HO1 - Introduction to Accounting AE 100

Exercise 1: Identify the effects (Increase or Decrease) of the following transactions on the assets, liabilities and
owners’ equity or capital
Assets Liabilities OE
1. Purchased office supplies by paying cash Increase (Office
supplies)
Decrease (Cash)

2. Purchased inventory on account. Increase Decrease

3. Paid the utilities bill. Decrease Decrease(expense)
4. The owner withdrew money from business Decrease Decrease(drawings)
for personal use.
5. Bought a building. Paid half of the price in Increase (building) Increase
cash and the balance as note payable. Decrease (cash)
6. Received cash from one of the clients who Increase Increase (revenue)
owed to the company.
7. Paid salary to the staff. Decrease Decrease (expense)
8. Earned service revenue on account. Increase Increase (revenue)
9. Lost equipment in fire. Decrease Decrease (expense)

Exercise 2: Show the effects of the following transactions on the assets, liabilities and capital accounts. Compute
the balances of the accounts after every transaction.
A. Started the business with P150,000 cash investment.
B. Purchased furniture and fixture for P25,000 cash.
C. Purchased merchandise inventory amounting to P75,000 (P50,000 cash; P25,000 credit).
D. Sold merchandise costing 15,000 for P17,000 cash.
E. Sold merchandise costing P10,000 for P10,500 on credit.
F. Paid utilities P2,500 utilities expense.
G. Withdrawal of owner of P1,000.
H. Collected the receivable from transaction E.
I. Paid advertising expense worth 2,500.
J. Invested additional P5,000 cash.

Assets Liabilities Capital

Cash Accounts Inventory Fixed Accounts Owner’s Withdr Revenues Expenses
Receivable Assets Payable Capital awals
A 150,000 150,000
Balance 150,000 150,000
s
B -25,000 25,000
Balance 125,000 25,000 150,000
s
C -50,000 75,000 25,000
Balance 75,000 75,000 25,000 25000 150,000
s
D 17,000 17,000
Balance 92,000 75,000 25,000 25,000 150,000 17,000
s
E 10,500 10,500
Balance 92,000 10,500 75,000 25,000 25,000 150000 27,500
s
F -2,500 -2,500
Balance 89,500 10,500 75,000 25,000 25,000 150,000 27,500 -2500
s
G -1000 -1000
Balance 88,500 10,500 75,000 25,000 25,000 150,000 -1000 27,500 -2500
s
H 10,500 -10,500
Balance 99000 0 75,000 25,000 25,000 150,000 -1000 27,500 -2500
s
I -2,500 -2500
Balance 96500 0 75,000 25,000 25,000 150,000 -1000 27,500 -5000
s
 HO1 - Introduction to Accounting AE 100

J 5000 5000
Balance 101500 0 75,000 25,000 25,000 155000 -1000 27,500 -5000
s

79000+75000+25000= 25,000+150,000+27,500-2,500
201500=201500

Exercise 3: Fill in the unknown values in the accounting equation for each entity (in Php).
Assets Liabilities Owners’ Equity
Company A 288.600 185.400 103.200
Company B 32.950 15.950 17.000
Company C 16.340 5.960 10.380

Exercise 4: Multiple Choice

1. During the year 2002, the assets of Murray Company decreased by Php20,000, and its liabilities decreased by
Php7,000. If the ending balance of the Stockholders’ Equity account was Php70,000, the beginning balance must be:
a. Php57,000.
b. Php83,000.
c. Php87,000.
d. Php97,000.

2. If total stockholders’ equity decreased by Php5,000 during a year and total liabilities increased by Php14,000 during the
year, the total assets must have
a. increased by Php19,000 during the year.
b. decreased by Php19,000 during the year.
c. increased by Php9,000 during the year.
d. decreased by Php9,000 during the year.

3. The total assets of Brennan Company equals three times its total liabilities. If the stockholders' equity is Php120,000,
the total assets must be
a. Php60,000.
b. Php180,000.
c. Php240,000.
d. Php360,000.