Activity 1

Long term Payable Accounts Payable Notes Receivable

Notes Payable Cash Prepaid Expense
Property, Plant and
Owner’s Capital Accrued Expense
Equipment
Accounts Receivable Unearned Income Inventory

Requirements:

1. Match the accounts on the table with the appropriate elements of the Statement of
Financial Position below:

Asset Liabilities Equity

1 Fundamentals of Accountancy, Business and Management 2: The Statement of Financial Position

2. Use the accounts in the table above to prepare a pro forma SFP using the report and
account format.
3. Use the accounts in the table in item number 1 to prepare a classified SFP given the
following assumptions:
a. The prepaid expense will be used up to 12 months from the SFP date.
b. The unearned income is due for delivery in six months.
c. The full amount of notes receivable is due to be collected 10 months from the
SFP date.
d. The full amount of notes payable is due to be paid 8 months from the SFP date.
4. Identify the SFP accounts that correspond to the given definitions:
a. Obligation to pay for goods and services already used in the operation of the
business such as salaries payable, utilities payable, rent payable, and interest
payable.
b. The account reports the balance of bank savings and checking accounts as well
as bills, coins, and checks on hand.
c. The cost of unsold merchandise that the company purchased for the purpose of
reselling to its customers in the normal course of its business.

EDUCARE COLLEGE, INC.

Senior High School Department
Accountancy and Business Management
 d. Long-term assets that are used in the operations of the company.
e. Obligation to the suppliers of purchased inventories.
f. Obligation to pay documented in a promissory note.
g. It is composed of the owner’s investments and the accumulated net income of
the company, net of any distributions to the owner.
h. Advance payments made by customers while goods and services are not yet
delivered to the customer.
i. Assets that pertain to the company’s right to collect or right to claim payment.
j. Asset account that refers to future expenses paid in advance before the services
or goods are used.
k. Obligations to pay to be settled at some specific date more than one year from
the date of the SFP.
l. Long-term assets that have no tangible properties.

Let’s Solve
Problem 1: Determining the balance of the account using T-Accounts.

The T-account below is for the account Prepaid Expense.

Prepaid Expense
March 1, 20F4 ₱150,600 July 31, 20F4 45, 760
August 15, 20F4 95,450 December 31, 20F4 90,000
2 Fundamentals of Accountancy, Business and Management 2: The Statement of Financial Position
The balance of Prepaid Expenses on January 1, 20F4 is ₱245,675. What is the balance
of Prepaid Expenses as of December 31, 20F4?

Problem 2: Using T-Accounts

The cash account has a January 1, 20S4 balance of ₱567,000.

1. During the year, the following transactions increased the cash account:
a. Company was able to collect ₱890,000 from its receivables.
b. Cash sales totaled ₱376,855.
2. During the year, the following transactions decreased the cash account:
a. The company paid ₱755,000 to suppliers and for other administrative expenses.
b. The owner withdrew ₱100,000 for his personal expenses.

Fill in the T-account for the effect of the above transactions.

Cash
Particulars Debit Credit
Balance – January 1, 20S4
1.a.
1.b.
2.a.
2.b.
Balance – December 31, 20S4
EDUCARE COLLEGE, INC.
Senior High School Department
Accountancy and Business Management
 Problem 3: Comprehensive Problem

The following were taken from the books of Amihan Company:

Long-term payable ₱500,000

Notes payable 120,000
Property, plant and equipment 750,000
Accounts receivable 56,000
Accounts payable 65,000
Accumulated depreciation 100,000
Cash 77,000
Owner’s Capital ?
Unearned income 15,345
Notes Receivable 244,000
Prepaid Expense 56,700
Accrued expense 37,890
Inventory 157,840
Intangible assets 124,500

Requirements:

1. Based on the above set of accounts, determine the total assets to be reported in the
3 SFP.
Fundamentals of Accountancy, Business and Management 2: The Statement of Financial Position
2. Based on the above set of accounts, determine the total liabilities to be reported in SFP.
3. Based on the above set of accounts, determine the balance of the Owner’s Capital to be
reported in the SFP.
4. Based on the above set of accounts, identify all the accounts with normal debit balances.
Compute the total of all accounts with debit balances.
5. Based on the above set of accounts, identify all the accounts with normal credit
balances. Compute the total of all accounts with credit balances.
6. The Owner’s Capital has a beginning balance of ₱500,545. The owner gave ₱100,000
additional contribution during the year. Based on the Statement of Comprehensive
Income, net income for the year was ₱120,445. How much money did the owner
withdrew from the business?
7. Prepare a classified 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 expense will be used during the year.

EDUCARE COLLEGE, INC.

Senior High School Department
Accountancy and Business Management