entries 4. All of these are benefits using a work sheet. 13. Which of the following should be closed to Income Summary? ‘© Accumulated Depreciation c, Salary Expense >. Withdrawals 4. All of these 24_- Completion ofthe Accounting Cycle ee post-closing trial balance of Santos Bakery includes the account "attested Blow, Which ones indent poner? bose’ ganos, Drawing, P 9,700 deeb’ ‘b. Income Summary, P 1,620 debit balance. ¢. Interest Revenue, P 3,000 credit balance, Allo thes inticate enor 15. Which situation indicates a net loss on the income statement? ‘a. Total debits exceeds total credits b. total debits equal total credits c. Total credits exceeds total debits 4. none of these 16. Supplies has a balance that is P 960 less inthe work sheet’s Balance Sheet debit column, than in the work sheet's trial balance debit column. This would be the result ‘a. AP 1,920 entry to Supplies Expense in the work sheet's ‘Adjustments debit column. b. AP-960 entry to Supplies Expense inthe work sheet’s ‘Adjustments credit column. e. AP960 entry to Supplies in the work sheet Adjustments credit column. 4. -AP-960 entry to Supplies in the work sheet Adjustments debit column. 17. The accountant left two entries off the Adjustments columns of the work sheet: P80 of service revenue was not accrued ‘© P'1,200 of uneamed revenue had been eamed, but no entry ‘was made. ‘What should be the amount of net income if the incorrect net income ‘was P 46,000? a P48,000 b.P45,600 —. P46,400 dP 44,000 2s‘Chapter 5 — Complain ote Acconting Ole Salary Expense 's Trial Balance debit column h 18. con the work shect’s as ep 901000 balance and P 112,500 balance on the work sheet's Tnvonme Statement debit column. The difference is due to: pn eny inte work set's Adjustments debit column for p {90,000 to Salary Expense ; b. Anenty in te work sheet’s Adjustments credit column fop *” p22,500 to Salary Expense. ; “Aneatry in the work sheet’s Adjustments credit column for P 22,500 to Salaries Payable. 4. None of these. 19. On December 31, Palermo Company correctly made an adjusting entry to recognize P 4,000 of accrued salaries payable. On Taauary 8 of the next year, total salaries of P 6,800 were paid ‘Assuming the correct reversing entry was made on January 1, the entry on January & will result in a credit 0 Cash P 6,800, and the following debits): ‘Salaries Payable P 2,800 and Salaries Expense P 4,000 bi. Salaries Payable P 4,000 and Selaries Expense P 2,800 ‘. Salaries Expense P 6,800 4. Salaries Payable P 6,800 20. Liabilities and owner's equity exceed total assets on the balance sheet by P 6,000. This could be the result of: ‘failure to close the withdrawals account of P 6,000 to the capital account. . failure to close the income summary account’s credit ‘balance of P 6,000 to the capital account. ©. failure to close salary expense of P 3,000 to the income ‘summary eccount. 4. failure to post either side of a P purchase of fahme pom 1,500 cash f