ASSESSMENT

________1. An accountant who render services to customers for a fee.

________2. Which of the following are/is true?
a. Assets = Liabilities + Capital
b. Capital= (Owner’s Investments + Revenues) – (Withdrawals + Expenses)
c. Expenses = Revenue – Prepaid Expenses
d. Liabilities = Unearned Revenue – Earned Revenue
________3. The purchase of delivery worth P 1,500,00 will
a. Increase an assets and decrease a liability
b. Increase in an asset and increase in owner’s equity
c. Increase an asset and increase a liability
d. Increase one asset and decrease another asset
________4. The purchase of equipment on account will
a. Increase an assets and decrease a liability
b. Increase in an asset and increase in owner’s equity
c. Increase an asset and increase a liability
d. Increase one asset and decrease another asset
________5. Accounting is also defined as the art of ________, _________, and __________.

6-11: Identify whether assets (A), liabilities (L), capital (C), revenue (R) or expense (E) account.
_________6. Franchise ________9. Wages Payable
_________7. Merchandise Inventory ________10. Professionals Fees
_________8. Wages Expense ________11. Speak Now, Drawing

PROBLEM SOLVING
12. Swifties, a famous tailoring shop. At the end of a recent year, Swifties’ total assets add up to
P 1,020,199 and owner’s equity was P 888,886. How much did Swifties owe creditors?

13. Assume that Swifties rendered a service worth P 1,313 to a loyal customer. How would this
transaction affect Swifties’ accounting equation?
a. Increase in both assets and liabilities by P 1,313.
b. No effect on accounting equation.
c. Increase both revenue and liability by P 1,313.
d. Increase both assets and owner’s equity by P 1,313.

14. Reputation Co. has P 13,073 in revenues, P 142,760 in expenses, P 5,600 owner’s
withdrawal, P 15,000 owner’s investments, and P 120,287 in liabilities. Owner’s equity changed by?
Indicate whether increase or decrease.

15. Exile Company, a service company received a total cash of P 50,000 for the whole month of
the business from their operating activities. But one-eighth of this are still unearned. Under cash basis of
accounting, how much is the total revenue of the Exile Company in that particular month?
 16. The owner’s equity of Betty-August-Cardigan Loves Company are equal to one-fourth of its
total assets. The total liabilities is P 8 100 000. What is the amount of Betty-August-Cardigan Loves
Company equity?

17-25 Riguel Alleje started his own accounting firm, LILI Accounting Firm, on August 01, 2020. The
following transactions occurred during the month of August:

August 1 Alleje invested P150,000 cash in the business

2 Purchased P12,000 worth of office supplies on account
5 Paid P1,500 to advertise in the Daily Prophet
9 Received P 38,600 for services provided to a client
14 Withdrew P300 for personal use
24 Performed P18,000 of services on account.
28 Borrowed P22,000 from Gringrots Bank. Issuing a promissory note for the same amount.
31 Received a cash payment of P12,600 for services rendered on August 24

Instructions:
(a) Show the effects of the above transactions on the accounting equation using the following
format.
(b) What is the total asset?
(c) What is the total liabilities and capital?

ASSETS = LIABILITIIES + CAPITAL

DATE Cash Accounts Supplies Notes Accounts Alleje, Capital

Receivable Payable Payable
 ANSWER KEY
1. Public Accountant
2. A and B
3. D
4. C
5. Recording, classifying, summarizing
6. A
7. A
8. E
9. L
10. R
11. C
12. P 131 3131
1 020 199 - 888 886
13. D
14. (P 120 287)
(13 073- 142 760)+ (15 000-5 600)
15. P 50 000
16. A= L+ C
C= 1/4A
A=L+ ¼ A
A-1/4A = L
3/4A= 8 100 000
3A= 32 400 000
A= 10 800 000

C= ¼ A
C= 10 800 000/4
C= P 2 700 000
17-25: Assets= 238 800; Liabilities and Capital 238 800

ASSETS = LIABILITIIES + CAPITAL

DATE Cash Accounts Supplies Notes Accounts Alleje, Capital

Receivable Payable Payable
June 01 150 000 150 000
02 12 000 12 000
05 ( 1 500) (1 5 00)
09 38 600 38 600
14 (300) (300)
24 18 000 18 000
28 22,000 22,000
31 12,600 (12,600)
221 400 5 400 12 000 22 000 12 000 204 800