11

Fundamentals of Accountancy, Business

and Management 1

Quarter 3 – Week 1 - 9
Learning Activity Sheets (LAS)

SCHOOLS DIVISION OF DINAGAT ISLANDS

Fundamentals of Accountancy, Business and Management 1
3rd Quarter – Learning Activity Sheets
Week 1-9
First Edition, 2020

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The publisher and authors do not represent nor claim ownership over them.

Published by Schools Division of Dinagat Islands

Development Team of the Learning Activity Sheets

Writer: Liezl I. Pertos

Editor: Emely S. Gimena & Carl Vincent B. Linaga
Reviewers:Edeliza F. Seguiz, Dr. Rene G. Ebol& Dr. Michael C. Paso
Layout Artist:Fernando M. Galito
Management Team:
Schools Division Superintendent FELISA G. LARANJO, PhD, CESO VI
OIC, Assistant Schools Division Superintendent LEONEVEE V. SILVOSA, CESE
Chief Education Supervisor, SGOD MILA O. GERALDINO, PhD
Chief Education Supervisor, CID LOPE C. PAPELERAS, PhD
Education Program Supervisor, SHS EDELIZA F. SEGUIZ
Education Program Supervisor, LRMS MICHAEL C. PASO, PhD

Printed in the Philippines by ______________________________

Department of Education – Learning Resource Management Section

Office Address: White Beach, Dinagat, Dinagat Islands
E-mail Address: [email protected],
[email protected]
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Week
1 General Overview of Accounting

Name: ________________________________________ Section: ________________________

Objectives:
1. Define Accounting (ABM_FABM11-IIIa-1)
2. Describe the nature of Accounting (ABM_FABM11-IIIa-2)
3. Narrate the history/origin of accounting (ABM_FABM11-IIIa-4)
4. Define external users and give example (ABM_FABM11-IIIa-7)
5. Define internal users and give example (ABM_FABM11-IIIa-8)

PRE- TEST:
Directions: Choose the letter corresponding to the correct answer for each of the
question provided below.

1. The selecting of economic events that are relevant to a particular business

transaction is called __________.
A. classifying C. measuring
B. identifying D. recording
2. Keeping a chronological diary of events that are measured in pesos is
___________.
A. interpreting C. summarizing
B. recording D. verifying
3. Occurs through the preparation and distribution of financial and other
accounting reports is ___________.
A. classifying C. recording
B. communicating D. measuring
4. Accounting provides assistance to decision makers by providing them
financial reports that will guide them in coming up with sound decisions is
called _____________.
A. a process C. an information system
B. a service activity D. an art and a discipline
5. Collects processes and communicates financial information of any entity is
______________.
A. a process C. an information system
B. a service activity D. an art and a discipline
6. The method of performing any specific job step by step according to
the objectives or targets is ____________.
A. a process C. an information system
B. a service activity D. an art and a discipline
7. Dealt with commercial transactions at the time of Mesopotamia such as
listing of accounts receivable and accounts payable is during _________.
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 A. The cradle of civilization C. The industrial revolution (1760-1830)
B. French revolution (1700’s) D. 14thcenturydouble-entry bookkeeping
8. Mass production and the great importance of fixed assets were given
attention during the period of ____________.
A.The cradle of civilization C. The industrial revolution (1760-1830)
B.French revolution (1700’s) D. 14thcentury double-entry bookkeeping
9. The most important event in accounting history is generally considered to be
the dissemination of double entry bookkeeping by Luca Pacioli happened
during _______________.
A.The cradle of civilization C. The industrial revolution (1760-1830)
B.French revolution (1700’s) D.14thcentury double-entry bookkeeping
10. Thorough study of accounting and development of accounting theory
began during the period of ______________.
A.The cradle of civilization C. The industrial revolution (1760-1830)
B.French revolution (1700’s) D.14thcentury double-entry bookkeeping

Key Concepts:
Definition of Accounting

Accounting is the process of identify, recording, and communicating

economic events of an organization to interested users. (Weygandt, J. et.al).

Identifying- this involves selecting economic events that are relevant to a

particular business transaction. The economic events of an organization are
referred to as transactions. Example of economic events or transaction – In a
bakery business:

Sales of bread and other bakery products

Purchases of flour that will be used for baking
Purchases of trucks needed to deliver the products

Recording – This involve keeping a chronological diary of events that are

measured in pesos. The diary referred to in the definition is journals and
ledgers which will be discussed in future chapters.

Communicating – Occurs through the preparation and distribution of

financial and other accounting reports.

Accounting is commonly called the “Language of Business” wherein it

delivers financial information to different users through financial
statements.
Nature of Accounting

According to the accounting theory, accounting is a systematic recording of

financial transaction and the presentation of related information to
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
appropriate persons. Based on this definition we can derive the following
basic features of accounting:

Accounting is a service activity. Accounting provides assistance to decision

makers by providing them financial reports that will guide them in coming
up with sound decisions.
Accounting is a process. A process refers to the method of performing any
specific job step according to the objective or targets. Accounting is identified
as a process, as it performs the specific task of collecting, processing and
communicating financial information. In doing so, it follows some definite
steps like the collection, recording, classification, summarization,
finalization, and reporting of financial data.
Accounting is both an art and a discipline. Accounting is the art of
recording, classifying, summarizing and finalizing financial data. The word
“art” refers to the way something is performed. It is behavioural knowledge
involving a certain creativity and skill to help us attain some specific
objectives. Accounting is a systematic method consisting of definite
techniques and its proper application requires skill and expertise. So by
nature, accounting is an art. And because it follows certain standards and
professional ethics, it is also a discipline.
Accounting deals financial information and transactions. Accounting records
financial transactions and data, classifies these and finalizes their results
given for a specified period of time, as needed by their users. At every stage,
from start to finish, accounting deals with financial information and
financial information only. It does not deal with non-monetary or non-
financial aspects of such information.
Accounting is an information system. Accounting is recognized and
characterized as a storehouse of information. As a service function, it
collects processes and communicates financial information of any entity.
This discipline of knowledge has evolved to meet the need of financial
information as requires by various interested groups.

History of Accounting

Accounting is as old as civilization itself. It has evolved in response to various social

and economic needs of men. Accounting started as a simple recording of repetitive
exchanges. The evolution of accounting:

Cradle of Civilization – The oldest evidence of this practice was the “clay tablet” of
Mesopotamia which dealt with commercial transactions at
the time such as listing of accounts receivable and
accounts payable.

14th Century – Double-Entry Bookkeeping

French Revolution (1700s) - The thorough study of accounting and development of

accounting theory began during this period. Social
upheavals affecting government, finances, laws, customs
and business had greatly influenced the development of
accounting.

The Industrial Revolution (1760-1830) – Mass production and great importance of

fixed assets were given attention.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
19th Century – The beginnings of Modern Accounting in Europe and America.

The Present – The Development of Modern Accounting Standards and Commerce.

The External and Internal Users of Financial Information

According to Slavin and Reynolds, Accounting is the discipline that provides

information on which external and internal users of the information may base
decisions that result in the allocation of economic resources in society.

INTERNAL USERS – Internal users of accounting information are those individuals

inside a company who plan, organize, and run the business. These are directly
involved in managing and operating the Business. These include marketing
managers, production supervisors, finance directors, company officers and owners.

EXTERNAL USERS – External users are individuals and organizations outside a

company who want financial information about the company. These users are not
directly involved in managing and operating the business. The two most common
type of external users are potential investors and creditors.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity 1 : Define Me!
Direction: Fill in the graphic organizer by writing the definition of accounting and
Cite one example.

______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________

ACCOUNTING is the
process of

________________________
________________________
________________________
________________________
________________________
________________________
________________________
_________________

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity 2: Infomercial
Instructions:
1. You will create an infomercial on the nature and evolution/ history of
accounting.
2. Be creative
3. Submit your video presentation only in one file through cell phone, USB, or
any of your convenience.
Guidelines :

Use any media platform at your convenience

Minimum of 5 minutes and Maximum of 2 minutes only
You can use Mother tongue, tagalong or English as language
Wear casual attire

RUBRICS FOR INFOMERCIAL

Score (Points)
30 pts Content
10 pts Creativity
5 pts Communication Skills/Delivery
5 pts Over-all presentation
50 pts Total

Activity 3: Identify
Direction: Identify the word below whether it is internal or external users of
accounting information by checking the box.

USERS Internal External

1. Board of Directors
2. Customers
3. Supervisors
4. Labor Unions
5. Creditors
6. Management
7. Employees
8. Investors
9. Tax Authorities
10.Owners

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity 4 : Essay
Direction: Write down your ideas about the questions below.

1. How would you apply accounting in your daily life especially in this time of
pandemic?
2. What do you think is the significance of accounting in business and in your
personal life?

RUBRICS FOR ESSAY

Score (Points)
50 pts Content
20 pts Original thinking
20 pts Understanding/Application
10 pts Structure (Spelling, punctuation)
100 pts Total

Reflection:
Direction:
Now that you have completed your worksheet for this week, write your
reflection about what you have learned from the lesson. Your reflections should
include your opinion, personal experience, and evidence to back up your thoughts.
The purpose of this is to ensure you are processing your thoughts on the content of
the lesson. Write your reflection on the space provided below.

I learned that……………
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Post-test : Multiple Choices
Direction: Choose carefully the letter that best describes your answer. Write your
answer in the space provided before the number.

1. The method of performing any specific job step by step according to

the objectives or targets is ____________.
A. A process C. An information system
B. A service activity D. An art and a discipline
2. Dealt with commercial transactions at the time of Mesopotamia such as
listing of accounts receivable and accounts payable is during _________.
A. The cradle of civilization C. The industrial revolution (1760-1830)
B. French revolution (1700’s) D.14thcenturydouble-entry bookkeeping
3. Mass production and the great importance of fixed assets were given
attention during the period of ____________.
A.The cradle of civilization C. The industrial revolution (1760-1830)
B.French revolution (1700’s) D. 14thcentury double-entry bookkeeping
4. The most important event in accounting history is generally considered to be
the dissemination of double entry bookkeeping by Luca Pacioli happened
during _______________.
A.The cradle of civilization C. The industrial revolution (1760-1830)
B.French revolution (1700’s) D.14thcentury double-entry bookkeeping
5. Thorough study of accounting and development of accounting theory
began during the period of ______________.
A.The cradle of civilization C. The industrial revolution (1760-1830)
B.French revolution (1700’s) D.14thcentury double-entry bookkeeping
6. The selecting of economic events that are relevant to a particular business
transaction is called __________.
A. Classifying C. Measuring
B. Identifying D. Recording
7. Keeping a chronological diary of events that are measured in pesos is
___________.
A. Interpreting C. Summarizing
B. Recording D. Verifying
8. Occurs through the preparation and distribution of financial and other
accounting reports is ___________.
A. Classfying C. Recording
B. Communicating D. Measuring
9. Accounting provides assistance to decision makers by providing them
financial reports that will guide them in coming up with sound decisions is
called _____________.
A. A process C. An information system
B. A service activity D. An art and a discipline
10. Collects processes and communicates financial information of any entity is
______________.
A. A process C. An information system
B. A service activity D. An art and a discipline

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
References:

Licuanan P. (2016). Teaching Guide for Senior High School

Fundamentals of Accountancy, Business and
Management 1
Specialized Subject I ACADEMIC – ABM
Published by the Commission on Higher Education,

Accountingtheory(n.d) Retrieved from http://accountingtheory.weebly.com/nature-

and-scope-of-accounting

Answers Key

Post-Test
Item no. Pre-Test Activity 3
Multiple Choice
1 B Internal A
2 B External A
3 Internal C
B
4 B Internal D
5 C External B
6 A Internal B
7 A Internal B
8 C External B
9 D External B
10 B Internal C

Activity 1

Identifying- this involves selecting economic events that are relevant to a

particular business transaction.

