BOOKKEEPING NC III

UNIT 2 – MODULE 2:
BASIC CONSIDERATION
ON FINANCIAL STATEMENTS

JAPEATH D. VILLEGAS, CPA, LPT

Trainer
Email: japeathv@gmail.com Cell #: 0977-349-3016

Ref.:Ballada, Win and Susan Ballada. (2019). Basic Accounting Made Easy 21st Edition.
Manila: Domdane Publishers and Made Easy Books.
Page 0 of 35
 MODULE WEEK 5-8
Activity no. 1

NAME: MAESTRADO, JEFFREY LOIS S. YR.&SEC.

COURSE: DATE

MULTIPLE CHOICE

1. If a business is not being sold or closed, the amounts reported in the accounts for
assets used in the business operations are based on the cost of assets. This practice
is justified by
a. Accrual
b. Time period
c. Going concern
d. Accounting entity

2. It is the capacity of information to make a difference in decision by helping users

evaluate past, present and future events, or confirming, or correcting their past
evaluations.
a. Relevance
b. Reliability
c. Understandability
d. Comparability

3. The attributes of relevance include all except

a. Neutrality
b. Materiality
c. Predictive value
d. Feedback value

4. It is the quality of information that assures readers that the information is free
from bias or error and faithfully represents what it purports to show.
a. Relevance
b. Reliability
c. Understandability
d. Comparability
 MODULE WEEK 5-8

5. The financial accounting information is directed toward the common needs of

users and is independent of presumptions about particular needs and desires of
specific.
a. Neutrality
b. Relevance
c. Completeness
d. Verifiability
6. It is the result of the standard of adequate disclosure
a. Completeness
b. Neutrality
c. Faithful Representation
d. Substance over form
7. The financial information must be comprehensible or intelligible if it is to be
useful.
a. Comparability
b. Understandability
c. Relevance
d. Reliability
8. It is the ability to bring together for the purpose of noting similarities and
dissimilarities
a. Relevance
b. Reliability
c. Comparability
d. Understandability
9. Financial reporting is concerned only with information that is significant enough to
affect evaluation or decision.
a. Materiality
b. Timeliness
c. Comparability
d. Cost and benefit
10. The purchase of an asset on account will
a. Increase total liabilities and decrease total assets
b. Have no effect on total assets or total liabilities
c. Increase total assets and increase total liabilities
d. Increase total assets and decrease owner’s equity
 MODULE WEEK 5-8

11. Amounts owed by a business are referred to as

a. Assets
b. Equities
c. Liabilities
d. Capital

12. Which of the following equations is the fundamental accounting equation?

a. Assets – Liabilities = Owner’s Equity
b. Assets = Liabilities + Owner’s Equity
c. Assets – Owner’s Equity = Liabilities
d. Assets – Owner’s Equity = Liabilities

13. When an owner deposits cash in an account in the name of the business, it is an
increase to
a. Cash and Accounts receivable
b. Cash and withdrawals
c. Cash and capital
d. Cash and expenses

14. Which of the following is not considered an account?

a. Equipment
b. Revenues
c. Accounts Payable
d. Cash
e. Accounts Receivable

15. If an owner invests her computer and printer in the business, there is an increase to
a. Cash and capital
b. Computer Equipment and withdrawals
c. Cash and withdrawals
d. Computer equipment and capital
 MODULE WEEK 5-8

16. The owner invested P50,000 in the business. What are the effects on the fundamental
accounting equation?
a. Assets increase P50,000; liabilities no effect; owner’s equity increase P50,000
b. Assets increase P50,000; liabilities decrease P50,000; owner’s equity increase
P50,000
c. Assets increase P50,000; liabilities increase P50,000; owner’s equity no effect
d. Assets increase P50,000; liabilities no effect; owner’s equity decrease P50,000

17. The purchase of an asset for cash will

a. Increase total assets and decrease total liabilities
b. Have no effect on total assets or total liabilities c.
Increase total assets and increase total liabilities
d. Increase total assets and increase total owner’s equity

18. When the rent for the business is paid with a check
a. Cash is decreased and rent expense is decreased
b. Cash is decreased and rent income is increased
c. Cash is decreased and rent expense is increased
d. Cash is decreased and accounts payable is decreased

19. The purchase of supplies for cash will

a. Increase supplies and decrease cash
b. Increase supplies expense and decrease cash
c. Decrease cash and increase accounts payable
d. Decrease cash and increase capital

20. Which of the following transactions does not include an increase to expense?
a. Received and paid the phone bill
b. Bought office supplies on account
c. Received cash for services performed
d. Paid the week’s salaries
 MODULE WEEK 5-8
ACTI VITY NO. 2

NAME: MAESTRADO, JEFFREY LOIS S. YR.&SEC.

COURSE: DATE

PROBLEM #1
Assets Liabilities Owner’s Equity
1 760,000 360,000 400,000
2 860,000 268,000 592,000
3 868,000_ 108,000 760,000
4 626,600 376,240 250,360
5 700,000__ 800,000 ( 100,000)
6 600,000 150,000__ 450,000
7 940,000__ 530,000 410,000
8 473,000 153,700 319,300
9 383,500 _ 147,000 236,500
10 624,000 237,000 387,000

 Fill the amount of the missing element of the financial position.

