CHAPTER 3: CHART OF ACCOUNTS AND

DOUBLE ENTRY SYSTEM

PART 1: MULTIPLE CHOICES QUESTION
1.An account used to record the owner's investments in the business is called a(n):
A) Capital account.
B) Revenue account.
C) Expense account.
D) Liability account.
2.A record of the increases and decreases in a specific asset, liability, equity, revenue,
or expense is a(n):
A) Journal.
B) Posting.
C) Trial balance.
D) Account.
3.Which of the following statements is correct?
A) When a future expense is paid in advance, the payment is normally recorded in
a liability account called Prepaid Expense.
B) Promises of future payment are called accounts receivable.
C) Increases and decreases in cash are always recorded in the owner's equity
account.
D) An account called Tangible asset is commonly used to record increases and
decreases in both the Tangible and Intangible asset owned by a business.
4.A ledger is:
A) A record containing increases and decreases in a specific asset, liability,
equity, revenue, or expense item.
B) A collection of documents that describe transactions and events entering the
accounting process.
C) A list of all accounts with their debit balances at a point in time.
D) A record containing all accounts and their balances used by a company.
5.A debit is:
A) An increase in an account.
B) The right-hand side of a T-account.
 C) A decrease in an account.
D) The left-hand side of a T-account.
6.The right side of a T-account is a(n):
A) Debit.
B) Increase.
C) Credit.
D) Decrease.
7.Which of the following statements is incorrect?
A) The normal balance of accounts receivable is a debit.
B) The normal balance of owner's equity is a credit.
C) The normal balance of revenues is a credit.
D) The normal balance of an expense account is a credit.
8.A simple account form widely used in accounting to illustrate how debits and credits
work is called a:
A) Withdrawals account.
B) Capital account.
C) Drawing account.
D) T-account.
9.Which of the following statements is correct?
A) The left side of a T-account is the credit side.
B) Debits decrease asset and expense accounts, and increase liability, equity, and
revenue accounts.
C) The left side of a T-account is the debit side.
D) Credits increase asset and expense accounts, and decrease liability, equity, and
revenue accounts.
10. An account balance is:
A) The total of the credit side of the account.
B) The total of the debit side of the account.
C) The difference between the total debits and total credits for an account
including the opening balance.
D) Assets = liabilities + equity.
11. A debit is used to record:
 A) A decrease in an asset account.
B) A decrease in an expense account.
C) An increase in a revenue account.
D) An increase in the balance of the asset account.
12. A credit entry:
A) Increases asset and expense accounts, and decreases liability, owner's equity,
and revenue accounts.
B) Is always a decrease in an account.
C) Decreases asset and expense accounts, and increases liability, owner's equity,
and revenue accounts.
D) Is recorded on the left side of a T-account.
13. Double-entry accounting is an accounting system:
A) That records each transaction twice.
B) That records the effects of transactions and other events in at least two
accounts with equal debits and credits.
C) In which each transaction affects and is recorded in two or more accounts but
that could include two debits and no credits.
D) That may only be used if T-accounts are used.
14. ABC Industries received its telephone bill in the amount of $300,000 (‘000 VNĐ)
and immediately paid it. ABC's general journal entry to record this transaction
will include a
A) Debit to Telephone Expense for 300,000.
B) Credit to Accounts Payable for 300,000.
C) Debit to Cash for 300,000.
D) Credit to Telephone Expense for 300,000.
15. Thanh Cong Co., Ltd purchased office supplies on credit. The general journal
entry made by Thanh Cong will include a:
A) Debit to Accounts Payable.
B) Debit to Accounts Receivable.
C) Credit to Cash.
D) Credit to Accounts Payable.
PART 2: PROBLEMS
Problem 3.1
 The following transactions occurred during Mien Nam Company’s January
of year N: (Unit 1.000 VND).
-Opening balance:
Raw Materials: 90.000
Trade payable: 450.000.
- Transactions occurred during the month:
1. Business capital is contributed with raw materials 650.000.
2. Paid cash in banks to settle an account (trade) payable 300.000
3. Purchased raw materials on credit 500.000.
4. Used raw materials in production 55.000.
5. Paid cash in banks to purchase raw materials 160.000
6. Issued raw materials to use in selling deparment 30.000 and use in production 250.000.
7. Borrowed form the bank to purchase raw materials 280.000
8. Sold raw materials to a customer for 180.000, collected by bank deposits. The raw
materials had cost 120.000.
9. Received the balance due from a customer by raw materials worth 180.000.
10. The company paid 150.000 cash in banks to settle an trade payable.
11. Acquired a new delivery car on credit 400.000.
12. Borrowed from the bank to settle an trade payable 210.000.
Required:
1. Prepare T-accounts of Raw materials and Trade payable.
2. State the meaning of above account balances.
( nêu ý nghĩa các số dư tài khoản trên. )

