ANALYZING TRANSACTIONS TO START A BUSINESS

Exercises

a. Using the accounting equation, compute the missing amounts for each of the following
companies, stated in millions of pesos reported in their 2018 financial reports:
Company Assets = Liabilities + Equity
Kopiko P87.27 (1) P23.22
Nescafe (2) P62.93 P11.20
Great Taste P 9.79 P 7.66 (3)
SanMig Coffee P18.86 54.74% (4)
5. Which Company has the highest net worth?
6. Applying the formula (Equity/Assets x 100 = %), Which is most solvent?
In 2019, the companies’ financial report were presented below:
Company Assets = Liabilities + Equity
Kopiko P90.29 P64.13 (7)
Nescafe (8) P47.74 P21.93
Great Taste P 7.70 (9) P 2.01
SanMig Coffee P19.89 61.20% (10)
11. Whose solvency improved the most just over a period of one year?

b. Jacklyn is the owner of a JC Consulting business. At the end of its accounting period December 31,
2018, JC Consulting has assets of P1,325,000 and liabilities of P1,142,000.
12. Using the accounting equation, determine Jacklyn, Capital as of December 31, 2018.
13. How much is Jacklyn, Capital as of December 31, 2019, assuming that assets increased by
P84,000 and liabilities increased by P47,000 during 2019?

c. Complete the Statement of Financial Position of Ms. Ruth and prepare the Statement of Owner’s
Equity. She started the WashUrClothes business Jan 2019 with a cash capital of P150,000.
Assets Liabilities and Owners Equity
Cash P 60,0000 Accounts Payable P100,000
Accounts receivable (14) Notes Payable (17)
Car (15) Ruth, Capital (18)
Equipment (16)
Total Assets (19) Total Liab. And OE (20)
Determine the missing figures based on the following information and give the total assets, total
liabilities and owner’s equity:
i. Financial records show that the business has P10,000 receivable from customers.
ii. The car costs a friend P360,000 but Ruth got it from him for only 1/3 of its costs.
iii. Ms. Ruth signed a note payable to the bank for P500,000 which he used to buy the car and
equipment.
iv. Only half of the note in (iii) is outstanding.
v. Ruth, Capital should represent the amount missing amount required to show a balanced structure
of the assets against the liabilities and owner’s equity.
 Compare the initial amount invested and the ending capital balance from one information that is
missing.
21. How much was the change in the Capital of Ruth? What caused the change in Capital?
22. Assume the business has not started the operation yet, what would that change mean?
23. Ignore no. 22. Assume the business has already started operation and there are no additional
investment nor personal drawings made, what would that change mean?

d. The following items were found in the Statement of Financial Position of JJ’s Sports
Club: Cash P 120,0000 Accounts Receivable P 280,000
Bank Loan Payable 400,000 Accounts Payable 360,000
Supplies 10,000 Car 890,000
Equipment 500,000 Office Furniture 150,000
24. Group the items into assets and liabilities.
25. Determine the club’s net worth by means of an accounting equation.
26. What will happen to the accounting elements if additional equipment were purchased on
account for P50,000?
27. What will happen to the accounting elements if the first out of ten instalments of the bank
loan was paid in cash?
28. What will happen to the accounting elements if the owner made a cash withdrawal of P50,000?

e. A list of transactions appears below. Indicate which accounting elements of the business are affected
by placing in the respective columns of the amount and the + (increase) or – (decrease) sign or NA,
if the element is not affected. Ms. May is the owner-manager of May Pizza. Unless otherwise stated,
the transactions are all for the business.

Transactions Assets Liabilities Owner’s Equity

i. May received a retirement pay of P1,000,000 29. 30. 31.
cash and invested half of this to put up her
business.
ii. From the remaining pension of P500,000, she 32. 33. 34.
got a car for her own use, P750,000 and issued
a note for the balance.
iii. She hired a cook, a cashier, and a server for a 35. 36. 37.
monthly salary of P10,000 each worker.
iv. She bought cooking equipment and paid 38. 39. 40.
P350,000.
v. She bought office equipment from Beks Shop for 41. 42. 43.
P120,000 on credit.
vi. She paid a third of the account due to Beks 44. 45. 46.
Shop
vii. She took P5,000 cash and bough supplies. 47. 48. 49.
50. Were you able to record all the transactions in the books of the business? If not, what principle
will be violated of those non-recordable transaction were recorded?
f. Jham Villa started a new business in advertising called Wow Advertising. The following are the
transactions which you are required to summarize using the format presented in the demonstration
problem (please refer to power point presentation for Lesson no.3) except that balances be
extracted only after the last transaction. Use the heading provided.

ASSETS LIABILITIES EQUITY

Art Office Furniture Accounts Notes Villa,
Date Cash Supplies Supplies Equipment & Fistures = Payable Payable + Capital

Feb 05 She transferred half of her P300,000 savings to the account of the business.
09 Purchased art supplies and paid P15,000 in cash.
16 Purchased photo equipment at a cost of P105,000 from Camera World. She paid one third and
promised to pay another one third at the end of the month.
20 A friend, Joe Vi, bought a fax machine a year ago for P10,000. She sold this to Villa who
promised to pay her after 30 days.
22 Purchased paper for fax machine and paid cash, P1,500.
25 Purchased furniture and fixtures on credit P8,000.
28 Paid one half of the account owing to Camera World and issued a note promising to pay the
balance within 30 days.
Additional requirements:
1. What amount did you use in recording cash investment? What concept supports this?
2. What amount did you use in recording the fax machine? What concept supports this?
3. Prepare a statement of financial position based on the final balances.

g. The following transactions were entered into by Dr. Jan Zen for the month of June:

04 Jan Zen opened “Zen’s Health Spa” by investing P1,500,000 cash and a half of a lot inherited by
Jan and his sister Joyce worth P500,000.
07 Interviewed a nurse and a business graduate to work for him for a salary of P15,000.
08 Valdez bought for a cash P900,000 worth of equipment and P15,000 worth of supplies.
10 Bought furniture and fixtures from a friend at a cost of P150,000 promising to pay after 7 days.
Only P80,000 of this was placed in the clinic. The remaining P70,000 furniture and fixtures were
placed in his condominium unit.
12 Applied for a P2,500,000 business loan from a bank by mortgaging his inherited lot. The money will
be used to construct the clinic.
14 Withdrew supplies worth P2,000 for personal use.
15 The loan was approved and the money deposited for the account of the health spa.
17 Paid one half of the amount due on the furniture and fixtures.
30 A two-storey clinic was constructed on the inherited lot. The construction cost amounted to
P2,400,000. Terms: down payment P500,000, and a note for the balance.

1. Analyze the transactions in the accounting equation similar to the format above. Include money
columns for Cash, Supplies, Land, Building, Equipment, Furniture and Fixtures, Accounts Payable,
Loans Payable, Zen, Capital.
2. Prepare a statement of financial position as at June 30, using the final balances.

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