Think and Recall

In the following chart, write what you remember about the different financial statements you studied in
Grade 11. How these statements assist the business in monitoring its day-to-day operation and short
and long-term business objectives.

Put on your thinking caps. Write your ideas on the space provided.
1. Income Statement
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
2. Statement of Changes in Owner’s Equity
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
3. Statemen of Financial Position
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
4. Cash Flows Statement
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

DIFFERENTIATING TYPES OF BUSINESS ORGANIZATION

The following describes several different business organizations. On the space before each number
write:
A- If the description refers to the sole proprietorship
B- If the description refers to a partnership
C- If the description refers to a corporation

_____1. Benedict San Jose, owner of San Jose Landscaping Services, renders services for a fee for
scholastics.
_____2. The ownership of Manila Electric Company is divided into 200,000 shares of stock.
_____3. Tom and Jerry own and manage a catering service business
_____4. Rosario’s Dress Shop is owned by Charito Deang, who is personally liable for debts of the
business.
_____5. Makiling Tours and Services is owned by more than a thousand shareholders.
_____6. Jose, Evelyn, Luz, Efren and Rene own Prosperity Development Rural Bank. Neither one of the
owner has personal responsibility for the liabilities of the bank.
_____7. Hardy Buoys and Nancy Drew are running a law firm. Both are personally liable for debts of the
business.
_____8. Ultra Clean Laundry Services does not have a separate legal existence apart from the one
person who owns it.
_____9. Micro-Computer Enterprises does not pay taxes and has one owner.
_____10. Magnificent Consulting firm pays its own taxes and has two owners.
CHANGES IN OWNER’S EQUITY
The following amounts are available from the records of Simon Peter Delivery Services at the end of the
years indicated:

December 31 Total Assets Total Liabilities

2017 P1,250,000 P522,000
2018 1,790,000 767,000
2019 2,184,000 1,037,000

Required:
1. Compute the changes in Simon Peter Delivery Services’ owner’s equity during 2018 and 2019.
2. Compute the amount of Simon Peter Delivery Services’ net income (or loss) for 2018 assuming
that no withdrawal was made by Simon during the year.
3. Compute the amount of Simon Peter Delivery Services’ net income (or loss) on 2019 assuming
that withdrawals made by Simon during the year amounted to P100,000

ACCOUNTING EQUATION
Using the accounting equation, answer each of the following independent questions.
1. Argem Company starts the year with P1,000,000 in assets and P650,000 in liabilities. The net
income for the year is P250,000 and no withdrawal was made by the owner. How much is the
owners’ equity at the end of the year.
2. Miracle Company doubles the amount of its assets from the beginning to the end of the year.
Liabilities at the end of the year amounted to P240,000 and the owners’ equity is P520,000.
What is the amount of Miracle Company’s assets at the beginning of the year?
3. During the year, the liabilities of the Serendipity Enterprises triple in amount. Assets at the
beginning of the year amount to P300,000 and owners’ equity is P100,000. What is the amount
of liabilities at the end of the year?

ACCOUNTING EQUATION
For each of the following independent cases, fill in the blank with appropriate peso amount.

  ASSETS = LIABILITIES + EQUITY

Case A P725,000 P135,000 ?
Case B P2,825,000 ? P1,950,000
Case C ? P5,320,000 P3,725,000
Case D P10,525,000 P6,001,000 ?
Case E P4,525,000 ? P2,150,000
FINANCIAL STATEMENTS CLASSIFICATION
Classify each of the following account titles according to (1) whether it belongs on the Comprehensive
Statement Income (CSI), Statement of Owner’s Equity (SOE), or Statement of Financial Position (SFP)
and whether it is a Revenue (R), Expense (E), Assets (A), Liability (L), or Owners’ Equity (OE) item.

Item Appears on Classified as

the
Example: Accounts Receivable SFP A
1 Accounts Payable    
2 Acumulated Depreciation-Building    
3 Accumulated Depreciation- Furniture and Fixture    
4 Accumulated Depreciation- Sewing Equipment    
5 Accumulated Depreciation- Store Funiture and Equipment    
6 Accrued Interest Income    
7 Accrued Rent Expense    
8 Advances to Employees    
9 Advertising Expense    
1
0 Allowance for Doubtful Accounts    
1
1 Argem, Capital    
1
2 Argem, Drawing    
1
3 Bonds Payable    
1
4 Building    
1
5 Cash in Bank    
1
6 Cash on Hand    
1
7 Depreciation Expense- Building    
1
8 Depreciation Expense- Furniture and Fixture    
1
9 Depreciation Expense- Sewing Equipment    
2
0 Depreciation Expense- Store Furniture and Equipment    
2
1 Dividend Income    
2
2 Donation and Contribution Expense    
2
3 Doubtful Accounts Expense    
2
4 Freight In    
2
5 Freight Out    
2
6 Furniture and Fixture    
2
7 Gas and Oil Expense    
2
8 Insurance Expense    
2
9 Interest Expense    
3
0 Interest Income    
3
1 Interest Payable    
3
2 Interest Receivable    
3
3 Internet and Communication Expense    
3
4 Investments in Trading Securities    
3
5 Land    
3
6 Light, Power, and Water Expense    
3
7 Merchandise Inventory    
3
8 Miscellaneous Expense    
3
9 Mortgage Payable    
4
0 Notes Payable    
4
1 Notes Receivable    
4
2 Pag-ibig Contributions Payable    
4
3 Prepaid Advertising    
4
4 Prepaid Insurance    
4
5 Purchase Discount    
4
6 Purchase Returns and Allowance    
4 Purchases    
7
4
8 Rent Expense    
4
9 Repairs and Maintenance Expense    
5
0 Representation and Entertainment Expense    
5
1 Salaries and Wages Payable    
5
2 Sales    
5
3 Sales Discount    
5
4 Sales Return and Allowances    
5
5 Service Income    
5
6 Sewing Equipment    
5
7 Sewing Supplies    
5
8 Sewing Supplies Expense    
5
9 Shop Salaries and Wages Expense    
6
0 SSS and PhilHealth Premium Payable    
6
1 SSS and Philhealth Contribution Expense    
6
2 Store Furniture and Equipment    
6
3 Store Salaries and Wages Expense    
6
4 Store Supplies    
6
5 Store Supplies Expense    
6
6 Taxes and Licenses Expense    
6
7 Transportation and Travel Expense    
6
8 Unearned Service Income    
6
9 Utilities Payable    
7
0 Withholding Taxes Payable    
CLASSIFYING FIRM’S BUSINESS ACTIVITIES
Any business that is in its first few years of operation normally engages in the following transactions.
Classify these given transactions into either (1) operating, (2) investing, (3) financing activity by writing
your answer on the space before each number.
_____1. Opening an account under the business name and depositing cash for initial capital contribution
of the owner.
_____2. Paying barangay, municipal, and other related taxes for the creation of the business entity.
_____3. Contributing land to the business.
_____4. Purchasing a building
_____5. Purchasing computers and printer for office use
_____6. Borrowing cash from a bank for additional working capital
_____7. Purchasing office tables and chairs
_____8. Selling and distributing merchandise sold by the company
_____9. Conducting advertising for public exposure of goods for sale
_____10. Paid electricity and water consumption during the month
_____11. Rendered services to customers
_____12. Made internet subscription for office use
_____13. Mortgaged business property to acquire loan from the bank
_____14. Owner withdrew cash for personal use
_____15. Paid salaries of employees