Cubalit, Karen H.

BSTM 2
MODULE 1

LEARNING ACTIVITIES

If you have the opportunity to put up a business, what would it be and why?

NOTE: Disregard any financial restriction that you may have. Imagine you have the money you
need to put up any business you like. However, you need to consider any skills that you
currently have or skills you are willing to acquire. Such skills can be technical (e.g., Cooking
skills, computer programming, art, music, mathematics, gardening, carpentry, etc.? or non-
technical (communication skills, people skills or “charisma”, street smart. Also, you need to
consider the things or activities that make you happy.

Final Note: Be HONEST to yourself! You will be graded based on your honesty, so don’t just
to impress your teacher.

If I have given a chance to put up a business and considering my cooking skills, I would
like to meet my dream restaurant and bar. I’ll use the money to make life for the Dinners Resto
Bar, it is a restaurant from the outside but it has a hidden underground bar inside. Those who
wanted to grab a meal and snacks they can probably enjoy the stay while those wanted to get
tipsy or drunk, the hidden underground bar is probably good for them. I choose this kind of
Restaurant and Bar concept, because it is unique and different from the common bars and
restaurants. This is two in one concept for every guest who wished to try. I love watching movies
and that’s where I get the idea to have my own restaurant and bar sooner or later. I wanted to
have a business like that because this opportunity might change my life either. This kind of
business will keep on rotating the money that you have specially if you choose to be a part of the
food and beverages industry and if you know how to manage your business firm then it is
probably a good idea to start with.

ASSIGNMENT

Instruction: Before each statement, write TRUE if the statement is correct or FALSE if the
statement is incorrect.

TRUE 1. A sole proprietorship is registered with the Department of Trade and Industry (DTI)
rather than with the Securities and Exchange Commission (SEC).
TRUE 2. A corporation is registered with the Cooperative Development Authority (CDA).
TRUE 3. A partnership business is registered with the Department of Trade and Industry (DTI)
and the Securities and Exchange Commission (SEC).
FALSE 4. A grocery store is most likely to be considered a service business.
FALSE 5. Businesses that engage in more than one type of business activity, such as selling
goods and at the same time offering services, are referred to as hybrid businesses.
FALSE 6. A school is most likely to be considered a manufacturing business – the raw materials
are the students and the finished products are responsible and competent business professionals.
TRUE 7. A car dealer, one who buys cars from car producers and sells them in their original
state and without further modifications, is most likely to be considered a trading business rather
than a manufacturing business.
FALSE 8. A stockholder of a corporation is personally liable for the debts of the corporation.
FALSE 9. A corporation is the easiest form of business organization to establish because there
are fewer legal requirements compared to the other forms of business organization.
FALSE 10. You and your friend are members in a cooperative. You hold 1 share while your
friend holds 10,000 shares. During members’ meetings, your friend can cast 10,000 votes while
you can only cast 1 vote.

EVALUATION
QUIZ 1. MULTIPLE CHOICE. Write the best answer beside the item number.
1. Which of the following is an appropriate definition of accounting?
a. A means of recording transactions and keeping records
b. Electronic collection, organization, and communication of vast amount of information
c. The interconnected network of subsystems necessary to operate a business
d. The measurement, processing, and communication of financial information about an
identifiable economics entity.

2. Accounting is a service activity. Its function is to provide

a. Qualitative information c. quantitative information
b. Quantitative and qualitative information d. none of the above

3. A professional accountant should be straightforward and honest in all professional and

business relationships. This is in consonance with the fundamentals principle of
a. Confidentiality c. integrity
b. Objectivity d. professional competence and due care

4. Which area of public accounting means the examination of financial statements by a CPA
for the purpose of expressing an opinion as to the fairness of the statements?
a. External auditing c. Internal Auditing
b. Management advisory services d. taxation

