Equation Expanded To Show Operating Activities

Cruz Jr, Jose M.
BSHM 3-G
EQUATION EXPANDED TO SHOW OPERATING ACTIVITIES

Exercises
1. Analyze the following transactions and fill up the given matrix. The answer to the first transaction is
given as an example.
Income S
Business Transactions
1 Owner invested P100,000 cash in business

2 Incurred legal expenses and paid P10,000
3 Paid cash for employees wages, P15,000
4 Issued note for cash borrowed, P300,000
5 Received P80,000 cash for service provided
6 Bought car P500,000. 50% down, note for 50%
7 Bought office equipment on credit, P180,000

8 Provide services to client on credit, P75,000
9 Collected 50% on client accounts
10 Owner withdrew cash, P5,000

11 Net Income/Net Loss to Owner's Equity
a. Get the totals and prove the accounting equation.

Assets = Liabilities + Equity
₱ 955,000.00 ₱ 730,000.00 ₱ 225,000.00
Assets = Total Liabilities & Owners Income

₱ 955,000.00 = ₱ 955,000.00
b. Compute for the Return on Equity (ROE = Net Income / Equity)
ROE = Net Income/Equity ROE

130,000/ 225,000
2. S&T Advertising has the following March transactions:

a. During March, advertising services amounted to P104,000 of which P54,000 was on credit.
b. The following expenditures were paid: water P800, salaries P26,000.
c. Half of the notes payable was also paid.
d. Supplies used up amounted to P12,000.
e. Telephone and light bill were incurred but remain unpaid, P7,500.
f. Additional supplies were purchased for cash, P5,000 but Kalaw took home P1,000 for her
personal needs.
g. Kalaw wanted to expand her business. She applied for a bank loan which was approved by SM
Bank for P100,000 payable in 24 monthly instalments.
Requirements Prepare a cash flow working paper using this format

Transactions
a During March, advesrtising services amounted to P104,000 of which P54,000 was on credit
b The ff. expenditures were paid: water P800, salaries P26,000
c Half of the notes payable was also paid
d Supplies used up amounted to P12,0000
e Telephone & light bill were incurred but remain unpaid, P7,500
f Additional supplies were purchased for cash, P5,000 but Kalaw took home P1,000 for her personal needs
g Kalaw wanted to expand her business, She applied for a bank loan which was approved by
SM Bank for P100,000 payable in 24 monthly installment
Income Statement Statement of Financial Position
+Revenues Total Assets Total Liabilities Owner's Equity
- Expenses
100,000 100,000
-10,000 -10,000
-15,000 -15,000
300,000 300,000
80,000 80,000
500,000 250,000
-250,000
180,000 180,000
75,000 75,000
37,500
-37,500
-5,000 -5,000
₱ 130,000.00 ₱ 130,000.00
₱ 955,000.00 ₱ 730,000.00 ₱ 225,000.00
= Net Income/Equity ROE =

0.57777x100
Operating Investing Financing
P 104, 000
-26,800
₱ 27,000.00
-12,000
-7,500
-4,000 -1,000
100,000
Net Income/Equity
57.777 or 57.78%
3. Sue Ramirez opened a travel agency business on April 5, 2019. A month after she was able to
comply with the legal requirements and documents, the business started the operation. The
following balances were taken from April 30, 2019:
The following transaction took place during the month of May:

2 Received P45,000 from the office of PAGCOR for the processing of their documents with the
Department of Foreign Affairs. Use the revenue title – Processing Fees.
2 Received from various airline companies commission for ticket purchased for clients, P28,000.
Use the revenue title – Commission Income.
5 Paid P10,0000 to BDO.
8 Paid for supplies bought, P7,250.
10 Received P8,000 commission from airline companies for tickets purchased for clients.
11 Bought a photocopying machine for P15,000 by paying 50% in cash, the balance on account.
14 Collected service fees of P5,000 from clients for processing of visa and passports.
15 Paid cash for salaries, P15,000.
18 Billed Moyses Company P12,000 for processing of visa and passport of their officers.
20 Mr. and Mrs. Smith paid P1,000 for the processing of their papers.
24 Paid P5,000 of the account payable.
25 Moyses Company paid 50% of their account.
27 Billed PAL P3,500 for commissions accruing on tickets purchased.
28 Bills were received from the following: PLDT, P3,500 and Meralco, P5,500.
29 Receipts from various clients for services rendered: from tourist and immigrants, P4,500 and
airline companies, P7,500.
30 Paid cash P7,500 for rent and P15,000 for salaries.
31 Supplies used up, P3,500.
FINANCIAL TRANSACTION WORKSHEET- SUE RAMIREZ TRAVEL AGENCY

Date Cash Accounts Supplies Furniture Equipment
Recievable
Apr. 30 61,000 14,500 50,500 25,000
May-02 45,000
May-02 28,000
May-05 -10,000
May-08 -7,250 7,250
May-10 8,000
May-11 -7,500 15,000
May-14 5,000
May-15 -15,000
May-18 12,000
May-20 1,000
May-24 -5,000
May-25 6,000 -6,000
May-27 3,500
May-28
May-28
May-29 4,500
May-29 7,500
May-30 -7,500
May-30 -15,000
May-31 -3,500
₱ 98,750.00 ₱ 9,500.00 ₱ 18,250.00 ₱ 50,500.00 ₱ 40,000.00
₱ 217,000.00
Account 24-month Ramirez
Payable Note Due to BDO Capital
15,000 50,000 100,000
-8,000
-6,000
45,000
28,000
-10,000
8,000
7,500
5,000
-15,000
12,000
1,000
-5,000
3,500
3,500 -3,500
5,500 -5,500
4,500
7,500
-7,500
-15,000
-3,500
₱ 26,500.00 ₱ 40,000.00 ₱ 150,500.00
₱ 217,000.00
Explanation
for changes
Investment
Taxes and Licenses
Registration Expenses
Received cash for Processing fees
Comission Income
Paid to BDO
Bought Supplies
Received comission from airline companies
Bought Photocopying Machine, 50% downpayment, 50% on account
Received from client for processing visa & passports
Salary Expense
Billed Moyses Company for processing visa and passports
Received cash from Mr & Mrs Smith for Processing fees
Paying Account
Received Cash from Moyses Company
Billed PAL for accruing on ticket purchased
PLDT bill
Meralco Bill
Service Income from tourist
Service Income from airline companies
Rent Expense
Salary Expense
Supplies Expense

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What is the accounting equation and how is it used?

What is return on equity (ROE) and how is it calculated?

Cruz Jr, Jose M.

EQUATION EXPANDED TO SHOW OPERATING ACTIVITIES

1 Owner invested P100,000 cash in business

7 Bought office equipment on credit, P180,000

10 Owner withdrew cash, P5,000

a. Get the totals and prove the accounting equation.

Assets = Total Liabilities & Owners Income

b. Compute for the Return on Equity (ROE = Net Income / Equity)

ROE = Net Income/Equity ROE

2. S&T Advertising has the following March transactions:

Requirements Prepare a cash flow working paper using this format

= Net Income/Equity ROE =

The following transaction took place during the month of May:

FINANCIAL TRANSACTION WORKSHEET- SUE RAMIREZ TRAVEL AGENCY

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