Activity 6 - Answer

1. The business owner contributes P100,000 cash to the business.

No. Account Title Debit Credit

Cash 100,000
Owner’s Capital 100,000
To record the owner’s investment to the
business

2. The business obtains loan of P800,000.

No. Account Title Debit Credit

Cash 800,000
Notes payable 800,000
To record the loan obtained

3. The business purchases equipment for P200,000 cash.

No. Account Title Debit Credit

Equipment 200,000
Cash 200,000
To record the equipment purchased by the
business

4. The business purchases goods worth P500,000 on cash basis

No. Account Title Debit Credit

Inventory 500,000
Cash 500,000
To record acquisition of inventory

5. The business sells goods costing P50,000 for P120,000 on cash basis.

No. Account Title Debit Credit

Cash 120,000
Sales 120,000
To record sales of the business
No. Account Title Debit Credit
Cost of sales 50,000
Inventory 50,000
To record the cost of goods sold as expense

6. The business pays advanced rent amounting to P60,000.

No. Account Title Debit Credit

Prepaid Rent 60,000
Cash 60,000
To record advanced payment for rent

7. The business pays half of the loan in #2 above.

No. Account Title Debit Credit

Notes payable 400,000
Cash 400,000
To record partial payment of notes payable

8. The business pays interest expense of P80,000.

No. Account Title Debit Credit

Interest expense 80,000
Cash 80,000
To record payment of interest expense

9. The business pays utilities expense of P10,000.

No. Account Title Debit Credit

Utilities Expense 10,000
Cash 10,000
To record payment of utilities expense

10. The business pays salaries expense of P32,000.

No. Account Title Debit Credit

Salaries expense 32,000
Cash 32,000
To record payment of salaries expense
Activity 8 – Answer

1. The owner invests P100,000 cash to the business.

Journal Entry

No. Account Title Debit Credit

Cash 100,000
Owner’s Equity 100,000
To record investment of the owner to business

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Cash 100,000 0 Owner’s Equity 100,000

2. Payment of Mayor’s Permit costing P10,000.

Journal Entry

No. Account Title Debit Credit

Permit Expense 10,000
Cash 10,000
To record cost of permit expense

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Permit
Cash (10,000) 0 (10,000)
Expense
3. Payment of tarpaulin, pamphlets, and other marketing and promotional activities
totaling P20,000.

Journal Entry

No. Account Title Debit Credit

Advertising Expense 20,000
Cash 20,000
To record cost of advertisement expense

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Advertisement
Cash (20,000) 0 (20,000)
expense

4. Purchase of office supplies worth P1,000. The business uses a prepaid account.

Journal Entry

No. Account Title Debit Credit

Prepaid supplies 1,000
Cash 1,000
To record advance payment of supplies

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Prepaid Supplies 1,000 0 0
Cash (1,000)

5. Purchase of goods worth P40,000 on cash basis.

Journal Entry

No. Account Title Debit Credit

Inventory 40,000
Cash 40,000
To record acquisition of inventory

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Inventory 40,000 0 0
Cash (40,000)

6. Sale of goods costing P30,000 for P70,000 on account.

Journal Entry

No. Account Title Debit Credit

Accounts receivable 70,000
Sales 70,000
To record sales of the business on account

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Accounts
70,000 0 Sales 70,000
Receivable

Journal Entry

No. Account Title Debit Credit

Cost of sales 30,000
Inventory 30,000
To record cost of goods sold as expense

Effect on basic accounting equation

 ASSETS = LIABILITIES + CAPITAL (EQUITY)
Inventory (30,000) 0 Cost of sales (30,000)

7. Payment of P10,000 delivery expense for the goods sold in #6.

Journal Entry

No. Account Title Debit Credit

Freight-out 10,000
Cash 10,000

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Cash (10,000) 0 Freight-out (10,000)

8. Collection of P50,000 accounts receivable.

Journal Entry

No. Account Title Debit Credit

Cash 50,000
Accounts Receivable 50,000
To record collections of accounts receivable

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Cash 50,000 0 0
Accounts
(50,000)
Receivable

9. Payment of P8,000 salaries expense.

Journal Entry

No. Account Title Debit Credit

Salaries Expense 8,000
Cash 8,000
To record payment of salaries expense

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Salaries Expense 8,000
Cash (8,000)

10. Payment of electricity, water, internet, and mobile charges totaling P12,000. The
business uses single account to record these types of expenses.