5. The basic purpose of accounting is

a. To measure the periodic income of the economics entity.
b. To provide information that the creditors of an economics entity can use in deciding
whether to make additional loans to the entity.
c. To provide quantitative information about a business enterprise that is useful in
making rational economics decision.
d. To provide the information that the managers of an economic entity need to control its
operations.
6. Accountants employed by a particular business firm or on-for-profit organization,
perhaps as chief accountant, controller, or financial vice president, are said to engage in
a. General accounting c. practice in commerce and industry
b. Independent accounting d. public accounting

7. Carrying out professional responsibility diligently and in accordance with applicable

technical and professional standards is descriptive of the principle of
a. Independence c. integrity
b. Objectivity d. professional competence and due care

8. Which is not an attribute of accounting?

a. It is a service activity
b. It provides qualitative information
c. It is an art of recording, classifying, summarizing and interpreting
d. None of the above

9. Accountancy qualifies as a profession because

a. CPAs adhere to a Code of Ethics and are members of PICPA
b. CPAs have their own body language
c. All its members are Certified Public Accountants (CPAs)
d. All of the above

10. A highly complex technical branch of accounting that involves the computation of tax
payable by both business entities and individuals
a. Taxation c. Cost accounting
b. Financial Accounting d. Management accounting
Cubalit, Karen H.
BSTM 2
MODULE 2

LEARNING ACTIVITIES

1. Identify and explain the basic accounting principles and standard;

We have accrual, going concern, accounting entity concept, time period
assumption and monetary unity assumption as the five basic accounting principles and
standard. Accrual is an accounting adjustment used to track and record revenues that have
been earned but not received, or expenses that have been incurred but not paid. It
includes accounts payable, accounts receivable, goodwill, future tax liability, and future
interest expense. Going Concern is important part of the generally accepted accounting
principles. Without it, businesses would not be able to perform accrued or prepaid
expenses. Well, if we assume the business might not operate long enough to realize these
future expenses, then we would not prepay or accrue anything. Accounting entity concept
is a clearly defined economic unit that isolates the accounting of certain transactions from
other subdivisions or accounting entities. An accounting entity can be a corporation or
sole proprietorship as well as a subsidiary within a corporation. Time period assumption
is the period in which businesses divide ongoing business into shorter periods to prepare
the financial statements. The time period assumption usually monthly, quarterly, or
annually. The income statement will show us the company performance over a period of
one month, quarterly, or annually. Lastly is the monetary unity assumption, The monetary
unit principle is the assumption that money itself is treated as a unit of measurement, and
that all transactions or economic events recorded in the accounts of a business can be
expressed and measured in monetary terms by a currency.

2. Explain the importance of the phases of accounting;

The phases of accounting consist of recoding, classifying, summarizing and
interpreting. Each step in the accounting cycle plays an important role in creating
accurate entries and managing the company's finances each time a purchase is made or
revenue is earned. If a company decides to implement an accounting cycle, it is important
that each step is followed in the right order. An accounting cycle enables the financial
accounting that businesses need to perform to be in compliance with federal regulations
and tax codes. The government requires companies of all sizes to disclose their financial
results and pay taxes on their profits, which they must calculate on their own. The
fundamental concepts above will enable you to construct an income statement, balance
sheet, and cash flow statement, which are the most important steps in the accounting
cycle.
 3. Explain the objective of general-purpose financial statements and the
stewardship of management;
The objectives of general-purpose financial statements (GPFSs) are to provide
information about the financial position, financial performance, and cash flows of an
entity that is useful to a wide range of users in making and evaluating decisions about the
allocation of resources. Stewardship is concerned with the accountability of the directors,
or management board, of a business entity to its proprietors or owners. This is at the heart
of the financial reporting process in many jurisdictions. The balance sheet, income
statement, and cash flow statement each offer unique details with information that is all
interconnected. Together the three statements give a comprehensive portrayal of the
company's operating activities. Personal financial stewardship represents the care,
conservancy, planning, attention, upkeep, and management of our financial resources and
choices beginning at the individual level. In contrast, Thesaurus.com shows ignorance,
negligence, squandering, and waste as antonyms of stewardship.

