ACTIVITY

NO. 1

THE FUNDAMENTAL ACCOUNTING EQUATION

ASSETS = LIABILITIES + OWNER’S EQUITY

CASE 1

1. Given liabilities of 50,000 and the owner’s equity of 150,000, find the value of
assets.
2. Given the assets of 180,000 and the owner’s equity of 110,000, find the
liabilities.
3. Given assets of 250,000 and liabilities of 90,000, find the owner’s equity.


CASE 2
Below are accounts taken from the books of Luffy’s Ship Repair Services fro the
months of August. Prepare the income statement of the data.


Repairs Revenue P200,000
Rent Income 10,000
Salaries and Wages 35,000
Utilities Expense 14,000
Supplies Expense 11,000
Depreciation Expense 2,000
Miscellaneous Expense 3,000

CASE 3
For each of the following, write I if it is an income statement item and B if it is a
balance sheet item.

1. Accounts Payable 11. Interest Expense
2. Building 12. Supplies Expense
3. Miscellaneous Expense 13. Interest Income
4. Cash 14. Mortgage Payable
5. Insurance Expense 15. Supplies
6. Salaries Expense 16. Expenses
7. Prepaid Rent 17. Equipment
8. Drawing Account 18. Furniture
9. Accrued Expense 19. Accrued Income
10. Loans Payable 20. Unearned Rent


CASE 4
EFFECTS OF OWNER’S INVESTMENT/ WITHDRAWAL AND CASH ACQUISITION

Give the effect of the following transactions on the assets and owner’s equity:

1. Owner invests cash in the business.
2. Owner invests furniture.
3. Owner withdraws cash for personal use.
4. Owner purchases supplies using cash.
5. Owner purchases furniture using cash.
6. Owner makes additional cash investment.
7. Owner withdraws supplies for personal use.

TRANSACTION ASSETS LIABILITIES OWNER’S ANALYSIS
EQUITY
1. Owner invests Assets Capital Assets increase
cash in the Increase Increases because owner
business. invests cash in
the business
which is an
asset. Owner’s
interest in the
business
increases as
represented by
an increase in
capital.


CASE 5
EFFECTS OF INCOME EARNED AND PAYMENT OF EXPENSES

1. Rendered services for cash.
2. Rendered services on credit.
3. Paid telephone bill.

TRANSACTION ASSETS LIABILITIES OWNER’S ANALYSIS
EQUITY
1. Rendered
services for
cash.