ACTIVITY NO.

1
Instructions: Write only the answers. No need to copy the questions.

I. Write the correct letter of the correct answer on the blank.

A. Accounting
B. Accrual Principle
C. Business Transaction
D. Calendar Year
E. Cash Basis Accounting
F. Classifying
G. Corporation
H. Fiscal Year
I. Generally Accepted Accounting Principle
J. Going concern
K. Historical Cost
L. Materiality
M. Monetary Measure
N. Objectivity Principle
O. Partnership
P. Periodicity
Q. Separate Entity
R. Single proprietorship

J 1. Under this concept, accountant assumes that the business

will remain in operation long enough to use existing resources for their intended purpose

O 2. A business where two or more people join together to earn

and share profits

H 3. A period of 12 consecutive months starting in any month of

the year selected by a business as the reporting year for annual reports

G 4. A business organization where multiple owners buy ownership shares in the company called capital
stock

A 5. An information system that generates financial information about a business

Q 6. The concept that treats a business as distinct and apart from its creditors, customers, and owners
C 7. Economic events that affect the financial position of an entity
A 8. An information system that measures, processes, and communicates financial information about an
identifiable economic entity

I 9. The convention, rules, and procedures necessary to define accepted accounting practice at a
particular time

K 10. This ensures that the accounting records and statements are based on the most reliable data
available

R 11. A business owned by only one person

J 12. This assumes that the business will remain in operation for a foreseeable future
M 13. The principle that specifically states that we should record transactions at amounts that can be
verified

P 14. Ensures that financial information is reported at regular intervals

K 15. This states that acquired assets and services should be recorded at the price originally paid for
them

I 16. Standards used by accountant to make financial information more meaningful

B 17. The principle that states that whenever possible the amounts used in recording transactions
should be based on source documents

L 18. This principle does not allow the accountant to record subsequent changes in the value of the
assets

B 19. This principle attempts to record the financial effects of a transaction or event in the period in
which this transaction or event occur rather than in periods in which cash is received or paid by the
business

_____________20. The recognition that net income for any period less than the life of the business must
be regarded as tentative but still useful estimate of the net income for the period

C 21. Any event that affects the financial position of a business and can be recorded reliably

_____________22. The exchange price associated with a business transaction at the point of recognition

F 23. The process of assigning all transactions to the appropriate account

K 24. The amount given up to purchase an asset
L 25. A concept that requires an item large enough and significant enough to influence decision makers
to be separately identified in accounting statements
II. Indicate the accounting concept or principle that suits the statement.

Materiality 1. If the amount involved is insignificant with regards to the overall size of the business,
consider the item as an outright expense

Separate Entity 2. This concept supports the separation of the business assets and liabilities from the
personal assets and liabilities of the owner.

Expense recognition principle 3. Expenses should be recognized in the accounting perioding which
the goods were actually used to produce revenue.

Objectivity 4. Transactions should be based on verifiable documents.

Consistency Principle 5. The accountant should apply consistently the same accounting method to like
items from one period to another.

Revenue recognition principle 6. Revenue is recognized when goods have been delivered or services
performed.

Full disclosure 7. Relevant information about the business significant enough to affect the user's
assessment of the business should be clearly reported in the financial statements.

Historical Cost/Cost 8. This is the value ordinarily assigned to an asset regardless of the asset's market
value.

Accounting period 9. This is the period of time, usually a span of one year, over which changes in the
owner's equity are summarized.

Materiality 10. The amount of paper clips purchased for the business is outright charged to expense.
Liquidation accounting 11. This does not consider liquidation in accounting for the affairs of the
business.

Financial Information 12. This assures that investors, creditors and other users of financial
information can expect the financial statements to contain all the significant economic financial
information in relation to their understanding of the financial condition of the business.

Income statement 13. This is necessary for the timely and useful measurement of income for a period
of time less than the life of a company

Accrued Income 14. Joey Lao Engineering signed a contract to construct Brett Eriel Haven and received
full payment of the contract price. Joey Lao did not recognize the income until the construction was
completed.
Bankruptcy 15. This concept or principle will not apply if a business has declared bankruptcy or
insolvency.

III. State the accounting concept/principle violated by each of the following case.

Going Concern Principle 1. Mt. San Toh founded Saints Enterprises. He treated his residence and
other personal assets as part of Saints Enterprises.