Recording – This involve keeping a chronological diary of events that are

measured in pesos.

Communicating – Occurs through the preparation and distribution of

financial and other accounting reports.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Week ACCOUNTING CONCEPTS &
2 PRINCIPLES

Name: ________________________________________ Section: ________________________

Objectives:
1. Explain varied accounting concepts and principles (ABM_FABM11-
IIIb-c-15)
2. Solve exercises on accounting principles as applied in various cases
(ABM_FABM11-IIIb-c-16)

Pre-test
Direction: Choose carefully the letter that best describes your answer. Write your
answer on the space provided before the number.

_______1. Which accounting guideline that requires financial statement information

to be supported by independent, unbiased evidence other than someone’s
belief or opinion?
A. Business entity principle
B. Cost principle
C. Going-concern principle
D. Monetary unit principle
E. Objectivity principle
________2. It is a principle that requires every business to be accounted for
separately and distinctly from its owner or owners?
A. Business entity Principle
B. Cost Principle
C. Going-concern principle
D. Revenue recognition principle
E. Objectivity principle
________3. What rule that requires financial statements to reflect the assumption
that the business will continue operating instead of being closed or sold,
unless evidence shows that it will not continue?
A. Cost principle
B. Business entity principle
C. Going-concern principle

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 D. Monetary principle
E. Objectivity principle
________4. The principle that includes the personal assets and transactions of a
business’s owner in the records and reports of the business would be in
conflict with?
A. Business entity principle
B. Going-concern principle
C. Realization principle
D. Revenue recognition principle
E. Objectivity principle
________5. Objectivity principle means?
A. A business may not re-organize revenue until cash is received
B. Information is supported by independent, unbiased evidence
C. Information can be based on what the preparer thinks is true
D. Financial statement should contain information that is optimistic

Key Concepts:
Accounting is called the language of business. It communicates the financial
condition and performance of a business to interested users of decision-making
purposes.
A widely accepted set of rules, concepts and principles refers to as the
Generally Accepted Accounting Principles (GAAP) governs the application of
accounting procedures. This has been developed by the accounting professionals to
guide prepares of financial statements in recording and reporting financial
information regarding a business enterprise, hence aiding in the effective execution
of the accounting procedure and in communicating the financial condition of the
business.
In addition to those concepts, there are other, more technical standards
accountants must follow when preparing the financial statements. The accounting
standards used in the Philippines are the Philippine Accounting Standards (PAS)
and Philippines Financial Reporting Standards (PFRS).
These are following principles governs the application of accounting procedures.
Business entity principle – a business enterprise is separate and district from
its owner or investor.
Examples:
 If the owner has a barbershop, the cash of the barbershop should be
reported separately from personal cash.
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
  The owner had a business meeting with a prospective client. The expenses
that come with that meeting should be part of the company’s expenses.
 If the owner paid for gas for his personal use, it should not be included as
part of the company’s expenses.
Going concern principle – Business is expected to continue indefinitely.
Example:
 When preparing financial statements, you should assume that the entity will
continue indefinitely.
Time period principle – Financial statements are to be divided into specific
time intervals.
Example:
 Philippine companies are required to report financial statements annually.
 The salary expenses from January to December 2015 should only be
reported in 2015.
Accounting Period - This principle entails a business to complete the whole
accounting process over a specific operating time period. Accounting period may
be monthly, quarterly or annually. For annual accounting period, it may follow
a Calendar or Fiscal year.
Example:
 The owner can monitor the results of the business operations periodically
either monthly, quarterly, annually to check whether it is profitable or not.
Monetary unit principle – Amounts are stated into a single monetary unit.
Example:
 Jollibee should report financial statements in pesos even if they have branch
in the United States.
 IHOP should report financial reports in dollars even if they have a branch
here in the Philippines.
Historical Cost – all business resources acquired should be valued and
recorded based on the actual cash equivalent or original cost of acquisition, not
the prevailing market value or future value. The exception to the rules is when
the business is in the process of closure and liquidation.
Example:
 The cost of fixed assets is recorded at the date of acquisition cost. The
acquisition cost includes all expenditure made to prepare the asset for its
intended use. It includes the invoices price of the assets, freight charges,
insurance, and installation cost if any.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Objectivity principles – financial statements must be presented with
supporting evidence.
Example:
 When the customer paid Jollibee for their order, Jollibee should have a copy
of the receipt to represent as evidence.
Cost principle – Accounts should be recorded initially at cost.
Example:
 When Jollibee buys a cash register, it should record the cash register at its
price when they bought.
 When a company purchase a laptop, it should be recorded at the price it was
purchased.
Accrual Accounting principle – revenue should be recognized when earned
regardless of collection and expenses should be recognized when incurred
regardless of payment. On the other hand, the cash basis principle in which
revenue is recorded when collected and expenses should be recorded when paid.
Cash basis is not the generally accepted principle today.
Example:
 When a barber finishes performing his services he should record it as
revenue. When the barbers shop receives an electricity bill, it should record
as an expense even if it is not unpaid.
Matching principles – cost should be matched with the revenue generated.
Example:
 When you provide tutorial services to a customer and there is a
transportation cost incurred related to the tutorial services, it should be
recorded as an expense for that period.
Disclosure principles – all relevant and material information should be
reported.
Example:
 The company should report all relevant information.
Conservatism principle – also known as prudence. In case of doubt, assets
and income should not be overstated while liabilities and expenses should not
be understated.
Example:
 In case of doubt, expenses should be recorded at a higher amount. Revenue
should be recorded at a lower amount.
Consistency Principle – The consistency principles states that companies
should use the same accounting treatment for similar events and transaction
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 over time. The consistency principle does not state that business always have to
use the same accounting method forever.
Example:
 Rox Zy Computers, a computer retailer, has historically used FIFO for
valuing its inventory. In the last few years, the business has become quite
profitable and Rox Zy accountant suggests that Rox Zy switches to LIFO
inventory system to minimize taxable income. According to the consistency
principle, Rox Zy Computers can change accounting methods for justifiable
reason. Minimizing taxes as a justifiable reason is debatable.
Materiality principle - in case of assets that are immaterial to make a
difference in financial statements, the company should instead record it as an
expense.
Example:
 A school purchased an eraser with an estimated useful life of three years.
Since an eraser is immaterial relative to assets, it should be recorded as an
expense.

Qualitative Characteristics of Financial information

Relevance - the concept of relevance implies that financial statement can
have predictive value and feedback value. This means the financial
statements are accurate and can be used to predict future company
performance.
3 Main Characteristics of Relevant Accounting Information:
 Predictive Value
 Feedback Value
 Timeless

Activity 1 – Identification
Direction: Identify the word below whether it is Underlying Accounting
Assumptions or Basic Accounting Principles in accounting standards by checking
the box.

Accounting Accounting
Accounting Concepts
Assumptions Principles
1. Accrual Basis
2. Going Concern

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 3. Monetary Unit
4. Full Disclosure
5. Materiality

Activity 2 – Match in the Box

Direction: Match the following accounting principles with their definition.

a. Going concern principle e. Time period principle h. Monetary unit principle

b. Objectivity principle f. Cost principle i. Accrual accounting principle

c. Matching principle g. Disclosure principle j. Conservatism principle

d. Materiality principle

________1. All relevant information should be included in the financial reports

________2. In case of doubt, asset and income should not be overstated

________3. Assume that the company will continue indefinitely.

________4. All transactions should be supported by unbiased evidence.

________5. Expenses should be recorded in the period when the revenue is

generated.

________6. Minimal costs incurred should be recorded as an expense.

________ 7. A Philippine company should report financial statements in pesos.

________ 8. A barber who performs services for a client should record revenue.

_________9. Statement of Financial position should be recorded as of December

31,2015.

________10. A company that purchases furniture should record it at its acquisition

price.

Activity 3 – What Kind of

Direction: Accounting principles. Indicate which principles are violated. Write your
analysis on the line provided.
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 1. The owner-manager bought a computer for personal use. The invoice was
given to accountant who recorded it as an asset of the business.

___________________________________________________________________________

2. The statement of financial position of a company included equipment

purchased from Japan for 350,000 yen. It was reported at that amount in
the statement of financial position while all the assets were reported in
Philippines pesos.

___________________________________________________________________________

3. No financial statements were prepared by Michael Go for his business. He

explained that he will prepare the statements when he closes the business,
which he predicts to take place after 20 years.

___________________________________________________________________________

4. Aside from owning a shoe store, Albert operates a canteen. The assets of the
canteen are reported in the statement of financial position of the shoe store.

___________________________________________________________________________

5. Purchased a hammer at a cost of P500. This was recorded as an asset and

expense to decrease its value by P50 per year for 10 years.

Activity 4 – Included or Not (Application of the Business Entity Principle)

Direction: Answer the questions below.

Petness First Petshop

Angela Mijas opened her pet shop business called Petness First Petshop. She
opened a bank account for her business and deposited P500,000. The business
earned P50,000 but she had doubts with the recorded expense of P60,000. She is
not sure if she should include the following items as expenses:

Salary expense ------------------------------- P20,000

Rent expense ------------------------------ 10,000
Utilities expense (at home) ----------------- 15,000
Utilities expense (at the store) ------------- 10,000
Insurance expense --------------------------- 5,000
Withdrawals ---------------------------------- 10,000
TOTAL ----------------------------------------- 60,000

__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity 5 – Problem Analysis
Direction: Solve the following exercises.

Question 1: Emon runs a real estate development firm. Five years ago, he
purchased a piece of land for P250,000. This year, an appraiser tells
Emon that the land is worth P300,000. At what value should Emon
report the land on his balance sheet? Why?

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

Question 2: Clarky is the sole owner of his firm, In June, he moves P30,000 from
his business checking account to his personal checking account. If
Clarky wants his financial records to be in accordance with GAAP,
should he record the transaction or not? Why?

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

Reflection:
Rate yourself. For each parameter, please put a check that shows a degree of your
understanding.

Not
Really
Parameters Awful Very Good Brilliant
Good
Good
I can identify generally
accepted accounting principles.
I can describe the basic
assumptions and principles of
accounting
I can explain the basic
principles of accounting.
I can solve problems on
accounting principles.
I can apply accounting
principles in various cases.

Post-test
Direction: Choose carefully the letter that best describes your answer.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
_______1. It is a principle that requires every business to be accounted for
separately and distinctly from its owner or owners?
A. Business entity Principle
B. Cost Principle
C. Going-concern principle
D. Monetary unit principle
E. Objectivity principle
________2. Which accounting guideline that requires financial statement
information to be supported by independent, unbiased evidence other
than someone’s belief or opinion?
A. Business entity principle
B. Cost principle
C. Going-concern principle
D. Monetary unit principle
E. Objectivity principle
________3. What rule that requires financial statements to reflect the assumption
that the business will continue operating instead of being closed or sold,
unless evidence shows that it will not continue?
A. Cost principle
B. Business entity principle
C. Going-concern principle
D. Monetary principle
E. Objectivity principle
________4. Objectivity principle means?
A. A business may not re-organize revenue until cash is received
B. Information is supported by independent, unbiased evidence
C. Information can be based on what the preparer thinks is true
D. Financial statement should contain information that is optimistic
_________5. The principle that includes the personal assets and transactions of a
business’s owner in the records and reports of the business would be in
conflict with?
A. Business entity principle
B. Going-concern principle
C. Realization principle
D. Revenue recognition principle
E. Objectivity principle
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
References:

Teaching Guide for Senior High School

Fundamentals of Accountancy, Business and
Management 1
Specialized Subject I ACADEMIC – ABM
Published by the Commission on Higher Education,
2016 Chairperson: Patricia B. Licuanan, Ph.D.

