Professional Documents
Culture Documents
A. Accounting
B. Accrual Principle
C. Business Transaction
D. Calendar Year
E. Cash Basis Accounting
F. Classifying
G. Corporation
H. Fiscal Year
I. Generally Accepted Accounting Principle
J. Going concern
K. Historical Cost
L. Materiality
M. Monetary Measure
N. Objectivity Principle
O. Partnership
P. Periodicity
Q. Separate Entity
R. Single proprietorship
will remain in operation long enough to use existing resources for their intended purpose
the year selected by a business as the reporting year for annual reports
_____________4. A business organization where multiple owners buy ownership shares in the company
called capital stock
_____________6. The concept that treats a business as distinct and apart from its creditors, customers,
and owners
_____________10. This ensures that the accounting records and statements are based on the most
reliable data available
_____________12. This assumes that the business will remain in operation for a foreseeable future
_____________13. The principle that specifically states that we should record transactions at amounts
that can be verified
_____________15. This states that acquired assets and services should be recorded at the price
originally paid for them
_____________17. The principle that states that whenever possible the amounts used in recording
transactions should be based on source documents
_____________18. This principle does not allow the accountant to record subsequent changes in the
value of the assets
_____________19. This principle attempts to record the financial effects of a transaction or event in the
period in which this transaction or event occur rather than in periods in which cash is received or paid by
the business
_____________20. The recognition that net income for any period less than the life of the business must
be regarded as tentative but still useful estimate of the net income for the period
_____________21. Any event that affects the financial position of a business and can be recorded
reliably
_____________22. The exchange price associated with a business transaction at the point of recognition
_____________25. A concept that requires an item large enough and significant enough to influence
decision makers to be separately identified in accounting statements
II. Indicate the accounting concept or principle that suits the statement.
_____________1. If the amount involved is insignificant with regards to the overall size of the business,
consider the item as an outright expense
_____________2. This concept supports the separation of the business assets and liabilities from the
personal assets and liabilities of the owner.
_____________3. Expenses should be recognized in the accounting perioding which the goods were
actually used to produce revenue.
_____________5. The accountant should apply consistently the same accounting method to like items
from one period to another.
_____________6. Revenue is recognized when goods have been delivered or services performed.
_____________7. Relevant information about the business significant enough to affect the user's
assessment of the business should be clearly reported in the financial statements.
_____________8. This is the value ordinarily assigned to an asset regardless of the asset's market value.
_____________9. This is the period of time, usually a span of one year, over which changes in the
owner's equity are summarized.
_____________10. The amount of paper clips purchased for the business is outright charged to expense.
_____________11. This does not consider liquidation in accounting for the affairs of the business.
_____________12. This assures that investors, creditors and other users of financial information can
expect the financial statements to contain all the significant economic financial information in relation
to their understanding of the financial condition of the business.
_____________13. This is necessary for the timely and useful measurement of income for a period of
time less than the life of a company
_____________14. Joey Lao Engineering signed a contract to construct Brett Eriel Haven and received
full payment of the contract price. Joey Lao did not recognize the income until the construction was
completed.
_____________15. This concept or principle will not apply if a business has declared bankruptcy or
insolvency.
III. State the accounting concept/principle violated by each of the following case.
_____________1. Mt. San Toh founded Saints Enterprises. He treated his residence and other personal
assets as part of Saints Enterprises.
_____________2. St. Benjamin's Hospital has been serving the community for twenty years. However,
since new hospitals such as Saint Look's Medical Center and Metropolitan City Medical Center have
opened in the area, St. Benjamin's Hospital felt the stiff competition. The stockholders are suggesting
upgrading the hospital's equipment and infusing more capital. However, the management of St.
Benjamin's declines the proposal because of the belief that the hospital will lose the competition and
that it is ready to stop operations anytime to avoid losses. Hence, the accounting department is
operating based on this assumption.
_____________3. Gisel Ong owns Magnificent Gel's Candle shop. She proposes to account for the shop's
assets at current market value in order to have realistic amounts on the books should she decide to
liquidate the business anytime.