Going Concern Principle 2. St. Benjamin's Hospital has been serving the community for twenty years.
However, since new hospitals such as Saint Look's Medical Center and Metropolitan City Medical Center
have opened in the area, St. Benjamin's Hospital felt the stiff competition. The stockholders are
suggesting upgrading the hospital's equipment and infusing more capital. However, the management of
St. Benjamin's declines the proposal because of the belief that the hospital will lose the competition and
that it is ready to stop operations anytime to avoid losses. Hence, the accounting department is
operating based on this assumption.

Business Entity Principle 3. Gisel Ong owns Magnificent Gel's Candle shop. She proposes to account
for the shop's assets at current market value in order to have realistic amounts on the books should she
decide to liquidate the business anytime.

Monetary unit principle 4. Panda Airlines entered into an agreement with Cathy Pacific to transfer
the ownership of forty of its one hundred Boeing 747 for one billion dollars. Panda Airline will receive
10%of the amount next month. However, Panda Airline did not report this undertaking as no amount
has been received. Panda airlines feel this is a wise move in order to generate cash in the business.

Accrual Principle 5. St. Luis University starts its fiscal year June and ends in May. The accountant
received its utilities bill for the month of May from Maynilad. Since this will be paid on the second week
of June, the accountant recorded it as expenses under the month it was paid.

Time Period Principle 6. Niko Ong Developers got a contract to develop the five hectares Flora Heights
Subdivision on January this year, At the end of the year, Niko Ong Developers cannot determine its
profit or loss from the project as the accounting record for the project has not yet been established.
According to the manager, development is still in progress that is why the profit or loss on this endeavor
cannot be determined. However, in a span of twelve years, accounting for this project will be presented
after its expected completion.

Disclosure Principle 7. Manny Pacquaio is one of the richest athletes in the world. As such, he
operates many businesses. On the overall, his businesses combined are yielding a net income although
he suspects that one or two of his businesses are incurring a net loss. All business reports from Luzon,
Visayas, and Davao, yield a profit. However, he cannot pin point which particular business from what
specific area should be closed since the financial data of all the businesses are consolidated on a per
area basis. As such, different businesses in Davao are reported under the Davao Business financial
statement. This holds true for businesses in Luzon and Visayas.

Business Entity Principle 8. The Philippine government is known for its under the table “lagay”
system. In order to record these unsupported expenses, Sincere Corporation summed up all its
undocumented under the table transactions with the government officials under the account title
"Facilitation Expenses”.

IV. Multiple Choice. Write the letter that represents the correct answer on the blank.

C 1. The process of identifying, measuring, and communicating the economic activities of a business
enterprise in order to assist users of a financial statement in making informed judgment is

a) Transacting

b) Computing

c) Accounting

d) Costing

B 2. The principle that supports the assumption that the same Generally Accepted Accounting Principles
have been applied in the preparation of a company's successive financial statements.

a) Objectivity Principle

b) Historical Cost

c) Adequate Disclosure

d) Consistency

C 3. The rights and claims of the owners of a business enterprise

a) Assets

b) Liabilities

c) Owner's Equity

d) All of the above

B 4. This is used as a basis in accounting for the assets of a business because it can be measured
objectively.

a) Market Value

b) Historical Cost

c) Assessed Value

d) Inflation Value

A 5. The concept that requires the distinction between the personal assets and liabilities or a proprietor
from his business assets and liabilities

a) Entity

b) Stable Monetary Unit

c) Periodicity

d) All of the above

A 6. X Co. bought a pencil sharpener at a cost of P85.00. It 1s estimated to have a useful

life of 10 years: Because of the length of its useful life, the accountant recorded this

as a debit to office equipment. The accounting principle violated is

a) Objectivity

b) Consistency

c) Historical Cost

d) Materiality

A 7. The start of X company's accounting period is October I and ends September 30 of

the following year. What kind of period is followed by X Company?

a) Fiscal Year
b) Lunar Year

c) Calendar Year

d) None of the above

B 8. A company that purchases a finish product for future sale

a) Service Company

b) Merchandising Company

c) Manufacturing Company

d) None of the above

D 9. In order to update the assets' records with increases in their current market values,
Fidas Co. adjusts the balance sheet amounts for assets whenever there is a change in

market value. The accounting principle violated is:

a) Materiality

b) Accrual Principle

c) Consistency

d) Historical Cost

A 10. It is a service activity whose purpose is to provide quantitative information about the
economic entities that are intended to be useful in making economic decisions.