4. Discuss the elements of financial statements.

The elements of a financial statement are Assets, Liabilities, Equity, Investments
by owners, Distributions to owners, Revenues, Expenses, Gains, Losses and
Comprehensive Income Statements. A case can be made for each of the financial
statements being the most important, though the ultimate answer depends on the needs of
the user. The key points favoring each of these financial statements as being the most
important are: Income statement. Financial statements are important to investors because
they can provide enormous information about a company's revenue, expenses,
profitability, debt load, and the ability to meet its short-term and long-term financial
obligations. There are three major financial statements. The elements of financial
statements are the general groupings of line items contained within the statements. These
groupings will vary, depending on the structure of the business. Thus, the elements of the
financial statements of a for-profit business vary somewhat from those incorporated into
a nonprofit business (which has no equity accounts).

ASSIGNMENT

Discuss among yourselves how can you apply the basic accounting concept listed below to
grow your business
a. Separate entity concept
b. Time period
c. Historical cost concept
d. Materiality concept
e. Matching
f. Accrual basis of accounting
g. Going concern
 Note: your answer must be practical, meaning they are applicable in real-life setting.
You will be graded not on accuracy but on how you closely your answer
simulates the real-life setting. Use your imagination and be creative.

EVALUATION

MULTIPLE CHOICE. Write the letter of the correct answer beside the item
number.

1. The business owner inappropriately included his personal expenses with the expenses of
the business. Which of the following concepts is violated?
a. Historical cost
b. Separate entity concept
c. Accrual concept
d. Time period

2. The income of the business during the current year is low. To report profit, the owner
deliberately did not recognize depreciation expense. Which of the following qualitative
characteristics is violated?
a. Materiality
b. Relevance
c. Faithful representation
d. Predictive value

3. Inventories acquired for ₱100,000 are deliberately valued at a selling price of ₱300,000.
Which of the following principles is most likely not violated?
a. Historical cost
b. Materiality
c. Faithful representation
d. Free from error
4. A business sells goods to a customer who promises to pay for the purchase price next
year. The business records the sale this year, when the transaction has occurred, rather
than waiting until next year when the sale price is collected. This is an application of
which of the following accounting principles?
a. Accrual basis
b. Stable monetary unit
c. Credit principle
d. Utang concept

5. Right now, the business owner does not expect that its business will end in the
foreseeable future. This accounting assumption is called
a. Prudence.
b. Cost-benefit.
c. Going concern.
d. Liquidating concern.

6. A business purchased a small stapler. The stapler is expected to be used for a long period
of time. However, the business immediately expensed the cost of the stapler rather than
recognizing it as an asset to be depreciated over the stapler’s useful life. The business is
invoking which of the following accounting concepts?
a. Cost-benefit
b. Accrual basis
c. Full disclosure
d. Matching

7. A business acquired goods that are held for resale. Instead of expensing immediately the
cost of the goods, the business initially recognized them as assets. As each good is sold,
the business recognizes the cost of the good sold as expense. This is an application of
which of the following accounting concepts?
a. Completeness
b. Relevance
c. Full disclosure
d. Matching

8. This accounting principle entails trade-offs to be made between the level of detail and the
conciseness of information presented in the financial statements, keeping in mind the
costs of preparing the information.
a. Comparability
b. Relevance
c. Full disclosure
d. Matching
 9. This concept requires a business to apply the same accounting policies for like items and
retain those accounting policies from period to period.
a. Consistency
b. Verifiability
c. Going concern
d. Matching

10. Big companies often round-off peso amounts when presenting financial statements. This
practice is acceptable because of which of the following concepts?
a. Historical cost
b. Materiality
c. Faithful representation
d. Rounding principle

Cubalit, Karen H.
BSTM 2
MODULE 3

LEARNING ACTIVITIES

TRANSACTION EFFECT ON THE BASIC ACCOUNTING MODEL

Give the effect on the accounting equation by putting a (+) sign to indicate an
increase and a (-) sign to indicate a decrease on the transactions enumerated
below. Identify also the specific account affected by the transaction.

