Module 1 Exercises

II. ACTIVITY

Directions: As a group work answer the following questions and discuss it with your group mates.

1. What is accounting?
2. Write down the accounting equation.
3. What are the major accounts?
4. What are the rules of debit and credit?

III. ANALYSIS

Directions: Encircle the letter of the correct/best answer for the following statements.

1. Equity means?
A. Current assets minus current liabilities. C. Capital of the partnership.
B. Total assets less total liabilities D. Accounts receivable less allow. for bad debts
2. Which is not an expense account?
A. Rent expense C. Repairs and maintenance
B. Utilities D. Accumulated depreciation
3.Which is not a balance sheet account?
A. Asset C. Liabilities
B. Drawing D. Cost of goods sold
4. If the beginning capital was 50,000 and at the end of the year it became 70,000, assuming no additional
investment was made, what could be the reason for the increase?
A. Asset C. Income
B. Liability D. Capital
5. Mr. Abad invested 100,000 in Abad Barber Shop. He bought equipment on account for 200,000 giving a
50% down payment. The asset of Abad Barber Shop is?
A. 100,000 C. 300,000
B. 200,000 D. None

V. APPLICATION

A. Directions. You were hired by Mr. X Mo to prepare his sari-sari store’s Statement of Financial Position. In
order to prepare the statement, you identified the following assets and liabilities of Mr. X Mo:

a. His sari-sari store has cash deposited in a bank account amounting to P50,000
b. His sari-sari store had a lot of uncollected sales from customers amounting to P75,000
c. The total amount of merchandise left inside the store is P30,000
d. He already paid one year’s rent in advance amounting to P12,000
e. The value of all the company’s furniture amounted to P100,000
 f. He bought merchandise from his supplier amounting to P25,000 and the supplier agreed that
payment can be made 2 months after year-end
g. SSS, Philhealth and Pag-ibig Payables for his one employee totaled P5,000
h. The sari-sari store had outstanding liabilities to utility companies amounting to P3,000
i. He had a loan from the bank amounting to P50,000 to be paid in 3 years.

Prepare a Statement of Financial Position for the company (one in report form and one in account form)

B. Directions. The following were taken from the books of Winter Company.

Long-term payable 500,000 Notes payable 120,000 PPE 750,000

Accounts receivable 56,000 Accounts payable 65,000 Accum. Dep. 100,000
Cash 77,000 Owner’s Capital ? Unearned inc. 15,345
Notes receivable 244,000 Prepaid expenses 56,700 Accrued exp. 37,890
Inventory 157,840 Intangible assets 124,500

Requirements:

1. Total assets to be reported in the SFP?

2. Total liabilities to be reported in the SFP?
3. The balance of the Owner’s Capital account?
4. Identify all the accounts with normal debit balances and compute the total amount of all debit balances.
5. Identify all the accounts with normal credit balances and compute the total amount of all credit balances.
6. The Owner’s Capital has a beginning balance of 500,545. The owner gave 100,000 additional
contributions. Based on the Income Statement, net income for the year was 120,445. How much money did
the owner withdrew from the business?
7. Prepare a SFP given the following additional information:
a. Note payable is due 6 months from now.
b. Note receivable is collectible 9 months from now.
c. Prepaid expenses will be used during the year.

C. Directions True or False. Read each sentence carefully and determine whether the statement is True or
False. Write your answers in the space provided before the number.

True 1. The SFP provides readers with the information as to the company’s financial position as of a
specified date.
False 2. Assets - Liabilities = Equity is the governing equation of the SFP.
False 3. Assets is an element of the SFP that has a normal balance of credit.
True 4. Debit means to increase an account.
True 5. T-account is a representation of the general ledger account used in teaching accounting.
True 6. An entry on the opposite side of the normal balance of an account means to decrease the
account by the amount entered.
True 7. The normal balance of liabilities and equity is credit.
True 8. The normal balance of Notes Receivable is credit.
True 9. Credit means to decrease an account.
False 10. The normal balance of Unearned income is debit.
D. Directions: Answer the following questions and show your solution.

1. MAHAL PA DIN KITA Company had current assets amounting to Php100,000. Noncurrent assets for the
year totaled Php76,000. How much is the company’s total assets? Php176,000

2. KUNG AKO NA LANG SANA Company’s total liabilities amounted Php10,000. Total equity had an
ending balance of Php20,000. How much is total assets? Php30,000

3. TAMA NA’s had the following accounts at year end: Cash-250,000, Accounts Payable-70,000, Prepaid
Expense-15,000. Compute for the company’s current assets. Php 265,000

4. MISS KITA’s Accounts Receivable amounted to Php 500,000. Prepaid Expense and Unearned Income
totaled Php 30,000 and Php 10,000 respectively. Cash balance amounted to Php 100,000 while
Accounts Payable and Inventory totaled to Php 20,000 and Php 10,000
respectively. How much is the company’s current assets? Current liabilities? Php640,000 and Php30,000

5. Company’s Total Liabilities and Equity amounted to Php 285,000. Total noncurrent assets ended at Php
85,000. Cash totaled Php50,000. Inventory amounted to Php100,000. The company had no other
assets, How much is Accounts Receivable? 50,000

6. Total assets amounted to Php575,000. Total equity amounted to Php 250,000. Accounts Payable
amounted to Php 50,000 while Unearned Income totaled Php 85,000. Assuming there are no other
current liabilities, compute for the company’s noncurrent liabilities. 190,000

7. If assets are Php17,000 and owner's equity is Php10,000, liabilities are 7,000.

8. At the end of the first month of operations for Juana’s Delivery Service, the business had the following
accounts: Accounts Receivable, Php1,200; Prepaid Insurance, Php500; Equipment, Php36,200 and
Cash, Php40,650. On the same date, Juana owed the following creditors: Nena’s Supply Company,
Php12,000; Maria’s Equipment, Php9,500. The current assets for the Juana’s Delivery Service are
42,350.

9. At the end of the first month of operations for Juana’s Delivery Service, the business had the following
accounts: Accounts Receivable, Php1,200; Prepaid Insurance, Php500; Equipment, Php36,200 and
Cash, Php40,650. On the same date, Juana owed the following creditors: Nena’s Supply Company,
Php12,000 (due in 6 months); Maria’s Equipment, Php9,500 (due after 2 years). Current liabilities are
12,000.

10. If during the year total assets increase by Php75,000 and total liabilities decrease by Php16,000, by
how much did owner's equity increase/decrease? 91,000

11-20. Prepare a Statement of Financial Position using the following accounts (one in report form and one
in account form): Cash – 5,000 Loans Payable – 77,500 Accounts Receivable – 2,600 Supplies – 2,300
Equipment – 17,000 Owner’s equity – 40,000 Accounts Payable – 22,400 Building – 113,000 Learners
can use any business name and the end of the current year for the heading.