Lesson 2 Accounting Elements Answer Key

Lesson 2
Answer Key
Problem 1 Accounting Elements with Debit and Credit
Instruction: Indicate whether the account affects the accounting elements (ASSET, LIABILITY, EQUITY),
and classify whether the account is to be debited (Dr.) or to be credited (Cr.).
Element Dr. or Cr.
Example : Increase in cash Asset Dr.
1. Decrease in unpaid salaries Liability Dr.
2. Decrease in accounts receivable Asset Cr.
3. Increase in office supplies Asset Dr.
4. Increase in rent income Equity Cr.
5. Decrease in unearned income Liability Dr.
6. Decrease in prepaid insurance Asset Cr.
7. Decrease in owner’s equity Equity Dr.
8. Increase in net income Equity Cr.
9. Increase in accounts payable Liability Cr.
10. Increase in owner’s drawings Equity Dr.
11. Decrease in notes payable Liability Dr.
12. Increase in withholding tax payable Liability Cr.
13. Increase in unused supplies Asset Dr.
14. Increase in calamity loss Equity Dr.
15. Increase in bank overdraft Liability Cr.

Problem 2 Normal Balance and Rules of Debit and Credit
Instruction: Indicate whether the normal balance of the account is debit or credit, and whether the increase or
decrease of the said account should be debit or credit.
Normal Change
Particulars:
Balance Debit/Credit
Sales discount decreased by P2,000 Debit Credit
1. Cash in bank increased by P1,000 Debit Debit
2. Merchandise decreased by P40,000 Debit Credit
3. Cost of sale increased by P20,000 Debit Debit
4. Transportation out increased by P1,000 Debit Debit
5. Accounts payable increased by P10,000 Credit Credit
6. Accrued salaries increased by P6,000 Credit Credit
7. Accounts receivable decreased by P5,000 Debit Credit
8. Cash increased by P8,000 Debit Debit
9. Equipment sold for P50,000 Debit Credit
10. Gain on sale of equipment, P3,000 Credit Credit
11. Furniture was acquired for P20,000 Debit Debit
12. Paid accrued interest on notes payable Credit Debit
13. Loans payable in bank was paid in full Credit Credit
14. Notes receivable was collected in full Debit Credit
15. Rent expense decreased by P1,500 Debit Credit

Problem 3 Basic Accounting Equation
Indicate on the columns affected the value of increase or decrease for each accounting element:
Assets Liabilities Owner’s Equity

Debit Credit Debit Credit Debit Credit
1. The owner invested P50,000 cash

50,000 50,000
to start the business.
2. Purchase office supplies on

account, payable next week, 2,000 2,000
P2,000
3. Collected P10,000 cash for

10,000 10,000
services rendered to customer.
4. Purchase office machine,

P15,000, P5,000 down, balance 15,000 5,000 10,000
issued with promissory note.
5. Rendered P20,000 services,

20,000 20,000
collectible next week.
6. Paid the account in number 2. 2,000 2,000
7. Paid P500 electric bill for electric

consumed in the conduct of 500 500
business.
8. Collected the account in number

20,000 20,000
5.
9. Paid P5,000 personal drawing of

5,000 5,000
the owner.
10. Received P200 water bill, payable

200 200
next week.
11. Rendered services to water

company, offset against the P200
200 200
account payable to the water
company
Problem 4 Basic Accounting Elements
1. The owner invested cash P50,000, and a land costing P50,000.
2. Bought a merchandise on account, P40,000.
3. Bought an office machine for P10,000. Half was paid as a down payment and the balance on account.
4. Rendered services to charge customer, P8,000.
5. Rendered services to cash customer, P2,000.
6. Paid business expenses, P500.
7. Paid P5,000 to the owner for personal use.
8. Rendered services to customer, P4,000 was paid, and a promissory note was issued, P1,000.
9. Partially paid the account on transaction 3, P2,000.
10. Accrued salaries of workers, P500.
11. The note from customer on transaction 8 was collected with an interest of P10.
12. Borrowed cash from bank, P20,000.
13. Issued a promissory note for the account on transaction 2.
14. Paid the note issued.
15. Accrued interest expense, P200.