PROBEM #2

Income Expense Profit (Loss)

1 840,000 480,000 360,000
2 2,400,000 1,860,000 540,000
3 1,300,000 860,000 440,000
4 2,720,000 2,000,000 720,000
5 1,400,000 1,800,000 (400,00)
6 750,000 500,000 250,000
7 500,000 600,000 (100,000)
8 700,000 550,000 150,000
9 600,000 750,000 (150,000)
10 900,000 900,000 0

 Fill the amount of the missing element of the financial performance.

 MODULE WEEK 5-8

PROBEM #3

1. At the beginning of the year, the assets of Luke Services were P360,000 and
its owner’s equity was P200,000. During the year, assets increased by
P120,00 and liabilities increased by P20,000. What was the owner’s equity
at the end of the year?

Assets = Liabilities + Equity

Beginning 360,000 160,000 200,000

of the Year + 120,000 + 20,000

End 480,000 - 180,000 = 300,000

of the Year

2. The liabilities of Neechee Company equal one-third of the total assets, and the
owner’s equity is P240,000. What is the amount of the liabilities?

Assets = 360,000 (240,000 ÷ 2/3)

Liabilities = 120,000 (360,000-240,000) 1/3
Equity = 240,000 2/3

2. At the beginning of the year, Cora Station had liabilities of P100,000

and owner’s equity of P96,000. If assets increased by P40,000 and
liabilities decreased by P30,000. What was the owner’s equity at the end of
the year?

Assets = Liabilities + Equity

Beginning of the Year 196,000 100,000 96,000
+ 40,000 - 30,000
End of the Year 236,000 - 70,000 = 166,000

❖ Use the accounting equation to answer each of the questions above.

 MODULE WEEK 5-8
ACTIVITY NO. 3
NAME: MAESTRADO, JEFFREY LOIS S. YR.&SEC.
COURSE: DATE

PROBLEM #1
Instruction: Indicate on the space provided, (1)(X)on the element where the account
belong (2) BS if the account is Balance Sheet account and IS if the account is income
statement account; Dr (debit) or Cr (credit) to identify the normal balance of the account.

OWNER’S BS OR DR OR
ACCOUNTS ASSET LIABILITES EQUITY IS CR
1. Repairs and Maintenance Expense X IS Dr
2. Salaries and Wages Expense X IS Dr
3. Notes Payable X BS Cr
4. Notes Receivable X BS Dr
5. Service Vehicle X BS Dr
6. Mortgage Payable X BS Cr
7. Utilities Expense IS Dr
8. Furniture and Fixtures X BS Dr
9. Communication Expense X IS Dr
10. Employees’ benefits payable X BS Cr
11. Office Equipment X BS Dr
12. Prepaid Insurance X BS Dr
13. Owner’s Withdrawal X BS Dr
14. Professional fees earned X IS Cr
15. Accounts Receivable X BS Dr
16. Representation Expense X IS Dr
17. Salaries Payable X BS Cr
18. Office Supplies Expense X IS Dr
19. Office Supplies X BS Dr
20. Accounts payable X IS Cr
21. Cash X BS Dr
22. Inventory X BS Dr
23. Land X BS Dr
24. Accumulated Depreciation X BS Cr
25. Miscellaneous Expense X IS Dr
26. Prepaid Rent X BS Dr
27. Rent Expense X IS Dr
28. Juan, Capital X BS Dr
29. Insurance Expense X IS Dr
30. Depreciation Expense X BS Dr
 MODULE WEEK 5-8
ACTI VITY NO. 4

NAME: MAESTRADO, JEFFREY LOIS S. YR.&SEC.

COURSE: DATE
PROBLEM #1 Identifying the effects of a transaction

Instruction: Indicate the following sign in the appropriate column; (+) for increases,
(-) for decreases, and (+/-) for both increase and decrease.
Owner’s
Assets Liabilities
Equity
1. Cash payment by the owner
+ +
(investment)
2. Payment for taxes and licenses expense - -
3. Repair and maintenance of office - -
4. payment of rent expense - -
5. Purchase of office supplies on account + +
6. Purchase of office supplies for cash +-
7. Payment of accounts payable - -
8. Provide services for cash + +
9. Purchase of equipment and
+-
furniture for cash
10. Purchase of equipment and furniture
giving a 30day promissory note + +

11. Payment of salaries of employees - -

12. Personal transaction like
- -
withdrawal of the owner
13. Provide services on account + +
14. Provide services for cash + +
15. Collection of account from a customer +-
16. Payment of utility bills - -
17. Provide services receiving a
+ +
30day promissory note
18. Payment for other expenses +
19. Bought supplies paying 50% on cash, and
+- +
the remaining on account.
20. Rendered service receiving partial
payment on cash and the remaining on + +
account.