A L OE
Received cash as additional investment + +
Purchased supplies for cash +/-
Borrowed money from the bank
Rendered services to cash customers - -
Billed customers for services rendered + +
Collected on account receivable in full
Paid creditors on account - -
Returned supplies which were purchased on account
Paid advertising expense - +
Purchased equipment, 25% down payment, - +
balance on credit.

ASSIGNMENT
Identifying Balance Sheet Accounts & Income Statement Accounts.
 For each of the following, write I if it is income statement item and B if it is a balance
sheet item

I 1. Interest Expense I 11. Salaries Expense

B 2. Interest Receivable I 12. Accounts Payable
B 3. Mortgage Payable B 13. Prepaid Rent
I 4. Interest Income I 14. Insurance Expense
I 5. Miscellaneous Expense B 15. Cash
B 6. Drawing Account B 16. Used Supplies
I 7. Supplies Expense B 17. Unearned Revenue
B 8. Supplies I 18. Prepaid Expense
B 9. Equipment B 19. Professional Fee
B 10. Building I 20. Sales

EVALUATION

TRUE OR FALSE. Write “T” if the statement is correct and letter “F” if incorrect.

TRUE 1. The left-hand side of the account refers to its credit side while the right-hand
side refers to the debit side.
TRUE 2. The debit side of an account is for the value received while the credit side is for
the value parted with in a transaction analysis.
FALSE 3. Business transactions are analyzed from the point of the business rather than
the owner.
FALSE 4. An assets normal balance is a debit while that of a liability is credit.
FALSE 5. To debit an asset is to increase the balance of its account while to credit is to
decrease its balance.
TRUE 6. Creditors are given the first priority over the assets of the business in case of
liquidation
TRUE 7. The reason why land is not subject to depreciation is that it is expected to be
useful to the business enterprise for an indefinite period of time.
TRUE 8. When drawing account is debited, the balance of the account decreased.
TRUE 9. When a debit entry is bigger than the credit entry, the account is said to have a
debit balance.
FALSE 10. Withdrawals by the proprietor has the effect of reducing profit for the period.
B. MULTIPLE CHOICE. Choose the correct answer.

1. At the start of the period, a business has total assets of ₱500,000 and total liabilities
of ₱300,000. During the period, the business earned total income of ₱1,000,000 and
incurred total expenses of ₱640,000. No additional investments or withdrawals were
made by the owner. Total liabilities at the end of the period were ₱380,000. How
much is the total assets at the end of the period?
a. 980,000
b. 960,000
c. 940,000
d. 880,000

2. A business has total assets of ₱640,000 and total equity of ₱360,000 at the beginning
of the period. The business earned income of ₱220,000 during the period and
reported profit of ₱80,000. There were no transactions with the owner during the
period. How much is the ending balance of equity?
a. 500,000
b. 440,000
c. 360,000
d. 280,000

3. A business has ending total assets of ₱480,000, ending total liabilities of ₱100,000
and beginning equity of ₱280,000. If the total expenses for the period amount to
₱200,000, how much is the total income?
a. 300,000
b. 340,000
c. 280,000
d. 420,000

4. A business has ending total assets of ₱680,000, ending total liabilities of ₱320,000
and beginning equity of ₱480,000. If the total income for the period amount to
₱560,000, how much is the total expenses?
a. 680,000
b. 560,000
c. 480,000
d. 420,000

5. A business has total assets, total liabilities, and total equity of ₱100,000, ₱70,000
and ₱30,000, respectively, at the beginning of the period. During the period, total
 liabilities decreased to ₱40,000. The business reported profit of ₱50,000 for the
period. How much is the ending total assets?
a. 170,000
b. 140,000
c. 120,000
d. 90,000