Accounting Theory (n.d) Retrieved from

http://accountingtheory.weebly.com/nature-and-scope-of-accounting

Answer Key

Post-Test
Item Pre-
Activity 1 Activity 2 Activity 3 Activity 4 Multiple
no. Test
Choice
1 E Accounting G Business B
Assumptions entity
2 B Accounting J Monetary E
Assumption unit
3 A Accounting A Time Period A
Assumption
4 B Basic B Business A
Principles entity
5 A Basic C Materiality B
Principles
6 D
7 H
8 I
9 E
10 F

Activity #4- Answer Key

1. Salary expense – It should be included since it is related to the operations of
the business
2. Rent Expense – It should be included since the rent is for the business
3. Utilities expense(home) – should not be included; it is a personal expense
4. Utilities expense (store) – should be included; it is an expense of the
business
5. Insurance expense – should be included since the insurance is for the
business
6. Withdrawals – should not be included since the withdrawals is for personal
use.
Activity # 5 – Answer Key

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 1. Emon should report the land at its original cost: P250,000. Under GAAP’s
“Historical cost” assumption assets are reported at their historical cost
rather than at their current market value. This is done in order to remove
subjective assets violations from reporting process.
2. Yes, in order to be in compliance with GAAP, Clarky must record
transaction, GAAP’s “Entity Assumption” considers business to be separate
entities from their owners. As such, transactions between a business and its
owners must be recorded as they were between the business and an entirely
separate party.

Week
3
THE ACCOUNTING EQUATION

Name: ________________________________________ Section: ________________________

Objectives:
1. Illustrate the Accounting Equation (ABM_FABM11-IIIb-c-17)
2. Perform operation involving simple cases with the use of accounting
equation (ABM_FABM11-IIIb-c-18)

Pre-Test
Direction: Select the letter of the best answer.

1. It shows the relationship between a company’s assets, liabilities, and capital.

a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
2. This refers to the economic resources owned by the company.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
3. Refers to the property and rights owned by business.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
4. This refers to the investment of an owner.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
5. These include claims of the creditors on the assets of the company.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
6. This refers to the obligations to pay and debts of a company.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
7. This has to show a balance in every business transaction.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 8. This include a company’s cash, supplies, and equipment.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
9. Shows no change when an owner invest additional cash in the business.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
10.Demonstrates the dual aspect of a business transaction and proves that
Debit=Credit.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity

Key Concepts:

The accounting equation formula represents the relationship between the

assets, liabilities, and owner’s equity of a business. The value of a company’s assets
should always equal the sum of its liabilities and owner’s equity. The underlying
concepts of this formula is that every asset acquired by a company was financed
either through debt (liability) or through investment from owners (owner’s equity)
The accounting formula materializes a company’s asset in terms of its
liabilities and owner’s equity. This simple formula serves as the foundation of
double-entry bookkeeping wherein there are always two account entries made for
each transaction – a debit to one account and a credit to another.

The Accounting Equation

Owners
ASSETS Equity
Liabilities

Keep reading to have a better understanding of the accounting formula

basics, its elements, and relationship to one another.

The Elements of the Accounting Equation

1. Assets – These are economic resources owned by the company expected for
future gain. They are property and rights of value owned by the company.

 Assets refer to items like cash, inventory, accounts receivable, buildings,

land, or equipment. Purchasing something with the company’s cash on hand
will not affect the accounting equation because it’s just converting one type
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 of asset (cash) into another type of asset (inventory, equipment, or whatever
else is purchased). The accounting formula doesn’t differentiate between
types of assets.
2. Liabilities – These are debts or obligations, which are amounts owed to
others. These include debts, obligation to pay, and claims of the creditors on
the assets of the company. Liabilities are one of three ways in which a
business can acquire funding.
 Liabilities can include bank loans, credit card accounts, or accounts payable
(such as when a supplier offers to extend credit to a business).
3. Owner’s Equity – These are the total capital the owners have invested in the
business. These include the interest of the owners on the company; claims of
the owners on the assets of the company.; and the investment of the owner
plus or minus the results on the operations of the company.
 Owner’s Equity or capital comes from two main sources: investment of
owners and earning from the company.
Let us put into practice the accounting equation above. For example, If
Company Tibs owns P100,000 in assets but owes P30,000 to creditors, how much
would be the total claim of the owners?
Assets = Liabilities + Owner’s Equity
P100,000 = P30,000 + ?
P100,000 = P30,000 + P70,000
P100,000 = P100,000
The equity to which owners/investors have a claim is P70,000. As you can see,
the accounting formula is all about balance. Any activity on the right side is
reflected on the left side.
Here are some more example:
1. Given liabilities of P10,000 and the owner’s equity of P50,000, Find the value
of the assets.
Assets = Liabilities + Owner’s Equity
Assets = P10,000 + P50,000
Assets = P60,000
2. Given assets of P100,000 and the owner’s equity of P70,000, Find the
liabilities.
Assets = Liabilities + Owner’s Equity
Liabilities = Assets – Owner’s Equity
Liabilities = P100,000 – P70,000
Liabilities = P30,000
3. Given assets of P200,000 and liabilities of P90,000, find the owner’s equity.
Assets = Liabilities + Owner’s Equity
Owner’s Equity = Assets – Liabilities
Owner’s Equity = P200,000 – P90,000
Owner’s Equity = P110,000

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Analyzing the effects of Business Transactions to the Accounting Equation
The accounting equation shows that for every debit, there must be an equal
credit. As we have already discussed, Assets, Liabilities and Owner’s Equity are the
three components of accounting equation that make up a company’s balance sheet.
Accounting Equation demonstrates the dual aspect of a business transaction and
proves that Debit=Credit. Here is a table to show you the effects of transactions on
the accounting equation.

Assets Liabilities EQUITY

= +
Cash Accounts Payable Owner Contribution + Revenue + Expenses –
Inventory Notes Payable Owner Withdrawals –
Receivables Deferred Revenue Sales Wages
Prepaid Expenses Interest Cost of Goods Sold
Equipment Rent Income Rent
Service Fees Depreciation
Advertising
Professional Fees
Utilities
Office Supplies

Activity 1 : Identify
Direction: On the last column, write I if the account title is an income account, E if
expense, A if asset, or L if liability.

# Account Title Answer

1 Accounts Payable
2 Accounts Receivable
3 Accumulated Depreciation
4 Advances to Employees
5 Advertising Expense
6 Allowance for Doubtful Accounts
7 Bad Debts Expense
8 Bonds Payable
9 Building
10 Cash
11 Commission Expense
12 Commission Receivable
13 Depreciation Expense
14 Dividend Income
15 Donation Expense
16 Fuel & Oil Expense
17 Furniture and Fixtures
18 Insurance Expense
19 Interest Expense
20 Interest Income
21 Interest Payable
22 Interest Receivable

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
23 Investment in Trading Securities
24 Land
25 Machinery
26 Miscellaneous Expense
27 Mortgage Payable
28 Notes Receivable
29 Notes Payable
30 Office Equipment
31 Office Supplies
32 Pag-ibig Contributions Expense
33 PhilHealth Contributions Payable
34 Prepaid Insurance
35 Prepaid Rent
36 Prepaid Subscriptions
37 Professional Fees
38 Rent Expense
39 Rent Income
40 Rent Receivable
41 Repair & Maintenance Expense
42 Representation & Entertainment Expense
43 Salaries & Wages Expense
44 Salaries & Wages Payable
45 Service Income
46 SSS Premiums Expense
47 SSS Premiums Payable
48 Store Equipment
49 Store Supplies
50 Tax and License Expense
51 Tax and License Payable
52 Transportation Equipment
53 Travel Expense
54 Unearned Advertising
55 Unearned Commission
56 Unearned Rent
57 Unearned Expense
58 Utilities Payable
59 Utilities Expense
60 Withholding Tax Payable

Activity 2 – What the Effect

Direction: Indicate the effect {increase ( ), decrease ( )} on assets, liabilities, and capital
and the specific account titles for each transaction.
For transaction affecting the capital, indicate on the last column “Investment”,
“Withdrawal”, or specific income and expense account.
Number 1 has already been answered for you as an example.

TRANSACTION ASSETS LIABILITIES CAPITAL TRANSACTION

Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 AFFECTING
THE CAPITAL
Cash investment of the
owner Cash Capital Investment
Permanent cash
withdrawal of the owner
Borrowing of money by
issuing a promissory
note
Cash advance to an
employee
Purchase of office
supplies for cash
Purchase of office
supplies on account
Purchase of store
equipment for cash
Purchase of store
equipment on account
Partial payment of
accounts payable
Rendering of services for
cash
Rendering of services on
account
Full collection of
accounts receivable
Cash receipt for
commission income
Payment of advertising

Activity 3 – You’re TURN

Direction: Give the effect of the following transactions on the accounting equation.

On March 25, 2020, Don Clarion opens Clarions Laundry Services. On the transaction
summary table below, indicate the effect of each transaction to each account. Put “+” to
signify increase or “-“ to signify decrease. Indicate the amount of increase or decrease for
each account. Copy and answer in a ½ sheet of paper.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Transaction Assets Liabilities Owner’s Equity

1.Don Clarion
invested P200,000
cash in the
business.
2.Bought P5,000
worth of supplies

3.Borrowed
P80,000 cash from
Don Clarky.

4.Services
rendered to client
on credit worth
P10,000

5.Cash services
rendered to Mr.
Emon Mejas
P5,000

Activity 4 – My Own Accounting

Direction: Applying the accounting equation to your daily life as a student and consumer,
write your transactions made on a day to day basis and analyze the effects of each
transaction to different accounting accounts. Copy and answer in a 1 whole sheet
of paper.

Transaction Assets Liabilities Owner’s Equity

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity 5: Choose from the Box
Direction: Choose the corresponding answer from the word box and write on the
space provided before each number

Assets Decrease
Increase No changes
Liabilities Owner’s Equity
Balance sheet Accounting Equation

________________1. This refers to the obligations to pay and debts of a company

________________2. This refers to the economic resources owned by the company
________________3. This has to show a balance in every business transaction
________________4. This demonstrate the dual aspect of a business transaction and
proves that Debit = Credit
________________5. This refers to the property and rights owned by the business
________________6. This refers to the investment of an owner
________________7. These include claims of the creditors on the assets of the
company
________________8. This include a company’s cash, supplies, and equipment
________________9. It shows the relationship between a company’s assets, liabilities,
and capital
________________10. This shows no changes when an owner invests additional cash
in the business.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Reflection:
Direction:
Now that you have completed your worksheet for this week, write your reflection
about what you have learned from the lesson. Your reflections should include your
opinion, personal experience, and evidence to back up your thoughts. The purpose
of this is to ensure you are processing your thoughts on the content of the lesson.
Write your reflection on the space provided below.

I learned that……………

_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________

Post-test
Direction: Select the letter of the best answer.