_____________4. Panda Airlines entered into an agreement with Cathy Pacific to transfer the ownership
of forty of its one hundred Boeing 747 for one billion dollars. Panda Airline will receive 10%of the
amount next month. However, Panda Airline did not report this undertaking as no amount has been
received. Panda airlines feel this is a wise move in order to generate cash in the business.
_____________5. St. Luis University starts its fiscal year June and ends in May. The accountant received
its utilities bill for the month of May from Maynilad. Since this will be paid on the second week of June,
the accountant recorded it as expenses under the month it was paid.
_____________6. Niko Ong Developers got a contract to develop the five hectares Flora Heights
Subdivision on January this year, At the end of the year, Niko Ong Developers cannot determine its
profit or loss from the project as the accounting record for the project has not yet been established.
According to the manager, development is still in progress that is why the profit or loss on this endeavor
cannot be determined. However, in a span of twelve years, accounting for this project will be presented
after its expected completion.
_____________7. Manny Pacquaio is one of the richest athletes in the world. As such, he operates many
businesses. On the overall, his businesses combined are yielding a net income although he suspects that
one or two of his businesses are incurring a net loss. All business reports from Luzon, Visayas, and
Davao, yield a profit. However, he cannot pin point which particular business from what specific area
should be closed since the financial data of all the businesses are consolidated on a per area basis. As
such, different businesses in Davao are reported under the Davao Business financial statement. This
holds true for businesses in Luzon and Visayas.
_____________8. The Philippine government is known for its under the table “lagay” system. In order to
record these unsupported expenses, Sincere Corporation summed up all its undocumented under the
table transactions with the government officials under the account title "Facilitation Expenses”.
IV. Multiple Choice. Write the letter that represents the correct answer on the blank.
______1. The process of identifying, measuring, and communicating the economic activities of a
business enterprise in order to assist users of a financial statement in making informed judgment is
a) Transacting
b) Computing
c) Accounting
d) Costing
______2. The principle that supports the assumption that the same Generally Accepted Accounting
Principles have been applied in the preparation of a company's successive financial statements.
a) Objectivity Principle
b) Historical Cost
c) Adequate Disclosure
d) Consistency
a) Assets
b) Liabilities
c) Owner's Equity
a) Market Value
b) Historical Cost
c) Assessed Value
d) Inflation Value
______5. The concept that requires the distinction between the personal assets and liabilities or a
proprietor from his business assets and liabilities
a) Entity
c) Periodicity
______6. X Co. bought a pencil sharpener at a cost of P85.00. It 1s estimated to have a useful
life of 10 years: Because of the length of its useful life, the accountant recorded this
a) Objectivity
b) Consistency
c) Historical Cost
d) Materiality
______7. The start of X company's accounting period is October I and ends September 30 of
a) Fiscal Year
b) Lunar Year
c) Calendar Year
a) Service Company
b) Merchandising Company
c) Manufacturing Company
______9. In order to update the assets' records with increases in their current market values,
Fidas Co. adjusts the balance sheet amounts for assets whenever there is a change in