a) Accounting

b) Transaction

c) Generally Accepted Accounting Principles

d) Business Organization

B 11 The claims of the creditors of the business enterprise

a) Assets

b) Liabilities
c) Owner's Equity

d) All of the above

C 12. A twelve-month period that starts January 1 and ends December 31

a) Fiscal Year

b) Lunar Year

c) Calendar Year

d) None of the above

B 13. The person to whom a liability is owed

a) Debtor

b) Creditor

c) Owner

d) None of the Above

B 14. This is the phase of accounting that makes accounting the language of business
a) Recording

b) Classifying

c) Summarizing

d) Interpreting

C 15. Choose the incorrect statement about a business transaction.

a) It can be measured objectively.

b) A completed action expressed in monetary terms

c) It must involve outside parties.

d) None of the above

D 16. This is the exchange price considered in the accounting books upon recognition of the business
transaction.

a) Cost

b) Assessed Value

c) Market Value

d) Book Value

D 17. A company that is engaged in the processing of raw materials to finished goods intended for sale
a) Service Company

b) Merchandising Company

c) Manufacturing Company

d) None of the above

V. Enumerate the three forms of business organizations.

1. SOLE PROPRIETORSHIP
2. PARTNERSHIP
3. CORPORATION

VI. Enumerate the three types of business activities.

1. MANUFACTURING BUSINESSES
2. MERCHANDISING BUSINESSES
3. SERVICE BUSINESS
VI. State what type of business activity is performed by each of the 1oliowing establishments.

beauty parlor SERVICE BUSINESSES

gift shop MANUFACTURING BUSINESSES
law office SERVICE BUSINESSES
drugstore MERCHANDISING BUSINESS
furniture MANUFACTURING BUSINESSES
factory MANUFACTURING BUSINESS
beauty shop SERVICE BUSINESSES
dental clinic SERVICE BUSINESSES
sari-sari store MERCHANDISING BUSINESSE
medical clinic SERVICE BUSINESSES
grocery MERCHANDISING BUSINESSES
textile company MANUFACTURING BUSINESSES
plastic extrusion MANUFACTURING BUSINESSES
drug company MANUFACTURING BUSINESSES
spa and wellness center SERVICE BUSINESSES

boutique MANUFACTURING BUSINESSES

Belo Medical Clinic SERVICE BUSINESSES
book store MERCHANDISING BUSINESSES
shoe factory MANUFACTURING BUSINESSES
consultancy center SERVICE BUSINESSES
vulcanizing shop SERVICE BUSINESSES
supermarket MERCHANDISING BUSINESSES
security agency SERVICE BUSINESSES
hardware MANUFACTURING BUSINESS
advertising agency SERVICE BUSINESSES
Pfizer Incorporated MANUFACTURING BUSINESSES
Colgate Palmolive Co. MANUFACTURING BUSINESSES

IX. The Stay Healthy Medical Clinic's Balance sheet on December 31, 2011 showed an owner's equity
of ₱1,280,000. The December 31, 2012 balance sheet showed an owner's equity of ₱1520,000. During
the year, the owner withdrew ₱210,000 for personal use. What is the net income or net loss for the
year 2012? Present the owner’s equity statement for year ended December 31, 2012.

Stay Healthy Medical Clinic Owner’s equity statement for year ended December 31, 2012

December 31, 2012 owner's equity ₱1,520,000

Add: Owner Withdrew ₱210,000

Total ₱1,730,000

Less: December 31, 2011 owner's equity (₱1,280,000)

Net Income ₱450,000

X. Mighty Minds Tutorial Center's statement of financial position on December 31, 2011 showed an
owner's equity of ₱1,664,000. The December 31, 2012 statement of financial position showed owner's
equity of ₱1,976,000. During the year, the owner withdrew ₱273,000 for personal use. What is the net
income or net loss for the year 2012. Present the statement of owner's equity for year ended
December 31, 2012.