1. Refers to the obligations to pay and debts of a company.

a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
2. This has to show a balance in every business transaction.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
3. Include a company’s cash, supplies, and equipment.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
4. Shows no change when an owner invest additional cash in the business.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
5. Demonstrates the dual aspect of a business transaction and proves that
Debit=Credit.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity

6. It shows the relationship between a company’s assets, liabilities, and capital.

a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
7. This refers to the economic resources owned by the company.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
8. Refers to the property and rights owned by business.
a. Assets c. Liabilities
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 b. Accounting Equation d. Owner’s Equity
9. This refers to the investment of an owner.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity
10.These include claims of the creditors on the assets of the company.
a. Assets c. Liabilities
b. Accounting Equation d. Owner’s Equity

References:

Teaching Guide for Senior High School

Fundamentals of Accountancy, Business and Management 1
Specialized Subject I ACADEMIC – ABM
Published by the Commission on Higher Education, 2016 Chairperson: Patricia B.
Licuanan, Ph.D.

Accounting Theory (n.d) Retrieved from

http://accountingtheory.weebly.com/nature-and-scope-of-accounting

Answer Key

Post-Test
Item Pre-
Activity 3 Multiple
no. Test
Choice
1 C Assets+200,000 D
and Owner’s
Equity +200,000
2 A Assets+5,000 and C
Owner’s
Equity+5,000
3 B Assets+80,000 A
and
Liabilities+80,000
4 B Assets+10,000 B
and Owner’s
Equity+10,000
5 A Assets+5,000 and C
Owner’s
Equity+5,000
6 D C
7 C A
8 A B
9 B B
10 C A

Week
4 THE MAJOR ACCOUNTS & THE
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 CHART OF ACCOUNTS

Name: ________________________________________ Section: ________________________

Objectives:
1. Discuss the five major accounts (ABM_FABM11-IIId-e-19)
2. Prepare a Chart of Accounts (ABM_FABM11-IIId-e-21)

Pre-test: Multiple Choice

Direction: Select the letter of the best answer.

1. The _________________ includes everything that your company owns. It is

divided into tangible and intangible.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

2. Any product or service that your company purchases to generate income or

manufacture goods is considered an _________________. This may include
advertising costs, utilities, rent, salaries and others.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

3. _________________, one of the primary types of accounts in accounting,

includes the money your company earns from selling goods and services. This
term is also used to denote dividends and interest resulting from marketable
securities.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

4. _________________ include the debts or obligations payable to creditors and

other outsiders to which your company owes money. These can be loans, unpaid
utility bills, bank overdrafts, car loans, mortgages and more.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

5.The ________________ defines how much your business is currently worth. It's
the residual interest in your company's assets after deducting liabilities.
Common stock, dividends and retained earnings are all examples of this.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

6.Tangible and intangible items that the Company owns that have value.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 A. Assets C. Income E. Owner’s Equity or Equity
B. Expenses D. Liabilities

7.Money that the Company owes to others.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

8.The money that the company earns from its sales of products or services, and
interest and dividends earned from marketable securities.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

9.Money the company spends to produce the goods or services that it it sells.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

10.That portion of the total assets that the owners or stock holders of the company
fully own; have paid for outright.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

Key Concepts:
There are five main types of accounts in accounting, namely: Assets,
Liabilities, Capital/Owner’s Equity, Income, and Expense.

Five Types of Major Accounts

1. Assets – These are all the economic resources owned by the company and
are expected for future gain. They include property and rights of value owned
by the company. Assets refer to items like Cash, Inventory, Accounts
Receivable, Building, Land, or Equipment.
Assets can be categorized to Tangible and Intangible. Tangible assets are the
physical entities that the business owns such as its land, building, vehicles,
equipment, and inventory. While Intangible assets are the things that represent
money or value such as Accounts Receivables, patents, contracts, and
certificates of deposit (CDs).

Two types of Assets:

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 1. Current Assets – Cash and other assets that are expected to be converted to
cash within a year.
Examples:
 Cash includes coins, currencies, check, bank deposits, and other cash items
readily available for use in the operations of the business.
 Cash Equivalents are short-term investments that are readily convertible to
known amounts of cash which are subject to an insignificant risk to changes
in value.
 Marketable securities are stocks and bonds purchased by the enterprise and
are to be held for only a short span of time or duration. They are usually
purchased when business has excess cash.
2. Non-Current Assets – An asset that is not likely to turn to unrestricted cash
within one year. It is also referred as a long term assets.
Examples:
 Long-term investments are assets held by an enterprise for the accretion of
wealth through capital distribution such as interests, royalties, dividends
and rentals, for capital appreciation or for other benefits to the investing
enterprise such as those obtained through trading relationships.
 Property, plant, and equipment are tangible assets that are held by an
enterprise for use in the production or supply of goods or services, or for
administrative purposes.
a. Land – a piece of lot or real estate
b. Building – structure used to accommodate the office, store, or factory
c. Equipment – includes typewriter, air –conditioner, calculator, filing
cabinet, computer, electric fan, trucks, and cars used by the business in
its office or factory, Specific account titles may be used such as:
- Office equipment,
- Store equipment.
- Delivery equipment,
- Transportation equipment, and
- Machinery equipment.
d. Furniture and Fixtures – include tables, chairs, carpets, curtains, lamp
and lighting fixtures. Specific account titles may be used such as:
- Office furniture and fixtures
- Store furniture and fixtures

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 2. LIABILITIES – These include the debts or obligations payable to creditors and
other outsiders to which your company owes money. Liabilities are one of
three ways in which a business can acquire funding.
Two types of Liabilities:
1. Current Liabilities – amounts due to be paid to creditors within twelve
months.
Examples:
 Accounts payable includes debts arising from the purchase of an asset or
the acquisition of services on account.
 Notes payable includes debts arising from purchase of an asset or the
acquisition of services on account evidenced by promissory note.
 Loans payable is a liability to pay the bank or other financing institution
arising from funds borrowed by the business from these institutions payable
within twelve months or shorter.
 Utilities payable is an obligation to pay utility companies for services
received from them. Examples of this are telephone services, electricity, and
water services.
 Unearned revenues represent obligations of the business arising from
advance payments received before goods or services are provided to the
customer. This will be settled when certain goods or services are delivered or
rendered.
 Accrued Liabilities include amounts owed to others for expenses already
incurred but are not yet paid. Examples of these are salaries payable,
utilities payable, taxes payable, and interest payable.
2. Non-current Liabilities – are long term liabilities or obligations which are
payable for a period longer than one year.
Examples:
 Mortgage payable is a long-term debt of the business with security or
collateral in the form of real properties.
 Bonds payable is a certificate of indebtedness under the seal of a
corporation, specifying the terms of repayment and the rate of interest to be
charged.
3. Owner’s Equity – Defines how much your business is currently worth. Owner’s
Equity or Capital is an account bearing the name of the owner representing the
original and additional investment of the owner of the business. It is increased by
the amount of net income earned during the year and decreased by the cash or
other assets withdrawn by the owner as well as the net loss incurred during the
year. Drawing represents the withdrawals made by the owner of the business in
cash or other assets.
Two types of Equity:
1. Contribution (Investments) – may be start-up capital or a later infusion of
cash.
2. Drawing (withdrawals) – If a business is profitable, the owners often want
some of the profit returned to them.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
4. Income or Revenue – is money the business earns from selling a product or
service, or from interest and dividends on marketable securities. Other names for
income are revenue, gross income, turnover, and the “top line”.
Net income is computed as revenue less expenses. Other name income
includes profit, net profit, and the “bottom line.”This is because their balance is
reset to zero at the beginning of each new accounting period.
5. Expenses – these are money the company spends that allow a company to
operate. This may include advertising costs, utilities, rent, salaries and others. Like
revenue accounts, expense accounts are temporary accounts that collect data for
one accounting period and are reset to zero at the beginning of the next accounting
period.
A unique type of expenses account, Depreciation Expense, is used when
purchasing fixed assets. Costly items, such as vehicles, equipment, and computer
systems, are not expensed, but depreciated over the life expectancy of the item. A
contra-account, Accumulated Depreciation, is used to offset the asset account for
the item.
Examples:
 Salaries or wages expense include all payments made to employees or
workers for rendering services to a company
 Utilities expense is an expense related the use of electricity, fuel, water, and
telecommunication facilities.
 Supplies expense covers office supplies used by a business in conduct of its
daily operations.
 Insurance expense is the expired portion of premiums paid on insurance
coverage such as premiums paid for health or life insurance, motor vehicles,
or other.
 Depreciation expense is the annual portion of the cost of tangible assets
such as building, machineries, and equipment charged as expense for the
year.
 Uncollectible accounts expense/doubtful accounts expense / bad debts
expenses means the amount of receivables charge as expense for the period
because they are estimated to be doubtful of collection.
 Interest expense is the amount of money charged to the borrower for use of
borrowed funds.

Chart of Accounts
A chart of accounts is a list of all your company’s accounts used, and is
listed together in one place. The main account types include Assets, Liabilities,
Owner’s Equity, Income, and expense.
Here’s a sample chart of accounts list. This is a chart of accounts for a
fictional business:

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Augustus Cleaning Supply Company
Chart of Account
Account No. Title
101 Cash
112 Account Receivable
128 Cleaning Supplies Inventory
130 Prepaid Insurance
150 Truck
152 Cleaning Equipment
160 Accumulated depreciation
180-189 Intangibles
190-199 Other Assets
201 Accounts Payable
220 Unearned Revenue
225 Interest Payable
230 Notes Payable
311 Common Stock
312 Additional Paid in Capital
320 Retained Earnings
332 Dividends
350 Income Summary
400 Service Revenue
401 Product Sales
630 Bank Service Charge
633 Gas and Oil Expense
634 Cleaning Supplies Expense
711 Depreciation Expense
722 Insurance Expense
725 Payroll Tax Expense
730 Interest Expense
735 Amortization Expense
Companies in different lines of business will have different looking charts of
accounts. The chart of accounts should give anyone who is looking at it a rough

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
idea of the nature of your business by listing all the accounts involve in your
company’s day-to-day operations.
The Chart of accounts is designed to be a map of your business and its
various financial parts. A well-designed chart of accounts should separate out all
the company’s most important accounts, and make it easy to figure out which
transactions get recorded in which account.

Activity 1 – Identify Me
Direction: Identify by putting a check ( √ ) if the account is an asset, Liability,
equity, income or expense.

Item OWNER’S
ACCOUNT ASSET LIABILITIES INCOME EXPENSE
No. EQUITY
1. Partner A,
Drawing
2. Prepaid
Insurance
3. Revenue
4. Salaries
5. Interest
Payable

6. Land

7. Common
Stock
8. Bonds
Payable
9. Unearned
Income

10. Office
Equipment
11. Machinery
Equipment

12. Uncollectible
Accounts

13. Part B,
Capital
14. Wages
15. Cash

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity # 2. My Personal Chart of Accounts
Direction: Applying the lessons you learned on the chart of accounts, create your
fictional business and make your very own chart of accounts. Follow the format
below.

CHART OF ACCOUNTS

Account Account Title Account Account Title

Number Number

Activity # 3:
Direction: Give your own thoughts, understanding and opinion in each item.

1. In your own opinion, why do companies need to create their personalized Chart of
Accounts?

2.In your own opinion, is it better for a company to acquire current or non-current
assets?

3.Differentiate current and non-current liabilities.

___________________________________________________________________

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 RUBRICS FOR ESSAY
Score (Points)
50 pts Content
20 pts Original thinking
20 pts Understanding/Application
10 pts Structure (Spelling, punctuation)
100 pts Total

Reflection:
Direction:
Now that you have completed your worksheet for this week, write your
reflection about what you have learned from the lesson. Your reflections should
include your opinion, personal experience, and evidence to back up your thoughts.
The purpose of this is to ensure you are processing your thoughts on the content of
the lesson. Write your reflection on the space provided below.

