Ortiz, John Paul A.

HRM 1-4

Exercise 1.

Pre-Assessment: Exercise #1

– Multiple Choice:

1. The business is considered as an entity that is separate and distinct from the owner:

a. Accounting Entity c. Business Entity

b. Separate Entity d. All of these

2. The accounting assumption that gives the business a continuous life of existence

: a. Periodicity c. Stable Monetary Unit

b. Going Concern d. Accrual

3. It represents the residual interest in the assets of the business after deducting its liabilities:

a. Net Worth c. Capital

b. Owner’s Equity d. All of the above

4. Accounting is the bridge of communication between the owner of the business and various users
through:

a. Balance Sheet c. Financial Statements

b. Income Statements d. Statement of Owner’s Equity

5. The records of properties acquired, and services availed of by a business are maintained in
accordance with the:

a. Proprietorship Principle c. Cost Principle

b. Business Entity Concept d. Matching Principle

Exercise 2

Hanna Grace Co. showed the following account balances. Determine the unknown accounting values in
two (2) separate cases:

Case 1

- Accounts Payable P 40,000

Unearned Income 25,000

Hanna Grace, Capital 207,000

How much is Assets?

Capital + Unearned Income + Accounts Payable = Assets

207,000 + 25,000 + 40,000 = 207,000

Hanna’s Assets is P 207,000

Case 2 –

Cash in Bank P 70,000

Accounts Receivable 180,000

Estimated Uncollectible Accounts ( 3,000)

Prepaid Expenses 10,000

Supplies Inventory 15,000

How much is Owner’s Equity balance? P 272,000

Activity/ Evaluation:

Exercise #1:

Accounting Concepts, Assumptions, and Principles: Multiple Choice: Encircle the letter that best
describes the statement.

1. The financial statements should be stated in terms of the common financial denominator:

a. Accrual c. Time period

b. Going concern d. Stable monetary unit

2. This principle requires relevant information to form part of financial statements for decision-making
purposes:

a. Objectivity c. Adequate disclosure

b. Materiality d. Accounting entity

3. They encompass the conventions, rules, and procedures necessary to define what is the accepted
accounting practice:

a. Accounting concepts b. Generally accepted accounting principles

c. Conceptual frameworks d. Accounting assumptions

4. The assumption that an entity will continue to operate for the foreseeable future is called:

a. Accrual basis b. Comparability

c. Going concern d. Relevance

5. The records of properties acquired, and services availed of by a business are maintained in
accordance with the:

a. Matching principle b. Cost principle

c. Business entity concept d. Proprietorship principle

Exercise #2:

Elements of Financial Statements Instruction:

Classify the following account titles as to Assets, Liabilities, and Owner’s Equity (Income, Cost, and
Expense). Use a “check mark”.

Owner’s

Asset Liability Equity

1. Cash in Bank ____✔______ __________ __________

2. Unused Office Supplies ____✔______ __________ __________

3. Insurance Expense ____✔______ __________ __________

4. Accrued Income __________ _____✔_____ __________

5. Taxes and Licenses _____✔_____ __________ __________

6. Juan Dela Cruz, Capital __________ __________ ____ ✔______

7. Accounts Receivable ____✔______ __________ __________

8. Freight Out ____✔______ __________ __________

9. Accounts Payable __________ _____✔_____ __________

10.Sales ____✔______ __________ _________

Reinforcement/ Assignment:

Open a Single Proprietor business of your choice and start creating your business Chart of Accounts by
applying the Elements of the Financial Statements. Submit in a bond Paper.

Pong’s Computer Shop

Account No. Account Title

Assets
110 Cash
120 Accounts Payable
150 Food Supplies
160 Equipment
Liabilities
210 Accounts Payable
220 Salaries Expense
Owner’s Equity
310 Mr. Ortiz capital
Revenue
420 Sales
Expenses
520 Salaries Expense
525 Rent Expense
530 Utilities Expense
540 Taxes and License