a) Materiality
b) Accrual Principle
c) Consistency
d) Historical Cost
______10. It is a service activity whose purpose is to provide quantitative information about the
a) Accounting
b) Transaction
d) Business Organization
a) Assets
b) Liabilities
c) Owner's Equity
a) Fiscal Year
b) Lunar Year
c) Calendar Year
a) Debtor
b) Creditor
c) Owner
______14. This is the phase of accounting that makes accounting the language of business
a) Recording
b) Classifying
c) Summarizing
d) Interpreting
a) Cost
b) Assessed Value
c) Market Value
d) Book Value
______17. A company that is engaged in the processing of raw materials to finished goods intended for
sale
a) Service Company
b) Merchandising Company
c) Manufacturing Company
1.___________________________________________
2.___________________________________________
3.___________________________________________
1.___________________________________________
2.___________________________________________
3.___________________________________________
VI. State what type of business activity is performed by each of the 1oliowing establishments.
drugstore _______________________________________________________________
furniture _______________________________________________________________
factory _______________________________________________________________
grocery _______________________________________________________________
boutique _______________________________________________________________
supermarket ______________________________________________________________
hardware _______________________________________________________________
_____1. Obligations arising from a business' past transactions which are expected to be settled from the
company's economic resources
_____3. Cash flow classification of cash receipts or cash payments for the purchase or sale of the entity's
property and equipment Monetary loans to employees payable through salary deductions or cash
_____5. The account charged to customers for goods sold or services rendered
_____6. Resources consumed or cash outflows resulting to future economic benefits that decrease
owner's capital other than owner's personal drawing
_____7. A financial statement that shows the inflows and outflows of cash from operating activities,
investing activities, and financing activities over a period of time
_____8. This is the resulting figure when expenses exceed revenues in the income statement
_____11. Cash flow classification of cash receipts and cash payments arising from normal operations of
the business
_____12. A report showing the business worth as of a given period of time in terms of business'
resources, debts, as well as the investments and withdrawals of the owner
_____15. Inflows of future economic benefits that increase owner's equity other than investments by
the owner
_____16. Interest due and collectible from promissory note received from customers
_____19. The cash flow classification of cash receipts and payments from the owners and creditors of
the business
II. Identify the accounting term that best suits each statement.
_____________2. Cash flows from transactions that relate to net income on the income statement
_____________3. The residual interest in the assets of an entity that remains after deducting the
liabilities
_____________4. Outflows of assets or increases in liabilities incurred to perform services or sell goods
_____________5. Increases in owner's capital that result from operating the business
_____________6. Probable future sacrifices of economic benefits arising from present obligations of a
particular entity to transfer assets or provide services to other entities in the future as a result of past
transactions or events.
_____________8. The statement that shows all the reasons why cash on an entity's balance sheet
changed from one date to another.
_____________11. Cash flows from transactions that relate to obtaining resources from owners and
providing them a return on their investment and obtaining resources from creditors and repaying
amounts borrowed
_____________12. Probable future economic benefits obtained or controlled by a particular entity as a
result of past transactions or events
_____________14. Decreases in owner's capital that result from operating the business
_____________15. Cash flows from transactions that relate to buying and selling of plant assets, buying
and selling investment securities, and lending money and collecting on the loans
_____________16. This reports the cash coming in and the amount of cash going out during a period
_____________17. This lists all the entity's assets, liabilities, and owner's equity as of a specific date,
usually the end of a month or a year
_____________18. This presents a summary of an entity's revenues and expenses there by providing a
moving picture of operations during a period of time such as a month or a year.
_______1. The net cash from financing activities shows the net cash inflow or outflow from additional
financing a business needs to pay for operating and investing activities.
_______2. Financial position refers to the economic resources belonging to a company and the claim
against those resources at a point in time.
_______3. Transactions that affect the net income are revenue, expenses, and additional investment.
_______4. The net cash from investing activities shows the cash inflows from buying new long-term
assets and the cash outflows from selling old long-term assets used in the business.
_______5. The balance sheet presents a view of the business as the holder of resources of assets that
are equal to the sources of or claims against those assets.
_______6. The net cash from operating activities shows the difference between cash received from
revenues and cash paid for expenses on the income statement.
_______7. An accounting entity is any organization unit for which we gather and process financial and
economic data for the purpose of decision making.
_______8. One of the primary concerns of many financial statement users 1s the profitability of the
business.
_______9. Preparation of the balance sheet maybe made in any of the following forms namely: account
form, report form, and financial position form.
_______10. Because the income statement shows the results of operations, it is considered more
important than the balance sheet.
_______11. In listing assets in the balance sheet, the most important asset is listed first followed by the
asset of lesser importance
_______12. In accounting, profit and income have the same meaning and can be used interchangeably.
_______13. The basic financial position of a company is shown in the income statement.
_______14. Obligations that are not yet due need not be shown in the balance sheet.
_______15. The owner's equity account of a sole proprietorship represents only the original investment
and additional investment of the owner.
_______16. If the statement of financial position and the statement of comprehensive income are
presented together, the heading of the income statement may be omitted as the balance sheet already
has a heading.