Mighty Minds Tutorial Center Owner’s equity statement for year ended December 31, 2012

December 31, 2012 owner's equity ₱1,976,000

Add: Owner Withdrew ₱273,000

Total ₱2,249,000

Less: December 31, 2011 owner's equity (₱1,664,000)

Net Income ₱585,000

XI. The capital of The Little Tike's Tutorial Services owned and operated by Ms. Jean showed a
beginning balance of ₱301,000. At the end year, results of operations showed a net income of
₱96,000. During the year, Ms. Jean withdrew ₱18,900 for personal use. Prepare the statement of
changes in owner's equity for The Little Tike's Tutorial Services for the year ended December 2012.

The Little Tike's Tutorial Services for the year ended December 2012

Ms. Jean Beginning balance ₱301,000

Add: Net Income ₱96,000

Total ₱397,000

Less: Ms. Jean withdrew ( ₱18,900)

Ms. Jean Capital, December 2012 ₱378,100

XII. Assuming Ms. Jean did not make any withdrawal for the year but instead made an additional
investment of ₱30,000 and the business incurred a net loss of ₱28,000, prepare the statement of
changes in owner's equity for the year ended December 31, 2012.

Ms. Jean Statements of Changes in Equity for the period ended December 31, 2012

Ms. Jean Beginning balance ₱301,000

Add: Investment by Owner ₱30,000

Total ₱331,000

Less: Net loss ( ₱28,000)

Ms. Jean, Capital, December 31, 2012 ₱303,000

XIII. The Jupiter Spa owned and operated by Mr. Joe showed a beginning balance of P391.300. The
results of operations at end of the year yielded a net loss of ₱124,800. During the year, Mr. Joe
withdrew ₱24,570 for personal use. Prepare the statement of owner's equity for Jupiter Spa for year
ended December 31, 2012.

Jupiter Spa Statements of Changes in Equity for the period ended December 31, 2012

Mr. Joe, Beginning Balance, January 1, 2012 ₱391,300

Less: Net loss (₱124,800)

Withdrawals by Owner (₱24,570)

Mr. Joe Capital, December 31,2012 ₱241,930

XIV. Assuming Mr. Joe withdrew ₱5,000 for the year and made an additional investment of ₱30,000,
and the business incurred a net income of ₱36,400, prepare the statement of changes owner's equity
for the year ended December 31, 2012.

Mr. Joe Statements of Changes in Equity for the period ended December 31, 2012

Mr. Joe, Beginning Balance, January 1, 2012 ₱391,300

Add: Net Income ₱36,400

Investment by Owner ₱30,000

Total ₱457,700

Less: Withdrawals by Owner (₱5,000)

Mr. Joe, Capital, December 31, 2012 ₱452,700

XV. The information presented below are taken from the books of Mr. Joey Lao for the year ended
December 31, 2013. Determine the amount of withdrawals by preparing the statement of changes in
Owner's Equity.

Jan 1 Dec. 31
Assets ₱200,000 ₱300,000
Liabilities 80,000 120,000

Joey Lao made an additional investment of ₱40,000 during the year. Revenue and expenses during the
year amounted to ₱180,000 and ₱80,000 respectively.

Mr. Joey Lao Statements of Changes in Equity for the period ended December 31, 2013

Mr. Joe, Capital, January 1, 2013 ₱120,000

Add: Net Income ₱100,000

Investment by Owner ₱40,000

Total ₱260,000

Less: Withdrawal by Owner (₱80,000)

Mr. Joe, Capital, December 31, 2013 ₱180,000

XVI. The following information are taken from the books of Floring's Bake Shop for the year ended
December 31, 2012. Determine the amount of additional investment by preparing the statement of
changes in owner's Equity.

Dec. 31, 2012 Dec. 31, 2011

Assets ₱257,00 ₱260,000
Liabilities 156,000 104,000

Floring withdrew ₱104,000 during the year but made an additional investment of ₱52,000. Revenue
and expenses during the year amounted to ₱234,000 and ₱237,000 respectively.

Floring's Bake Shop Statements of Changes in Equity for the period ended December 31, 2012

Floring, Capital, January 1, 2012 ₱156,000

Add: Investment by Owner ₱52,000

Total ₱208,000

Less: Net Loss (₱3,000)

Withdrawal by Owner (₱104,000)

Floring, Capital, December 31, 2012 ₱101,000

XVII. Refer to the preceding problem, assume Flora made an additional investment and a personal
withdrawal of ₱155,000 during the year while revenue amounted to ₱120,000. Determine the amount
of expenses for the year.