I learned that……………
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

Post-test: Essay
Direction: Select the letter of the best answer.

1.Money the company spends to produce the goods or services that it it sells.

A. Assets C. Income E. Owner’s Equity Equity

B. Expenses D. Liabilities

2.That portion of the total assets that the owners or stock holders of the company
fully own; have paid for outright.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
3.One of the primary types of accounts in accounting, includes the money your
company earns from selling goods and services. This term is also used to denote
dividends and interest resulting from marketable securities.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

4.Include the debts or obligations payable to creditors and other outsiders to

which your company owes money. These can be loans, unpaid utility bills, bank
overdrafts, car loans, mortgages and more.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities
5.Defines how much your business is currently worth. It's the residual interest in
your company's assets after deducting liabilities. Common stock, dividends and
retained earnings are all examples of this.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

6.Tangible and intangible items that the Company owns that have value.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

7.Money that the Company owes to others.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities
8.That portion of the total assets that the owners or stock holders of the company
fully own; have paid for outright.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

9.The _________________ includes everything that your company owns. It is divided

into tangible and intangible.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

10.Any product or service that your company purchases to generate income or

manufacture goods is considered an _________________. This may include
advertising costs, utilities, rent, salaries and others.

A. Assets C. Income E. Owner’s Equity or Equity

B. Expenses D. Liabilities

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
References:

Teaching Guide for Senior High School

Fundamentals of Accountancy, Business and Management 1
Specialized Subject I ACADEMIC – ABM
Published by the Commission on Higher Education, 2016 Chairperson: Patricia B.
Licuanan, Ph.D.

Accounting Theory (n.d) Retrieved from

http://accountingtheory.weebly.com/nature-and-scope-of-accounting

Answer Key:

Item PRE-TEST ACTIVITY 1 POST-TEST

No.
1 Assets Owners Equity Expenses
2 Expenses Asset Equity
3 Income Income Income
4 Liabilities Expenses Liabilities
5 Owners equity/Equity Liability Owner’s Equity
6 Assets Asset Assets
7 Liabilities Owner’s Equity Liabilities
8 Income Liability Income
9 Expenses Liability Asset
10 Equity Asset Expenses
11 Asset
12 Expenses
13 Owner’s Equity
14 Expense
15 Asset

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Week
5
THE BOOKS OF ACCOUNTS

Name: ________________________________________ Section: ________________________

Objectives:
1. Illustrate the format of a general and special journals (ABM_FABM11-
IIIf-23)
2. Illustrate the format of a general and subsidiary ledger
(ABM_FABM11-IIIf-24)

Pre-test : Multiple Choice

Direction: Encircle the letter of the best answer.

1. The _________________________journals is used to record specific types of high-

volume information that would otherwise be recorded in and overwhelm the general
ledger.
A. Cash C. Ledger E. Special
B. General D. Purchase

2. The source documents for ______________________ journal are the invoices from
the supplier of the company.
A. Cash C. Ledger E. Special
B. General D. Purchase

3. The ________________________ledger (commonly referred by accounting

professionals as GL) is a grouping of all accounts used in the preparation of
financial statements.
A. Cash C. Ledger E. Special
B. General D. Purchase

4. The _______________________refers to the accounting book in which the accounts

and their related amounts as recorded in the journal are posted periodically.
A. Cash C. Ledger E. Special
B. General D. Purchase

5. The _____________________ disbursement journal is used to record all

transactions involving cash payments.
A. Cash C. Ledger E. Special
B. General D. Purchase

6. It is known as the book of final entry.

A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
7. It is called the book of original entry.
A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger

8. It is the process of transferring information from the journal to the ledger.

A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger

9. This is used to record all cash that has been received.

A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger

10.Known as the process of entering or recording transaction data in the journal

A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger

Key Concepts:
The two major types of books of accounts are the Journal and Ledger.
1. JOURNAL
Companies initially record transaction and events in chronological order (the
order in which they occur). Thus, the journal is referred to us the book of original
entry. For each transaction, the journal shows the debit and credit effects on
specific accounts.

There are two types of Journals, The General Journal and the Special Journal.
A. General Journal
The general journal is the most basic journal. Typically, a general journal
has spaces for dates, account titles and explanations, references, and two amount
columns. The journal makes several significant contributions to the recording
process:
- It discloses in one place the complete effects of a transaction.
- It provides a chronological record of transactions.
- It helps to provide or locate errors because the debit and credit
amounts for each entry can be easily compared.
Entering transaction data in the journal is known as journalizing.
Companies make separate entries for each transaction. A complete entry consists
of:
A. The date of the transaction which is entered in the Date Column.
B. A brief explanation of the transaction which appears on the line below
the credit account title. A space is left between journal entries. The
blank space separates individual journal entries and makes the entire
journal easier to read.
C. The column titled Ref. (which stands for Reference) which is left blank
when the journal entry is made. This column is use later when the
journal entries are transferred to the ledger accounts.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 D. The debit account title (that is, the account to be debited) which is
entered first at the extreme left margin of the column headed
“Account Titles and Explanation,” and the amount of the debit is
recorded in the Debit column.
E. The credit account title (that is, the account to be credited) which is
intended and intended and entered on the next line in the column
headed “Account Titles and Explanation,” and the amount of the
credit is recorded in the Credit column.

Journal entry should contain the date, account titles and explanation,
posting reference, debit and credit. Below is a sample of a general journal.
Account Titles and
Date P.R Debit Credit
Explanation
xxx
xxx Xxx xxx
xxx Xxx
Xxx

To illustrate the recording of transactions in the general journal, let us use

the following transactions as an example.

August 21, 2020 Mr. J Pacs invested PHP500,000 in a coffee shop

business.
 August 30, 2020 purchased equipment for his business amounting to
PHP100,000 by cash.
 September 6, 2020 started his operations and made a sales for that day
amounting to PHP20,000.
We will now record the above transactions in the general journal.
ACCOUNT TITLES AND
DATE P.R. DEBIT CREDIT
EXPLANATION
2020
Aug 21 Cash 500,000
J Pacs, Capital 500,000
Initial Investment

Aug 30 Equipment 100,000

Cash 100,000
Purchased equipment for cash

Sep 6 Cash 20,000

Sales 20,000
Cash sales for shop operations
Some entries involve only two accounts, one debit and one credit. An entry
like these is considered a simple entry. Some transactions, however, require
more than two accounts in journalizing. An entry that requires three or more
accounts is a compound entry. All of the transactions in the above examples
are simple entries. An example of a compound entry is the following:
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 On December 25, 2020, Mr. J Pacs purchased furniture costing
PHP80,000. He pays PHP30,000 cash and agrees to pay the remaining
PHP50,000 on account (to be paid later). The compound entry is as follows:

ACCOUNT TITLES AND

DATE P.R. DEBIT CREDIT
EXPLANATION
2020
Dec 25 Furniture and Fixture 80,000
Cash 30,000
Accounts Payable 50,000
Bought furniture by paying cash and
the balance on account

A. SPECIAL JOURNALS

Some businesses encounter voluminous quantities of similar and recurring

transactions which may create congestion if these transactions are recorded
repeatedly in a single day or a month in the general journal. These journals
are used to record specific types of high-volume information that would
otherwise be recorded in and overwhelm the general ledger .
Take the case of our example above, if Mr. J Pacs will record the sales per
day using the Official Receipt or Cash Sales Invoice issued, it would be
unnecessary and impractical to credit “sales” account repeatedly. In order to
facilitate efficient and practical recording of similar and recurring transactions,
a special journal is used.

The following are the commonly used special journals:

a. Cash Receipts Journal – used to record all cash that has been
received. The cash receipts journal is used to record transaction
involving receipt or collection of cash. The source document for
this journal is the Official Receipts or Cash receipts issued by the
business. The following illustrate the format of a cash receipts
journal:

 The date of the transaction is entered in the date column.

 A brief explanation of the transaction is entered in the description
column.
 The column titled Ref. (which stands for Reference) which is left blank
when the journal entry is made. This column is used later when the
journal entries are transferred to the ledger accounts.
 The Debit Cash column represents the amount of cash received for a
particular transaction.
 Major categories of receipts, such as cash sales and collection of
accounts receivable are provided with separate columns. These
transactions are frequent and repetitive items, therefore a separate
column is provided.
 The column sundry is used for various miscellaneous and less regular
items, such as capital investment, receipt of loan proceeds, among
others.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 b. Cash Disbursements Journal – used to record all transactions
involving cash payments. The cash disbursements journal is the
opposite of the cash receipts journal. It is the journal where all
cash payments are recorded. The source documents used to update this
journal are the check voucher or cash voucher, cash
receipts or official receipts from suppliers or vendors. The following
illustrate the format of a cash disbursement journal:

 The date of the transaction is entered in the date column.

 A brief explanation of the transaction is entered in the description
column.
 The column titled Ref. (which stands for Reference) which is left blank
when the journal entry is made. This column is used later when the
journal entries are transferred to the ledger accounts.
 The Check or Voucher number represents the identifying number of the
check issued for the related cash payment. Most of the time, a check or
cash voucher accompanies the disbursement. The voucher number may
be used as the alternative for this column.
 The Debit Cash column represents the amount of cash received for a
particular transaction.
 Major categories of receipts, such cash sales and collection of accounts
receivable are provided with separate columns. These transactions are
frequent and repetitive items, therefore a separate column is provided.
 The column sundry is used for various miscellaneous and less regular
items, such as capital investment, receipt of loan proceeds, among
others.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 c. Sales Journal (Sales on Account Journal) – used to record all sales
on credit (on account). The Sales Journal or Sales on Account Journal is
used in recording several sales transactions on account. The source
document for this journal is the charge invoice or sales invoice to
various customers or clients. The following illustrate the format of a
sales journal:

 The date of the transaction is entered in the date column.

 A brief explanation of the transaction is entered in the description
column or the name of the customer.
 The column titled Ref. (which stands for Reference) which is left blank
when the journal entry is made. This column is used later when the
journal entries are transferred to the ledger accounts.
 The Charge Invoice Number or Sales Invoice Number represents the
identifying number of the source document issued to the customer
when the sale was made.
 The Debit Accounts Receivable column represents the amount of the
sale transactions indicated in the charge invoice.
 The Credit Sales column represents the amount of the sale transactions
indicated in the charge invoice. The source document for this journal is
the Charge Invoice issued by the business.

d. Purchase Journal (Purchase on Account Journal) – used to record all

purchases of inventory on credit (or on account). The Purchase journal
or the Purchases on Account Journal is used to record recurring
transactions of purchases on account. The source documents for

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 purchase journal are the invoices from the supplier of the company.
The following illustrate the format of a Purchase Journal:

 The date of the transaction is entered in the date column.

 A brief explanation of the transaction is entered in the description
column or the name of the supplier
 The column titled Ref. (which stands for Reference) which is left blank
when the journal entry is made. This column is used later when the
journal entries are transferred to the ledger accounts.
 The Charge Invoice Number or Sales Invoice Number represents the
identifying number of the source document issued by the supplier when
the items, goods or merchandise were delivered to the company when
the purchase was made.
 The Debit Purchases column represents the amount of the goods
purchases as indicated in the charge invoice from the supplier
 The Credit Accounts Payable column represents the amount of the
goods or items purchased on credit from the supplier. The amount is
indicated in the charge invoice issued by the supplier.