_______18. The owner's drawing and net income are two factors that bring about a decrease in
proprietorship
_______19. The amount of receivables approximated to have a low probability of collection charged as
expense for the period is called Doubtful Accounts Expense.
IV. Multiple Choice. Write the letter that represents the correct answer on the blank.
1. This is the final figure in the income statement when expenses exceed revenue
a) Net Income
b) Net Loss
c) Ending Capital
d) Beginning Capital
2. A balance sheet in which the sections of the liabilities and the owner's equity are
3. Reports which summarize the financial position and results of operations of a business
a) Financial Statements
b) Interim Reports
b) Income Statement
c) Balance Sheet
c) his withdrawal
8. A balance sheet in which the sections of the liabilities and the owner's equity a listed on the right of
the assets section is
9. The amount of assets consumed or services used in the process of earning a revenue
a) income
b) assets
c) expenses
d) liabilities
10. Obligations that must be paid within twelve months or in the normal course of the business'
operating cycle
a) current liabilities
b) non-current liabilities
c) other liabilities
1. If the economic obligations of a business amount to ₱120,000 and its residual interest amounts to
₱195,000, what is the amount of the economic resources of the business?
2. If the economic resources of a business amount to ₱1,120,000 and its economic obligations amount
to ₱880,000, what would be its residual interest?
3. If the economic resources of a business amount to P500,000 and its residual interest amounts to
₱199,000, what is the amount of its economic obligations?
4. If total liabilities amount to ₱2,196,000 which is 60% of the total assets, what is the amount of the
total assets of the business?
5. If owner's equity is thrice the total liabilities which is 25% of total assets, what would be the owner's
equity of the business? The amount of total assets is ₱720,000.
6. If the total owner's equity of Grand Services is ₱180,000 which is of the total assets, what would be
the amount of its total liabilities?
7. If the economic obligations of a business amount to F696,000 and its residual interest amounts to
₱385,000, what is the amount of the economic resources of the business?
8. The economic resources of a business amount to ₱920,000 and its economic obligations amount to
₱476,000, what would be its residual interest?
9. If the economic resources of a business amount to ₱1,500,000 and its residual interest amounts to
₱998,000, what is the amount of its economic obligations?
10. If owner's equity is ₱333,000 which is 1/3 of the total assets, how much is the total liabilities of the
business?
VIII. Answer the following questions. Show your computations in good form.
1. lf owner's equity is ₱250,000 which is 40% of the total assets, how much is the total liabilities of the
business?
2. If the economic resources of a business amount to ₱4,800,000 and its residual interest amounts to
₱2,995,000, what is the amount of its economic obligations?
3. The economic resources of a business amount to ₱3,200,000 and its economic obligations amount to
₱1,888,000, what would be its residual interest?
4. If the total owner's equity of Ace Studio is P960,000 which is of the total assets, what would be the
total liabilities of the business?
5. If the economic obligations of a business amount to ₱169,000 and its residual interest amounts to
284,000, what would be the amount of the economic resources of the business?
6. The economic resources of a business amount to P686,000 and its economic obligations mount to
₱225,000, what would be its residual interest?
7. If total liabilities amount to ₱550,000 which is of the total assets, what is the amount of the residual
interest of the business?
8. If owner's equity is twice the total liabilities which is 1/3 of total assets, what would be the owner's
equity of the business? The amount of total assets is ₱600,000
9. If the residual interest of a business amounts to ₱800,000 which is 40% of the total assets and 2/3 of
the total economic obligations, what are the amounts of the economic resources and economic
obligations of the business?
10. If the economics resources of the business is 180% of its residual interest and its residual interest is
120% of its economic obligations, how much are the total economic resources and residual interest of
the business if its economic obligations is ₱750,000.
IX. The Stay Healthy Medical Clinic's Balance sheet on December 31, 2011 showed an owner's equity
of ₱1,280,000. The December 31, 2012 balance sheet showed an owner's equity of ₱1520,000. During
the year, the owner withdrew ₱210,000 for personal use. What is the net income or net loss for the
year 2012? Present the owner’s equity statement for year ended December 31, 2012.