Problem 3.2
Binh Minh Company in the first quarter of year N accounting period has the
following accounting data (unit 1,000 VND):
- Balance at 1/1/N:
112 – Cash in banks: 200.000 331 – Trade payable: 10.000
131 – Trade receivables: 60.000 341 – Borrowings and finance lease liability:
156 – Merchandise goods: 140.000 20.000
411 – Owner’s equity: 370.000
- Transactions occurred during the quarter:
 1. Purchased merchandise from supplier A for 150.000. The purchase is paid with cash
in banks 40.000 and the remaining payment is due within 30 days.
2. Sold merchandise to customer B for 200.000 under credit term of 60 days. The
merchandise had cost 140.000.
3. Received through bank account the balance due of 200.000 from customer B.
4. The company paid 100.000 cash in banks to settle an trade payable of supplier A.
5. Borrowed form the bank to purchase merchandise 200.000.
6. Sold merchandise for customer C that had cost 140.000 for 180.000, collected by
bank 100.000.
7. Purchased merchandise on credit 350.000.
8. Received through bank account the balance due of 80.000 from customer C.
9. Paid cash in banks 200.000 for the loans.
10. The owner invested 300.000 cash in the company, deposit made through the bank
account.
Required:
1. Prepare journal entries to record the transactions for 1 st quarter and post them to the
ledger accounts.
2. Prepare the closing entries.
Problem 3.3
In October/N, Mr. DB established a company providing transportation services.
Economic transactions arising at the Company in October/N are as follows: (Unit: 1.000
VND)
1. Mr. DB's initial investment includes: 1.100.000 cash on hand and Cars used for
Company operations worth 1.600.000.
2. Purchased raw materials 50.000 in cash.
3. The company completed a processing service for a customer and collected
120.000 in cash.
4. Purchased office supplies 25.000, paid in cash.
5. Paid 220.000 for the October rent.
Required: Prepare journal entries to record the transactions and post them to the
ledger accounts.
Problem 3.4
 Anh Duong Company specializes in buying and selling computers. The
Company's balance sheet as of December 31, January 1 is as follows: (Unit 1,000 VND).
ASSETS Amounts CAPITAL Amounts
Cash on hand 50.000 Trade payable 20.000
Cash in banks 150.000 Taxes and other payable to 10.000
State Budget
Trade receivable 100.000 Borrowings and finance lease 140.000
liabilities
Merchandise goods 180.000 Owner’s equity 600.000
Tangible Fixed Assets 340.000 Undistributed profit after tax 30.000
Depreciation of Fixed (20.000)
assets
TOTAL 800.000 TOTAL 800.000

In the 1st quarter of 20xx, the Company had the following transactions:
1. The owner contributes additional capital with a bank deposit of 500.000, and a cargo
car worth 800.000.
2. Purchased a computer (merchandise goods) for 200.000 on credit.
3. Paid for computers purchased on transaction 2 through bank account.
4. Customers paid the balance due to the Company in cash 20.000 and by bank deposit
40.000.
5. Purchased office supplies worth 30.000, paid in cash 15.000, the rest on credit.
6. Spend 6.000 cash in banks to pay taxes to the State and pay off bank loans of 50.000.
7. Purchased 30 computers (10 used for management activities at the Company, the rest
for sale), unit price was 15.000/pc.
8. Repaid the bank loans by bank transfer of 90.000.
9. Used profit after tax to supplement business capital of 20.000.
Required:
1. Prepare journal entries to record the transactions.
2. Post them to the ledger accounts.
3. Prepare the trial balance for the first quarter of Year 20xx.
4. Prepare the balance sheet as at 30/03/20xx.
Problem 3.5
 On December 1, 20xx, Mr A created a new self-storage business, Mien Nam
Company. The following transactions occurred during the company’s first month (Unit:
1.000 VND):
1. The owner invested 30.000 cash and a cargo truck worth 150.000 in the
company.
2. Rented equipment by paying 2.000 cash for the first month rent.
3. Purchased 2.400 office supplies for cash.
4. Paid an employee 10.000 for four week’s salary earned.
5. Collected 9.800 cash for service fees from customers.
6. The company billed a customer L 18.000 for fees earned.
7. Paid 950 cash for minor repairs to a leaking roof.
8. Paid 400 cash for this month’s telephone bill.
10. Pay electricity and water bill at the office 1.000 by cash.
Required:
1. Prepare the journal entries to record the transactions.
2. Prepare the closing entries
3. Prepare the income statement for the month of December 20xx.
Problem 3.6
Posting errors are identified in the following table. In column (1), enter the amount of the
difference between the two trial balance columns (debit and credit) due to the error. In
column (2), identify the trial balance column (debit or credit) with the larger amount if
they are not equal. In column (3), identify the account(s) affected by the erroe. In column
(4), indicate the amount by which the account(s) in column (3) is under-or overstated.
Item (a) is copleted as an example.

(1) (2) (3) (4)

Difference
between Column Identify Amount that account(s)
Debit and with the account(s) is overstated or
Description Credit Larger incorrectly understated
Columns Total stated
a. $3,600 debit to Selling Selling
Expense is posted as $2,260 Credit Selling Expense is
Expense understated by $2,260
a $1,340 debit.
b. $6,500 credit to Cash
is posted twice as two
credits to Cash.
c. $2,050 debit to
Prepaid expenses is
posted as a debit to
Selling Expenses.

d. $38,000 debit to
Machinery and
equipment is posted
as a debit to Trade
Payables.

e. $5,850 credit to
Revenues is posted
as a $585 credit.

f. $1,390 debit to Tools

and Supplies is not
posted.