KORBEL FOUNDATION COLLEGE, INC.

Purok Spring 1, Brgy. Morales, Koronadal City

Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
A.Y. 1ST SEMESTER, 2021-2022

SUBJECT CODE: ACCTG 11

SUBJECT NAME: ACCOUNTING FOR SERVICE AND MERCHANDISING ENTITIES

ACTIVITY I

General Instruction. Read each requirement carefully. Write your answers on sheets
of paper and submit it to mateomichaelangelo25@gmail.com or
https://www.facebook.com/michaelangelo.mateo.50 before Tuesday, Sept. 28, 2021.

THEORIES
Part I. Essay. Provide the necessary explanations.

1. Why accounting often referred to as the language of business?

2. What are the three forms of business organization? Define each briefly.
3. What are the types of business? Distinguish them.
4. Enumerate the elements of financial statements. Define each briefly.
5. What is the basic summary device of accounting? What does it contain?
6. State the rules of debit and credit.
7. Income and expenses comprise the income statement. Give at least two examples for income
and five for expenses.
8. Cite a transaction that will decrease an asset and decrease a liability.
9. Debit means increase and credit means decrease. Is this statement always true?
10. The normal balance of withdrawals and expenses is debit, while that of income is credit? Why
is this so?

Part II. True or False. Write "AGREE" if the statement is true, otherwise "DISAGREE." If you
disagree, briefly explain why.

1. A corporation is a business owned by its stockholders.

2. The entity concept states that the transactions of different entities should be accounted for
together.
3. A withdrawal by the owner is recorded as a deduction from assets and an increase in
expenses.
4. According to the accounting equation, the owner’s equity must equal the assets and liabilities.
5. Expenses cause decreases in the owner’s equity.
6. An entry to accounts payable will be on the left side of the account if there is an increase and
on the right side of the account if there is a decrease.
7. A cash acquisition of supplies will cause total assets to increase.
8. In the fundamental accounting equation, assets are added to liabilities.
9. Salaries payable is a type of expense.
10. An increase in equity is recorded by a debit.
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
A.Y. 1ST SEMESTER, 2021-2022

Part III. Multiple Choice. Choose the letter of your best choice. Use capital letters in answering.

1. The debit and credit analysis of a transaction normally takes place

a. Before an entry is recorded in a journal
b. When the entry is posted to the ledger
c. When the trial balance is prepared
d. At some other point in the accounting cycle
e. Answer not given

2. The normal balance of an account is on the

a. Debit side of the account
b. Credit side of the account
c. Side represented by increases in the account balance
d. Side represented by decreases in the account balance
e. Answer not given

3. The book of original entry is also known as

a. Subsidiary ledger
b. Trial balance
c. General ledger
d. Journal
e. Answer not given

4. Debit always means

a. Right side of an account
b. Increase
c. Decrease
d. No effect
e. Answer not given

5. This arises in the course of ordinary regular activities of the entity and is referred to by a
variety of different names including sales, fees, interest, dividends, royalties and rent.
a. Income
b. Revenue
c. Profit
d. Gain
e. Answer not given
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
A.Y. 1ST SEMESTER, 2021-2022

6. Which of the following statements in relation to income is true?

a. Income encompasses both revenue and gain
b. Revenue encompasses both income and gain
c. Gain encompasses both income and revenue
d. Income encompasses revenue only
e. Answer not given

7. Which is false concerning the rules of debit and credit

a. The left side of an account is always the debit side and the right side is always the credit
side
b. Increases in assets and expenses are debit entries, and increases in liabilities, equity
and revenue are credit entries
c. The normal balance of any account appears on the side for recording increases
d. The word "debit" means to increase and the work "credit" means to decrease
e. Answer not given

8. The purchase of an asset for cash will

a. Increase total assets and decrease total liabilities
b. Have no effect on total assets and total liabilities
c. Increase total assets and increase total liabilities
d. Increase total assets and increase owner’s equity
e. Answer not given

9. Which of the following events does not require an entry in journal form?
a. Payment of service performed previously
b. Purchase of a one-year insurance policy
c. Agreement to perform a service at a future date
d. Performance of a service agreed to at a past date
e. Answer not given

10. Debits
a. Increase assets and decrease expenses, liabilities, revenue and owner’s equity
b. Increase assets and owner’s equity and decrease liabilities, expenses and revenue
c. Increase assets and expenses and decrease liabilities, revenue and owner’s equity
d. Decrease assets and expenses and increase liabilities, revenue and owner’s equity.
e. Answer not given
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
A.Y. 1ST SEMESTER, 2021-2022