X. Mighty Minds Tutorial Center's statement of financial position on December 31, 2011 showed an
owner's equity of ₱1,664,000. The December 31, 2012 statement of financial position showed owner's
equity of ₱1,976,000. During the year, the owner withdrew ₱273,000 for personal use. What is the net
income or net loss for the year 2012. Present the statement of owner's equity for year ended
December 31, 2012.
XI. The capital of The Little Tike's Tutorial Services owned and operated by Ms. Jean showed a
beginning balance of ₱301,000. At the end year, results of operations showed a net income of
₱96,000. During the year, Ms. Jean withdrew ₱18,900 for personal use. Prepare the statement of
changes in owner's equity for The Little Tike's Tutorial Services for the year ended December 2012.
XII. Assuming Ms. Jean did not make any withdrawal for the year but instead made an additional
investment of ₱30,000 and the business incurred a net loss of ₱28,000, prepare the statement of
changes in owner's equity for the year ended December 31, 2012.
XIII. The Jupiter Spa owned and operated by Mr. Joe showed a beginning balance of P391.300. The
results of operations at end of the year yielded a net loss of ₱124,800. During the year, Mr. Joe
withdrew ₱24,570 for personal use. Prepare the statement of owner's equity for Jupiter Spa for year
ended December 31, 2012.
XIV. Assuming Mr. Joe withdrew ₱5,000 for the year and made an additional investment of ₱30,000,
and the business incurred a net income of ₱36,400, prepare the statement of changes owner's equity
for the year ended December 31, 2012.
XV. The information presented below are taken from the books of Mr. Joey Lao for the year ended
December 31, 2013. Determine the amount of withdrawals by preparing the statement of changes in
Owner's Equity.
Jan 1 Dec. 31
Assets ₱200,000 ₱300,000
Liabilities 80,000 120,000
Joey Lao made an additional investment of ₱40,000 during the year. Revenue and expenses during the
year amounted to ₱180,000 and ₱80,000 respectively.
XVI. The following information are taken from the books of Floring's Bake Shop for the year ended
December 31, 2012. Determine the amount of additional investment by preparing the statement of
changes in owner's Equity.
Floring withdrew ₱104,000 during the year but made an additional investment of ₱52,000. Revenue
and expenses during the year amounted to ₱234,000 and ₱237,000 respectively.
XVII. Refer to the preceding problem, assume Flora made an additional investment and a personal
withdrawal of ₱155,000 during the year while revenue amounted to ₱120,000. Determine the amount
of expenses for the year.
XVII. Refer to problem XVI, assuming Flora made an additional investment of 75,000 and a personal
withdrawal of ₱188,000 during the year. Current year's expenses amounted to ₱68,000. Determine
the revenue for the year.
XIX. Given the following information, determine the net increase/decrease in owner's capital for the
current year.
During the year, the owner made an additional investment of ₱100,000 but made a cash withdrawal
of ₱220,000.
XX. Given the following information, determine the net increase/decrease in owner's equity for the
current year.
Additional investment during the year amounted to ₱80,000 and cash withdrawals totaled
₱150,000.
XXI. Compute for the missing figure in each of the following independent cases.
A B C D
Owner's Equity, ₱50,000 ₱200,000 ₱30,000 ?
Jan1
Additional 25,000 ? 15,000 40,000
Investment
Withdrawal 60,000 3,000 8,000
Revenue 20,000 140,000 ? 32,000
Expenses 10,000 100,000 6,000 16,000
Owner's Equity, ₱80,000 ₱300,000 ₱48,000 128,000
Dec 31
XXII. Compute the missing figure in each of the following independent cases.
A B C D
Owner's Equity, ₱65,000 ? ₱39,000 ₱104,000
Jan 1
Additional ? 78,000 3,900 10,300
Investment
Withdrawal 32,500 156,000 19,500 ?
Revenue 26,000 182,000 ? 41,500
Expenses 13,000 130,000 7,800 20,800
Owner's Equity, ₱104,000 ₱360,000 ₱52.400 ₱166,400
Dec 31