Journal Entry

No. Account Title Debit Credit

Utilities Expense 12,000
Cash 12,000
To record payment of utilities expense

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Utilities Expense 12,000
Cash (12,000)

ASSETS = LIABILITIES + CAPITAL (EQUITY)

1.) Cash 100,000 0 Owner’s Equity 100,000
2.) Permit
Cash (10,000) 0 (10,000)
Expense
3.) Advertisement
Cash (20,000) 0 (20,000)
Expense
4.) Prepaid Supplies 1,000 0 0
Cash (1,000)
5.) Inventory 40,000 0 0
Cash (40,000)
6.) Accounts
70,000 0 Sales 70,000
Receivable
Inventory (30,000) Cost of sales (30,000)
7.) Cash (10,000) 0 Freight-out (10,000)
8.) Cash 50,000 0 0
Accounts
(50,000)
Receivable
9.) Salaries
Cash (8,000) 0 (8,000)
Expense
10. Utilities
Cash (12,000) 0 (12,000)
) Expense
Total 80,000 0 80,000
Overall Accounting Equation
Activity 9 – Answer

1. The business owner invests P200,000 cash to the business.

Journal Entry

No. Account Title Debit Credit

Cash 200,000
Owner’s Capital 200,000
To record investment of owner to business

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Owner’s
Cash 200,000 0 200,000
Capital

2. The business obtains a loan of P600,000.

Journal Entry

No. Account Title Debit Credit

Cash 600,000
Notes payable 600,000
To record the loan obtained

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Notes 600,00
Cash 600,000 0
Payable 0
3. The business purchases equipment worth P450,000 for cash.

Journal Entry

No. Account Title Debit Credit

Equipment 450,000
Cash 450,000
To record equipment purchased by business

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Equipment 450,000 0 0
(450,000
Cash
)

4. The business pays advanced rent of P20,000.

Journal Entry

No. Account Title Debit Credit

Prepaid Rent 20,000
Cash 20,000
To record advanced payment of rent

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Prepaid Rent 20,000 0 0
Cash (20,000)
5. The business purchases inventory worth P500,000 on account.

Journal Entry

No. Account Title Debit Credit

Inventory 500,000
Accounts Payable 500,000
To record inventory purchased on account

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Accounts 500,00
Inventory 500,000 0
Payable 0

6. The business sells goods costing P80,000 for P200,000 on cash basis.

Journal Entry

No. Account Title Debit Credit

Cash 200,000
Sales 200,000
To record sales of the business

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Cash 200,000 0 Sales 200,000

No. Account Title Debit Credit

Cost of sales 80,000
Inventory 80,000
To record cost of goods sold as expense
Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Inventory (80,000) 0 Cost of sales (80,000)

7. The business sells goods costing P400,000 for P900,000, on account.

Journal Entry

No. Account Title Debit Credit

Accounts Receivable 900,000
Sales 900,000
To record sales of the business

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Accounts
900,000 0 Sales 900,000
Receivable

No. Account Title Debit Credit

Cost of sales 400,000
Inventory 400,000
To record cost of goods sold as expense

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

(400,000
Inventory 0 Cost of sales (400,000)
)
8. The business pays accounts payable of P400,000.

Journal Entry

No. Account Title Debit Credit

Accounts Payable 400,000
Cash 400,000
To record the payment of accounts payable

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

(400,000 Accounts (400,000
Cash
) Payable )

9. The business owner withdraws P10,000 from the business.

Journal Entry

No. Account Title Debit Credit

Owner’s drawing 10,000
Cash 10,000
To record the withdrawal of the owner

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Owner’s
Cash (10,000) 0 (10,000)
drawing
10. The business pays interest expense of P15,000.

Journal Entry

No. Account Title Debit Credit

Interest Expense 15,000
Cash 15,000
To record the payment of interest expense

Effect on basic accounting equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Interest
Cash (15,000) 0 (15,000)
Expense
 Overall Accounting Equation

ASSETS = LIABILITIES + CAPITAL (EQUITY)

Owner’s
1.) Cash 200,000 0 200,000
Capital
2.) Notes
Cash 600,000 600,000 0
Payable
3.) Equipment 450,000 0 0
Cash (450,000)
4.) Prepaid Rent 20,000 0
Cash (20,000)
5.) Accounts
Inventory 500,000 500,000 0
Payable
6.) Cash 200,000 Sales 200,000
Inventory (80,000) Cost of Sales (80,000)
7.) Accounts
900,000 Sales 900,000
Receivable
Inventory (400,000) Cost of Sales (400,000)
8.) Accounts
Cash (400,000) (400,000)
Payable
9.) Owner’s
Cash (10,000) (10,000)
Drawings
10.) Interest
Cash (15,000) (15,000)
Expense
1,495,00
Total 700,000 795,000
0