Flora Statements of Changes in Equity for the period ended December 31, 2012

Floring, Capital, January 1, 2012 ₱156,000

Add: Investment by Owner ₱207,000

Total ₱363,000

Less: Net Loss (₱3,000)

Withdrawal by Owner (₱259,000)

Floring, Capital, December 31, 2012 ₱101,000

Net Loss= Total Revenue - Total Expenses

Total Expenses= Net Loss - Total Revenue

120,000 + 3,000= 117,000

Expenses of the year is ₱117,000

XVIII. Refer to problem XVI, assuming Flora made an additional investment of 75,000 and a personal
withdrawal of ₱188,000 during the year. Current year's expenses amounted to ₱68,000. Determine
the revenue for the year.

Floring's Bake Shop Statements of Changes in Equity for the period ended December 31, 2012

Floring, Capital, January 1, 2012 ₱156,000

Add: Investment by Owner ₱52,000

Total ₱208,000

Less: Net Loss (₱3,000)

Withdrawal by Owner (₱104,000)

Floring, Capital, December 31, 2012 ₱101,000

Net Loss= Total Revenue + Total Expenses

Total Revenue = Net Loss + Total Expenses

110,000 + 68,000= 178,000

Revenue of the year is ₱178,000

XIX. Given the following information, determine the net increase/decrease in owner's capital for the
current year.

Professional Fees ₱900,000

Salaries Expense 75,000

Utilities Expense 90,000

Rent Expense 120,000

During the year, the owner made an additional investment of ₱100,000 but made a cash withdrawal

of ₱220,000.

Total Expenses= 75,000 + 90,000 + 120,000 + 900,000

Total Expenses= 1,185,000= Net Loss

Add: Investment by Owner ₱100,000

Less: Net Loss (₱1,185,000)

Withdrawal by Owner (₱220,000)

Total Owner, Capital (₱1,305,000)= Net decrease

XX. Given the following information, determine the net increase/decrease in owner's equity for the
current year.

Service Revenues ₱580,000

Salaries Expense 125,000

Utilities Expense 160,000

Insurance Expense 210,000

Additional investment during the year amounted to ₱80,000 and cash withdrawals totaled

₱150,000.

Total Revenue= ₱580,000

Total Expenses= ₱495,000

Net Income/Loss= Total Revenue - Total Expenses

Net Income/Loss= ₱580,000 - ₱495,000

Net Income= ₱85,000

Add: Net Income ₱85,000

Investment by Owner ₱80,000

Total ₱165,000

Less: Withdrawal by Owner (₱150,000)

Total Owner, Capital ₱15,000= Net Increase

XXI. Compute for the missing figure in each of the following independent cases.

A B C D
Owner's Equity, ₱50,000 ₱200,000 ₱30,000 ?
Jan1
Additional 25,000 ? 15,000 40,000
Investment
Withdrawal ? 60,000 3,000 8,000
Revenue 20,000 140,000 ? 32,000
Expenses 10,000 100,000 6,000 16,000
Owner's Equity, ₱80,000 ₱300,000 ₱48,000 128,000
Dec 31

A B C D
Owner's Equity, ₱50,000 ₱200,000 ₱30,000 ₱80,000
Jan1
Additional 25,000 120,000 15,000 40,000
Investment
Withdrawal 5,000 60,000 3,000 8,000
Revenue 20,000 140,000 12,000 32,000
Expenses 10,000 100,000 6,000 16,000
Owner's Equity, ₱80,000 ₱300,000 ₱48,000 128,000
Dec 31
XXII. Compute the missing figure in each of the following independent cases.

A B C D
Owner's Equity, ₱65,000 ? ₱39,000 ₱104,000
Jan 1
Additional ? 78,000 3,900 10,300
Investment
Withdrawal 32,500 156,000 19,500 ?
Revenue 26,000 182,000 ? 41,500
Expenses 13,000 130,000 7,800 20,800
Owner's Equity, ₱104,000 ₱360,000 ₱52.400 ₱166,400
Dec 31

A B C D
Owner's Equity, ₱65,000 ₱386,000 ₱39,000 ₱104,000
Jan 1
Additional 58,500 78,000 3,900 10,300
Investment
Withdrawal 32,500 156,000 19,500 ?
Revenue 26,000 182,000 36,800 41,500
Expenses 13,000 130,000 7,800 20,800
Owner's Equity, ₱104,000 ₱360,000 ₱52.400 ₱166,400
Dec 31