Problem 5 Effects in the Accounts
Transaction Effects in the Accounts Amount
Debit Credit
Increase in Cash (Asset) 100,000

1. Owner’s investment, P100,000.
Increase in Capital (Owner’s Equity) 100,000
2. Hired two delivery boys. No Effect
3. Hired cashier No Effect
Increase in Supplies (Asset) 1,000

4. Purchased supplies, P1,000.
Decrease in Cash (Asset) 1,000
Increase in Advertising expense (Owner’s 400
Equity
5. Paid advertising expense, P400.
Decrease in Cash (Asset 400
6. Received cash from customers on
account, P4,200.
Decrease in Accounts receivable (Asset) 4,200
7. Received cash from cash customers,
P18,000. Increase in Service income (Owner’s 18,000
Equity)
Decrease in Accounts payable (Liability) 2,500
8. Paid creditors on account, P2,500.
Increase in Deliver truck (Asset) 45,000

9. Purchased delivery truck on account,
P45,000.
Increase in Accounts payable (Liability) 45,000
Increase in Rent expense (Owner’s Equity) 3,000

10. Paid rent during the month, P3,000.
Increase in Accounts receivable (Asset) 3,500
11. Charged customers for delivery service
on account, P3,500. Increase in Service income (Owner’s 3,500
Equity)
Increase in Drawings (Owner’s Equity) 5,000
12. Paid cash to owner for personal use,
P5,000.
Increase in Salaries expense (Owner’s 19,560
Equity)
13. Accrued salaries of workers.
Increase in Salaries payable (Liability) 19,560
Problem 6 Recording to the General Journal and Posting to the General Ledger Accounts
Requirement #1:
GENERAL JOURNAL Page No. 01
Date
Particulars PR Debit Credit
2020
Oct. 01 Cash GL-101 250,000
Ventura, Capital GL-301 250,000
To record the investment of owner.
03 Equipment GL-103 135,000

Ventura, Capital GL-301 135,000
To record the additional investment of owner.

Cash GL-101 50,000
To record the purchase of equipment.

Accounts payable GL-201 15,000
To record purchase of equipment on account.

Cash GL-101 20,000
To record purchase of equipment with P20,000 down
payment and the balance on account.
18 Accounts receivable GL-102 48,000

Service income GL-401 48,000
To record service rendered to a charge customer.

To record service rendered to a charge customer.
25 Cash GL-101 65,000

Accounts receivable GL-102 35,000
To record service rendered to customer, P65,000 down,
balance on account.
30 Cash GL-101 50,000

Equipment GL-103 50,000
To record the sale of equipment due to unsatisfactory
performance.
Requirement #2:
GENERAL LEDGER
Account
CASH Account No. 101
:
Date Particulars PR Debit Date Particulars PR Credit
Oct. 01 Initial investment GJ-01 250,000 Oct. 05 Purchase of equipment GJ-01 50,000
25 Down for service rendered GJ-01 65,000 16 Down on equipment GJ-01 20,000
30 Sale of equipment GJ-01 50,000
Total debits 365,000 Total credits 70,000
- Debit balance 295,000
365,000 365,000
Account
ACCOUNTS RECEIVABLE Account No. 102
:
Oct. 18 Rendered service GJ-01 48,000
20 Rendered service GJ-01 90,000
25 Rendered service with down GJ-01 35,000
Debit balance 173,000
Account
EQUIPMENT Account No. 103
:
Oct. 03 Additional investment GJ-01 135,000 Oct. 30 Sale by cash GJ-01 50,000
05 Purchase by cash GJ-01 50,000
08 Purchase on account GJ-01 15,000
16 Purchase with down GJ-01 65,000
265,000 265,000
Account
ACCOUNTS PAYABLE Account No. 201
:
Oct. 08 Purchase of equipment GJ-01 15,000
16 Purchase of equipment GJ-01 45,000
Credit balance 60,000
Account
VENTURA, CAPITAL Account No. 301
:
Oct. 01 Initial investment GJ-01 250,000
03 Additional investment GJ-01 135,000
Account
SERVICE INCOME Account No. 401
:
Oct. 18 Service on account GJ-01 48,000
20 Service on account GJ-01 90,000
25 Service with down GJ-01 100,000
Global Services
Unadjusted Trial Balance
For the month of October, 2020
Accounts Debit Credit
Cash P295,000 P
Accounts receivable 173,000
Equipment 215,000
Accounts payable 60,000
Ventura, Capital 385,000
Service income 238,000
P683,00
TOTAL P683,000
0
Requirement #3:
a. Cash P295,000
Equipment 215,000
TOTAL ASSETS P683,000
b. TOTAL LIABILITIES P 60,000
c. TOTAL OWNER’S EQUITY P623,000

Problem 7 Recording and Posting Transactions
Requirement #1:
Date
2020
Jul. 02 Office supplies on hand GL-103 3,600
To record purchase of office supplies on account.
03 Rent expense GL-503 2,500

Cash GL-101 2,500
To record payment of rent for the month
05 Telephone expense GL-504 450

Cash GL-101 450
To record payment of telephone bill for the month.
09 Cash GL-101 5,600

Fees earned GL-401 5,600
To record services rendered.
10 Advertising expense GL-502 750

Cash GL-101 750
To record payment for advertisement in local newspaper.
14 Honey, Drawings GL-301 2,500

Cash GL-101 2,500
To record temporary withdrawal of owner.

