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Far 1 - Activity 1 - Sept. 09, 2020 - Answer Sheet

The document summarizes the basic principles and concepts of accounting that apply to a sole proprietorship trading business. It discusses 11 accounting transactions involving the acquisition of assets, recognition of revenues and expenses, and cash flows. The key concepts covered include the entity, historical cost, expense recognition, and revenue recognition principles. It also addresses the principles of periodicity, going concern, materiality, adequate disclosure, and consistency.

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1K views4 pages

Far 1 - Activity 1 - Sept. 09, 2020 - Answer Sheet

The document summarizes the basic principles and concepts of accounting that apply to a sole proprietorship trading business. It discusses 11 accounting transactions involving the acquisition of assets, recognition of revenues and expenses, and cash flows. The key concepts covered include the entity, historical cost, expense recognition, and revenue recognition principles. It also addresses the principles of periodicity, going concern, materiality, adequate disclosure, and consistency.

Uploaded by

Anonn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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FINANCIAL ACCOUNTING AND REPORTING 1

ACTIVITY – SEPT. 09, 2020


NAME:
BSA 1-________
1. Identify the basic principles and fundamental concepts of accounting.
(you can add additional row/s if this is insufficient.
Sentences / Paragraphs basic principles and fundamental
concepts of accounting
1. During the year, you started a - ENTITY CONCEPT
business of selling personalized
mugs and T-shirts. You opened a
separate bank account for the
business and deposited your initial
investment of P250,000 to this
account.

2. The business acquired a printing - HISTORICAL COST


machine. The regular selling price is
P100,000: however, you were able to
acquire it at a discounted price of
P90,000. You will record the
machine at its acquisition cost of
P90,000 rather than at the regular
selling price.
3. The business acquired initial - EXPENSE RECOGNITION
inventory of mugs and T-shirts for a
PRINCIPLE
total cost of P50,000. You will record
the cost as an asset (ie. Inventory)
rather than as expense.

4. All the inventory was sold on - REVENUE RECOGNITION


credit for P300,000. You will PRINCIPLE
immediately record the credit sales
as accounts receivable rather than
waiting for them to be collected.
Also, you will now record the
P50,000 cost of the inventory
expense.

5. You collected P290,000 out of - ENTITY CONCEPT


P300,000 total credit sales. You will
deposit the collection to the bank
account of the business rather than
to your personal account.

6. You withdrew cash of P80,000 - ENTITY CONCEPT


from the business for your personal
use. You will record the transactions
as a withdrawal of your investment
from the business rather than a
business expense.

- PERIODICITY CONCEPT
7. At the end of the year, you
prepared the financial statements of
your business to determine whether
your business has earned profit.

8. When preparing the financial - GOING CONCERN


statements, you found out that the
regular selling price of a new
printing machine increased from
P100,000 to P120,000. You will
ignore this information and will report
the printing machine at its
acquisition cost of P90,000 in the
financial statements. This is because
your don’t expect to close your
business in the foreseeable time.
9. During the year, the business - MATERIALITY
bought a trash bin for P80. You
expect to use this over several
years. You record this as an expense
rather than as asset.

10. You will make a brief description - ADEQUATE DISCLOSURE


of the “Miscellaneous Expenses”
account in the notes to financial
statements, sufficient for users to
understand the nature of this
account.

11. You will make a brief description - CONSISTENCY PRINCIPLE


of the “Miscellaneous Expenses”
account in the notes to financial
statements, sufficient for users to
understand the nature of this
account.

2. Identify what type of business you started.


- Trading Business

3. What is the form of business organization?


- Sole Proprietorship

4. Three types of business activities


Sentences / paragraphs Business activities

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