1. LEDGER

The ledger refers to the accounting book in which the accounts and their
related amounts as recorded in the journal are posted periodically. The ledger is
also called the ‘book of final entry’ because all the balances in the ledger are used
in the preparation of financial statements. This is also referred to as the T-Account
because the basic form of a ledger is like the letter ‘T’.

There are two types of ledgers, the General Ledger and the Subsidiary Ledger.

A. GENERAL LEDGER

The general ledger (commonly referred by accounting professionals as GL)

is a grouping of all accounts used in the preparation of financial statements.
The GL is a controlling account because it summarizes all the activities that
have taken place as recorded in its subsidiary ledger.

The format of a general ledger is shown below, based on the discussion

example on the general journal:

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
General Journal
Page 1
ACCOUNT TITLES AND
DATE P.R. DEBIT CREDIT
EXPLANATION
2020
Aug 21 Cash 110 500,000
J Pacs, Capital 310 500,000
Initial Investment

General Ledger
Account Title: Cash
Account No. 110
DATE EXPLANATION J.R. DEBIT CREDIT BALANCE

2020
500,00
Aug 21 Initial Investment J-1 500,000
0

General Ledger
Account Title: J Pacs, Capital
Account No. 310
DATE EXPLANATION J.R. DEBIT CREDIT BALANCE

2020
Aug 21 Initial Investment J-1 500,000 500,000

 The account portion refers to the account title for example: cash,
accounts receivable.
 The account number is an assigned number for each account title to
facilitate ease in recording and cross-referencing.
 The Date column identifies when the transaction happened.
 The item represents the source journal and the nature of the
transactions.
 The Reference identifies the page number of the general our special
journal from which the information was taken.
 The Debit and Credit columns are used in recording the amount of
transactions from the general journal or special journal.
 The Balance Column represents the running balance of the Account
after considering the debit and credit amounts. If the running balance
amount is positive, the account has a debit balance whereas if it has a
negative running balance, the accounts has a credit balance.

Posting is the process of transferring information from the journal to the

ledger. Debits in the journal are now correspondingly posted as debits in the
ledger, and credits in the journal are likewise posted as credits in the ledger.
The steps in posting are as follows:
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 a. From the journal, copy the date of the transaction to the ledger.
b. Under the journal reference (J.R.) column of the ledger, copy the page
number of the journal.
c. Under the debit column in the ledger, transfer the debit amount from
the journal. Similarly, under the credit column in the ledger, transfer
the credit amount from the journal.
d. After posting the amount to the ledger, write the account number in the
posting reference (P.R.) column on the journal.

B. SUBSIDIARY LEDGER

A subsidiary ledger is a group of like accounts that contains the

independent data of a specific general ledger. A subsidiary ledger is created or
maintained if individualized data is needed for a specific general ledger
account.

An example of a subsidiary ledger is the individual record of various

payables to suppliers. The total amount of these subsidiary ledgers should
equal the balance in the Accounts Payable general ledger.

An example of an Accounts Payable subsidiary ledgers is shown on the next

page.

 The upper portion indicates the name of the vendor or supplier.

 The vendor number is an assigned number for each vendor as reference
in keeping the records of a supplier.
 The Date column identifies when the transaction happened.
 The description column describes the nature of transaction.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
  The Reference identifies the page number of the general our special
journal from which the information was taken.
 The Debit and Credit columns reflect the various effects of every
transaction to the record of the supplier or vendor.
 The Balance column provides the running balance of every
supplier.Take note that the total running balance for all subsidiary
ledgers should equal the Accounts payable general ledger.

The purpose of keeping subsidiary ledgers is for accuracy and efficiency.

They aid us in keeping accurate records. Since the total of a certain subsidiary
ledger must agree with the balance shown in the general ledger account, this
system helps us find mistakes. It provides an internal control over record
keeping. Today, computerized accounting information systems use the same
method to store and total amounts, but it takes a lot less time.

Activity 1: Accounting Chart

Direction: Using the terms you learned from the module, fill in the blank boxes
accordingly.

BOOKS OF ACCOUNTS

1. 2.

3. 4. 5. 6.

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity 2: Journal Entry
Direction: Journalize the following transaction of Tam-is Bakeshop for the month of
December 2020. Use the provided format below.

2020
December 3 Ms. Tam-is invested Php300,000 in the business.
5 Paid cash Php 15,000 for electricity bill for the month.

15 Purchased kitchen equipment Php50,000 on account.

25 Paid baker’s salary for the month, Php20,000.

ACCOUNT TITLES AND
DATE P.R. DEBIT CREDIT
EXPLANATION

Reflection:
Direction:
Now that you have completed your worksheet for this week, write your
reflection about what you have learned from the lesson. Your reflections should
include your opinion, personal experience, and evidence to back up your thoughts.
The purpose of this is to ensure you are processing your thoughts on the content of
the lesson. Write your reflection on the space provided below.

I learned that……………

______________________________________________________________________
______________________________________________________________________
Author: LIEZL I. PERTOS
______________________________________________________________________
School/Station: CNHS
Division: Dinagat Islands
______________________________________________________________________
Email Address: [email protected]
______________________________________________________________________
Post-test:
Direction: Encircle the letter of the best answer.

1.The _____________________ disbursement journal is used to record all transactions

involving cash payments.
A. Cash C. Ledger E. Special
B. General D. Purchase
2. It is known as the book of final entry.
A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger
3. It is called the book of original entry.
A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger
4. It is the process of transferring information from the journal to the ledger.
A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger
5. This is used to record all cash that has been received.
A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger
6.Known as the process of entering or recording transaction data in the journal
A. Cash Receipt Journal C. Journalizing E. Posting
B. Journal D. Ledger

7. The _________________________journals is used to record specific types of high-

volume information that would otherwise be recorded in and overwhelm the general
ledger.
A. Cash C. Ledger D. Special
B. General D. Purchase

8. The source documents for ______________________ journal are the invoices from
the supplier of the company.
A. Cash C. Ledger E. Special
B. General D. Purchase

9. The ________________________ledger (commonly referred by accounting

professionals as GL) is a grouping of all accounts used in the preparation of
financial statements.
A. Cash C. Ledger E. Special
B. General D. Purchase

10. The _______________________refers to the accounting book in which the accounts

and their related amounts as recorded in the journal are posted periodically.
A. Cash C. Ledger E. Special
B. General D. Purchase

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
References:

Teaching Guide for Senior High School

Fundamentals of Accountancy, Business and Management 1
Specialized Subject I ACADEMIC – ABM
Published by the Commission on Higher Education, 2016 Chairperson: Patricia B.
Licuanan, Ph.D.

Accounting Theory (n.d) Retrieved from

http://accountingtheory.weebly.com/nature-and-scope-of-accounting

Answer Key:

Item Pre-test Activity 1 Post-test

No.
1 Special Journal Cash
2 Purchase Ledger Ledger
3 General General Journal Journal
4 Ledger Special Journal Posting
5 Cash General Journal Cash
6 Ledger Subsidiary Ledger Jounalizing
7 Journal Special
8 Posting Purchase
9 Cash General
10 Journalizing Ledger

Acctivity # 2

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Week THE ACCOUNTING CYCLE OF THE
7-9 SERVICE BUSINESS

Name: ________________________________________ Section: ________________________

Objectives:
1. Described the nature of transactions in a service business
(ABM_FABM11-IVa-d-29)
2. Records transactions of a service business in the general journal
(ABM_FABM11-IVa-d-30)
3. Post transactions in the ledger (ABM_FABM11-IVa-d-31)
4. Prepares a trial balance (ABM_FABM11-IVa-d-32)
5. Prepares adjusting entries (ABM_FABM11-IVa-d-33)
6. Complete the accounting cycle (ABM_FABM11-IVa-d-34)

Pre-test : Multiple Choice

Direction: Encircle the letter of the best answer.

1. Which of the following is a business event that is also considered a recordable

transaction?
A. A company hires a new employee
B. A customer purchase a merchandise
C. A company orders a product from a supplier
D. An employee sends a purchase requisition to the purchasing department

2. A purchase of supplies on account should be recorded as

A. A debit to supplies expense and a credit to Cash
B. A debit to accounts payable and a credit to supplies
C. A debit to Supplies expense and a credit to accounts payable
D. A debit to supplies expense and a credit to accounts receivable

3. Which principles business is expected to continue indefinitely.

A. Revenue Recognition Principle
B. Matching Principle
C. Going Concern Principle
D. Solidity Principle

4. Which of the following steps in the accounting cycle are listed in the logical
order?
A. Prepare the income statement, Prepare the statement of financial position
and then prepare a worksheet

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 B. Post the journal entries to the ledger accounts, prepare trial balance, and
then prepare a worksheet
C. Journalize the closing entries, post the closing entries, and then take a post
closing trial balance
D. Post the closing entries, take a post-closing trial balance, then journalize the
closing entries

5. Which of the following gives the correct sequence of accounting procedures?

A. Ledger, Trial Balance, Journal, Financial Statements
B. Journal, Ledger, Trial Balance, Financial Statements
C. Financial Statements, Trial Balance, Ledger, Journal
D. Financial Statements, Journal, Ledger, Trial Balance

Key Concepts

Review the first steps in the accounting cycle that were previously discussed.
Step 1 – Transactions and/or Events: Identification and measurement of external
transactions and internal events.
Step 2 – Preparation of journal entries (Journalization): Business transactions are
recorded in the journal using debits and credits.
Step 3 – Posting: Posting of journal entries to general ledger.
Step 4 – Unadjusted trial balance: Preparation of unadjusted trial balance.

THE ACCOUNTING CYCLE

1. Transactions 4. Journal Entries 3. Posting 2. Trial Balance

5. Closing the 6. Financial 7. Adjusting 8. Worksheets

Books Statements Journal
EntriesBal
ance

Step 5 – Worksheets
This step is simply about plotting the items in the unadjusted trial balance on the
worksheet. In a manual accounting system, a worksheet is a large columnar sheet
of paper specifically designed to conveniently arrange all the accounting
information required at the end of a period. The worksheet is used to check
whether ledger accounts are balanced and adjusted. The worksheet serves as the
source in the preparation of financial statements and other closing and adjusting
entries. The body of the worksheets contains five pairs of money columns.
SAMPLE OF WORKSHEET:
Name of the Company
Worksheet
For the period (monthly/year) Unadjusted Adjusted Statement Statement
ended _____,20__ Trial Trial of of
Adjustments
Balance Balance Income Financial
Position
DR CR DR CR DR CR DR CR DR CR

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Statement of Financial
Position Accounts
Cash
Accounts Receivable
Inventory
Office Equipment
Accum. Deprn-off Equipment
Land
Intangible Assets
Accounts Payable
Owner’s Payable
Owner’s Capital
Owner’s Withdrawal
Income Statement Accounts
Sales
Sales Returns and
Allowances
Sales Discounts
Interest Income
Purchases
Purchases Returns and
allowances
Purchase Discounts
Freight In
Sales Expense
Supplies Expense
Utilities Expense

Recall the problem, about Pedro Matapang who started his Matapang Computer
Repairs business on February 14, 2016. The following transaction transpired in
February 2016:

February 14, 2016 – Pedro Matapang invested PHP200,000 into his Matapang
Computer Repair business.

February 15, 2016 – Pedro hired Juana Magaling, an experience secretary.

February 17, 2016 – Repair the computer of Jean and collected PHP10,000.

February 18, 2016 – Repair the computer of Mike; however, Mike will pay
PHP15,000 only on March 18, 2016.