To record services rendered on account.
19 Accounts payable GL-201 1.600

Cash GL-101 1,600
To record partial payment of account.
23 Salary expense GL-501 850

Cash GL-101 850
To record payment of salary to employee.
27 Cash GL-101 2,550

To record services rendered
Date
2020
Jul. 30 Electricity expense GL-505 600
Cash GL-101 600
To record payment of electricity for the month.
Requirement #2:
GENERAL LEDGER
Account
:
Jul. 09 Rendered services GJ-01 5,600 Jul. 03 Payment of rent GJ-01 2,500
27 Rendered services GJ-01 2,550 05 Payment of telephone GJ-01 450
10 Payment of advertisement GJ-01 750
14 Temporary withdrawal GJ-01 2,500
19 Payment of account GJ-01 1,600
23 Payment of salary GJ-01 850
30 Payment of electricity GJ-02 600
Credit balance 1,100 -
9,250 9,250
Account
:
Jul. 17 Services rendered GJ-01 5,250
Account
OFFICE SUPPLIES ON HAND Account No. 103
:
Jul. 02 Purchase on account GJ-01 3,600
Account
:
Jul. 19 Partial payment GJ-01 1,600 Jul. 02 Purchase of office supplies GJ-01 3,600
3,600 3,600
Account
HONEY, DRAWINGS Account No. 301
:
Jul. 14 Withdrawal of cash GJ-01 2,500
Account
FEES EARNED Account No. 401
:
Jul. 09 Service for cash GJ-01 5,600
17 Service on account GJ-01 5,250
27 Service for cash GJ-01 2,550
GENERAL LEDGER
Account
SALARY EXPENSE Account No. 501
:
Jul. 23 Payment to employee GJ-01 850
Account
ADVERTISING EXPENSE Account No. 502
:
Jul. 10 Paid to local newspaper GJ-01 750
Account
RENT EXPENSE Account No. 503
:
Jul. 03 Payment for the month GJ-01 2,500
Account
TELEPHONE EXPENSE Account No. 504
:
Jul. 05 Payment for the month GJ-01 450
Account
ELECTRICITY EXPENSE Account No. 505
:
Jul. 30 Payment for the month GJ-02 600
Honey Servicing
For the month of July, 2020
Cash P P 1,100
Office supplies on hand 3,600
Honey, Drawings 2,500
Fees earned 13,400
Salary expense 850
Advertising expense 750
Rent expense 2,500
Telephone expense 450
Electricity expense 600
TOTAL P 16,500 P 16,500
Problem 8 Journal Entries and Correct Amounts
Requirement #1:
Date
2020
May 01 Cash GL-101 210,000
Bungal, Capital GL-301 210,000
To record investment of owner.

Cash GL-101 18,000
To record purchase of equipment, P18,00 down, balance
on account.

10 Cash GL-101 7,040

To record services rendered with 80% down, balance on
account.
12 Utilities expense GL-501 3,000

Cash GL-101 3,000
To record payment of telephone bill.
13 Supplies GL-104 2,500

Cash GL-101 2,500
To record purchase of repair supplies.
14 Cash GL-101 5,000

To record collection of account from customer.
18 Accounts payable GL-201 9,000

Cash GL-101 9,000
To record partial payment of account to Bungi Co.
20 Cash GL-101 6,000

