Assignment # 1

Give a scenario/example that adopts the following accounting concepts and

principles.
Note: Construct your own scenario/example.

1.Business Entity Principle

This transaction associated with a business must be separately recorded from those of its
owners.
Ex. A business issue a $2,000 disturibution to its sole holders. This is a reduction in equity the
records of the business, and $2,000 of taxable income to the holders.

2. Accrual Accounting Principle

Ex: The business have generated of total of 100,000 net income in one accounting period.
This includes cash receivables from service rendered amounting to 30,000. However, it also
incurred expenses of 40,000 including the electricity bill of 3,000 to be paid on the first
week of next accounting period. Therefore, the total net income is 60,000.

3. Time Period Principle

The accountant prepares financial statements yearly wherein they found out that the
income generated this year is 5% higher than the previous year. They were able to do
objective comparison because the financial statements are prepared within same period of
time.

4. Cost Principle
The business buys 3 unit of computers to be installed in the office. The unit price of a
computer is 12,000 but the business was offered 30,000 for the 3 computer units. The
accountant recorded this acquisition of asset amounted to 30,000 pesos.

5. Objectivity Principle
An accountant is tasked to prepare the statement of comprehensive income of the
business he work for. When the owner asked where he got the amount of the revenue, he
said that the amounts are based on how much the cashier remembered collecting, and did
not verified the amounts in using any receipts or invoices. He violates the objectivity
principle because he did not verified if the amounts are factual or not, hence, misleading
the owners.

Assignment # 2
Given the business transactions below, identify whether the assets, liabilities, and
owner’s equity increase, decrease or no effect.

1. The owner invested cash to start its car repair shop.

● Assets = increase
● Liabilities = no effect
● Equity = increase
2. The business purchased tools for the shop.
○ Assets = increase and decrease
○ Liabilities = no effect
○ Equity = no effect
 3. The business collected cash from a client.
○ Assets = increase and decrease
○ Liabilities = no effect
○ Equity = no effect
4. The business purchased equipment on credit.
○ Assets = increase
○ Liabilities = increase
○ Equity = no effect

Assignment # 3
Given the business transactions below, put the amount to the account it affects.
Remember that the amount in Assets should be balanced with Liabilities plus
Owner’s Equity. Don’t forget to use parenthesis ( ) to show deduction of amount.

1. The business collected Php 5,000.00 from a client.

a. Assets = Liabilities + Owner’s Equity
5,000 = 5,000

2. The owner invested additional Php 20,000.00 to the business.

a. Assets = Liabilities + Owner’s Equity
20,000 = 20,000
3. The business paid utilities amounting to Php 2,200.00.
a. Assets = Liabilities + Owner’s Equity
2,200 = 2, 200

4. The business borrowed P10,000.00 from the bank.

a. Assets = Liabilities + Owner’s Equity
10, 000 = 10,000