PROBLEMS
PROBLEM 1
“Weddings Us” entered into the following transactions during 2021:
a. Elizabeth Monfort is a social entrepreneur from the South. She is into a lot of interesting causes.
Her fine taste is preeminent such that she is considered an authority in planning weddings. Upon
the advice and prodding of an esteemed colleague, Maria Concepcion, Elizabeth decided to
organize her wedding consultancy. She invested P250,000 into this entity.
b. Rented office space and paid two months’ rent in advance, P8,000.
c. Hired an office staff assistant and an account executive each with a P7,800 monthly salary. Or,
each is to receive P300 per day for the 26-day work month.
d. Acquired service vehicle for P 420,000.
e. Paid Prudential Guarantee and Assurance, Inc. P14,400 for a one-year comprehensive
insurance coverage on the service vehicle.
f. Acquired office equipment from Fair and Square Emporium for P60,000; paying P15,000 in cash
and the balance next month.
g. Purchased supplies on credit for P18,000 from San Jose Merchandising.
h. Paid San Jose Merchandising P10,000 of the amount owed
i. Coordinated and finalized simple bridal arrangements for three couples and collected fees of
P8,800 per couple. Services include prospecting and selecting the church and reception
location, couturier, caterer, car service, flowers, souvenirs and invitations.
j. Paid salaries, P6,600. The entity pays salaries every two Saturdays.
k. Monfort withdrew P14,000 for personal expenses.
l. Paid salaries, P7,200.
m. Received the ICC-BayanTel telephone bill, P1,400.
n. Received P24,000 from two clients for services billed last May 19.
o. Settled the electricity bill of P3,000 for the month.

Requirement:
Record the transactions using a FINANCIAL TRANSACTION WORKSHEET. Use the following
accounts: Cash, Accounts Receivable, Supplies, Prepaid Rent, Prepaid Insurance, Service Vehicle,
Office Equipment, Accounts Payable, Notes Payable, Utilities Payable, Unearned Referral Revenues,
Monfort, Capital.
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
A.Y. 1ST SEMESTER, 2021-2022

PROBLEM 2
Dominic Savio has started his own business, Property Appraisals. He inspects property for buyers and
sellers of real estate. Savio rents office space and has a pert-time assistant to answer the phone and
to help with inspections. The transactions for the month of September are as follows:
a. Savio invested cash by making a deposit in a bank account for the business, P150,000.
b. Paid rent for the month, P3,000.
c. Bought a second-hand service vehicle for cash, P80,000.
d. Bought service tools on account, P30,000.
e. Paid electricity bill, P500.
f. Paid a one-year insurance premium on the service vehicle, P6,000.
g. Received cash from clients for service performed, P20,000.
h. Paid salaries to assistant for first half of the month, P2,000.
i. Performed appraisal services for clients on account, P10,000.
j. Paid water bill, P350.
k. Bought office supplies for cash, P1,000.
l. Received cash from clients for inspections performed on account in (i), P3,000.
m. Paid salaries to assistant for last half of the month, P2,500.
n. Made partial payment on service tools bought in (d), P10,000.
o. Additional revenues earned amounted to P20,000: 14,000 for cash and P6,000 on account.
p. Savio withdrew cash for personal expenses, P5,000.

Requirements:
1. Record the transactions using a financial transaction worksheet.
- Establish the following accounts: Cash, Accounts Receivable, Office Supplies,
Prepaid Insurance, Service Tools, Service Vehicle, Accounts Payable, Savio, Capital.

2. Prepare the journal entries.

- Use the following accounts: Cash, Accounts Receivable, Office Supplies, Prepaid
Insurance, Service Tools, Service Vehicle, Accounts Payable, Savio, Capital, Savio,
Withdrawals, Service Revenue, Rent Expense, Salaries Expense, and Utilities Expense.
 KORBEL FOUNDATION COLLEGE, INC.
Purok Spring 1, Brgy. Morales, Koronadal City
Contact No. 228-1996/887-2051
Business Department
korbelbusinessdepartment@gmail.com
A.Y. 1ST SEMESTER, 2021-2022

PROBLEM 3
Fatima Simeon formed Graphics Design Services on September 1, 2021. She deposited P225,000 in
DBO bank in the name of the new business. During the month of September 2021, the following
transactions occurred:
Sept. 2 Acquired a service vehicle for P225,000 on account.
4 Acquired supplies for cash P58,000.
9 Received P 112,500 cash for signs printed
10 Paid the month’s rent P15,000
12 Painted signs for Carlo Company on account P240,000
15 Paid P75,000 on account from August 2.
17 Withdrew P30,000 for personal use
25 Collected P75,000 from Carlo Company.
29 Paid employees for services rendered during the month P 37,250
30 Paid Therese Telco. P12,250 for the telephone expenses during the month.
31 Paid AdST. P6250 for the advertising for the month.
31 Received water bill from Marbel Water District for the water consumption for the
month P1,250.
31 Ordered furniture costing P200,000 from Anthony, Inc.

Requirements:
1. Establish the following accounts in a financial transaction worksheet using the following account
titles: Cash, Accounts Receivable, Supplies, Service Vehicle, Furniture, Accounts Payable and
Simeon, Capital. Record in the worksheet the transactions listed above.

2. Prepare the necessary journal entries.