February 19, 2016 – Pedro purchase Office Supplies from MM Merchandise

amounting to PHP5,000.00 on account. Pedro will pay this on March 30, 2016.

February 25, 2016 – Paid the salary of Juana amounting to PHP4,000.00

General Journal
Date Account Title and Explanation Ref Debit Credit
2/14/16 Cash 200,000
Matapang, Capital 200,000
To record the initial investment of

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 owner P. Matapang
2/15/2016 Office Equipment 25,000
Cash 25,000
To record the purchase of 1
computer unit
2/17/2016 Cash 10,000
Service Revenue 10,000
To record receipt of cash from
customer
2/18/2016 Accounts Receivable 15,000
Service Revenue 15,000
To record services rendered to a
customer on account
2/19/2016 Supplies Expenses 5,000
Accounts Payable 5,000
To record purchase of office
supplies on account
2/25/2016 Salaries Expenses 4,000
Cash 4,000
To record payment of salary of
Juana
The entries to record the above transactions.

Recall that after posting to the general ledger, the unadjusted trial balance was:
MATAPANG COMPUTER REPAIRS

Unadjusted Trial Balance February 29, 2016

Account Title Debit Credit
Balance Sheet Accounts
Cash 181,000
Account Receivable 15,000
Office Equipment 25,000
Accounts Payable 5,000
Matapang, Capital 200,000

Income Statement Accounts

Service Revenue 25,000
Supplies Expense 5,000
Salaries Expense 4,000
230,000 230,000
This now represents the first two money columns in the worksheet.

Step 6 – Adjusting Entries

At the end of the accounting period, some accounts in the general ledger would
require updating. The journal entries that bring the accounts up to date are called
adjusting entries. One purpose of adjusting ensure that both the revenue
recognition and matching principles are followed. Prior to your lecture, recall the
previous discussion on accounting principles and concepts. Specifically the
matching principle.

Revenue recognition – accounting standards require that revenue is recognized

when it is earned and the amount can be measured reliably. To illustrate:

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Assume that you are preparing the financial statements for February 2016.
Matapang Computer Repairs rendered services amounting to PHP25,000 for the
computer units of Mr. Tamad on Feb. 26, 2016. However, the payment for these
services of Matapang will be made on Mar. 15, 2016.

Question: When should you recognize the PHP25,000 as revenue or income, in

February or March? Applying the revenue recognition principle, it should be
reported as revenue for 2016.

Assume that you are preparing the financial statements for February 2016. On
February 28, 2016, Matapang Repairs received payment from Mr. Tamad
amounting to PHP25,000. This payment is for the repair of the computer units of
Mr. Tamad on March 5, 2016.

Question: When should you recognize the P25,000 as revenue or income, in

February or March? Applying the revenue recognition principle, it should be
reported as revenue in March 2016. Take note that since the service will be
rendered in March, the revenue should be earned in March. What about February
2016? The amount is recorded as a liability because Matapang Repairs has the
obligation to render this service in the future.

Matching Principle – This principle directs a business to report an expense on its

income statement within the same period as its related income. To illustrate:
Assume that you are preparing the financial statements for February 2016. The
business gives a commission of 10% service income to its employees. The
commission is paid the following month. On February 2016, the total service
income for the month is PHP100,000. Thus, the employees are entitled to a
commission expense be recorded in the book of accounts of the business, in March
or in February? Applying the matching principle, the answer is in February.

Adjusting entries are made at the end of each accounting period. Adjusting entries
make it possible to report correct amounts on the statement of financial position
and on the income statement. All adjusting entries affect at least one income
statement account and one statement of financial position account. Thus, an
adjusting entry will always involve an income or an expense account and an asset
or a liability account. There are five basic sources of adjusting entries:
1. Depreciation expense
2. Deferred expenses or prepaid expenses
3. Deferred income or unearned income
4. Accrued expenses or accrued liabilities
5. Accrued income or accrued assets

#1 Depreciation. Depreciation is a method of allocating the cost of an asset to an

expense over the accounting periods that make up the asset’s useful life. Examples
of assets subject to depreciation are: Store, Office, Building, and Transportation
equipment. These types of assets lose their ability to provide useful service as time
passes. Take note that Land is not subject to depreciation because the value of
land mostly increases as time passes.
Exercising on Adjusting entries to record Depreciation
Recall that Matapang acquired office equipment on February 15, 2016 for his
repair shop business. The cost of the equipment is PHP25, 000. It was estimated to

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
have a useful life of five years. It is estimated that after five years, the office
equipment can be be sold at a scrap value of PHP1,000. The company uses the
straight line method of depreciation.
Depreciation is a means of allocating the cost of an asset to an expense over the
accounting period that will benefit the use of the asset. In the exercise above, the
equipment will be used by Matapang for five years. Proper accounting procedures
dictates that the cost of PHP25,000 should be spread over five years.

There are several methods of formulas to compute the amount of depreciation. The
simplest is the straight line method. The formula is Annual Depreciation:
(Acquisition Cost – Salvage or Residual Value) / Useful Life. Applying this formula
to the exercise:
Annual Depreciation = (25,000 – 1,000) / 5
= PHP4,800
If the accounting period being reported by Matapang is for the moth ending
February 29, 2016, adjusting entry to record this depreciation in the books of
Matapang is:
General Journal
Date Account Title and Explanation Ref Debit Credit
2/29/16 Depreciation Expense 200
Accumalated Depreciation-Office Eqpt 200

#2 Deferred Expenses or Prepaid Expenses: These are items that have been
initially recorded as assets but are expected to become expenses over time or
through the operations of the business.
Exercise – Adjusting entries to record deferred expenses or prepaid expenses
Recall that on February 19, 2016 Matapang purchased PHP5,000 worth of office
supplies on account. By the end of the month, PHP2,000 worth of these supplies
are still unused.
The February 19, 2016 entry to record the purchase on the account of office
supplies was already posted to the general ledger and included in the balances, as
shown in the unadjusted trial balance above. The entry was shown only for
illustration purposes.
General Journal
Date Account Title and Explanation Ref Debit Credit
2/19/16 Supplies Expense 5,000
Accounts payable 5,000
To record the purchased of office supplies
on account
2/29/16 Supplies 2,000
Supplies Expense 2,000
To set-up the value of unused supplies
The “Supplies” account debited on February 29, 2016 above is an asset account
and represents the value of supplies unused as of the end of February 2016. If
these journal entries are posted to the general ledger, the following should be the
balance of each account.
Account Title Debit Credit
Supplies 2,000
Accounts Payable 5,000
Supplies Expense 3,000

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
General Journal
Date Account Title and Explanation Ref Debit Credit
2/19/16 Supplies 5,000
Accounts payable 5,000
To record the purchased of office supplies

2/29/16 Supplies expense 3,000

Supplies 3,000
To set up the value of unused supplies
If these entries are posted in the general ledger, the following should be the
balances of each account:

Account Title Debit Credit

Supplies 2,000
Accounts Payable 5,000
Supplies Expense 3,000
Notice that even with the different approaches in recording the transactions in the
journal entries, the balances in the general ledger will always be the same whether
you used the first approach or the second approach.

#3 Deferred Income or Unearned Income.

These are items that have been initially recorded as liabilities but are expected to
become income over time or through the operations of the business.
Exercise – Adjusting entries to record deferred or unearned income
On February 15, 2016 Matapang entered into a contract with Makisig to maintain
the computers of Makisig for two months starting on February 15, 2016 up to April
15, 2016. On the same date, Makisig paid the total contract amount of PHP40, 000
in full. The entries to record and adjust the books are:
In the February 29, 2016 entry above, as of end of February 2016, Matapang has
already earned the service revenue for the first 15 days, thus an adjusting entry is
recorded.
General Journal
Date Account Title and Explanation Ref Debit Credit
2/15/16 Cash 4,000
Unearned Service Revenue 4,000
To record receipt of full payment for the two-
month service contract with Makisig

2/29/16 Unearned Service Revenue 10,000

Service Revenue 10,000
To record service income earned from Feb. 15-
29, 2016; P40,000 x (1/2 month /2 months)

#4 Accrued Expenses or Accrued Liabilities. These are items of expenses that

have been incurred but have not been recorded and paid.
Exercise – Adjusting entries to record Accrued expense or accrued liabilities
On February 29, 2016, Matapang received the electric bill for the month of
February amounting to PHP3,800. Matapang will pay this bill on March 2016.
The electric bill represents the cost of electricity used (or incurred) for February.
Although the said bill is still unpaid and thus, was not recorded, the matching
principle and accrual basis of accounting dictates that the same should be
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
recorded in February, otherwise, your expense will be understand and thus the
company will be reporting an overstated income (or an erroneous income). Needless
to say, erroneous information may lead to wrong decisions.
The entry to record the accrual of this expense is:
General Journal
Date Account Title and Explanation Ref Debit Credit
2/29/16 Utilities Expense 3,800
Utilities Payable 3,800
To accrued the cost of electricity incurred
for the month of February.

#5 Accrued Income or Accrued Assets

These are income items that have been earned but have not been recorded and
paid by the customer, In short, these are receivables of the business.
Exercise – Adjusting entries to record accrued income or accrued assets
On February 28, 2016, Matapang repaired the computer of Pedro for PHP15,000.
Pedro was on an out of-town trip so he could not pay Matapag. He told Matapang
that he will pay for their services on March 1, 2016.
Matapang has already earned the PHP15,000 but was not paid as the end of
February 2016. Therefore, an income should be properly recognized in February
2016 for this transaction. The entry to record this is:
General Journal
Date Account Title and Explanation Ref Debit Credit
2/28/16 Accounts Receivable 15,000
Service Income 15,000

Enter all adjustments to the worksheet:

Matapang Computer Repairs
WORKSHEET
For the Month ending February 29, 2016
Unadjusted Trial Adjusted Trial
Adjustments
Balance Balance
DR CR DR CR DR CR
Balance Sheet Accounts
Cash 221,000 221,000
Accounts Receivable 15,000 15,000 30,000
Supplies 2,000 2,000
Office Equipment 25,000 25,000
Accum. Depm-Off Eqpt 200 200
Accounts Payable 5,000 5,000
Utilities Payable 3,800 3,800
Unearned Service 40,000 10,000 30,000
Revenue
Matapang, Capital 200,000 200,000

Income Statement
Accounts
Service Revenue 25,000 25,000 50,000
Supplies Expense 5,000 2,000 3,000
Salaries Expense 4,000 4,000
Utilities Expense 3,800 3,800

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Depreciation Expense 200 200
270,000 270,000 31,000 31,000 289,000 289,000
Note: the entry to record the receipt of P40,000 from Makisig on February 15,2016
was reflected in the unadjusted trial balance columns.

Step 7- Preparation of the Financial Statements,

Using the information from the worksheet, the financial statements are prepared.
The following are the financial statements to be prepared:
1. Statement of Financial Position (SFP) – Also known as the balance sheet. This
statement includes the amounts of the company’s total assets, liabilities and
owner’s equity which in totality provides the financial position of the company on
a specific date.
2. Statement of Comprehensive Income (SCI) – Also known as the Income Statement.
Contains the results of the company’s operations for a specific period of time.
This can be prepared on a monthly, quarterly or yearly basis.
3. Statement of Changes in Equity (SCE) – This statement is prepared prior to
preparation of the Statement of Financial Position in order to obtain the ending
balance of the equity to be used in the SFP. All changes, whether increases or
decreases to the owner’s interest on the company during the period, are reported
here.
4. Cash Flow Satement – Provides an analysis of inflows and/or outflows of cash
from/to operating, investing and financing activities.