Date
2020
May 21 Utilities expense GL-501 1,500
Utilities payable GL-202 1,500
To record electricity incurred for the month.
GENERAL LEDGER
Account
:
May 01 Initial investment GJ-01 210,000 May 03 Down for equipment GJ-01 18,000
10 Down for service rendered GJ-01 7,040 12 Payment of telephone GJ-01 3,000
14 Collection of account GJ-01 5,000 13 Purchase of supplies GJ-01 2,500
20 Service rendered GJ-01 6,000 18 Partial payment of account GJ-01 9,000
228,040 228,040
Account
:
May 08 Service rendered GJ-01 5,000 May 14 Collection GJ-01 5,000
10 Service rendered with down GJ-01 1,760
6,760 6,760
Account
EQUIPMENT Account No. 103
:
May 03 Purchase with down GJ-01 30,000
Account
SUPPLIES Account No. 104
:
May 13 Purchase by cash GJ-01 2,500
Account
:
May 18 Partial payment GJ-01 9,000 May 03 Purchase of equipment GJ-01 12,000
12,000 12,000
Account
UTILITIES PAYABLE Account No. 202
:
May 21 Electricity GJ-02 1,500
GENERAL LEDGER
Account
BUNGAL, CAPITAL Account No. 301
:
May 01 Initial investment GJ-01 210,000
Account
SERVICE INCOME Account No. 401
:
May 08 On account GJ-01 5,000
10 With down GJ-01 8,800
20 By cash GJ-01 6,000
Account
UTILITIES EXPENSE Account No. 501
:
May 12 Payment of telephone bill GJ-01 3,000
21 Received electric bill GJ-01 1,500
Debit balance 4,500
Honey Servicing
For the month of July, 2020
Cash P195,540 P
Equipment 30,000
Supplies 2,500
Utilities payable 1,500
Bungal, Capital 210,000
Service income 19,800
Utilities expense 4,500
TOTAL P234,300 P234,300
Requirement #2:
a. May 10 Down payment of customer P 7,040

May 14 Collection of account of customer 5,000
May 20 Collection from service rendered 6,000
Total Cash Collections P 18,040
b. Total Cash Available P195,540
c. Accounts Receivable P 1,760
d. Revenue P 19,800
e. Expenses P 4,500
f. Bungal, Capital P210,000

Revenue 19,800
Expenses 4,500
Owner’s Equity P225,300

Lesson 2 Accounting Elements Answer Key

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Lesson 2 Accounting Elements Answer Key

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Lesson 2

Problem 1 Accounting Elements with Debit and Credit

Element Dr. or Cr.

Example : Increase in cash Asset Dr.

1. Decrease in unpaid salaries Liability Dr.

2. Decrease in accounts receivable Asset Cr.

3. Increase in office supplies Asset Dr.

4. Increase in rent income Equity Cr.

5. Decrease in unearned income Liability Dr.

6. Decrease in prepaid insurance Asset Cr.

7. Decrease in owner’s equity Equity Dr.

8. Increase in net income Equity Cr.

9. Increase in accounts payable Liability Cr.

10. Increase in owner’s drawings Equity Dr.

11. Decrease in notes payable Liability Dr.

12. Increase in withholding tax payable Liability Cr.

13. Increase in unused supplies Asset Dr.

14. Increase in calamity loss Equity Dr.

15. Increase in bank overdraft Liability Cr.

1. Cash in bank increased by P1,000 Debit Debit

2. Merchandise decreased by P40,000 Debit Credit

3. Cost of sale increased by P20,000 Debit Debit

4. Transportation out increased by P1,000 Debit Debit

5. Accounts payable increased by P10,000 Credit Credit

6. Accrued salaries increased by P6,000 Credit Credit

7. Accounts receivable decreased by P5,000 Debit Credit

8. Cash increased by P8,000 Debit Debit

9. Equipment sold for P50,000 Debit Credit

10. Gain on sale of equipment, P3,000 Credit Credit

11. Furniture was acquired for P20,000 Debit Debit

12. Paid accrued interest on notes payable Credit Debit

13. Loans payable in bank was paid in full Credit Credit

14. Notes receivable was collected in full Debit Credit

15. Rent expense decreased by P1,500 Debit Credit

Assets Liabilities Owner’s Equity

1. The owner invested P50,000 cash

2. Purchase office supplies on

3. Collected P10,000 cash for

4. Purchase office machine,

5. Rendered P20,000 services,

6. Paid the account in number 2. 2,000 2,000

7. Paid P500 electric bill for electric

8. Collected the account in number

9. Paid P5,000 personal drawing of

10. Received P200 water bill, payable

11. Rendered services to water

1. The owner invested cash P50,000, and a land costing P50,000.

2. Bought a merchandise on account, P40,000.

4. Rendered services to charge customer, P8,000.

5. Rendered services to cash customer, P2,000.

6. Paid business expenses, P500.

7. Paid P5,000 to the owner for personal use.

9. Partially paid the account on transaction 3, P2,000.

10. Accrued salaries of workers, P500.

12. Borrowed cash from bank, P20,000.

13. Issued a promissory note for the account on transaction 2.

14. Paid the note issued.

15. Accrued interest expense, P200.

Transaction Effects in the Accounts Amount

Increase in Cash (Asset) 100,000

2. Hired two delivery boys. No Effect

3. Hired cashier No Effect

Increase in Supplies (Asset) 1,000