Cubalit, Karen H.
BSTM 2
MODULE 4
LEARNING ACTIVITIES

JOURNALIZING, POSTING AND UNADJUSTED TRIAL BALANCE

Entity A started operations on January 1, 20x1. The following were the transactions during the
first week of operations:

Jan. Transactions
1 The owner provided ₱600,000 cash as initial investment to the business.
2 The business acquired a building for ₱400,000 cash.
3 The business acquired office equipment for ₱100,000 cash.
4 The business purchased supplies for ₱20,000 cash. The business uses a prepaid asset
account.
5 The business rendered services worth ₱150,000 on cash basis.
6 The business rendered services worth ₱100,000 on account.
7 The business paid ₱25,000 salaries expense.

Requirements:
a. Provide the journal entries.
b. Post the journal entries to the ledger. Use T-accounts for this purpose. Arrange your T-
accounts in this order: Assets, Liabilities, Equity, Income and Expenses.
c. Prepare the unadjusted trial balance.

A.
Date Explanation Debit Credit
1 Cash 600,000
A. Capital 600,000

2 Buildings 400,000
 Cash 400,000

3 Office equipment 100,000

Cash 100,000

4 Supplies Expense 20,000

Cash 20,000

5 Cash 150,000
Service fees 150,000

6 Accounts Receivable 100,000

Service fees 100,000

7 Salaries expense 25,000

Cash 25,000

B.
Cash .
1/1 600,000 400,000 1/2
1/5 150,000 100,000 1/3
20,000 1/4

Office equipment Buildings .

1/3. 100,000 1/2 400,0000
Balance: 100,000 Balance: 400,0000

Salaries expense Service fees .

1/7 25,000 150,000 1/5
Balance: 25,000 100,000 1/6
Balance: 250,000
Owners Capital .
600,000
Balance 600,0000
C.
Entity A

Unadjusted Trial Balance

Jan 7 20x1

Accounts Debit Credit

Cash P 205,000

Accounts Receivable 100,000

Prepaid supplies 20,000

Building 400,000

Office equipment 100,000

Owners Capital 600,000

Service fees 250,000

Salaries expense 25,000

P850,000 P850,000

ASSIGNMENT

Fill in the missing accounts debited to complete the journal entries.

Jan 3 Cash
C, Araw, Capital

Jan 7 Equipment
Accounts Payable

Jan 10 Supplies
 Accounts Payable

Jan 13 Accounts Receivable

Service income

Jan 15 Drawings
Cash

Unknown Accounts to be credited.

Fill in the missing accounts credited to complete the journal entries of Carolina
Colds, owner of Toril Refrigeration Services.

Dec 3 Cash in Bank

Initial investment

Dec 10 Shop supplies

Purchased various supplies on account

Dec 15 Accounts Receivable

Rendered refrigeration service on account.

Dec 17 Accounts payable

Payment of accounts.

Dec 18 Shop equipment

Notes Payable

VII. EVALUATION. Prepare journal entries

Mary decided to invest in a travel agency. Below are the transactions for the month of
June 2015.
You are requested to journalize the transactions.

June 1 Mary invested car worth P550,000 and cash of P1,200,000.

 4 Borrowed P250,000 from Meta Bank.
5 Bought furniture from Slim’s P30,000 on account
6 Withdrew cash P100,000 for personal use
15 Rendered services to Happy Tours P500,000 on account
21 Paid Employees salaries for P50,000
30 Collected account from Happy Tours

Date Explanation PR Debit Credit

June
1 Cash 1,200,000
Car 550,000
Mary’s Capital 1,750,000

4 Cash 250,000
Bank loan 250,000

5 Furniture’s and fixtures 30,000

Accounts payable 30,000

6 Drawing 100,000
Mary’s capital 100,000

15 Accounts Receivable 500,000

Service income 500,000

21 Salaries expense 50,000

Cash 50,000

30 Cash 500,000
Mary’scapital 500,000