The income statement is prepared first so that net income can then be recorded in
the statement of changes in equity. The statement of changes in equity is then
prepared to determine the ending balance of equity or capital account. Once the
ending balance is determined, the statement of financial position is prepared. The
cash flow statement is prepared last.

Name of Company
WORKSHEET
For the month ending February 29, 2016
Adjusted Trial Balance Income Statement
DR CR DR CR
Balance Sheet Accounts
Cash 221,000
Accounts Receivable 30,000
Supplies 2,000
Office Equipment 25,000
Accum. Depm-Off Eqpt 200
Accounts Payable 5,000
Utilities Payable 3,800
Unearned Service Revenue 30,000
Matapang, Capital 200,000

Income Statement Accounts

Service Revenue 50,000 50,000
Supplies Expense 3,000 3,000
Salaries Expense 4,000 4,000
Utilities Expense 3,800 3,800
Depreciation Expense 200 200
11,000 50,000
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Net Income 39,000

Matapang Computer Repairs

Statement of Comprehensive Income
For the month ended February 29, 2016
SERVICE REVENUE 50,000
LESS: EXPENSES
Supplies Expense 3,000
Salaries Expense 4,000
Utilities Expense 3,800
Depreciation 200
Total Expenses 11,000
Net Income 39,000

Step 8 – Journalize the Closing Journal Entries

The income, expense, withdrawal (equity) accounts are called temporary accounts or
nominal accounts. They are called temporary because they accumulate the
transactions of only one accounting period. At the end of this accounting period,
the changes in owner’s equity accumulated in these temporary accounts are
transferred into the owner’s capital account. This process serves two purposes: (1)
to update the balance of the owner’s capital; and (2) it returns the balance of the
temporary accounts to zero, so that they are ready to measure the income.
Expenses and drawings of the next accounting period again. The owner’s capital
account and other statement of financial position accounts are referred to as
permanent or real accounts because their balances continue to exist beyond the
current accounting period. Closing the books is the process of transferring the
balances of the temporary accounts to the owner’s permanent capital account.

The Closing journal entries should consist of the following:

 All the normal revenue accounts should be closed to the income summary
account by a Debit to revenue and a Credit to income summary.
 All of the nominal expenses accounts should be closed to the income
summary by a Credit to expenses and a Debit to income summary.
 The balance in the income summary account should now reflect the net
income for the accounting period. The next journal entry should close the
income summary account to the equity or capital account. If there is a net
profit this entry will be a Debit to income summary and a Credit to owner’s
capital account.
 Once the closing journal entries have been entered into the general journal,
the information should be posted to the general ledger. When this is
accomplished, all of the nominal accounts in the general ledger should have
zero balances. To double check on this, we should prepare another trial
balance based on the new balances in the general ledger. If we have any
nominal accounts with positive balances, a mistake was made along the way
and will need to be corrected before proceeding to the next accounting
period. To illustrate:
General Journal
Date Account Title & Explanation Ref Debit Credit
2/29/16 Service Revenue 50,000
Income Summary 50,000
To close nominal revenue accounts

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Income Summary 11,000
Supplies Expense 3,000
Salaries Expense 4,000
Utilities Expense 3,800
Depreciation Expense 200

After the above entries, the balance for these accounts are:
Supplies Salaries Utilities Depreciation Revenue Income
Expense Expense Expense Expense Accounts Summary
Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit Debit Credit
3,000 3,000 4,000 4,000 3,800 3,800 200 200 50,000 50,000 11,000 11,000
0 0 0 0 0 0

Notice that the ending balance of the Income Summary Account amounting to
PHP39,000 credit represent the net income for the period of Matapang. The balance
of the income summary account is then closed to the capital account by this entry.

General Journal
Date Account Title & Explanation Ref Debit Credit
Income Summary 39,000
Matapang Capital 39,000

Activity 1 – Problem Solving

Direction: Solve the exercises below and write your answer in a separate sheet of
paper.

Spencer Company has a fiscal year-end of June 30, 2016. The following adjusting
journal entries must be prepared in order to bring the accounting records up to
date for the preparation of year-end financial statements.

Interest on notes payable of PHP400 is accrued.

Fees earned but unbilled total PHP1,400
Salaries earned by employees of PHP700 have not been recorded
Bad debt expense for year is PHP900.

Required: Journalized each adjustment using general journal format.

Activity 2 – Solve the Problem

Direction: Prepare Adjusting entries, adjusted trial balance, income statement and
closing entries. (write your answer in a separate sheet of paper).

Kay Travel was organized on September 1, 2016. Assume that the accounts are
closed and financial statements are prepared each month. The company occupies
rented office space but owns office equipment estimated to have a useful life of 10
years from date of acquisition, September 1, 2016. The unadjusted trial balance for
Kay at November 30, 2016 is shown below:

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 Unadjusted Trial Balance
Account Title and Explanation Debit Credit
Cash 1,750
Accounts Receivable 1,210
Office Equipment 4,800
Accumulated Depreciation- Office
80
Equipment
Accounts Payable 1,640
Kay, Capital 7,490
Kay, Withdrawal 500
Service Revenue 4,220
Advertising Expense 800
Salaries Expense 3,600
Rent Expense 770
13,430 13,430

Additional information:
 The rent expense amounting to PHP770 covers rental for the
month of November and December 2016.
Required:
1. Prepare the adjusting entries necessary for the above problem
2. Prepare an adjusted trial balance
3. Prepare an income statement ending November 30, 2016
4. Prepare closing entries

Activity 3 – Compute for Depreciation

Direction: Compute the depreciation expense for the following independent cases.
Use the straight line method of depreciation. Write your answer in a separate sheet
of paper.

1. Pedro Reyes purchased a delivery vehicle on January 1, 2016 amounting to

PHP250,000. It is estimated that the vehicle will be useful for 10 years. The
vehicle can be sold for PHP10,000 at the end of its useful life. If the accounting
period being reported by Pedro is one (1) year from January-December 2016,
how much is the depreciation expense?

2. Pedro Reyes purchased a delivery vehicle on April 1, 2016 amounting to

PHP250,000. It is estimated that the vehicle will be useful for 10 years. The
vehicle can be sold for PHP10,000 at the end of its useful life. If the accounting
period being reported by Pedro is one(1) year from January- December 2016,
how much is the depreciation expense?

Reflection:
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Direction: Rate yourself. For each parameter, please put a check that shows a
degree of your understanding.

Not Very
Parameters Awful Good Brilliant
Good Good
1.I can explain the nature of
transaction in a service
business.
2.I can prepare the general
journal form of a service
business transactions.
3.I can explain the financial
statement of a service
business.
4.I can solve problems on
accounting cycles.
5.I can apply accounting
principles in a various cases.

Post-test: Essay
Direction: Select the letter of the best answer.
1. Which of the following steps in the accounting cycle are listed in the logical
order?
A. Prepare the income statement, Prepare the statement of financial position
and then prepare a worksheet
B. Post the journal entries to the ledger accounts, prepare a trial balance,
and then prepare a worksheet
C. Journalize the closing entries, take a post-closing entries, and then take
a post closing trial balance
D. Post the closing entries, take a post closing trial balance, the journalize
the closing entries

2. Which of the following is a business event that is also considered a

recordable transaction?
A. A company hires a new employee
B. A customer purchase a merchandise
C. A company orders a product from a supplier
D. An employee sends a purchase requisition to the purchasing department

3. A purchase of supplies on account should be recorded as

A. A debit to supplies expense and a credit to cash
B. A debit to accounts payable and a credit to supplies
C. A debit to supplies expense and a credit to accounts payable
D. A debit to supplies expense and a credit to account receivable

4. Which of the following gives the correct sequence of accounting procedures?

A. Ledger, Trial Balance, Journal, Financial Statements
B. Journal, Ledger, Trial Balance, Financial Statements
C. Financial Statements, Trial Balance, Ledger, Journal
Author: LIEZL I. PERTOS
School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 D. Financial Statement, Journal, Ledger, Trial Balance

5. Which principles business is expected to continue indefinitely.

A. Revenue Recognition Principle
B. Matching Principle
C. Going Concern Principle
D. Solidarity Principle

References:
Licuanan P. (2016). Teaching Guide for Senior High School
Fundamentals of Accountancy, Business and
Management 1
Specialized Subject I ACADEMIC – ABM
Published by the Commission on Higher Education,

Accountingtheory(n.d) Retrieved from http://accountingtheory.weebly.com/nature-

and-scope-of-accounting

ANSWERS KEY:

Activity no. 1

General Journal
Date Account Title and Explanation Debit Credit
06/30/1 Interest Expense 400
6
Interest Payable 400
To record accrued interest on note payable
through June 30, 2016
06/30/1 Accounts Receivable 1,400
6
Service Revenue 1,400
To record service revenue for services
unbilled at year-end
06/30/1 Salaries Expense 700
6
Salaries Payable 700
To record accrued salaries through June
30,2016
06/30/1 Bad debts Expense 900
6
Allowance for doubtful accounts 900
To record bad debt expense for the year-
ended June 30, 2016

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
Activity no. 2

1. Adjusting Entries
General Journal
Date Account Title and Explanation Ref Debit Credit
Prepaid Expense 385
Rental Expense 385
Depreciation Expense 40
Accumulated Depreciation-Office Equip. 40

2. Adjusted Trial Balance

Adjusted Trial Balance
Account Title Debit Credit
Cash 1,750
Accounts Receivable 1,210
Prepaid Expense 385
Office Equipment 4,800
Accumulated Dep.-Office Equipment 120
Accounts Payable 1,640
Kay, Capital 7,490
Kay, Withdrawal 500
Service Revenue 4,220
Advertising Expense 800
Salary Expense 3,600
Rent Expense 385
Depreciation Expense 40
Total 13,470 13,470

3. Statement of Comprehensive Income

KAY TRAVEL
Statement of Comprehensive Income
For the Month ended November 30, 2016

Service Revenue P 4,220.00

Less: Expenses
Advertising Expense 800.00
Salaries Expense 3,600.00
Rental Expense 385.00
Depreciation Expense 40.00
Total Expense 4,825.00
NET LOSS (605.00)

4. Closing Entries

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]
 General Journal
Date Account Title & Explanation Ref Debit Credit
29/16 Service Revenue 4,220
Income Summary 4,220
To close nominal revenue accounts

Income Summary 4,825

Advertising Expense 800
Salaries Expense 3,600
Rental Expense 385
Depreciation Expense 40
To close the expense accounts

Kay, Capital 500

Kay, Withdrawal 500
To close the withdrawal account

Kay, Capital 605

Income Summary 605
To close the Income summary account

Activity no. 3
1. Solution:
Annual Depreciation = (Acquisition Cost-Salvage or Residual Value)/Useful Life
Annual Depreciation = (250,000-10,000)/10
Answer = PHP24,000
2. Solution:
Annual Depreciation = (Acquisition Cost – Salvage or Residual Value)/Useful Life
Annual Depreciation = (250,000 – 10,000)/10
Annual Depreciation = PHP24,000
Multiply the annual depreciation of PHP24,000 to the number of months in
used/12, thus 24,000x(9/12)
Where the “9” represent the number of month from April to December.
Answer = PHP18,000

PRE-TEST:
1. B 2. C 3. C 4. B 5. B
POST -TEST:
1. B 2. B 3. C 4. B 5. C

Author: LIEZL I. PERTOS

School/Station: CNHS
Division: Dinagat Islands
Email Address: [email protected]