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ACTIVITY 1
ACCOUNTING ENVIRONMENT AND ACCOUNTING FRAMEWORK
1. May Pag-asa of Manila is a graduate of culinary arts and an OFW working in a a hotel in
London. After working for ten years she was able to save 100,000 pounds. She decided to go
back to Manila and put up her own Café de Malate. She used only the best local coffee beans for
her brewed coffee and since pastry is her expertise, she baked sweet bread, cakes and rolls on
the side. At the time she put up the shop the exchange rate of a peso to a pound was P68.
a. How much did she invest translated to pesos?
6,800,000 Pesos Merchandising
b. What is the type of operation and the form of business did she put up?
Sole Proprietorship
c. Other than for profit, explain why people like May engage in business?
To earn money

2. Refer to no. 1 May wants to buy the lot beside her house which is practically located in a
business district. This way she can expand the coffee shop and put up a culinary school, as well.
To do so, she thinks she will need around P3,000,000. She remembered her two high school
friends who are now both working – Ann is a culinary school in France and Jean in the Finance
Department of a food processing company. They decided to make a go for it but their funds
amounted only to P1,500,000.
a. What is the form of business and type of operation of the second venture?
Partnership and Services
b. Where can they go for added financing? Name as many sources as possible.
Bank Loan
c. Where must be prepared first before their loan can be approved by a bank? Who among the
three will be capable of doing it?
SCI or Feasibility report
3. From the following matrix, select the form of organization in Column 2 that fits the
description given in Column 1. You can have more than one answer.

Column 1 Column 2
____C __1. Must register with SEC A. Sole Proprietorship
____A__2. Investor has unlimited liability B. Partnership
____A__3. Profit may easily be withdrawn C. Corporation
____C__4. Must register with BIR
____A__5. Usually managed by its investor (s)
____B__6. Business may easily be terminated
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___A___7. May sell his or her interest over the firm
___C___8. Large amount of contributed capital
___C___9. Must get permit to operate from the local government
____S__10. Business must pay for its own income tax

4. There are several stakeholders who need financial reports. Based on the given needs
described in each number, identify the stakeholder as:
a. Customer
b. Manager
c. Government
d. Investors
e. Lender

1.Requires the submission of a weekly performance report of the different sales departments, as
a basis of reviewing and evaluating performance.
-Manager
2. Penalizes individuals and businesses for late filing of returns and for deficient payment of
taxes.
-Government
3. Demands the rollback of gas prices and threatens to stage a boycott.
-Customer
4. Requires a project feasibility study as a basis for evaluating project’s profitability, solvency
and liquidity before a loan can be approved.
-Lender
5. Compares the performance of each listed company in the Philippines Stock Exchange, (value
and trend of its stock price) before making a decision on what shares to buy.
-Inventors

“A wise man will hear and increase learning, and a man of understanding will attain wise counsel.” (Proverbs 1:5)